The Trap

The Trap

The Trap

October 2019

Some of your readers will have heard of The Thucydides Trap, but for those who have not it may have an application in the increasingly tense relations between the United States and China as the latter appears to represent a growing challenge to the former in global markets.

The Thucydides Trap refers to a situation where one great power threatens to displace another and war is almost always the result, although it does not always have to be. Graham Allison, the American political scientist and Professor at the John F. Kennedy School of Government at Harvard and author of Destined for War. Can America and China Escape the Thucydides Trap? writes “as China challenges America’s predominance, misunderstandings about each other’s actions and intentions could lead them into a deadly trap first identified by the ancient Greek historian Thucydides. As he explained, “It was the rise of Athens and the fear that this instilled in Sparta that made war inevitable.” The past 500 years have seen 16 cases in which a rising power threatened to displace a ruling one. Twelve of these ended in war.

Of the cases in which war was averted — Spain outstripping Portugal in the late 15th century, the United States overtaking the United Kingdom at the turn of the 20th century, and Germany’s rise in Europe since 1990 — the ascent of the Soviet Union is uniquely instructive today. Despite moments when a violent clash seemed certain, a surge of strategic imagination helped both sides develop ways to compete without a catastrophic conflict. In the end, the Soviet Union imploded, and the Cold War ended with a whimper rather than a bang.”

 

How does the Trap affect China and the US?

Viewed from one perspective there appears to be a seemingly unstoppable China rising to displace the United States. An extraordinary reversal of the 1978 situation where 90% of Chinese people were surviving on under $2 a day and now only 1% are in that situation. The Trap is, as Henry Kissinger said, a way to look through the news and noise of today to understand what is happening.

There may need to be an event to trigger conflict. North Korea could be the provocateur or a violent intervention in Hong Kong in the way that the assassination in Sarajevo started the chain of events leading to the First World War. However, after the end of World War Two steps were taken to create a peaceable world – The Marshall Plan funded by American taxation revenues – and elements of an order to create peace and stability. Only those who refuse to study History are condemned to repeat it.

 

What are the causes of the current situation and can they be reversed?

What, we should ask ourselves, does the current Trade War with China initiated by the US Administration hope to achieve? Is it the reversal of China’s seemingly unstoppable growth? Is it the protecting of American manufacturing and other jobs? Is it an attempt to prevent Intellectual Property theft?

Wendy Cutler, Vice President of the Asia Society Policy Institute was previously Acting Deputy US Trade Representative. She recently noted the news that fresh negotiations that will include not just ministerial-level meetings, but ongoing discussions at the vice-ministerial level are heartening. She comments:

“I think what would be extremely helpful now is for both sides to quiet down and… let the negotiators do their work. If China and the U.S. can establish a better atmosphere in the coming months, through such goodwill gestures like the U.S. approving domestic companies’ licenses involving non national security products to sell to Huawei, or China buying more American agricultural products, then the two sides could get back to the actual negotiating text that fell apart last May… and resolve those handful of outstanding issues.” However, as I write, the US Administration has just threatened to stop Chinese companies listing on the NYSE.

 

Failure to resolve these and other issues will probably exacerbate the trend of China challenging the hegemony of the United States

China has several challenges to tackle and its ability to do so will accelerate its growth and potential threat to displace the United States. Right now, the U.S. economy is the biggest in the world. It produces roughly $20 trillion worth of goods and services every year. China produces about $13 trillion worth of goods, so it’s still a bit behind.

But China’s economy is growing more than twice as fast as America’s and China is a much bigger country in terms of land and population. Plug those factors into a spreadsheet, and it seems inevitable that eventually China will have a bigger overall economy than the United States.

George Magnus, previously Senior Economic Advisor at UBS Investment Bank and now Research Associate at the China Centre, Oxford University and author, doesn’t entirely agree with this spreadsheet approach. “It is fair to say that there is an adversarial relationship between the US and China that did not exist before Xi Jinping and that after his ascendancy in succession to Hu Jintao there was a material change as Xi Jinping initiated his China Dream. China became more ideological and assertive. If China can grow its economy at 5 or 6% for the next ten to twenty years against growth of 2 to 3% in the United States, at some time between 2027 and 2032 China’s GDP will be bigger although Chinese income per capita will be only 15 to 20% of the US.” However, he notes that China may not sustain that rate of growth and that the RMB exchange rate being pegged to the $ is likely to end.

 

Finally, Some Factors to consider

The steps being taken by the United States to curb and curtail China are understandable but the Trump Administration’ significant ceding of influence has been a major contributing factor to the dangers of the Trap that is referred to. First withdrawal from the Trans Pacific Partnership (TPP) has effectively opened the way for China to increase its economic leverage in the region and forced smaller Asian nations to take it more seriously. Second, its Belt and Road initiative has started to tie countries into a network model that China first used for domestic purposes in opening its Western Provinces. Trump’s renunciation of the Paris Climate Accord handed China the chance to assume a leadership role as Xi laid out in his Davos speech and lost the US a great deal of moral leadership, further compounded by environmentally unfriendly moves since then. Finally, the whole tone in the US of decrying globalisation and amplifying the importance of nationhood and self-interest first has been its theme at the recent United Nations General Assembly.

Add the above to the growing concerns over impeachment in the US and a feeling that traditional laws and norms are being breached or ignored and one sees a weakened Power with disjointed and distracted leadership, a great deal more vulnerable to the Trap that Thucydides wrote of nearly two and a half thousand years ago, challenged by a rising China with an autocratic governance system and centrally planned economy.

We shall see where it all ends and to quote Napoleon Bonaparte “Let China sleep, for when she wakes, she will move mountains. Let her sleep for when she wakes, she will shake the world”.

Or, in the words of an Asian saying “You have the watches, but we have the time”.

 

 

Roddy Gow

Chairman, Asia Scotland Institute

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