US becoming ‘lone ranger’ containing China

The US quest to “contain” China is becoming a lonely one, and for good reasons. Pressuring allies to bar Chinese telecommunications giant Huawei from their fifth-generation (5G) networks could set back their telecom architecture by at least a year or two and cost them billions of dollars. Preventing allies from joining China’s Belt and Road Initiative (BRI) is to demand that they ignore their national interests.

It might be for these reasons that four major European leaders – Prime Minister Giuseppe Conte of Italy, President Emmanuel Macron of France, Chancellor Angela Merkel of Germany and President Jean-Claude Juncker of the European Commission – have defied US President Donald Trump’s warnings on Huawei and the BRI.

Juncker played down China’s “systematic competitor” image, suggesting the term was meant to indicate “healthy competition” between the European Union and China. Merkel went further, saying Europe should be part of the BRI. Macron vowed to tighten the relationship between his country and China. Conte signed on to the BRI and plans to attend the BRI Forum in Beijing next month.

Responsible leadership

By not caving in to US pressure, the stances of these European leaders could be construed as responsible leadership: promoting and protecting their countries’ national interests. The EU countries have no other means to pull out of the economic stagnation that the US-originated 2008 financial crisis created, growing at less than 1% annually since then, according to International Monetary Fund figures.

The US not only offers no alternative financial assistance, but is imposing tariffs on EU steel, aluminum, automobiles and other products. What’s more, Washington is acting like a mafia, demanding that EU buy more US arms and paying the costs for the “privilege” of hosting US troops.

Turning to China makes economic sense. China, though its annual economic growth has slowed to between 6% and 6.5%, will still outshine the EU’s and America’s 2.5% or less in the coming years, according to the World Bank. While all Western economies lack fiscal and monetary policy ammunition because of high debts and low-interest-rate policies to boost economic growth, China has the financial means to reverse Europe’s economic malaise. For example, it jut signed a contract to buy 300 Airbus planes worth more than €30 billion (US$33.6 billion).

Moreover, China has not shown any indication that it poses a “national security” threat to any country. It has enough problems – climate change, poverty reduction, financial risk – of its own to worry about. In this sense, establishing closer economic relations with the dragon also makes geopolitical sense, not worrying about going to war with China.

Better to engage

Like the West, China is protecting its national interests by walking economic development and political paths that suit its history and institutions. For China, Deng Xiaoping’s theory of “socialism with Chinese characteristics” makes perfect sense. It is still at his infant stage of development, requiring state subsidies and protection, as was the case in Europe and America during their early developmental years.

What’s more, China is a country of many regions, each of which has its own norms and values, thus requiring a strong central government to get things done. It could indeed be argued that had it not for authoritarianism, China would not be what it is today.

Further, Western state subsidies were front and center during the post-financial-crisis era in which governments resorted to quantitative easing to bail out out banks and enterprises deemed “too big to fail.” The EU and the US subsidize research and development activities through tax incentives to corporations and grants to universities. Both heavily subsidize farmers, in that EU and US pay respectively nearly 50% and 25% of farmers’ incomes, according to the Organization for Economic Cooperation and Development. Criticizing China’s development architecture is thus like the pot calling the kettle black.

Besides, China is willing to address issues through negotiations and make concessions. For example, it is willing to buy more US products to reduce the latter’s trade deficits and bar “forced technology transfers,” albeit it is unclear why a condition of doing business is considered “forced.” The foreign partner has a choice: It does not have to do business with Chinese firms. One could indeed argue that transferring advanced technology would increase productivity, leading to higher profits.

In any event, China is too big to coerce. Hell has to freeze over before China will surrender its economic and political architectures, suggesting cooperation is the only way going forward

In any event, China is too big to coerce. Hell has to freeze over before China will surrender its economic and political architectures, suggesting cooperation is the only way going forward. The world, except the US and a few of its staunch allies, has come to that conclusion, explaining why Europe, Asia, Latin America and Africa are seeking rapprochement with Beijing.

Even New Zealand, a diehard US ally, is trying to mend fences with the dragon. After following the US lead of barring Huawei from its 5G network, exports to China and the number of Chinese tourists declined. Because of her country’s reliance on the China, New Zealand Prime Minister Jacinda Ardern is to travel to China next week to put the relationship back on track.

The speculation that Chinese-made equipment could be used to spy on New Zealand is just that, speculation. And using the same logic, New Zealand should not buy Apple, Samsung, Nokia or Ericsson products because they too are made or assembled in China. Besides, what secrets does New Zealand have that China wants to steal?

Canada, too, is finding out the hard way the cost of siding with the US in arresting Huawei chief financial officer Meng Wanzhou for allegedly violating US unilateral sanctions or Iran. It just lost the China market for its granola seeds, and more retaliatory measures will likely emerge if Meng is extradited to the US. In addition, two Canadians held on spying charges remain incarcerated. The irony of the Canadian decision to arrest Meng at the behest of the US is that Trump still treats Canada as a “national security” threat, maintaining tariffs on Canadian steel and aluminum.

The fact of the matter is that China cannot be isolated without inflicting unthinkable damage to its tormentors. For example, the US is losing just as much if not more than China from the trade war. A joint study conducted by the US Federal Reserve and some elite universities such as Columbia and Harvard estimated that the trade war could cost more than $1 trillion over five years.

China’s loss from the trade war is more psychological than economics, in that exports to the US represent only 4% of its gross domestic product, which could be easily absorbed by its huge domestic market and the BRI. China and the BRI participants represent more than 40% and 50% of world GDP and population respectively, according to the World Bank.

The world is increasingly defying the US on “containing” China because doing so harms national interests. As the 19th-century British diplomat Henry Temple observed, nations have no permanent friends or foes, only national interests. What’s more, US pressure and threats are based on “fake news” and fear-mongering.

The US should respect other countries’ interests and rights, otherwise it could become the world’s “lone ranger.”