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VOL 12 DECEMBER 2016 Dige tWhat’s Next?

Tung Chee Hwa 07ChairmanChina-United States Exchange Foundation COVER STORYPublisher Strategic First Principles in U.S.-ChinaAlan Wong RelationsEditorsZhang Ping The relationship between the two countries is between twoHong Chang societies, not merely between governments or leaders, and thatSpecial Advisor broad spectrum gives it long-term viability. Elevating our sharedZhu Yinghuang strategic gaze to the global level will be difficult, but it is essential.Assistant EditorsPeng Hui 4 EDITOR’S NOTEChen Xingda 7 COVER STORYChina-US Focus Digest is a bi-monthly magazine Strategic First Principles in U.S.-Chinaof exclusive commentaries on China-US relations. RelationsThe articles express views of influential opinion David Lampton, Hyman Professor and Director ofleaders and scholars in China and the US on the China Studies, Johns Hopkins-SAISissues faced by the two nations.@ China-United States 11 CHINA-U.S. RELATIONSExchange Foundation, 2016 The ‘Trumpquake’ and U.S.For comments, please send to [email protected] Cui Liru, Former President, China Institutes of Contemporary International Relations www.chinausfocus.com 15 Strange but Familiar: a Cautious LookWith special thanks to BLJ Worldwide and into Trump DiplomacyShanghai Institutes for International Studies fortheir supports to Zhu Feng, Director, Institute of International Studies,www.chinausfocus.com and Nanjing UniversityChina-US Focus Digest 20 The New Commander-In-Chief Franz-Stefan Gady, Associate Editor, Diplomat China-US Focus Digest

CONTENTS 15 42CHINA-U.S. RELATIONS GLOBALIZATION A Survival Guide to Interesting TimesStrange but Familiar: a Cautious Lookinto Trump Diplomacy Today, from American voters in an ugly U.S. election season to the rhetoric of newly elected Philippines Presi-While the president-elect’s background might suggest a dent Duterte, we are hearing widespread anger againstmore commercial approach to world affairs, he is likely to the governing structures of our time, against inequalitypreserve the US’ unchallengeable military advantages and and elitism. This sense of disempowerment is real andstrategic dominance – including some form of the “Pivot understandable. Our challenge, as individuals in this era ofto Asia”. discontent, is to ensure that we can still come together to move forward and improve the lives of all.25 The ‘New Normal’ in China-U.S. 42 GLOBALIZATION Military Relations A Survival Guide to Interesting Yao Yunzhu, Retired Major General, Chinese Times People’s Liberation Army Curtis S. Chin, Former U.S. Ambassador to Asian Development Bank29 ECONOMY 47 ‘Make Globalization Great Again’33 After the Death of TPP, What Happens Next? He Yafei, Former Vice Minister, State Council Office of Overseas Chinese Affairs Hugh Stephens, Senior Fellow, Asia Pacific Foundation of Canada Trump and U.S.-China Trade Tensions Yukon Huang, Senior Associate, Carnegie Endowment38 ‘PIVOT TO CHINA’ Is Duterte Really Separating from the U.S. in Favor of China? Richard Javad Heydarian, author of “Asia’s New Battlefield: US, China, and the Struggle for Western Pacific”www.chinausfocus.com Vol. 12 DECEMBER 2016 3

EDITOR’S NOTE Editor’s Note Zhang PingUncertainty, Continuity and Resilience David Lampton put it, “Elevating our sharedTrump won. Clinton conceded. Washington is strategic gaze to the global level will be difficult,moving on to usher in the Trump era with much but it is essential.” The two nations have grownbewilderment and unease. so interdependent that they have no choice butA strong sense of uncertainty on the U.S.’s China to cooperate, as Xi has wisely advised Trump.policy is also palpable in the foreign-policy At the very start of the new U.S. administration,communities in both countries. The campaign both countries may need to push to remove anyrhetoric trashing China and calls to go tougher doubts over the relationship. They also need toon China were expected yet disturbing. With a build more robust connections on sub-nationTrump win, it appears unclear what turn the ties (state and local government) levels, betweenbetween the two powers may take. civil societies and, most importantly, betweenTrump has been called unpredictable, among our communities.many other things. While there are plenty of Continuity is both necessary and enabling. Thereasons to worry that some specific areas in pathway to past successes can be duplicated,bilateral ties, such as trade, might fall victim to including the U.S. and China joining hands ina Trump presidency, it is unlikely the overall leading the fight against global warming andrelationship will go south. Over the last three reducing the danger of nuclear weapons anddecades or so, the relationship has been resilient, curbing terrorism. Being competitive doesn’tdefying key leadership changes and major mean the two see each other as rivals. Beijingdomestic and international events in either has been unequivocal in working together withcountry. the new Trump administration and focusing onAfter Trump won, China’s Xi Jinping moved areas where the two can cooperate and succeedswiftly to set the tone in dealing with the together.incoming Trump administration. During a In spite of all the not-so-optimistic forecasts,congratulatory call to Trump, Xi pledged solid we remain optimistic about a strong bilateralpersonal attention and urged continuity in relationship that we believe stands a goodChina-U.S. ties. In return, Trump stated that chance of growing even more resilient. After all,the two nations will have “one of the strongest China-U.S. ties have been expanding against allrelationships” moving forward. odds over the years.We are hopeful that Beijing and Washingtonwill be able to foster a strong relationship goingforward. There is no other way. With a steady,healthy and fruitful relationship, both countrieswin, and the world wins. As Focus contributor4 Vol. 12 DECEMBER 2016 China-US Focus Digest

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COVER STORY Strategic First Principles in U.S.-China Relations The relationship between the two countries is between two societies, not merely between governments or leaders, and that broad spectrum gives it long-term viability. Elevating our shared strategic gaze to the global level will be difficult, but it is essential.t David Lampton America has just concluded a Long ago, Britain’s Harold Hyman Professor and grueling general election. The Macmillan reportedly was Director of China Studies, voters have spoken, but, not asked what blew even the Johns Hopkins-SAIS much productive, realistic, or steadiest ship of state off enlightening was said about course as history unfolded. Two uneasily coexisting China policy during that His perhaps apocryphal and somewhat marathon campaign, except response was: “Events, my to raise red flags about tariffs dear boy, events.” contradictory impulses and trade arrangements, America’s just-completed are discernible in the alliance management, and general election is just embryonic Trump military strengthening. Two one such “Event,” and we Administration— uneasily coexisting and can be sure there will be an impulse to focus somewhat contradictory others. The tectonic plates impulses are discernible of the post-World War II attention outside Asia in the embryonic Trump order are shifting because and one to be more Administration—an impulse of tumultuous domestic muscular in Asia. to focus attention outside political developments in Asia and one to be more China, the United States, www.chinausfocus.com muscular in Asia. The U.S. and around the world. The national debate did not focus post-World War II free trade on the central questions our order is under pressure -- new executive and legislative world merchandise trade branch officials must now shrank about 14 percent in address. For its part, Beijing 2015 and world commercial is trying to understand the services trade was down net impact of these impulses by 6 percent. Some treaty in Washington as it, too, arrangements in East Asia are engages in pulling and fraying and President-elect hauling about China’s future Trump has emphasized his domestic and foreign policy determination to scotch the choices. Vol. 12 DECEMBER 2016 7

