Finding Balance in the US-China Relationship

On June 26, 2016, Panama celebrated the official opening of a new set of locks allowing the transit of Neopanamax vessels, the supersized cargo ships that service the global supply chain from Shanghai to Miami. Since its launch, with the transit of the SS Ancon in 1914, the Panama Canal has served as a testament to American power, ambition, and technological capacity. After more than $5 billion spent, and nearly a decade of construction, Panama hopes the new canal expansion will usher in another century of international trade and economic prosperity.

Given changes in trade patterns and increasing importance of the Asia-Pacific region, it is perhaps fitting that the first ship to transit the expanded locks – the M.V. COSCO Shipping Panama – hails from the world’s largest trading nation, China. In addition to some notable controversies, the canal expansion has had an inauspicious inauguration. According to the Canal Authority, 2016 has been one of the worst years for maritime cargo, largely due to a slowdown in China and decreasing levels of imports into the United States.

Indeed, from world trade to issues of war and peace, the United States and China are the determinative factors in international relations. With the surprising victory of Donald Trump in the U.S. presidential election, a new volatile variable has entered the equation. We can expect the unexpected. This was made abundantly clear when President-elect Trump accepted a phone call from President Tsai Ing-wen of Taiwan, a bold break from more than four-decades of U.S. policy. Such incidents should not distract the Trump administration from developing a larger view encompassing structural shifts in world politics and the grander framework of U.S.-China relations. The president-elect’s first mission in U.S. foreign policy is finding new balance in the U.S.-China relationship.

After the Rebalance

After inheriting two wars, involving a massive and costly U.S. footprint in  the Middle East and South Asia, U.S. President Barack Obama sought to leave his imprint on U.S. foreign policy through the so-called “pivot” – later “rebalance” – to the Asia-Pacific. In a speech before Australia’s Parliament, on November 17, 2011, Obama laid out his 21st century vision of American leadership in the region through the promotion of regional security, shared economic prosperity, and good governance. The U.S.-China Economic and Security Review Commission (USCC), a Congressional body charged with monitoring the national security implications of the bilateral trade and economic relationship with China, measured the rebalance strategy as part of its 2016 annual report.

In the security arena, the rebalance strategy has increased the scope and quality of the U.S. force projection in the region. The Obama administration committed to shifting 60 percent of U.S. Navy forces to the Asia-Pacific by 2020 to match the existing 60 percent of U.S. air force assets and two-thirds marine corps forces based in the region. In addition, the United States deployed the most advanced technology such as F-22 and F-35 fighters, and the Ford-class air carrier, Virginia-class attack submarine, and Zumwalt-class stealth destroyer. Rebalancing has also involved enlarging security assistance with key partners. For instance, in 2015, the Obama administration launched the Southeast Asia Maritime Security Assistance Initiative, dedicating $425 million to developing the maritime capacity of the Philippines, Vietnam, Indonesia, Malaysia, and Thailand. The United States is also set to deploy in 2017 a Terminal High Altitude Area Defense (THAAD) missile defense system in South Korea.

On the diplomatic front, the Obama administration has deepened U.S. multilateral and bilateral relationships. For instance, since the launch of the rebalance, the United States has joined the East Asia Summit, upgraded its relationship with the Association of Southeast Asian Nations (ASEAN) to a strategic partnership, and increased its involvement in the Asia-Pacific Economic Cooperation (APEC) forum and ASEAN Regional Forum. The State Department’s Lower Mekong Initiative and more recent Asia-Pacific Strategic Engagement Initiative are further evidence of fresh U.S. multilateral diplomacy. The list of states with notably improved U.S. bilateral relations includes India, Indonesia, Laos, Myanmar, Vietnam, and Laos.

In contrast, the Philippines is an area of specific concern given the controversial (and colorful) threats of President Rodrigo Duterte to withdraw from the U.S. defensive umbrella. The USCC reports that the Pentagon has not received any formal request for the withdrawal of U.S. forces or other specific changes in the U.S.-Philippines military relationship. Nevertheless, words matter.

The United States has primarily focused on developing regional free trade agreements under the economic component of the rebalance. More specifically, the Trans-Pacific Partnership (TPP) is the anchor of the Obama administration’s economic policy in the region. The TPP is a next-generation regional free trade agreement (FTA) involving 12 countries that represent approximately 40 percent of the world’s GDP. Even in the absence of the TPP, during the rebalance period, U.S. goods trade with Asia grew faster than trade with Europe, North America, or Latin America, representing 39 percent of all U.S. trade in goods in 2015. Still, reliance on this single large-scale deliverable, the TPP, may prove to be a weakness in Obama’s legacy. President-elect Trump has already vowed to withdraw from the TPP on his first day in office.

Will the Trump administration take decisive measures to alter or withdraw other measures taken under the rebalance strategy? The ultimate answer may depend on whether the rebalance is viewed as an innovative Obama-era initiative to address a rising China and increasingly important Asia-Pacific, or a natural continuation of U.S. policy and interests. The USCC concluded that Obama’s rebalance strategy was not a fundamental change in United States objectives or substantially different from traditional U.S. foreign policy.

