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US-China: Talking ourselves into trouble

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This post is part of the What is the US consensus on China? debate thread. To read other posts in this debate, click here.

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19 July 2011 10:57


This post is part of the What is the US consensus on China? debate thread. To read other posts in this debate, click here.

Geoffrey Garrett is CEO of the United States Studies Centre at the University of Sydney.

Nick Burns certainly rattled some cages on his recent visit to Australia as a guest of the US Studies Centre for our conference on the 9/11 Decade. I was surprised by how strident he was on US primacy as the key to stability in the Asia Pacific, mostly because I remember him as the consummate sensible centrist when he was at the State Department.

But I think Nick was provoked by what he perceived as the consensus position among the Australian chattering classes: Australia can no longer rely on the US so, for better or worse, it must come to terms with a China-dominated region. 

Not surprisingly, many Americans think, to paraphrase Mark Twain, that talk of the America's demise is exaggerated. But what I don't get about the whole China-US international security debate, particularly in Australia and reflected in The Interpreter's debate thread, is how much it discounts the positive geopolitical consequences of the massive ties between the world's two top economies.

Put simply, China and the US are so important to each other economically that they can't afford to allow their political-military relations to blow up.

Last week I argued in The Age that we are not on the verge of a second Cold War because, whereas the USSR was literally not part to the global capitalist economy and had virtually no economic ties with the US, China today is pivotal to the global economy, of which its relationship with the US is the single most important part.

Kant, Keynes, Monnet, George Bush Snr, Bill Clinton, even George W Bush, all thought that international economic connections are a win-win-win — good for the economy, good for peace and stability, and good for democracy promotion. But apparently a lot of people don't buy this when it comes to China-US, for two reasons.

First, as I showed in a chapter of a new ANU e-book, Rising China, published last week, Sino-American economic relations today are probably more imbalanced than any other bilateral relationship in history. Despite the promise of more Chinese consumption and more American savings following the GFC, the US trade deficit with China is now bigger than ever, as are Chinese holdings of US Treasury bonds. Second, Britain and Germany had intense trade ties in the 1910s, but that didn't stop World War I.

I don't buy either objection. China-US economic relations are massively imbalanced, but that doesn't detract from the reality that both sides benefit enormously from them. China lends the US money so that Americans will continue to buy Chinese exports. The US uses China as an assembly platform today and salivates over it as a market tomorrow. China likes US multinationals operating in China because, by hook or crook, this helps bring home-grown businesses up to global speed. 

And the dominance of multinational firms, slicing up the value chain by developing, making, and selling products in different places around the globe, is the big difference between globalisation pre WWI (and Britain-Germany ties then) and today's globalisation (and Sino-American relations now).
 
Every Apple i-device has a label on the back saying 'designed in California by Apple, assembled in China'. It doesn't add the other parts of the story: 'from parts made in Germany, Japan and Korea, and generating massive profits for Apple shareholders in the US'. GM came out of bankruptcy last year more on the back of its skyrocketing sales in China from cars made in China than its slumping sales in the US from cars made in Detroit. Having Apple and GM operating in China increases the chances that China will develop its own global champions to take them on. 

All this probably sounds like just too much naive liberalism and business school jargon to hard-nosed national security types. But I think it is important that the positive sides of China-US relations are talked up. Otherwise all the doom and gloom about the (real) downside risks could become a self-fulfilling prophesy that would be very bad for everybody.

Photo by Flickr user geographyalltheway.com.

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