Photo: Reuters/Carlos Barria
Photo: Reuters/Carlos Barria

It appears that 2018 could be a defining year for the US-China relationship and a litmus test of the political will of the two countries’ presidents. The US Congress’ passage of three pieces of legislation – the National Defense Authorization Act (NDAA), the Taiwan Travel Act (TTA), and a law requiring the US secretary of state to help Taiwan regain observer status at the World Health Organization – could signal a “two-China” policy, meant to provoke Beijing.

Additionally, US President Trump is threatening China with “heavy fines” for “stealing” technology or “forcing” US firms to transfer technologies in order to access the Chinese market. His defense secretary has labeled China as a strategic competitor, while his trade representative has accused China of not playing by World Trade Organization (WTO) “accepted trade rules.”

The US policies and intentions received a quick and unambiguous response from China, promising to beef up defenses in the South China Sea and retaliating against US tariffs on Chinese goods.

The two countries are on a collision course, and how to avoid crashing into each other could define the US-China relationship for years to come.

US congressional legislation on China

No matter how one interprets its latest legislation, the US is crossing a red line, challenging the “one China” policy. As far as the People’s Republic of China is concerned, that policy is non-negotiable. Further, China may also worry that the US will establish a military base in Taiwan or sell it huge quantities of weapons.

The TTA is equally worrisome. Having official exchanges between Washington and Taipei to discuss policies and decisions is in effect treating Taiwan as a sovereign nation. Should the legislation pass in the US Senate and Trump sign it into law, Taiwan and the US will be able to negotiate treaties and agreements.

The legislation allowing the US secretary of state to help Taiwan regain its observer status at the WHO may not be as troublesome as the NDAC and TAA, but it would strengthen Taiwan’s defiance against the PRC. Taiwan lost the observer status because its Democratic Progressive Party (DPP) refused to acknowledge the “1992 Consensus” recognizing that there is only one China on both sides of the Taiwan Strait.

Trump’s hostility toward China

Adding to the “pick a fight with China” legislation detailed above, Trump threatens to impose “heavy fines” on China for “not doing enough” to rein in North Korea’s nuclear-weapons development and on technology transfers between US and Chinese joint-venture partners. Should he make good such threats, a disruption in US-China trade relations or even a trade war could be on the horizon.

Defense Secretary James Mattis announced recently that the US was shifting its priority from fighting Islamic terrorism to countering Chinese (and Russian) “revisionism,” urging Congress to increase the defense budget substantially. He argued that it was “sequestration” – cutting the defense budget – that had eroded the US military’s ability to counter Chinese (and Russian) “aggression.”

US Trade Representative Robert Lighthizer blamed former president Bill Clinton for helping China’s entry to the WTO in 2001. Lighthizer said it was a mistake because China did not play by the WTO’s “market driven” trade rules.

Rationale behind increase in anti-China policies

Surely Trump and his senior advisers are fully aware of the poison they and Congress are fomenting, risking a military and/or trade war between the world’s two largest economies and endangering the lives of people on both sides of the Pacific Ocean. Since he and the American people would be among the victims, there is no reason to believe that Trump would actually follow through with the announced tough policies and threats in their entirety.

Might selling arms and gaining votes in the 2018 midterm congressional elections be the reasons behind the “China threat” escalation? One can only speculate.

China responding in kind

Still, China is not sitting idly by, but is responding in kind. For example, it deployed jet fighters and warships to warn a US destroyer to get out of the 12-nautical-mile exclusive economic zone of one of the islands it has built within the “Nine Dash Line.” It is also beefing up defenses in the South China Sea. China says the US has forced it to do so.

China sees the US as a troublemaker in the South China Sea, sticking its nose into an issue that has nothing to do with America. What’s more, China and the Association of Southeast Asian Nations and other territorial disputants are in the process of negotiating a code of conduct to address the issues. All involved in the region see bilateral negotiations or diplomacy as the only practical way to move forward.

Under President Xi Jinping, China has become more assertive in protecting its national interests. Recognizing that weakness invites bullying, Xi and the rest of the Chinese leadership have invested heavily in modernizing and strengthening the military. His promotion of interconnected, inclusive, innovated and invigorated economic growth has won many friends around the world. Indeed, if polls are to be believed, China has more friends than the US.

A defining year for US-China relationship

The stakes are very high not only for the two superpowers, but also the world. Together the US and China account for more than 40% of the global economy. Because of globalization, a trade war between them would harm economies involved in the world supply chain, of which China is the hub.

Embarking on a “two China” policy and treating China as an enemy may enhance the interests of a few, but would damage those of the US as a whole. China’s warning of using “non-peaceful” means to reunite Taiwan with the mainland is an indication that it is prepare to fight the US and its allies over the matter.

Taking the debate to its logical conclusion, Trump and Xi should and must cooperate in fostering better US-China relations. Working with China to address trade conflicts would yield benefits as it did in the “100-day working plan” they reached at last year’s Mar-a-Lago meeting. Conflict between them, on the other hand, benefits no one.

However, improving the huge trust deficit and narrowing the ideological gaps between the two countries will not be easy. China thinks the US is two-faced, talking nice while sticking a knife into its ribs at the same time. For its part, the US feels China cannot be trusted, and is scheming to supplant American supremacy.

The saving grace might be that Trump and Xi are well aware of the dire consequences that a trade or nuclear war would inflict on their countries and the world. To that end, the two leaders might be able to define the US-China relationship more positively for years to come.

Ken Moak

Ken Moak taught economic theory, public policy and globalization at university level for 33 years. He co-authored a book titled China's Economic Rise and Its Global Impact in 2015. His second book, Developed Nations and the Economic Impact of Globalization, was published by Palgrave McMillan Springer.