Compromise between the U.S. and China on Economic Friction: Is it Fading Away?
[Sejong Commentary] No. 2019-31
Kim Ki-Soo (Senior Research Fellow, The Sejong Institute)
Stories that the US and China’s economic friction will come to an end first appeared on October 11. It has been said that the two countries are aiming to resolve the conflict through a gradual compromise. Almost two months have passed, yet no sign of compromise can be found. Furthermore, President Trump recently announced that the formal talks between the two countries may be postponed after the presidential election which is scheduled next year. In retrospect, there had been various reasons that stalled the relations of the two. Could it be that, as China shed light to the possibility of dispute settlement and as other economic parties advocated such scenario, the probability of an actual dispute settlement may have been overestimated?
In the early days of the US-China economic friction, the focus was on China and its excessive trade surplus gained from the US. The US tried to limit China’s trade gains, and China, hoping to end the dispute, tried to buy a significant amount of high priced export goods from the US including commercial airplanes. However, demands from the US grew as time went by, including the cessation of technology transfer, termination of subsidies provided to Chinese conglomerates, and the requirement to open up China’s service industry. The problem was that the only way for the two countries to improve their relationship was for China to change its economic system. From the systematic point of view, the US tried to ultimately reshape China’s current system into something quite similar to that of the US.
The situation in which both sides impose their own ideology and system to each other ultimately leads to hegemonic competition. Tensions have now been heightened, as political conflicts have begun to pressure economic friction. On the 19th and 20th of November, and the US House and the Senate each passed the Hong Kong Human Rights and Democracy Act, which advocates Hong Kong’s protest for greater democratic freedom. The bill was eventually signed by President Trump, on the 27th of November. This bill is important for both countries as it provides the US government with a variety of means to intervene in China regarding the Hong Kong incident.
On December 3, the US House of Representatives passed another bill, the Uighur Act of 2019, which calls for human rights improvement of the ethnic minority group in China. The bill stipulates the right to deny entry into the US as well as freezing of the assets of certain cadres and government officials who are responsible for the oppression of Muslims in the Xinjiang Uygur Autonomous Region. In the US-China economic friction, ultimate change of the Chinese economic system seemed to be the main goal for the US to achieve. However in this bill, the US has stepped up to ultimately change the Communist Party’s dictatorial polity. It seems to be that a big front has been made regarding economic and political issues between the two. If there’s one more to come, it could be the possibility of military clash. The US is denying China’s maritime claims in the South China Sea, advocating the values of Freedom of Navigation. If China attacks the US navy vessel near the artificial islands, it will be difficult for China to avoid head-on collision with the US.
Earlier in the paper I have introduced the characteristic of hegemonic competition, that is, enforcement of one’s system to another. The friction between the Soviet Union and the US after WWII was a classic example of an hegemonic competition. Such competition ended only after the demise of the Soviet Union in the early 90s. The majority of the countries that were under the sphere of the influence of the Soviet Union adopted market economy and democracy as US hoped. The historical background well explains that today’s economic friction between the US and China is just one part of the hegemonic competition. Other issues such as politics and security are intertwined with economic conflicts. This is the fundamental reason why even a partial compromise is not an easy task for the two countries to achieve.
To date, it seems to be that China has been dragging along with the US. Will China find ways to reverse the situation? Chances are slim. It looks like China was unaware of some basic characteristics of the US, including how ideologically biased US foreign policy is, and how domestic policies play out in international affairs. How would China’s perception and understanding towards the US change? What differences will that change make? China’s understanding of the US’s intentions and traits will play a key role in developing future relations of the two countries.
※ Translator’s note: This is a summarized unofficial translation of the original paper which was written in Korean. All references should be made to the original paper.
※ This article is written based on the author’s personal opinions and does not reflect the views of the Sejong Institute.