A Partnership of Equals

C. Fred Bergsten

To be an economic superpower, a country must be sufficiently large, dynamic, and globally integrated to have a major impact on the world economy. Three political entities currently qualify: the United States, the European Union, and China. Inducing China to become a responsible pillar of the global economic system (as the other two are) will be one of the great challenges of coming decades (2) — particularly since at the moment China seems uninterested in playing such a role (1).

The United States remains the world’s largest national economy, the issuer of its key currency, and in most years the leading source and recipient of foreign investment (24). The EU now has an even larger economy and even greater trade flows with the outside world, and the euro (4) increasingly competes with the dollar (5) as a global currency. China, the newest member of the club, is smaller than the other two (3) but is growing more quickly and is more deeply integrated into the global economy. Its dramatic expansion is therefore having a powerful effect on the rest of the world. China poses a unique challenge because it is still poor, significantly non-marketized, and authoritarian. All three characteristics reduce the likelihood (14) that it will easily accept the systemic responsibilities that should ideally accompany superpower status (25). The integration of China into the existing global economic order will thus be more difficult than was (19), say, the integration of Japan a generation ago. The United States and the EU would like to co-opt China by integrating it into the regime that they have built and defended over the last several decades. There are increasing signs, however, that China (7) has a different objective (20). In numerous areas, it is pursuing strategies that conflict with existing norms, rules, and institutional arrangements (34).

Some take this lightly, viewing it as simply the usual free-riding and skirting of responsibility (29) by a powerful newcomer (6) cleverly exploiting (26) the loopholes and weak enforcement of existing international rules to pursue its perceived national interests. After all, they say, even the United States and the EU do the same on occasion, as do other major emerging-market economies (30).

Nevertheless, the situation is worrisome (21). Given its status as a powerful newcomer benefiting from an efficient economic order, China actually has a profound interest in seeing that the international rules and institutions function effectively.

TOWARD AN ASIAN BLOC?

On trade, China has been playing at best a passive and at worst a disruptive (15) role. It makes no effort to hide its current preference for low-quality, politically motivated bilateral and regional trade arrangements (31) rather than economically meaningful (and demanding) multilateral trade liberalization through the WTO. Since China is the world’s largest surplus country and second-largest exporter, this poses two important challenges to the existing global regime (22).

First, China’s refusal to contribute positively to the Doha Round of international trade negotiations (11) has all but ensured (16) the talks’ failure. Beijing has declared that it should have no liberalization obligations whatsoever (12) and has invented a new category of WTO membership (8) (“recently acceded members”) to justify its recalcitrance. Such a stance by a major trading power is akin to abstention (9) and has practically guaranteed that the Doha negotiations will go nowhere (13). And since the global trading system does not stay in place, but is always moving either forward or backward, a collapse of the Doha Round would be quite serious.

Second, China’s pursuit (17) of bilateral and regional trade agreements with neighboring countries is more about politics than economics (35). Its “free-trade agreement” with the Association of Southeast Asian Nations (ASEAN), for example, covers only a small share of its commerce with the countries in question; it is simply an effort to calm their fears of being swamped by their huge neighbor (27). China is also hurting the global trading system by supporting the creation of a loose but potent Asian trading bloc (32). The network of regional agreements that started with one between China and ASEAN has steadily expanded to include virtually all other possible Asian permutations (36).

NEW RULES OF THE GAME

What these policies (10) demonstrate is that China’s international mindset has not kept pace with its breathtaking economic ascent (33). China continues to act like a small country with little impact on the global system at large and therefore little responsibility for it (28). The central thrust (18) of contemporary Chinese foreign policy is not to assume a large role in the world but to avoid international entanglements that could disrupt the country’s ability to focus on its huge domestic challenges (37). Moreover, the speed at which China has risen is difficult for even the most experienced observers to comprehend (23).

(Extracted from BERGSTEN, C. F. A Partnership of Equals.)

(Foreign Affairs, July/August, 2008).

The overall tone of the last paragraph of the text is one of: