With the election of Donald Trump, the world as we knew it has been turned around. Rather than the U.S. lecturing China, China is calling on the U.S. to act responsibly in relation to global trade and climate norms.
The U.S. has long used dialogue to prod China to act in a manner supportive of global norms and institutions. In 2005, then Undersecretary of State Robert Zoellick, gave a speech where he called on China to start acting as a responsible stakeholder of the global governance regime. The speech was called “Whither China: from Membership to Responsibility.”
Zoellick never defined the term, but he signaled that being a responsible stakeholder meant redefining the national interest beyond short term issues to encompass the health of the international system. In Zoellick's view, China was a beneficiary of that system. Because of the benefits of trade and foreign aid, China, working with development officials and foreign investors, was able to move millions of its citizens out of poverty. Thus, if China wanted to be a responsible stakeholder, China should use its influence not only wisely, but also justly. Hence, Chinese leaders should not only worry about preserving social stability at home, but they should also work to preserve and enhance the global institutions that maintain global economic and political stability among nations.
Some eleven years later, the lectured became the lecturer. During a brutal election year, President-elect Donald J Trump called China a “currency manipulator,” threatened to impose stiff tariffs on Chinese imports, and accused the country of inventing the idea of climate change to undermine American businesses. China (as well as NAFTA) have become the poster children for all that ails the U.S. and prevents America from being “great, again.”
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While Chinese leaders disputed Trump's allegations, they did not lash back. Instead, they called for cooperation in support of global norms and institutions. In Marrakesh, at the first round of global climate talks on the first weekend after the election, a senior Chinese negotiator stated, "It is global society's will that all want to co-operate to combat climate change." A few days later,Reuters reported that when China's President Xi spoke to President-elect Donald Trump on November 14, Xi told him, according to China Central Television (CCTV), "the facts prove that cooperation is the only correct choice for China and the United States.” In short, Xi was telling Trump that acting responsibly in the global interest, rather than in the short term national interest, was the best strategy for the U.S. Government.
In recent months, the Chinese leaders often speak as if they have drunk the cool-aid. At the September 2016 G-20 Summit, China was the host. The final communiqué was a paean to cooperation:
The choices we make together will determine the effectiveness of our response to the challenges of today and help to shape the world economy of the future. We believe that closer partnership and joint action by G20 members will boost confidence in, foster driving forces for and intensify cooperation on global economic growth, contributing to shared prosperity and better well-being of the world…We will work harder to build an open world economy, reject protectionism, promote global trade and investment, including through further strengthening the multilateral trading system, and ensure broad-based opportunities through and public support for expanded growth in a globalized economy…. We reaffirm our determination to ensure a rules-based, transparent, non-discriminatory, open and inclusive multilateral trading system with the World Trade Organization playing the central role in today's global trade.
These sentences may be just pretty words, but they also reveal that China understands its stakes in maintaining the global system.
In truth, the two countries are both interdependent and at odds. Statistics reveal that both countries have the leverage to unravel each other's economy, a form of mutually assured destruction. China exports significantly more to the U.S. than the U.S. exports to China. According to the U.S. Trade Representative, the U.S. goods and services trade deficit with China was $336.2 billion in 2015. China is currently our largest goods trading partner with $598 billion in total (two way) goods trade during 2015. Trade in services with China (exports and imports) totaled an estimated $61.3 billion in 2015. Services exports were $45.4 billion; services imports were $15.9 billion. The U.S. services trade surplus with China was $29.5 billion in 2015. Services are growing at a much faster rate than goods trade. Meanwhile, China uses the funds accrued from such trade to invest in U.S. Treasury bills. As of August 2016, China held some $1.185 trillion or 30% of the total public debt owned by foreign countries; however, U.S. foreign direct investment (FDI) in China (stock) was $65.8 billion in 2014, while China had only invested $9.5 billion in 2014.
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These statistics should insinuate that mutual dependence would yield responsible behavior between the two trade giants. Nonetheless, a Trump Administration will be under pressure to show why they bashed China—whether through labeling China a currency manipulator or by reducing cooperation. Ironically such behavior will illuminate the decline of the U.S. as the trade hegemon and guarantor of the global trade system.
Nonetheless, there are several heartening factors. First, we know that the two countries have established bridges, structures such as the JCCT, to facilitate dialogue. Secondly, there are many people in China and the U.S. who have learned how to collaborate. These people have a stake not only in maintaining dialogue but also maintaining effective interdependence. Third, business and educational interests that benefit from China are loud and influential—they will not be silent if Trump acts in a protectionist manner. Finally, reducing cooperation will likely yield nothing, whereas continued cooperation could yield policies of mutual advantage. A deal maker such as Trump should recognize the power of incentives.