COVER STORYUS President Barack Obama shakes hands as he meets with Republican President-elect Donald Trump on transition planning inthe Oval Office at the White House on November 10, 2016 in Washington, DC. (Gettyimages)Trans-Pacific Partnership (TPP). Regional we also need to keep in mind that our twoproliferation dangers are mounting. Central countries now have a relationship betweenAsia and the Middle East are in seemingly our two societies, not just our two nationalendless turmoil, and the European Project governments, not just two national leaders.is searching for a way forward. Amid these Our two societies’ interdependence providesswirling events we must return to strategic dynamism, durability, and creative potentialfirst principles, keeping two different ideas in that are the relationship’s greatest strengths.our minds simultaneously. These linkages among our local governments,The first is that strategic foundations are companies, and civic organizations remindessential for the effective management of us of how much positive there is in U.S.-the U.S.-China relationship. Simultaneously, China ties. One opportunity to come out of the recent elections, for instance, is thatOur two societies’ interdependence provides dynamism, durability,and creative potential that are the relationship’s greatest strengths.8 Vol. 12 DECEMBER 2016 China-US Focus Digest

COVER STORY I would ask: “Do we have the luxury of not choosing among threats, of not having priorities?” And if we must choose, is China reasonably placed on the list of threats with the others? about 34 state governorships others? are in the hands of Republicans who generally are free trade and The first obligation of leadership investment oriented and likely to is to bring commitments into be dedicated to stable, productive alignment with resources. Not economic and cultural ties with doing so fosters anxiety among China. allies and friends, emboldens What are the strategic questions competitors, and creates domestic upon which both sides should confusion while gradually bleeding focus at this moment of transition national strength and resolve. in both our countries? Of the There are only limited ways to United States, I would first achieve alignment of resources ask: U.S. policy in the Obama and commitments--reduce threats; Administration asserts that “We reduce commitments; multiply don’t have the luxury of choosing friends; and/or expand financial among” challenges to our security: and political resources. The time North Korea, ISIS, terrorism, Iran, has come for America to do all Iraq, Syria, Afghanistan, Russia and four. China is best viewed as a China all currently are mentioned competitor with whom we can as central challenges, albeit over deal, not an existential threat now somewhat different time frames or any time soon. and in various ways. I would ask: “Do we have the luxury of not Second, an enduring national choosing among threats, of not interest of the United States having priorities?” And if we must has been to seek a sovereign, choose, is China reasonably placed cohesive China and to prevent on the list of threats with the a circumstance in which the Eurasian Continent is under theChina is best viewed as a competitor with whom we candeal, not an existential threat now or any time soon.www.chinausfocus.com Vol. 12 DECEMBER 2016 9

COVER STORYOf all the shared interests between China and America, the greatestis our common need for national development and renewal.dominance of any single hostile power Washington is for Beijing to improveor powers. This has been the lodestar of ties with its neighbors. Recent movesU.S. policy whether past challenges came towards peaceful management offrom Europe in the Nineteenth Century, maritime issues with the Philippines andJapan in the first half of the Twentieth Malaysia are welcome. Two steps in theCentury, the Soviet Union thereafter, right direction.or the current concerning convergence By way of conclusion, I would askof Chinese and Russian policy. If this both sides two additional questions:remains a defining U.S. national interest, “How can we cooperate to increase“How does driving Moscow and Beijing the density of economic and securitytogether by putting pressure on one institutions in Asia in which we bothfrom Europe and the other from the are participants?” And, “Are not thePacific, serve that objective?” transnational problems the world facesI also wish to ask Beijing a question: almost becoming existential security“While China has achieved a dramatic challenges, whether we considerincrease in its national strength over climate change, global health concerns,the last 40 years, and the international or the need to jointly contribute tosystem has made, and should continue the management of world economicto make, room for China in global stability?” Parenthetically, the incominginstitutions, would it not be preferable administration’s apparent intention tofor China to stick with the core reject the Paris Climate Agreement isfeature of Deng Xiaoping’s strategy? deeply disturbing. Elevating our sharedNamely, reassure the Asian region strategic gaze to the global level will beand the world beyond in order to difficult, but it is essential.focus leadership attention, nationalresources, and popular energies onthe protracted task of China’s nationalrenewal?” Demographic trends in thePeople’s Republic are challenging, asis the gargantuan task of rebalancingthe PRC’s economy, not to mentionenvironmental stresses. Of all the sharedinterests between China and America,the greatest is our common need fornational development and renewal. Thequickest way to better relations with10 Vol. 12 DECEMBER 2016 China-US Focus Digest

CHINA-U.S. RELATIONS The ‘Trumpquake’ and U.S. Diplomacy While the president-elect’s rhetoric suggests an isolationist turn, the reshaping of the US political landscape and Trump’s pragmatic, businesslike approach to decision-making suggest that his policies still defy easy prediction. Cui Liru Donald Trump’s triumph in the workers who, with Trump as Former President, 2016 US presidential election their spokesperson, advocate China Institutes of was not only a shocker to many strongly nationalist and populist Americans, but also sent shock domestic and foreign policies, Contemporary waves across the international hold high the anti-establishment, International Relations community. The “Trumpquake” anti-elite political banner, and will be an extra-ordinary episode pledge to fundamentally changewww.chinausfocus.com in the history of US presidential the status quo. On the other side election. is the traditional establishment The odd fruit of an unprecedented, and elite class, people who strive ferocious political battle resulted to preserve vested power and from the reality that social and political norms, and contain anti- political polarization in America establishment, populist political since 2008 has gone to the forces within the current political very extreme. The substantive and social framework, hoping to contest has been between two ease tensions and contradictions major forces: On one side is in relatively mild, incremental the force consisting mostly of manners. middle- and lower-level white As a result, the establishment has Vol. 12 DECEMBER 2016 11

