| Saturday, 27-Oct-2001 11:14 AM
the United States have been brought together by terrorism. David
James and Al Reyes analyse the implications for the region.
ATTACK on the United States has brought military issues to the fore
and cast economic concerns into the background. In terms of America's
relationship with China, it may lead to a mutual recognition that
they have more interests in common than there are forces driving
tensions that have characterised US-China relations - especially
since the incident when a Chinese spy plane collided with a US spy
plane near Hainan Island - may ease. It was noticeable that President
Jiang Zemin was quick to express "deep shock" at the attacks in
the US, and it is not inconceivable that faced with a stateless
terrorist threat, sovereign states may discover they have a common
enemy and pursue previously unimaginable loose alliances.
At the very
least, the Westphalian model, in which all power is thought to be
expressed through the nation-state, is being shown to be inadequate.
In future, the tensions will be played out in a far more complex
environment of national, transnational and stateless interests.
The world's two premier nation-states - the US, the dominant superpower,
and China, the emerging giant - are likely to have a mutual interest
in finding ways to respond to this probable decline in national
of the US administration's focus is bad news for the world economy.
The enormity of President George W. Bush's treatment of China in
current world economic conditions is easy to grasp. For the first
time since 1973, all the big economies of the world - Japan, the
US and Europe - are either in recession or on the verge of recession.
attack in the US is only likely to accelerate a downturn. The engine
of the world economy has been US consumer demand: it accounts for
two-thirds of the US economy; and the US economy produced two-thirds
of world economic growth in the second half of the 1990s. This was
already looking under threat, with household savings near zero in
It was only
the extent to which consumers thought their assets in the stockmarket
and housing market were appreciating (household savings at the time
of the attack were about 14 per cent when adjusted for realised
capital gains) that gave them the confidence to buy.
effects of the terrorist attack and probable further declines in
the stockmarket (and possibly also the housing market, although
the easing of interest rates makes this less likely) suggest that
consumer demand in the US will drop.
China's domestic economy as the only bright spot in the world economy.
Building China's domestic strength increasingly looks to be the
only way that the big economic powers can work out their massive
of China's continuing its economic growth is evident when looking
at the level of debt in the Asian region, with debt in non-Japan
Asia and Japan at $US2 trillion each (total debt in Japan is the
equivalent to 500 per cent of GDP). With non-performing loans in
many parts of Asia, including Japan, at around 30 per cent, it is
small wonder that the pundits are describing the situation in the
region as "the heaviest debt work-out in history".
Bush had derided
the idea that China could be a strategic partner. He may feel differently
when faced with an elusive adversary that does not represent a state
but a civilisation. Indeed, viewed through the prism of civilisation,
the US's Christian and secular culture sits in far less obvious
conflict with China's Confucian, and increasingly capitalist, culture.
And in the economic sphere, not taking a partnership approach to
China implies a level of choice that is probably not available to
the Bush administration. With global economies becoming more interdependent
- and China choosing to participate by continuing to open up its
economy - even the powerful US has less capacity to act as if it
And the US
is scarcely free of debt problems itself, with a current-account
deficit that has widened to a record 4.3 per cent of GDP. The only
pain-free way to get out of indebtedness is economic growth; and
the only country displaying that kind of growth currently is China.
The most crucial
event is the November meeting in Doha, Qatar, of the World Trade
Organisation's (WTO's) 142 member countries, when there will be
an attempt to launch a new global trade round.
After the terror
attacks, that this meeting is to take place in the Middle East takes
on much more than economic significance. The terrorists targeted,
in the World Trade Centre, one of the premier symbols of economic
globalisation. The WTO's response will be a seminal political signal:
if the members choose to go ahead with the meeting and "stand firm"
in continuing the globalisation process, it could well be the basis
for new forms of international coalitions against all global threats,
not just terrorism.
political implications of globalisation have tended to be in the
background - merely a consequence of economic change best ignored
- now they are crucial. A more "normal" situation in world affairs
has emerged, in which politics takes precedence over economics.
The Bush administration's former focus on achieving Trade Promotion
Authority (TPA) was due to a realisation that if Bush did not achieve
TPA now, he would have to wait for another four years. He also had
to overcome objections in both the Senate and the Congress, whereas
usually it is only the Congress that provides significant opposition.
