||Share the weight of the world|
La Stampa - January 18th 2011
Everyone, it seems, accepts that there is a “G2”, or Group of Two, at the forefront of world affairs except the two countries participating in it: the United States and China. The rest of the West, ie Europeans and Japanese, lament the rise of the G2 but also secretly pray that it will work harmoniously and constructively. The US and China publicly deny that anyone other than the G20 and other multilateral bodies makes global decisions but privately do work together. Whether they are doing so harmoniously and constructively, however, is open to doubt.
Not, of course, during President Hu Jintao’s state visit to America this week, which will be as carefully orchestrated as a Peking Opera performance, but with the noisiest percussion instruments removed. In the background to that visit, however, at least four crucial western interests are at stake.
The most obvious, and most public, interest is in the preservation of globalisation and, vitally, of European and American public support for it. Belief in free trade and open capital markets has brought great riches to the world, and especially to China, over the past 20 years, but it depends in the end on trust, on a perception that rules and behaviour are basically fair. China’s decision to stay out of the global system of floating exchange rates that was set up in the 1970s and instead to control its currency tightly at a cheap rate that helps the country’s exporters is the biggest threat to that sense of fairness.
Other countries also rig their exchange rates, but China is not just any old country: it is the world’s second largest economy, and its economic rise also has geopolitical implications. The spate of impositions of capital controls in other emerging economies (such as Brazil, Chile and Indonesia) in recent months is a direct consequence of China’s currency system. To avoid a domestic backlash against free trade in the West and a gradual desertion of it by emerging economies, the West needs China to announce and implement a programme for the renminbi to join the global floating-rate system, and no one is likelier to persuade it to do so than America.
It won’t do so by haranguing it or lecturing it in public, necessary though that sometimes is. But it might succeed by negotiating a deal with it: a scheme to allow China to swap the $2.5 trillion in foreign-exchange reserves it has accumulated while rigging its currency, into a stabler instrument managed by the International Monetary Fund, called “special drawing rights”, alongside a programme to move the renminbi towards a free float. At the same time, Europeans would welcome an agreement to launch a new round of trade-liberalisation talks in the World Trade Organisation, dumping the failed “Doha round” that began a decade ago.
The second big Western interest concerns North Korea, and that is much harder to discuss in public. With North Korea in possession of nuclear weapons and with a huge army massed near the border with South Korea, the risk of war on that peninsula is high and truly alarming—a fact highlighted last year by North Korea’s sinking of a South Korean naval ship and bombing of a populated island. China is North Korea’s closest ally, both geographically and politically. America is its sworn enemy, which makes negotiation with the North Koreans more than a little difficult.
So, although ideally the West would like China to force the North Koreans to throw aside their nuclear bombs and bargain for peace, in practice what we want is the confidence that, in a crisis, the Chinese will intervene quickly and decisively to prevent conflict from erupting. And to gain and keep that confidence, the West wants fast and open communication with the Chinese military about what is going on and how the Chinese are going to react.
That, more broadly, is also the third big Western interest. All over Asia, and especially around China’s vast borders, there are potential flashpoints where military and political conflicts could break out at any moment: Tibet, Taiwan, the huge Himalayan territories China disputes with India, the hundreds of islands in the East and South China Seas that it disputes with other Asian countries including Japan and Vietnam. Moreover, as the EP spyplane incident showed in 2001, when a Chinese fighter plane collided with the American one and forced it to land on Hainan Island, a confrontation between the militaries of America and China themselves is an ever-present danger, a danger that will rise now that China is making it clear that it soon plans to project its power well beyond its own coastline.
During the Cold War with the Soviet Union, one source of reassurance, at least after the Cuban Missile Crisis of 1961, was the open communications, the “hotline”, between Moscow and Washington. This does not yet exist, at least not in fully operational form, between Beijing and Washington. Whatever the two sides respective policies and interests, better, faster communication is a vital Western interest if it is to accept the rise of Chinese military power in the cool, calm, magnanimous way that the Chinese say they expect.
The fourth sort of Western interest in the relations between the US and China is harder to define and harder to secure. It is that an understanding should emerge that both these great countries should acknowledge, and take, leadership responsibilities in keeping the world secure and prosperous. Until recently, China hid behind multilateral institutions and rules, and just acted as a taker of those rules. That is unsustainable, even if sharing power with China will be awkward.
The West needs China to share responsibility both in making and in enforcing the rules—both because that would be fair and because it will in time be the only way to manage disputes between the West and China over such topics as nuclear proliferation, the environment, financial stability and trade. Sharing responsibility also means giving up some sovereignty, which is not something that comes naturally to either America or China. The rest of the West must hope that the inescapable reality of the G2 forces both countries to embrace this principle, even if reluctantly.