CHINA-U.S. RELATIONS Chinese newspapers and British newspapersfeature U.S. Republican candidate and PresidentElect Donald Trump on their front pages the day after Trump was announced the winner in U.S.presidential elections on November on November 10, 2016. (Gettyimages)completely lost control, while populist has worked so hard in the past eightand radical nationalist forces relish years to push ahead face the threattheir triumph. For many people, such of reversal. The US political balancean outcome was more undesirable will become even more skewed, andthan surprising. This overthrow of society’s split will not be healed for aexisting US political order and social long time.norms is actually a political crisis: The Undeniably both Trump and theso-called Trumpquake is mostly about voters and relevant political forcesmainstream political forces and social that have propelled him to the Whiteelite’s panic. House want badly to change the statusThe outcome of the election has quo of American domestic affairs andshattered the Democratic Party’s foreign policies. As a result, the future“majority alliance”, and will reshape agendas of American economic,both parties’ political landscapes. political and social changes will beThe GOP not only has won the dramatically different from those ofWhite House and retained control the Obama era. It remains to be seenover both the House and Senate, whether the main spindle will be abut further expanded its majority Trump agenda, a GOP agenda, or aadvantages at state-level legislative blend of both.and administrative offices. That means A main aspect of people’s concernthe process of economic and social about Trump as US president is hisreforms the Obama Administration12 Vol. 12 DECEMBER 2016 China-US Focus Digest

CHINA-U.S. RELATIONS The odd fruit of an unprecedented, ferocious political battle resulted from the reality that social and political polarization in America since 2008 has gone to the very extreme. personal temperament. A combination see an America that focuses narrowly of self-centrism and pragmatism, on “America first” interests, forsakes Trump is free of the fetters of responsibilities for preserving mainstream ideology and the principle international order, and returns to of political correctness, with white pre-WWII isolationism. In that case, supremacy ingrained deeply in his the changes Trump will bring to future bones. He is convinced this remains international relations will simply be a world where the law of the jungle immeasurable. prevails, and enshrines Hobbesianism Now people are watching the power and the “winner is king” credo; his transfer in Washington with curiosity headstrong, obstinate style requires and anxiety, trying to find clues in the his subordinates to be highly loyal and appointments and remarks Trump obedient; he can be unscrupulous in makes and the measures he takes order to achieve his goals, but at the that may foretell future American same time does not lack flexibility in domestic and foreign policies. Judging tactics. In the next few years, it will be from recent developments, Trump fascinating to observe how the “House has begun to change tunes on some of of Cards” of conflicts and compromises his sensational statements during the between the Trump team and the campaign, and is starting to do some establishment and elite in Washington political fence-mending. Obviously D.C. unfolds. Trump will not, cannot, as he bragged Compared with his domestic policies, on the campaign trail, abruptly change traditional American establishment the fundamental lines of US foreign and Western allies are more concerned policy and global strategy, or easily about Trump’s foreign policies. Based reverse major policies. on Trump’s remarks on US foreign What determines the basic principles trade and security policies as well as and overall posture of American some major issues on the campaign diplomacy and global strategy trail, in the words of famous Brookings has never been any individual scholar Robert Kagan, people willJudging from recent developments, Trump has begun to changetunes on some of his sensational statements during the campaign,and is starting to do some political fence-mending.www.chinausfocus.com Vol. 12 DECEMBER 2016 13

CHINA-U.S. RELATIONSpresident, but always the dominant forces that the US should no longer assume allrepresenting Washington and the status of responsibilities like before, catering toUS comprehensive strength. Since the 20th nationalist feelings at home while demandingcentury, when American diplomacy shifted higher protection fees from allies.from isolationism to internationalism, the Trump needs to experience a process ofstarting points and goals have never deviated transition from a businessman to a presidentfrom the “America first” principle. In different — learning to be a US president. He metperiods, the differences between US foreign with Henry Kissinger, the most veteranpolicies under different presidents were and prestigious diplomatic advisor of theonly about the paths and forms taken for US establishment, after getting electedpromoting so-called American “national and listened to his advice. Kissinger saidinterests”. After WWII, the internationalist afterward that he was optimistic about theschool has dominated American global new president’s strategic decisiveness, anddiplomacy, shaping the unprecedented urged outsiders to avoid dwelling on some ofsuperpower status the US has enjoyed. In the Trump’s campaign rhetoric, and allow himnearly two decades after the Cold War, the some time. With the new president movingfundamental and main driving force for the into the White House, the revolving doorUS has been to play the world’s policeman, of the government will see a new team oftrumpet globalization and preserve the US- ambitious individuals, many of whom aredominated world order, the US’ unrivalled unfamiliar faces. Some significant issuesstatus as the world’s sole superpower and its facing US diplomacy will to a great extent restinterest in industrial and financial capital on the diplomatic philosophy, policy stanceexpansion. and professional knowledge and experience ofThe wars in Iraq and Afghanistan, however, corresponding officials in charge.have significantly overburdened the US To sum up, Trump’s win was a major politicalpolitically and economically. The financial earthquake, some old, fragile entities willcrisis that broke out in 2008 exacerbated the inevitably give way to new ones, while thedecline of US strength from its pinnacle. solid ones will stay and continue to function.Against such background, the diplomatic Other things may suffer damage of variousstrategies of Obama, who got elected holding kinds and degrees and require repair. This maythe banner of change, promoted the shrinking well be the American politics and diplomacyof US global force deployment, and shifting we will have to face in the future.foreign trade and strategic focuses to theAsia-Pacific. Trump’s remarks on Americandiplomatic contraction also derive from sucha general trend. He has loudly advocatedthe “America first” principle, emphasizedWhat determines the basic principles and overall posture ofAmerican diplomacy and global strategy has never been anyindividual president, but always the dominant forces representingWashington and the status of US comprehensive strength.14 Vol. 12 DECEMBER 2016 China-US Focus Digest

CHINA-U.S. RELATIONSStrange but Familiar:A Cautious Look into TrumpDiplomacy While the president-elect’s background might suggest a more commercial approach to world affairs, he is likely to preserve the US’ unchallengeable military advantages and strategic dominance – including some form of the “Pivot to Asia”. Zhu Feng With the cabinet of United States President-elect Donald Trump Director, gradually taking shape, speculations about his foreign policy orientation abound. What diplomatic policies would Trump Institute of International present? What would they mean to the rest of the world? AnalyzingStudies, Nanjing University these questions will help handle and stabilize China-US relations in the Trump era. We can assuredly exclude three things fromwww.chinausfocus.com Trump’s diplomatic options: neo-isolationism, mercantilism, neo- interventionism. The core of Trump’s foreign policies will be America- centric neo-pragmatism. Trump repeatedly stated on the campaign trail that the US would shoulder fewer responsibilities for allies, asked such Asian allies as Vol. 12 DECEMBER 2016 15