But what exactly has been the U.S. tradition in foreign policy?

As Stephen Sestanovich masterfully documented, U.S. foreign policy since the end of World War II has followed a cycle of maximalist and retrenchment positions, with the next White House responding to the perceived traumas of the preceding administration. George Tenet, a former director of the CIA, described the Washington reality that for every action “there is an unequal and opposite overreaction.” For example, Obama’s extreme reluctance to intervene in Syria, to the point of erasing prior red lines, may reasonably be attributed to the scars of Iraq and Afghanistan.

So even if the Obama rebalance represents a “tactical adjustment rather than a strategic shift in U.S. policy” (to quote the USCC) we could witness a definitive swing in U.S. strategy in the region. In other words, as a result of personal and political factors, the Trump administration may be tempted to over-respond to perceived U.S. retrenchment in the Asia-Pacific – despite the new energy brought to U.S. foreign policy under the rebalance. The president-elect’s threat to reverse the “one China” policy and engage in a tariff trade war with Beijing may be symptomatic of this dynamic. A wiser approach would be to seek greater equilibrium between the positive and negative inducements in U.S.-China relations.

View from the Tower

If the art of the deal begins with signaling a position, the essence of a bargain is measuring the true value of the exchange. In the case of the United States and China, nothing short of the entire geopolitical landscape is at stake. We should not lose sight of this reality.

Even with the rebalance strategy, the USCC noted that the balance in military power in the region has shifted towards China and away from the United States and its allies, mostly due to the accelerated growth of Chinese defense spending. As a result, China feels increasingly empowered to assert alternative regional security and economic frameworks. The tension with the U.S. regional presence is exacerbated by geographic proximity and threats to what Beijing perceives are core territorial interests. In the East and South China Seas, where the U.S. and its allies share complimentary core interests, holding firm against Chinese aggression is critically important. The president-elect sent a critical message when receiving Prime Minister Shinzo Abe of Japan, his first in-person meeting with a foreign leader. In a similar vein, the Trump administration should continue freedom of navigation operations, including in conjunction with key allies, and the shifting of military resources to regional assets like Guam.

However, in other areas, such as in Central Asia, the United States should reasonably accommodate Chinese engagements such as the “One Belt/One Road” program, which is designed to develop a network of transportation infrastructure, funded by the Beijing-led Asian Infrastructure Investment Bank (AIIB) in partnership with the Asian Development Bank and the European Bank for Reconstruction and Development. As a former chair and participant in the Afghanistan Air Cargo and Logistics Conferences, I can attest to the desperate need for increased connectivity among the countries of Central Asia. The United States could, for example, provide guidance on lessons learned from initiatives like the Northern Distribution Network, the Pentagon-promoted logistical system connecting Baltic and Caspian ports with Afghanistan via Russia, Central Asia, and the Caucasus.

In comparison, the risk in the president-elect’s veto of the TPP is that there is no ready U.S. policy substitute. China, however, is offering a lower quality, but nevertheless ambitious, alternative free trade agreement (FTA), the Regional Comprehensive Economic Partnership (RCEP). Unlike the TPP, the RCEP does not include stronger labor, intellectual property, or foreign investment protections. Nevertheless, the RCEP, if realized, would account for 40 percent of global trade and cover three billion people across the region. The USCC cites a study predicting significant losses to China’s economy if the TPP moved forward, but also forecasting that these losses could be prevented and surpassed if the RCEP were passed and China consequently gained low-tariff access to many TPP countries. The gains for China increase if the RCEP is passed and the TPP is not passed. Is Donald Trump willing to cede this space to Beijing?

In weighing its options, the Trump administration must recognize that the tenets of the post-Cold War order are being buffeted by strong headwinds. The stability provided by the Atlantic community is being replaced with the uncertainty of the Asia-Pacific. In shared domains like the South China Sea and cyberspace, China and Russia are unwinding various strands of the international rules-based order. A precarious populism is sweeping across the West, a fact Donald Trump can appreciate. According to the World Trade Organization, trade grew only 80 percent as fast as the global economy in 2016, the first reversal of globalization since 2001 and only the second since 1982. Wild gyrations in the U.S.-China relationship will only further weaken a sputtering global economy, and potentially lead to conflict between the world’s most significant powers. Failing to see and comprehend the shifting ground in international relations will prevent the president-elect from taking the necessary steps to sustain American leadership and the global commons.

The top of the tallest building in Latin America, the Trump Tower in Panama City, provides a stunning, broad view of the adjacent canal and expansive Pacific, far different than the narrow slice, the limited perspective, offered from the streets below. Your outlook at the precipice, however, will remain obscured if you stare in the hotel mirror. As Donald Trump ascends to the Oval Office, he must recognize the larger vision required to see clearly at the height of power. Finding new balance in the U.S.-China relationship, the future of world politics, requires it.