In a ‘Grey’ World, No Grounds to Fear US-China Confrontation

27.01.2017

Under Donald Trump, the United States is deeply divided in terms of policy-making, so being tough on China is a way to overcome internal opposition to Trump. But does this mean that Trump can pursue a containment policy with China? Trump’s potential deal with China could become a major success

Last week, in line with his electoral promise, US President Donald Trump announced that he would withdraw from the Trans-Pacific Partnership, vowing to negotiate bilateral deals with Asia-Pacific countries instead. Although the decision is troubling for the region, it will not stop the impetus for economic integration, believes Valdai Club expert Huang Jing, Director of the Centre on Asia and Globalisation at the Singapore-based Lee Kuan Yew School of Public Policy.

“It is irrational to do away with the TPP, which could enable the US to take the lead for the rule-making in the next round of economic integration and free trade,” Professor Huang said in an interview with valdaiclub.com.

As the United States quits the TPP, US allies, such as Australia, Singapore, South Korea and Japan, will have to suffer most, the scholar believes. However, according to Huang, the momentum for economic integration in the region will not slow down.

“First, China, as the largest trading nation on Earth, will continue to push for economic integration based on free trade, as was assumed clearly by Xi Jinping’s speech in Davos. Second, the economies of such countries as Japan, Singapore, Australia, and South Korea are entirely based on trade. That’s why Australia has invited China to join the TPP,” he said.

Earlier this week, Australian Prime Minister Malcolm Turnbull said he was open to China joining the pact instead of the US. “Losing the United States from the TPP is a big loss, there is no question about that,” he said, as cited by the Financial Times. “But we are not about to walk away from our commitment to Australian jobs.”

Singapore has also changed its position, Huang said, and is now very supportive of the Regional Comprehensive Economic Partnership (RCEP), a proposed free trade agreement between the ASEAN member-states and key non-ASEAN countries of Asia-Pacific. According to him, it means that the momentum for economic integration will continue.

The repercussions of Trump’s decision will go far beyond the region, Huang said. “Under Donald Trump you can expect the United States to go back to unilateralism politically, economically and strategically, which of course will do substantial damage to the international order. Now the international order is entirely based on multilateral arrangements. It is the United Nations for political order, WTO and other trade agreements for economic order and World Bank, IMF, ADB and AIIB for the global financial order. […] So when the United States under Donald Trump will go back to unilateralism, this will do damage,” he said.

The rise of populism in the Western world is another key negative development, according to Huang: “As the West becomes overwhelmed with populism and, as a result, the right-wing forces will come back as a major power, going for protectionism economically and being very conservative socially and culturally, there will be more and more chauvinism, which is also bad news.”

The good news, however, is that the centre of gravity of global economic development, geopolitics and diplomacy has shifted to Asia-Pacific, Huang says: “Asia-Pacific will continue to promote free trade, economic integration, open society and open market economy. That, I hope, will cancel out the bad news from the United States and Europe.”

At the same time, Professor Huang is very sceptical of Trump’s anti-China statements, saying they are unlikely to translate into a consistent policy. “Under Donald Trump, the United States is deeply divided in terms of policy-making, so being tough on China is a way to overcome internal opposition to Trump. But does this mean that Trump can pursue a containment policy against China? I very much doubt, because now the foundation of containment is no longer there,” he said.

The world today is different from that of the Cold War era, Huang continued: “You need to divide the world into black and white, just like the former Soviet Union and the United States. But today’s world is no longer black-and-white, it is very grey. And also, you need two sides to form a military or security camp against each other, which is again not the case. So I don’t believe Donald Trump can really launch a containment policy against China. To me, his being tough on China is more positioning himself to drive a hard bargain with China.”

According to Huang, a financial deal with Beijing could be the case in point, because without financial cooperation with China the United States’ economy cannot go on. His choice of appointees to top economic positions could provide a clue to what he is going to do, he said. “All the people in charge of economic affairs are former senior managers from Goldman Sachs, who is a best friend of China. I cannot imagine Goldman Sachs go against China economically and politically. If Donald Trump can really serve as president for more than two years, then he will try to cut a deal with China, which means a bilateral deal to optimize American interests, but how and by what means and what kind of deal he is going to cut with China we don’t know yet,” he said.

If history is any guide, Trump’s potential deal with China could become a major success, according to Huang. “All the grand deals between China have been done by conservative Republican presidents – from Nixon and Reagan to G.H.W Bush and G.W Bush. I don’t believe Donald Trump can be any exception, because after all what really governs United States is not Donald Trump, it is interest groups which are much stronger than Donald Trump. And Donald Trump eventually will have to listen to those interest groups. Otherwise I don’t believe he has a future as a president,” Huang concluded.

Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.

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