CHINA-U.S. RELATIONSJapan and South Korea to share more positions in terms of both order andcost of resident US troops, even rules. Trump’s US has no reason orsuggesting he would let allies “protect domestic political ground to go backthemselves”. Such campaign rhetoric to the so-called neo-isolationism.cannot be translated into real-world Trump is an authentic, successfulpolicies, essentially because the US merchant, but it will be difficult forwill continue a strategy of US “uni- him to re-introduce “mercantilism”polar hegemony” in the Trump era. in foreign policies after assuming theThe core of such a strategy is the US presidency. Until World War I,US maintaining its global military 19th-century US diplomacy hadalliances, and, by means of such followed a typical mercantilist line.alliances, ensuring its dominance The expansion of American interestsand strategic superiority in the global in the Far East and the “open-door”system. Trump may impose burdens principle the US adopted in its Chinaon allies, but can’t change the mega policy in 1899 were cases in point.strategy that has become a part of the In the 21st century, however, thingselite consensus after the Cold War. are dramatically different with theThe US headed toward “isolationism” US’ multifaceted policy advantagesafter the 1919 Versailles Conference and rich experiences in managingbecause America’s international the relations between market order,proposals, featuring “Wilsonism”, trade and financial rules, as well ashad been refused by such old-time commercial interests. Even thoughempires as the United Kingdom Trump has clamored about launchingand France. The post-WWI a “trade war” against China andAmerica had no power advantage asked Japan to further open itsin the international system, and market, discussion of such issuesencountered policy frustrations in will have to take into perspective therebuilding post-war world order; interaction between geo-politics,that was the macro background of geo-strategy and geo-economics.the rise of isolationism. Nowadays, Trump emphasizes safeguardingthe US not only enjoys a power American business interests, keepingadvantage, but also has dominant manufacturing in America, andWe can assuredly exclude three things from Trump’s diplomatic options:neo-isolationism, mercantilism, neo-interventionism. The core ofTrump’s foreign policies will be America-centric neo-pragmatism.16 Vol. 12 DECEMBER 2016 China-US Focus Digest

CHINA-U.S. RELATIONS significantly renovating and increasing benefits in commerce, finance and investments in infrastructure; while market competitiveness, and outrun dealing with China and Japan, he will other countries in proposing new rules inevitably utilize US geo-strategic for international governance, all while tools. Trump’s nature as a businessman preserving the US’ unchallengeable may endow his diplomacy with military advantages and strategic “deal-cutting” characteristics, but the dominance. But that dominance Trump-era America will certainly would not be used to peddle continue highlighting long-term US American democratic values and geo-strategic interests. global interventionist responsibilities The probability of Trump adopting it has assumed. Such inclinations neo-interventionism may be the have always been the mainstream in lowest. Not because Trump is US diplomatic history. Present-day particularly passionate for peace, but America does have various troubles because the wars in Afghanistan and and challenges in its face. In Trump’s Iraq after 2001 have made Americans eyes, the most important problem aware that the neo-conservative and challenge is interest distribution hawks’ belief that the US can do undesirable to the US has emerged anything anywhere and assume the in the process of liberal globalization role of a global “liberator” has been a based on US global responsibilities, disaster to their country. The Obama which has hurt American interests and Administration withdrew US troops aroused indignation in white voters at from Iraq and reduced military home and strong reactions from the presence in Afghanistan, refused to conservative mainstream. launch ground wars in the “Jasmine Trump complained loudly about revolution” in the Middle East and spending $6 trillion in the Middle North Africa as well as in the Syrian East, saying the sum would have been civil war, and cut off links with “neo- enough for rebuilding roads, bridges, conservatives’”, “neo-interventionism”. tunnels and airports at home that are There is no reason for the Trump getting outdated. Trump’s diplomacy administration to renew what he sees will surely sustain the “America first” as a failed approach. principle he has openly advocated for Washington will more likely shift nearly 30 years. Specifically, it will be toward a “neo-utilitarian” policy. The “American affairs first”, “American main intent of such a policy will be interests first”, and “American domestic letting the US make a timely turn development first”. Such a policy will to new problems that demand its deviate from the mainstream of post- attention and about which society has Cold War US diplomacy – “liberal achieved consensus, gain practical internationalism”.www.chinausfocus.com Vol. 12 DECEMBER 2016 17

CHINA-U.S. RELATIONSIf such changes materialize in the Trump administration’sdiplomatic strategy transition, they will inflict practicalstrategic and economic pressures on China.Such a neo-pragmatist orientation with Russia on Middle East andmay very likely be most conspicuous European issues, even to accept thein three aspects: First, the Trump “post-Crimea” European politicaladministration may dump the TPP, landscape, reduce US diplomaticbut continue striving to highlight attention on the Middle East, andAmerican market principles and strive to cooperate with Russia so asstandards in foreign trade, business to end the stalemate in Syria.and financial relations, hence seeking Fourth, in the Asia-Pacific andto adjust and develop international Europe, he may encourage allies totrade and financial systems in the assume more responsibilities andUS’ favor. Trump has a fixation with act more aggressively, and continuemaking sure the US no longer suffers shifting the focus of global military“losses” in economic exchanges with deployment to the Asia-Pacific.China and Japan, and making sure Although it may no longer mentioninternational markets and investment “pivoting to the Asia-Pacific”, theand trade relations continue Trump administration will actuallybenefiting the US. It will be difficult inherit and press ahead with such afor the Trump administration strategy.to “de-globalize”, instead, it will If such changes materialize in thevociferously ask for American-style Trump administration’s diplomatic“re-globalization”. strategy transition, they will inflictSecond, he may push to dramatically practical strategic and economicincrease military expenditure, pressures on China. First, China-USwhile making advanced weaponry conflicts over the renminbi exchangemore affordable for the US military, rate, degree of market openness,directly pressure Russia and China investment areas, state-ownedinto an arms race. This marks firms and export subsidies willRepublican diplomacy’s return rise conspicuously, and Americanto the 1980s Regan era, with an pressures for favorable changes inemphasis on consolidating US power the Chinese market may be moreadvantages and pursuing peace with forceful, specific and insistent.might. Second, the intensity of US strategicThird, he could choose to cooperate intervention and interference in the18 Vol. 12 DECEMBER 2016 China-US Focus Digest