Now, his attention
is elsewhere, but the economic imperatives have not changed. One
of the benefits of Chinese openness is that the country cannot adopt
the mercantile (trade-oriented) strategy employed by Japan and much
of South-East Asia. The reason is that it is simply too big: China
cannot rise to economic strength on the back of trade; it must ultimately
aim to become a continental economy like the US.
It should also
be clear to the Chinese leadership, when it looks at countries such
as Singapore and Taiwan - which depend heavily on exports to the
US - that basing economic growth mostly on trade carries with it
high economic risk. Many of the smaller Asian economies rely on
trade for more than half their GDP. Such risk would be unpalatable
in China. For all its recent successes, the Chinese leaders still
face the largest economic challenge ever seen.
In short, despite
the military posturing, both countries need each other economically,
a lot more than either would probably like to admit. China is in
a position eventually to become a second "market of last resort",
so easing the pressure on the US, which has fulfilled that role
for more than two decades. Already, US companies sell more in the
Chinese domestic market than they export back to the US.
there are signs of an improvement in relations. Bush's choice of
Yale classmate and respected Mandarin-speaking commercial lawyer
Clark "Sandy" Randt as ambassador to Beijing has gone down well
among the American business communities in China, particularly Hong
Kong, where Randt has lived for several years.
Bush travels to Shanghai for the Apec summit and then on to Beijing
for a state visit and talks with his Chinese counterpart. It was
thought that by this time, he needed to be well along the path of
achieving fast-track authority. But now, Bush's political interests
have changed. He is not likely to eschew the opportunity to include
China in the international coalition that he is pursuing in his
attack on terrorism. At the very least he will not want to alienate
China, given the need for international co-operation in countering
For its part,
the Chinese leadership is hardly likely to think itself exempt from
any such terrorist threats. In recognition of this, Jiang, in a
telephone call to Bush, offered to "strengthen dialogue and co-operation"
with the US to fight "all manner of terrorist violence" in the world.
The great challenge for both sides will be to
national objectives in parallel with increasingly pressing transnational
attacks have also changed the balance of power in the region. Before
he took office, Bush indicated he intended to bolster ties with
Japan and Taiwan, at the expense of the relations with China. While
he supported China's accession to the WTO and the granting of "normal
trade relations" status to Beijing, he said that he would be sharper
with Beijing on a host of issues, including human rights and the
proliferation of weapons of mass destruction. He seemed to take
pains to distance himself from his father, who had been accused
by Bill Clinton in the 1992 election campaign of being too accommodating
to the Chinese.
of focusing on Taiwan and Japan to counteract the effect of China
is likely to be reconsidered. Taiwan is experiencing a dramatic
demonstration of the economic dangers of being heavily exposed to
the US economy and is likely to look for a more subtle approach
that allows an increase of economic ties with the mainland. Japan
is not really in a position to help anyone until it finds a way
of helping itself. In short, Bush is being faced with the obvious:
that it is impossible to sideline China.
And that was
before the political priorities were profoundly altered. After a
terrorist attack that exposed US shortcomings, high-tech initiatives
such as the defence shield have been exposed as part of the problem,
not the solution to US defence needs. The president's earlier assertion
that the US had an obligation to bolster Taiwan's military capability
and to "do what it takes" to defend the island if it came under
threat suggested that military tensions between the US and China
were based on the old sovereign-state tensions. These have not gone
away, but now new conflicts have to be considered.
As the US administration
ponders who exactly is its enemy, it is clear that the certitudes
of national militarism are fading.
the terror attacks, the challenges faced by China and the US were
of a level of complexity never before experienced; even the self-interest
of each side was becoming hard to identify. Traditional political
structures are not well placed to cope. Military problems are mainly
dealt with, inevitably, using the old state-to-state mechanisms.
increasingly becoming transnational, which tends to reduce the state
to being one player among many, rather than the central overseer.
flows, and issues such as terrorism, disease, migration and the
environment, are increasingly becoming truly global; literally stateless,
outside the ambit of state control. Now that terrorism has been
pushed to the top of the list, there will need to be a high level
of political skill and judgment on both sides of the Pacific.