C. Fred Bergsten - The United States vs. China

The rise of China makes it more important than ever for the United States to maintain the support of these countries. China fears isolation and is much more likely to alter its policies when faced by a strong international coalition than by unilateral pressure, even from the powerful United States: “Beijing views the Biden Administration’s forays into exclusive multilateralism – issue based coalitions in opposition to China – as the most serious external threat to its political security and the biggest obstacle to its national rejuvenation” (Yan 2021). Perhaps the greatest of all the errors of the Trump presidency was to alienate, rather than coalesce with, the traditional US allies, forgoing the potential for mounting multilateral support in the effort to induce the substantial Chinese reforms that will be necessary to alleviate the main international economic tensions.

But the will of the United States to exercise global economic leadership, in Administrations and Congress and the public more broadly, as described in chapters 2and 6, has been declining for about 25 years. Domestic hostility to globalization, and especially the “China shock,” has risen sharply because of their (greatly overstated) roles in generating wage stagnation and income inequality, and thus in much of the political polarization and dysfunction that now characterize American society. At the same time, the end of the Cold War eliminated the historical security rationale for such leadership.

Under President Trump, this decline was accelerated as America largely abdicated its traditional leadership role. His Administration itself violated fundamental rules and norms of the international economic order (and of its domestic order as well). It adopted blatantly protectionist trade, investment, and technology policies. It trashed the international institutions – both formal like the World Trade Organization (WTO) and World Health Organization (WHO), and informal like the G-7 and G-20 – that have fostered cooperative governance of the world economy. It attacked its allies as well as its adversaries, isolating itself from the rest of the world rather than leading, and producing “America alone” rather than “America first.” It utterly failed to promote any significant US interests, while inflicting severe damage on the global system. It got China’s attention, but was totally unable to achieve its goal of suppressing China’s rise or even to alter Chinese policies in meaningful ways. Its erratic and counterproductive behavior during the coronavirus pandemic further tarnished America’s standing around the world, and China’s respect for the United States has declined further.

The global leadership competition and the world economy will be crucially, perhaps decisively, affected by US policy under President Biden and his successors. Even a partial return to America’s traditional global economic leadership would roll back at least the most extreme costs of the Trump abdication. But continued United States slippage in the face of China’s continuing rise, even if conducted in more civil tones, would confirm that the problem was not simply President Trump but rather a more deeply rooted bipartisan tendency that the rest of the world would have to recognize was long-lasting. The possible future return of Trumpism, or even of President Trump himself, adds to such possibilities. 1

The allies, of course, will have to accept a return of US leadership if that leadership is to be restored. Some of the allies have disagreed mildly with some US leadership, and disagreed strongly on a few occasions. Some Europeans talk frequently about “strategic autonomy” and fending more for themselves (but have done little to move in that direction and hence have subjected themselves to constant US hectoring to contribute more, not less). But most are probably inclined to repair the hegemonic coalition, at least to where it stood prior to the Trump Administration. A particularly key role in Asia will be played by the Quad – the United States, India, Japan, and Australia – that resides closest to China, which has been denounced by Beijing, and held its first summit (virtually) at the outset of the Biden Administration.

Once burned, however, twice shy. Any US return to global economic leadership must be credible and sustained if it is to be believed and accepted by the other key countries, in both Europe and Asia. This will require, among other things, domestic US reforms to strengthen US leadership capabilities, and especially to rebuild a sustainable domestic political foundation that will support such leadership, as will be outlined in chapters 5and 10. This is particularly necessary because US leadership had already been eroding for some time, as we will see in chapters 2and 6, and because some echoes of even the more extreme Trumpian proclivities – especially with respect to China – can be expected to reappear with some regularity. The initial Chinese reaction to President Biden has been disappointment – i.e., he continues to take a hard line toward them (Wang 2021; Yan 2021). President Trump will then have left a lingering, if not permanent, impact on US policy in this domain.

At a minimum, this means that any restoration of US global economic leadership will have to continue beyond President Biden, and probably across at least one Administration of each party. Skeptics will be on the lookout for Trumpian deviation on these issues, especially by non-Trumpian governments. Under the best of circumstances, it will thus take considerable time to restore anything like the alliance solidarity that was so crucial in supporting US global economic leadership over the past seven decades.

The world economy is thus threatened by two potentially mutually reinforcing pressures: the rising capability of a new superpower, and the declining will of its traditional leader. The resulting leadership vacuum eerily inverts that of the early 1930s, when incumbent Great Britain no longer had the capacity to lead and rising America was not yet willing. That unique juxtaposition converted the national recessions of the day, via a downward spiral of trade and capital flows, into the Great Depression (Kindleberger 1973).

On this occasion, the incumbent power is still capable but may be losing its will, while the rising power does not yet have full capacity (and may not want to assert true leadership either). The world economy could thus succumb again to a “Kindleberger trap,” especially if faced with another shock like the global financial crisis of 2008–9 or the deep recession triggered by the coronavirus pandemic in 2020. At the same time, China – United States confrontation could presage a “Thucydides trap” conflict between the two superpowers.

There are several possible paths for future systemic evolution. As chapter 7will show, the leaderless non-system could prove sustainable (G-0 s) for at least a while if the key middle powers – notably, Europe and Japan – and the existing international institutions prove able to hold it together. This would be true especially if China would help to do so, which it should as it espouses multi-polarity and such an evolution would contribute to a reduction of American hegemony. But an unstable G-0 ucould also prevail if it turns out that a single dedicated leader is in fact required to produce systemic success.

China could make a dash for dominance to exploit the US abdication and seize leadership (G-1), as posited in chapter 8. This would require it to adopt important policy reforms and the rest of the world to accept at least some of its very different values. The United States could seek to reassert its traditional role, though it cannot restore dominance due to the rise of China. It is unlikely to try anyway, due to the underlying anti-globalization swing in its domestic politics and the lingering impact of Trumpism.