CHINA-U.S. RELATIONS West Pacific area will not decrease mutual dependence has reached conspicuously; alliance politics will such width and depth since they remain the core of US Asia-Pacific established diplomatic ties 37 diplomacy. Third, the impacts of “re- years ago, particularly after Beijing globalization” on Europe, the Middle proposed a “new-type major-power East, and Latin America may very relationship”, China and the US are likely further complicate conditions getting along generally well, in both for Chinese overseas investments and bilateral and multilateral settings. businesses in a certain period of time. Chinese President Xi Jinping’s phone Lower American market demand for conversation with the US president- imports will continue compromising elect on November 14 also set the Chinese efforts to boost foreign constructive tone of China-US trade, and global demand growth will continuing cooperation, managing stay weak in a fairly long time. disputes, and actively pursuing new Fourth, adjustments in American progress. The Trump administration’s industrial and business policies that China policy is still worth waiting for. are to come along with those in foreign policies will render China-US investment agreement negotiations even more difficult. The Trump-era US may very likely be both familiar and strange to us. Such a US will want to stimulate growth via neo- Keynesian tax cuts, encouraging exports and expanding infrastructure investments while aspiring to return to the aggressive posture of the Regan era in diplomacy, seeking peace with might. The question is: Can Trump become “a second Regan”? No matter what diplomatic principles Trump chooses to follow, they will profoundly and extensively affect China-US relations. However,The Trump-era US may very likely be both familiar and strange to us.www.chinausfocus.com Vol. 12 DECEMBER 2016 19

CHINA-U.S. RELATIONS The NewCommander- In-Chief Donald Trump’s ascension to the Donald Trump ascension to the presidency in presidency in 2017 will also make him the 2017 will also make him the new commander- in-chief of the United States Armed Forces. new commander-in-chief of the United Will the chances of the United States getting States Armed Forces. While some see involved in another war increase? Will his strongman style as reminiscent of President Trump be more likely to use nuclear weapons than his predecessors? Like it or not, Theodore Roosevelt’s Gunboat Diplomacy, he will have a large say over the question of there are too many known unknowns war and peace in the next four years. The President’s War Powers about Trump’s defense policies to predict The U.S. president’s powers to wage war are how he would react in the event of war or a quite extensive. Most importantly, he can take military actions without specific congressional perceived threat. authorization, although the so-called War Powers Resolution from 1973 mandates that Franz-Stefan Gady the president has to withdraw combat troops Associate Editor, Diplomat from foreign territory within 60 to 90 days unless Congress authorizes their continued20 Vol. 12 DECEMBER 2016 deployment. However, no president — including Barack Obama back in 2011, when he did not seek congressional authorization 60 days into the Libyan intervention — has accepted the constitutionality of the 60-90 day limit. China-US Focus Digest

CHINA-U.S. RELATIONS Trump’s war powers in the long run will depend on how well he will be able to work together with the Republican majority in both the House and Senate.According to executive-branch interpretation, expensive and has so far always required specialmost conflicts that the United States has been funding legislation. If Congress opposes militaryinvolved in did not the pass threshold definition action, it could just refuse to pass a law fundingof war for constitutional purposes. Indeed, the the president’s military adventure rather thanUnited States has not declared war since 1942 actively passing legislation to reduce the size of theand ever since U.S. President Harry Truman’s military or cut the defense budget. Consequently,decision to dispatch U.S. troops into Korea in Trump’s war powers in the long run will depend1950, the president has made the initial decision on how well he will be able to work together withto commence military hostilities abroad. In the the Republican majority in both the House andlate 20th/early 21st century, the executive branch’s Senate.power was generously interpreted as giving The Worst-Case Scenariothe president the ability to wage war without The question of war and peace under a Trumpcongressional authorization even when the United presidency becomes imminently more pressingStates is not facing an actual or imminent threat to when discussing the use of nuclear weapons.its national security. In the summer, an American talk show hostLike it or not, President Donald Trump will have a claimed that Donald Trump repeatedly asked alarge say over the question of war and peace in the foreign policy expert why, given that the Unitednext four years. States possesses nuclear weapons, it cannot useWhile Trump would be able to get the United them. (Trump denied the veracity of the story.)States into a war, Congress can cut off funds if President Barack Obama repeatedly stated heit believes that the president has misled them or would not trust Trump with the nuclear launchthat the military engagement is not in the interest codes for U.S. intercontinental nuclear ballisticof the United States. Fighting modern war is missiles given his temperament. Rather thanwww.chinausfocus.com Vol. 12 DECEMBER 2016 21

CHINA-U.S. RELATIONSSource: TheMilitary Balance 2015 continental United States. (As recently as 2013, the president ordered the U.S. Department ofbeing guided by deliberate and rational thought Defense to retain this capability under its Nuclearwhen making a decision that could annihilate the Employment Strategy.)lives of millions, emotions could get the better Under such a scenario, laid out in great detailof the president-elect and cloud his judgement, by Jeffrey Lewis and Dave Schmerler in Augustresulting in nuclear holocaust. 2016, President Trump would have less than eightWhile China (and potentially North Korea) minutes from the first call to the White Housecould hit the United States with nuclear weapons until the last moment he can act and decide to(keeping in mind that Beijing maintains a so- launch the 400 land-based nuclear-armed ICBMscalled minimum nuclear deterrent, however, before Russian missiles have started to detonatewith a no-first-use policy), it is a nuclear conflict on American soil and destroy U.S. missile silos.with Russia that poses the greatest danger to Under such a scenario, the president’s optionsthe United States given current U.S. nuclear are limited and there is practically no time forwar strategies. For example, the United States deliberations (e.g., trying to find out whether it ismaintains a so-called Launch Under Attack a false alarm). “The system is designed for speedcapability, which demands that the U.S. military and decisiveness. It is not designed to debatedetect the launch of Russian ICBMs and launch the decision,” retired General Michael Haydenretaliatory nuclear strikes before Russian missilestake out U.S. land-based missile silos on theThe United States will no longer be the policeman of the world, althoughgiven Trump’s pledge to expand the U.S. armed forces, the UnitedStates will remain militarily present in the world, perhaps in a morestandoffish manner built around the concept of offshore balancing.22 Vol. 12 DECEMBER 2016 China-US Focus Digest

