5 Questions with . . . Giulio Gallarotti on China-U.S. Relations

In this issue of The Wesleyan Connection, we ask 5 Questions of Giulio Gallarotti, professor of government and author of several books and scholarly articles, including The Power Curse: Influence and Illusion in World Politics. Lately he has turned his attention to the U.S.-China relationship and its place in the geo-political world.

Q: Your recent work has taken you to the transition in much of the world from a Cold War stance to the coming “cold co-existence” between the U.S. and China. How would you define “cold co-existence”?

A: The future U.S. relations with China will be far different than the Cold War relationship with the U.S.S.R., even if the Chinese get closer to nuclear parity with the U.S. The two nations will be far more interdependent economically than the U.S. and Soviets; hence their fates will be far more interlocked. While we had almost no major economic ties to the Soviets during the Cold War, we are now China’s major market (we ran a $295 billion trade deficit with China in 2011) and China is our largest lender (China presently holds over $1 trillion in American assets—largely bonds). In a sense, we are each other’s principal sources of revenues: trade revenues for China and loans for the U.S. government. This economic interdependence is here to stay, however, it will be embedded in a competitive environment, which will make the two nations anything but close allies. Add to the testy economic relationship friction over human rights, Taiwan, and disagreements over territorial claims in the South China Sea; and you have enough additional negative karma to generate a very “cold” posture between the two great nations.

Q: The economic competition between the two has received heightened scrutiny in the past few years, in part because China ignores the environmental laws employed by most western nations, controls its currency and exerts wage controls on its workers. How will these behaviors affect the relationship with the U.S. and the West in the next few years?

A: The battle of ideologies between communism and capitalism is withering quickly with the depreciation of the communist ideology among both Chinese leaders and people. But notwithstanding the geo-political friction just mentioned, the relations between China and the U.S. in the present century will be far more like the relations we have had with Japan since the end of WWII. In fact, the parallels are striking. We have been fighting diplomatically with Japan over precisely the same issues over which we have been battling the Chinese: market access for our exports, foreign direct investment in service and non-service sectors, exchange rates, and the promotion of greater consumption in Japan and China. You might say there is an Asian model in the foreign relations of the U.S. We happen to have similar points of friction with a number of Asian nations because these nations follow similar mercantilist models of foreign economic policy (export-led growth, encouragement of high savings rates, strategic trade restrictions and subsidies, and currency management). Hence, U.S.-China relations will be very similar to U.S. relations with developed Asian nations, but with more geo-strategic baggage.  In other words, in this economically polygamous world, the marriage between the U.S. and China will be stormier than U.S. relations with its other spouses, but a divorce is largely out of the question.

Q: While you say direct military conflict between the U.S. and China is unlikely, China has been playing the old Cold War game of aiding countries such as Iran, Syria and North Korea, which are openly opposed to U.S. foreign policy. The Obama Administration has attempted to cut deals with the Chinese to minimize this aid, but the Chinese have shown little interest in providing more than lip service to these deals. How do you see this playing out over the next decade or so?

A: All nations, even our closest allies, do things that cut against our geo-strategic interests. Our European allies have long engaged in important economic deals with so-called rogue nations targeted by U.S. sanctions, even selling them advanced weapons systems. We are yet to attack any of them. But touché, we support Taiwan and support counter-claims over territories in the South China Sea, and we are the world’s greatest polluter. The real question to be considered is: is the cost of divorce greater than the cost of friction in the marriage? I believe that both nations have limited trouble living with the friction, but would find divorce tragic.

Q: GM recently announced it was moving away from China as a primary partner in business ventures and turning to Australia. Are we looking at the beginning of a wider shift among U.S.-based multinationals in response to product quality and economic concerns?

A: Just the opposite is true. We are presently negotiating with China to allow greater American foreign direct investment, just as we have been with Japan and the Asian tigers. Right now the level of American foreign direct investment in China is miniscule. I would say that perhaps the most lucrative possibilities for American foreign direct investment in the future, in terms of potential earnings, lie in China.

Q: What does your research show will be the biggest unifying components and the largest stumbling blocks in U.S.-China relations in the coming decades?

A: If Japanese relations are a good predictor of future Chinese-U.S. relations, the economic issues promise to stay. Just as Japan has had problems deviating from its mercantilist model, so too will the Chinese. And this is fundamentally incompatible with the economic needs of the U.S. (to have free markets abroad and unrestricted targets for investment). The South China Sea problems, environmental controversy, and human rights problems will linger, but these issues will have greater potential for resolution than the Taiwan issue, which will prove much more resilient. But in the far future, one suspects that a unification is looming. History has proved that cultures which have been splintered by war ultimately find a way to reunite, even if it takes a long time.