America Responds to China’s Geopolitical Network

 

Almost every major geopolitical struggle in history has involved opposing alliances of nations with “shared interests,” as well as a set of nations that try to remain neutral.  The 20th century Cold War was defined by the competing ideological systems of communism and capitalism. That face-off, led by the United States and the Soviet Union, defined global geopolitical reality from 1948 to 1991. The stakes were somewhat analogous to the medieval struggles between Christianity and Islam.  The stated objective was to transform the global order into one dominated either by “Soviet-style central planning” or by “American-style entrepreneurial capitalism.”

 

That struggle was presaged by the joint U. S.-Soviet victory in World War II.  By 1944, it became clear that Germany, Japan, and their allies would be defeated. At that point, the United States and the Soviet Union recognized an unprecedented opportunity to rebuild the destroyed economies of Europe and Asia in their own images. From Eastern Europe to Vietnam to Korea to Cuba to Yemen, Soviet-back revolutionaries seized power and established Soviet-style economies; its military incarnation was the Warsaw Pact.  To counter this offensive, the U.S. launched the Marshall Plan and used the international institutions it had assembled at the end of World War II to build up the so-called Free World.  These institutions included the International Monetary Fund, the World Bank, NATO, and, to a certain extent, the United Nations.

 

This meant that, by the late 1950s, the world was partitioned into three competing alliances:  the “Free (or capitalist) World,” “the Communist World,” and a set of nominally “Non-aligned Nations.”  Non-aligned Nations included much of the Middle East, Africa, and India.  For the most part, Non-aligned Nations competed for the support of the Free World and Communist World, recognizing that their leverage was greatest when they were committed to neither side.

 

Between 1989 and 1991, communism in Russia and Europe collapsed under economic pressure from the Free World.  That led to nearly 30 years of globalized, market-based competition.  As a result, extreme poverty was largely eradicated, and global wealth exploded.  American culture seemed to be triumphant everywhere.

 

The greatest beneficiary of that victory was the People’s Republic of China.  This ironic considering that, Mao’s Soviet-backed Chinese Communist Party, or CCP, had originally been at the heart of the Communist World.  In 1949, the CCP defeated the Chinese Nationalists backed by the United States.  The Nationalists retreated to Taiwan, making it part of the Free World.  Then throughout the 1950s and 1960s, the People’s Republic of China remained isolated from the global mainstream, trading very little, even with other Communist countries, and relying on Russia for financing and technology.

 

However, by 1972, China’s alliance with Russia had frayed.  President Nixon saw in this rift a unique opportunity to split the Communist World by opening us a dialog with the Chinese Communist Party.  This caused China to move toward becoming a Non-aligned Nation during Mao’s twilight years.  Therefore, when Deng Xiaoping, succeeded Mao, he was positioned to implement a revolutionary idea: build an economy in which “government-controlled joint ventures with multinational corporations” coexisted with “state-owned enterprises,” under the tight control of the CCP.

 

Initially, this was a win-win for the Free World as well as China.  China’s enormous, literate, and youthful workforce enabled it to become the world’s preferred “contract manufacturer.”  And for nearly 30 years, China grew at an extraordinary pace which enabled it to become the second-largest economy in the world.  But unlike post-War Japan, China was not content to play a key supporting role in a global system dominated by the United States.

 

Especially since the rise of Xi Jinping as head of the CCP, China has set its sights on replacing the United States and its global system of Entrepreneurial Capitalism with its own uniquely authoritarian global system.

 

To do so, China cannot “go-it-alone.  It must build its own network of alliances, which when added to China’s domestic resources, will seek to compete with the United States and its allies. 

 

To understand the implications, consider how both sides are working to solidify relationships and which countries are emerging as members of the two alliances, as well as 21st century Non-aligned Nations.

 

To begin with, it’s important to recognize that today’s emergent Sino-American Cold War much more closely resembles the wars between Rome and Carthage or the Axis and Allies in World War II than it does the 20thCentury Cold War.  Today’s struggle is defined by incompatible sets of national interests, which we’ve previously discussed.  As such, alliances in this war are not based on ideology as much as they are on the medium-term benefits that can be derived by each nation and its leaders.  For this reason, the United States and China are striving to build networks that will provide a clear competitive advantage to their members.

 

What will hold these alliances together?  Economic self-interest and shared values.