CHINA-U.S. RELATIONSOne of the dangers of Donald Trump as the new commander-in-chiefis his staunch belief in the soundness of his judgment.said in an interview this August. In a Launch to conduct raids against military installations ofUnder Attack scenario, it is unclear whether any those deemed responsible.president would have much time for deliberations In short, we could experience a revival of a(three to four minutes at most) before making a Trumpian version of Teddy Roosevelt’s so-calleddecision that could kill millions. Gunboat Diplomacy. Perhaps, we even shouldHowever, given the size and diversity of the U.S. expect a 21st-century replay of the Pedicarisnuclear arsenal it will be virtually impossible for Affair of 1904, where Roosevelt sent seven U.S.Russia to succeed in dealing a knockout blow Navy warships and several hundred Marines toto the United States and destroy the majority Morocco (with unclear instructions) after theof missile silos, bombers, and ballistic missile kidnapping of an American citizen there, endingsubmarines. In addition, there is also no U.S. with a variant of the Roosevelt administration’spolicy in place that would require the president to succinct demand: “Pedicaris alive or Rasuli [thepromptly launch nuclear weapons in retaliation bandit who kidnapped the American] dead.”)even after the confirmation of a Russian nuclear Trump also repeatedly said during his campaignattack. As a consequence, no immediate decision that he will emphasize counterterrorismon the launch of nuclear retaliatory strikes is operations and seek the cooperation, not onlyrequired to preserve a counterstrike capability. of allies, but also of countries such as Russia.Trump could choose to, but would not need to, Nevertheless, given his reported admiration fororder a launch on warning. President Trump, Russian President Vladimir Putin (and otherif still alive after the very-hypothetical Russian strongmen), it is unclear how Trump will reactnuclear attack, would thus need to deliberate when challenged by Russia along NATO’s easterncarefully with his national security team over flank in Europe — especially since Trump appearswhether to launch retaliatory strikes or not. It is to think that the Russian military is as powerfuldifficult to assess how he would react under such as the United States armed forces. The possibilitycircumstances and whether he would rely on that Gunboat Diplomacy (i.e. bullying) might notexperienced national security staff to formulate a work could, in fact, cause him to back off.proportionate response or not.The Most Likely Scenario It is also likely, however, that Trump would beJudging from Donald Trump’s past leadership careful in deploying a large number of troopsstyle, the most likely war scenario in a Trump overseas for a prolonged amount of time givenpresidency is a disproportionate large military his neo-isolationist tendencies; he has repeatedlyresponse to a minor incident such as the alleged called for allies to share a larger burden whenattack on the U.S. Navy guided missile destroyer it comes to military expenditures and moreUSS Mason in October of this year. It is possible proactively providing for their own nationalthat a President Trump would, for example, order security. At the same time, it is also unclearmassive retaliatory airstrikes in response to such whether Trump would be capable of workingan incident or dispatch Special Operations Forces with Congress to appropriately fund large-scale military operations abroad for a prolongedwww.chinausfocus.com Vol. 12 DECEMBER 2016 23

CHINA-U.S. RELATIONStime. In a scenario such as described above, MacArthur was famously outmaneuvered bypredicated upon the president’s erratic temper Mao Zedong in 1950 when the communistand an unwillingness to listen to his (hopefully) leader compelled him to fight off a massivemore experienced national security staff at Chinese counteroffensive deep inside Norththe White House, moderate Republicans and Korea, necessitating a U.S. general withdrawalDemocrats would quickly move to slash funds and resulting in the successful Chinese recoveryor fail to pass necessary legislation and cut any of all of North Korea.impulsively ordered Trump military expedition It remains to be seen whether U.S. adversariesshort. will try to play on Trump’s volatile temperamentGiven the platform President Trump ran and what some perceive to be delusions ofupon, it is improbable that he would want to grandeur. There will certainly be some testinginvolve the U.S. military in nation-building by the Russians in Europe and Syria and theand democracy promotion abroad as seen over Chinese in Asia as to how far they can push athe last decade. Consequently, we are unlikely new President Trump. For example, will theto experience large-scale military operations Chinese step up so called gray-zone coercionakin to the large U.S. military involvements in — i.e. the use of China Coast Guard (CCG)Afghanistan and Iraq. The United States will no and maritime militia vessels to press Chineselonger be the policeman of the world, although claims in the South China Sea? Or will theygiven Trump’s pledge to expand the U.S. armed reduce their activities due to Trump’s largelyforces, the United States will remain militarily unpredictable behavior, existing U.S. rulespresent in the world, perhaps in a more of engagement, and international treatiesstandoffish manner built around the concept of notwithstanding?offshore balancing. There are too many known unknowns aboutTrump and the Unpredictable Trump’s defense policies to try to make anOne of the dangers of Donald Trump as the accurate depiction of his likely moves in thenew commander-in-chief is his staunch belief years ahead and how he would react in the eventin the soundness of his judgment. Trump has of war. Too many of his statements contradictrepeatedly expressed his admiration for U.S. one another. President Trump would do well,generals Douglas MacArthur and George S. however, to remember that should he decide toPatton, impulsive and unorthodox generals get involved in military conflicts, he should haveendowed with a great belief in their own a clear plan about how to eventually get out ofinvincibility. Trump appears to hold similar them. Bullying — as Richard Nixon and othersconvictions about his own leadership. This learned in Vietnam in the 1960s and 1970s —could be exploited by U.S. adversaries to lure will not suffice to end conflicts or to give thethe United States into unnecessary conflict. United States peace with honor.There are too many known unknowns about Trump’s defensepolicies to try to make an accurate depiction of his likely moves inthe years ahead and how he would react in the event of war.24 Vol. 12 DECEMBER 2016 China-US Focus Digest

CHINA-U.S. RELATIONSThe ‘New Normal’ The China-US military relationshipin China-U.S. goes beyond its traditional bilateralMilitary Relations boundary, and moves into regional and even global arenas. With the Chinese military extending its global reach, it finds more occasions to cooperate with its US counterpart. Yao Yunzhu Of all relationships between China Yao Yunzhu, and the United States, the military one has traditionally been theRetired Major General, most difficult. For more than two Chinese People’s decades, while relations between Liberation Army the two great powers in other fields had gone through ups and downs, defense relations had been trapped in an on-and-off pattern. Lack of understanding and deep- rooted suspicion had kept military ties at a low level and rendered them highly vulnerable. However, recent years have witnessed more positive developments, and some observers have even cheered the military relationship as a highlight in generally downhill bilateral relations. It seems that the China-US military relationship has entered a state of “new normal”, in which progress is encouraging, though challenges are daunting. One positive development in this About 1,200 soldiers and officers from the Chinese “new normal” pattern is the newly Navy arrive in the Pearl Harbor on June 29, 2016, found resilience in the mil-mil to take part in the U.S.-led Rim of the Pacific 2016 relation. The mutual understanding (RIMPAC 2016) multinational naval exercise. is that military ties are so important (Photo: CRI)www.chinausfocus.com Vol. 12 DECEMBER 2016 25

CHINA-U.S. RELATIONSThe mutual understanding is that military ties are so importantthat they have to be maintained even in difficult times.that they have to be maintained even in the two military establishments have been carrieddifficult times. The Chinese PLA and the US on in a more interactive and constructive way.military are now interacting with each other The mechanism of the Maritime Managementwith more frequency and greater density. The Consultation Agreement, in which both sidesChinese navy’s participation in the RIMPAC have tried to work out ways to avoid accidents2016 Exercise hosted by US Pacific Fleet, and at sea and in the air, has yielded concrete results.the consecutive visits to China by Adm. John At the national level, defense officials on bothRichardson, Chief of Naval Operations; Adm. sides have participated in the Strategic andScott Swift, Pacific Fleet Commander; and Gen. Security Dialogue. Meanwhile, the two militaries China’s Hengshui frigates sails behind the U.S’ Arleigh Burke class destroyer and the Gaoyouhu supply ship, all on their way to Hawaii in the RIMPAC 2016 Exercise. (Xinhua Photo)Mark A. Milley, Chief of the Army Staff, are have worked to set up new dialogue platformsexamples of unimpeded communication and between defense counterparts, such as betweenexchanges at times when the two countries are the strategic planning organizations and thepointing fingers at each other in the South China services.Sea and on the THAAD deployment decision. Functional exchanges make up the substanceHigh-level visits have not only been frequent in of military relations, including reciprocal visitsnumber but also candid and communicative in by military academies and schools, academicstyle. exchanges such as a seminar on internationalThe “New Normal” also features the extension issues jointly sponsored by the Chinese Academyand deepening of institutionalized exchanges and of Military Science and the US Army Wardialogues. Annual Defense Consultative Talks College, the exchange between military medicaland Defense Policy Coordination Talks between units, counter-terrorism units, cooperation of26 Vol. 12 DECEMBER 2016 China-US Focus Digest

CHINA-U.S. RELATIONS Submarine rescue officers from the U.S. and Chinese navies communicate during a trainingbrief for a multilateral submarinerescue exercise, during Rim of the Pacific 2016. (Photo: U.S. Navy) The two militaries archivists to locate the remains notification of major military carry out more of US MIAs during the Second activities, another on rules of World War, and port calls. behavior for safety in air and than 50 exchange Recent years have seen more maritime encounters. Last year,programs every year. joint exercises than ever before, an annex of “military crisis such as a counter-piracy joint notification mechanism for use exercise in the Gulf of Aden, of the defense telephone link” HADR (humanitarian assistance and an air-to-air part of the rules and disaster relief) exercises in of encounters were added to the both China and the US, and SAR two MOUs. Crisis-prevention (search and rescue) exercises management and confidence- in conjunction with port visits. building measures are important Functional exchanges are the new elements in the relationship essential way to build trust and now that both militaries find develop the habit of cooperation. themselves encountering each The two militaries carry out more other frequently. They are crucial than 50 exchange programs every stabilizers even in the worst year. circumstances. Another new development In addition, the China-US worth noting in this “New military relationship now goes Normal” are the measures and beyond its traditional bilateral mechanisms to prevent and boundary, and moves into manage crisis between the two regional and even global arenas. militaries. At the end of 2014, With the Chinese military the US Department of Defense extending its global reach, it finds and the Chinese Ministry of more occasions to cooperate with National Defense agreed upon its US counterpart. For example, two MOUs (Memorandums both militaries take a major of Understanding), one on supporting role in the ADMM+www.chinausfocus.com Vol. 12 DECEMBER 2016 27

CHINA-U.S. RELATIONS China’s bilateral disputes with its neighbors, some of whom are US allies, have brought the two militaries to new frictions, triggering significant multilateral and regional ramifications.framework joint exercises on HADR, MM, SAR, The current US military moves, includingcounter-terror, and so on. Chinese and American deployment of the most advanced weaponrynaval patrol ships carry out joint drills each year to the Western Pacific, increase of forwardin the Gulf of Aden. The Chinese naval vessels, military presence, large-scale allied exercises,together with Russian, American and Norwegian FONOPs in the South China Sea, new defensevessels, arrangements suchhave jointly as the rotationalaccomplished the deployment to theUN mission to military bases indestroy chemical the Philippines,weapons from upgrading of theSyria. Even security treaty withthough military Japan, arms sales tocooperation in China’s neighbors,a multilateral and the decision toframework is deploy a THAADstill nascent, it system in the ROK,foretells a “New all give China theNormal” where impression thatthe two militaries the US is using itsmay have more alliance frameworkcommon interests to suppress China’sand share rise, especiallymore common in the militaryresponsibilities. dimension. This has Chinese and U.S. soldiers greet with each other during the counter- proven to be a major piracy exercise in the Gulf of Aden, Aug. 25, 2013. (Photo: U.S. Navy)However, the obstacle to further“New Normal” improvement ofpattern has a negative side too. China’s bilateral military relations.disputes with its neighbors, some of whom areUS allies, have brought the two militaries to new To sum up, the current China-US defensefrictions, triggering significant multilateral and relationship is more resilient, substantive, andregional ramifications. For China, territorial extensive than before. However, to keep it on aintegrity is the vital national interest, and for the positive track, there is much to be done.US, the credibility of its defense commitment toallies is key to its regional security architecture.28 Vol. 12 DECEMBER 2016 China-US Focus Digest

ECONOMY After the Death of TPP, What Happens Next?Over the long term, Washington will need to re-assert its trade presence in the Asia-Pacific region.The supply chains are too interwoven and interdependent for the U.S. to go at it alone, despite theisolationist rhetoric emanating from the U.S. election. With the election of Donald Trump to the White House, Hugh Stephens the Obama Administration has finally accepted the Senior Fellow, inevitable and has announced that it will cease efforts to Asia Pacific Foundation push the Trans Pacific Partnership (TPP) forward in the of Canada waning days of the lame-duck session of Congress. From a U.S. perspective, the TPP is now dead. For the 11 other Vol. 12 DECEMBER 2016 29 TPP partners, this announcement is a disappointment, although not an unexpected one given the opposition to the TPP demonstrated by both Trump and Hillary Clinton. Japan has already passed TPP legislation and there is legislation pending in the New Zealand Parliament. In Canada, the Liberal Party, which inherited the TPP from its predecessors, has been conducting hearings on the treaty. However, while opponents received ample airtime, the hearings were really just awww.chinausfocus.com