 

As discussed previously, China is a rapidly aging country, with few energy resources, a serious need to import food, a shortage of some key minerals, limited naval power, an immature consumer economy, limited capital markets, and a rich, but inward-turning culture.  It’s access to seaborne trade is controlled by historical American allies and Non-Aligned Nations including Japan, South Korea, Taiwan, the Philippines, Indonesia, and Vietnam.  These are weaknesses that China will seek to resolve through new alliances while offering its allies financing, mega-project expertise, and trade opportunities.

 

Meanwhile, the United States is relatively youthful thanks to immigration.  It has abundant energy resources, massive food exports, access to most strategic minerals, the world’s preeminent navy, the world’s most vibrant consumer economy, the world’s largest capital markets, and a rich outwardly focused culture. It relies on allies to maximize economic scale, generate additional intellectual property, and provide cost-effective access to a few strategic minerals.  In turn, it provides defense guarantees, financial aid, and trade opportunities.

 

What’s the bottom line?  The United States and China will compete even more intensely to bring the nations of the world into their respective spheres of influence.

 

Given this trend, we offer the following forecasts for your consideration.

 
First, the Anglosphere will form the vital core of the American Alliance.

 

The United Kingdom, Ireland, the United States, Canada, Australia, and New Zealand share a common language and culture.  Entrepreneurial capitalism has been at the heart of its systems for 250 years.  Thanks to fracking and oil sands, Canada and the United States together are the world’s dominant energy producers as OPEC and Russia recently found out.  Furthermore, the anglosphere countries are among the world’s dominant net food exporters, complemented by certain Latin American countries including Brazil, Columbia, and Argentina.

 

Second, Japan will remain firmly anchored in the U.S. alliance as it upgrades its military capabilities.

 

With the USS. Ronald Reagan's carrier task force permanently based in Japan, the United States, and Japan are mutually committed to preventing threats to Japan’s commerce and autonomy.  Meanwhile, as Japan redeploys its supply chains away from China, the two will share less and less in common.

 

Third, South Korea will remain another staunch U.S. ally.

 
While South Korea bristles at the abrasive style of the Trump Administration, it recognizes that the United States is both a critical commercial customer and an indispensable guarantor of South Korean safety and autonomy.  Unless China suddenly abandons its tepid support of North Korea, its relations with South Korea will continue to cool.

 

Fourth, as discussed in previous issues, the United States will embrace Taiwan economically, diplomatically, and militarily over the next two years.

 

Since the 70s, the United States has traded with Taiwan, while paying “lip service” to its eventual reunification with the mainland.  However, the recent escalation of tensions related to trade and COVID19 is driving the United States on a path toward diplomatically recognizing and arming Taiwan.  Recently, Lockheed Martin agreed to upgrade Taiwan’s Patriot missile defense and sell it the latest version of the F-16 fighter.  Meanwhile, the United States has put in place rules preventing the world’s largest semiconductor company, based in Taiwan, from selling chips to China.  By 2024, the United States is likely to have an air force base in Taiwan armed with F-35s along with an installation of its state-of-the-art Aegis Ashore missile defense system.

 

Fifth, while the Philippines would like the two super-powers to compete for its favor, history and geography declare that it will join the American alliance.

Expect the United States to reoccupy bases in the Philippines which we abandoned in the 1990s.  At the end of the 20th century Cold War, these were superfluous; but in the 2020s, they will serve as a major symbolic deterrent to Chinese aggression in the South China Sea.

 

Sixth, most countries of Southeast Asia will rejoin the U.S. alliance almost solely for economic reasons.

 

Indonesia, Malaysia, Singapore, Thailand, Myanmar, Sri Lanka, Bangladesh, and Vietnam have all had ambivalent relations with China, as well as with the countries of the Anglosphere.   However, with about half of the manufacturing operations displaced from China ending up in these countries, the U.S. alliance will enjoy improved perceptions.  Moreover, in mid-July, when the United States firmly rejected Chinese claims to resources in the South China Sea, the economic rationale for these countries to join the U.S. alliance became overwhelming.

 

Seventh, while Israel and many EU countries would like to play both sides of the fence, when forced to choose sides they will opt to ally with the United States. 

 

As the Cold War intensifies, doing certain kinds of business with China will mean not being able to do business with the U.S. and it’s allies.  Given America’s financial preeminence, the choice will be easy.

 

Eighth, Despite being non-aligned during the 20th-century cold war, India will be one of America’s strongest allies during the Sino-American cold war.

 
The recent military confrontation between India and China merely underscores historical enmity.  Furthermore, Pakistan’s de facto shift into the Chinese camp will make neutrality less appealing.

 

Ninth, Russia will become a “relatively loose” Chinese ally.

 

Shared borders create a perfect trading environment for China and Russia. Exchanging Chinese manufactured goods for Russian oil and natural gas is ideal.  Furthermore, combining Russian strategic forces with Chinese tactical forces creates a military combine that is at least in the ballpark when compared to the U.S. alliance.  The big problem is that Chinese and Russian nationalism limit the degree of cooperation that’s possible.

 

Tenth, China will establish its most important strategic partnership with Iran.

 

Iran and China have already drafted a sweeping economic and security partnership that would clear the way for billions of dollars of Chinese investments in energy and other sectors, undercutting the Trump administration’s efforts to isolate the Iranian government because of its nuclear and military ambitions. The deal will expand Chinese presence in banking, telecommunications, ports, railways, and dozens of other projects. In exchange, China would receive a regular supply of Iranian oil over the next 25 years.  To date, U.S. sanctions, including the threat to cut off access to the international banking system for any company that does business in Iran, have succeeded in suffocating the Iranian economy by scaring away badly needed foreign trade and investment. But Tehran’s desperation has pushed it into the arms of China, which has the technology and appetite for oil that Iran needs. Worst of all, a Chinese naval base in Iran will increase hazards for U.S. operations in the area.

 

Eleventh, central Asia, and Pakistan will join the Chinese alliance for purely economic reasons.

 

Given its vulnerability to seaborne blockades, China has turned westward in an effort to secure trade routes through central Asia.  A seaport in Pakistan, served by railroad and highways from China, offers an important alternative.  However, given China’s human rights record vis a vis Muslims, it’s hard to envision a close relationship between the CCP and the Muslims in South and Central Asia. – This may be manageable, at least in the short-term, because China’s Belt and Road Initiative (or BRI) is bringing resources to a long-forgotten part of the world.  But countries increasingly see China as a predatory lender, poised to use infrastructure mega-projects as a way to enslave its customers.  China will have to carefully manage this perception if BRI is to help them acquire and hold allies.

 

Twelfth, some impoverished African countries with strategic resources will ally with China, others with the U.S., and still, others will remain non-aligned. 

 

This is the portion of the world with the least mature governments and the most desperate needs for assistance.  For that reason, specific outcomes are uncertain and highly reversible.  Longer-term, Africa’s young population and a unique array of minerals make it highly attractive, particularly to China.  And,

 

Thirteenth, with the exception of Cuba, Venezuela, Bolivia, and perhaps Panama, Latin American countries will have far more to lose than to gain by joining the Chinese alliance.

 

This is particularly important since Brazil and Argentina are two top food exporters that are not part of the Anglosphere.  Meanwhile, because of its proximity to the United States, China is likely to provide arms and other resources to drug cartels in Mexico.  The United States must be vigilant in thwarting this plan.

 

References
1. Fox News. July 15, 2020. Bradford Betz. Chinese state media editor-in-chief asks if US is ‘mentally retarded.’  https://www.foxnews.com/world/chinese-state-media-editor-us-mentally-retarded

 

2. New York Post. July 13, 2020.   US rejects Beijing’s claim to South China Sea, deepens Chinese anger. 
https://nypost.com/2020/07/13/us-rejects-chinas-claim-to-south-china-sea-straining-tension/

 

3. The National Interest. July 12, 2020.  Michael Rubin.  A China-Iran Alliance Against Donald Trump?  
https://nationalinterest.org/blog/middle-east-watch/china-iran-alliance-against-donald-trump-164654

 

4. NEW YORK TIMES. JULY 12, 2020.  Farnaz Fassihi and Steven Lee Myers.  Defying US, China and Iran Near Sweeping Trade and Military Partnership. 
https://www.nytimes.com/2020/07/11/world/asia/china-iran-trade-military-deal.html

 

5. The National Interest. July 6, 2020.  Michael Rubin.  China's Next Military Move: A Base in the Persian Gulf? 
https://www.aei.org/op-eds/chinas-next-military-move-a-base-in-the-persian-gulf/

6. The Washington Examiner. July 1, 2020.  Michael Rubin.  Pompeo must act now or China will win in Africa.  https://www.aei.org/op-eds/pompeo-must-act-now-or-china-will-win-in-africa/