ECONOMYway to “rag the puck”, running out the time negotiation. RCEP includes all 10 countriesuntil it became clearer what would happen in in the Association of Southeast AsianWashington. Nations (ASEAN) plus Japan, China, Korea,With the U.S. unwilling to ratify the India, and Australia and New Zealand.agreement that was signed in February, it Chile, Peru, and Mexico are members of thecannot go ahead unless it is revised. Under newly formed Pacific Alliance (PA), whichits current terms, it can only come into force is engaged in liberalizing trade in the Latinif at least 6 of the 12 original members, America region. Along with Canada, Mexicocomprising 85 percent of the combined GDP is a North Atlantic Free Trade Agreementof all members (in 2013), agree to proceed. (NAFTA) partner alongside the U.S.With the U.S. and Japan having a combined However, being a member of NAFTA theseshare of about 80 percent of combined GDP, days is not very reassuring given what Trumpthis effectively gives both countries a veto has said about revising — or scrapping — the(the U.S. share is about 62 percent). Whether 20-year-old agreement that has worked wellthe remaining eleven would be interested for all three partners.in proceeding without the U.S. is debatable While the TPP was accused of being negotiated in secret, the same is true of the China has been pushing the RCEP. And although the TPP text became FTAAP as an ultimate goal, publicly available after final agreements and APEC has even agreed were reached, the terms of the RCEP remain to a “strategic study”, co- vague. It is generally accepted that based on chaired by China and the bilateral agreements between the ASEAN U.S., to explore the ways in partners and the six countries that are the which the TPP and RCEP ASEAN bloc’s main trade partners, that could be made compatible RCEP represents lower ambition and benefit and mutually reinforcing. in terms of bringing down trade barriers in comparison to the TPP. However, insince gaining exclusive access to the U.S. addition to trade in goods, RCEP includesmarket was the main priority for many trade in services, investments, intellectualmember countries. property rights, competition policy, andSo where does this leave businesses and dispute settlement and technical cooperation.exporters in the U.S. and other TPP The agreement also includes China, thecountries? Most of the other TPP players world’s second-largest economy. Despite thehave another string to their bow. Australia, inevitable carve-outs for sensitive sectorsNew Zealand, Singapore, Malaysia, Vietnam, and long phase-ins for some products, whenBrunei and Japan are parties to the Regional the agreement is finalized, it will create aComprehensive Economic Partnership preferential trade zone for its members(RCEP) Agreement, which is currently under that will cover 45 percent of the world’s population with a combined GDP of $22 trillion, while accounting for 40 percent of global trade. It will be the world’s largest trade bloc—and the U.S. will be on the outside looking in.30 Vol. 12 DECEMBER 2016 China-US Focus Digest

ECONOMYAPEC (Asia-Pacific Economic Cooperation); TPP (Trans-Pacific Partnership); RCEP (Regional Comprehensive Economic Partnership);ASEAN (Association of Southeast Asian Nations). Graphic©Asia Briefing Ltd For U.S. companies exporting to or Asia will need to be located in Asia to operating in the region, it will likely provide goods and services to these faster lead to more outsourcing as companies growing, significant markets.” seek to get inside the RCEP zone. As the Asian Trade Centre in Singapore has This, of course, is the opposite outcome commented: for which Trump has been advocating. “Companies hoping to remain The TPP is supposed to be one of the competitive—and particularly those “pathways” (alongside the RCEP and the working in export markets—will have Pacific Alliance) to a much broader Free to work much harder now. Absent trade Trade Area of the Asia Pacific (FTAAP), preferences, firms are at a disadvantage a mega regional agreement that would relative to competitors in places like combine and multiply the benefits of its Asia or Europe. The outsourcing that components. China has been pushing Trump has complained about is likely the FTAAP as an ultimate goal, and to accelerate. Firms that want to take APEC has even agreed to a “strategic advantage of benefits conferred through study”, co-chaired by China and the deals like the Regional Comprehensive U.S., to explore the ways in which Economic Partnership (RCEP) in the TPP and RCEP could be madewww.chinausfocus.com Vol. 12 DECEMBER 2016 31

ECONOMYcompatible and mutually reinforcing. While Trump setting trade policy, it is hard to imaginethe FTAAP would bring China into a larger, that this will be a priority.presumably higher-discipline treaty, the U.S. has China is facing its own economic challengespreferred to focus first on the TPP, which would as its economy slows. Beijing is looking forbecome a building block of any larger trade ways to boost growth, such as the Belt andagreement. In this way, it would have the first- Road Initiative and by increasing domesticmove advantage and set the bar for the FTAAP. demand. Giving RCEP a push to reach aMany U.S. industries would benefit from the successful conclusion (perhaps by makinglowering of trade barriers and more transparent some concessions to provide momentum)rules in many areas, from investment-dispute would be another way to stimulate economicsettlement to intellectual-property rights to activity, particularly if Trump follows throughenvironmental and labor standards. However, on threats to disrupt Chinese exports to thethat strategy is out the window—at least for the U.S. It would also establish Chinese leadershipforeseeable future. vis a vis ASEAN at a time when U.S. economicThe risk is that the U.S. will be seen as turning commitments to Asia are in question.its back on Asia. China will push to conclude Ultimately, over the long term, Washingtonthe RCEP, making the RCEP a template for will need to re-assert its trade presence in thebroader trade within the region. Countries in Asia-Pacific region. The supply chains are toothe Western Hemisphere will see a divide down interwoven and interdependent for the U.S. tothe Pacific. go at it alone, despite the isolationist rhetoricFor North American businesses operating in emanating from the U.S. election. For theAsia, it will be important to maintain an active immediate future, however, the still-birth of thepresence in the region and to take advantage of TPP is a setback for U.S. exports, for Westernnew trade blocs if and when they emerge. As interests in Asia, and for companies, workers,noted, it may mean that companies will have and consumers in both the U.S. and otherto localize their presence. Existing bilateral TPP countries. It will take time to assess and,agreements, such as the FTAs that Korea has eventually, remedy the damage.with the U.S., Canada and Chile will help. Withthe collapse of the TPP, Canada can be expectedto revive its bilateral free-trade discussions withJapan that were suspended when Japan joinedthe TPP negotiations (Japan already has anagreement with Chile). It may be time for theU.S. and Japan to consider a bilateral agreementbased on the groundwork that has been laidthrough the TPP negotiations — although withFor the immediate future, however, the still-birth of the TPP is a setbackfor U.S. exports, for Western interests in Asia, and for companies,workers, and consumers in both the U.S. and other TPP countries.32 Vol. 12 DECEMBER 2016 China-US Focus Digest

ECONOMY There is little evidence that Trump and U.S.-China an undervalued renminbi Trade Tensions played a major role in driving China’s trade surpluses over President-elect Donald Trump has capitalized on the fact the past decade. Likewise, a that complaints about unfair competition are politically causal relationship between the popular, with China often being the convenient target. Ask U.S. trade deficits and China’s the average person in Detroit or even Washington, and hesurplus has been assumed that is will likely say that China’s manipulation of its currency isnot true. Structural shifts, not an one of the causes for America’s trade deficit and job losses.undervalued exchange rate, were However, economic principles tell us that the currentthe major factors driving China’s account balance of each country is determined within its own borders, not by its trading partners, and that export capabilities. employment gains or losses are rarely a trade issue. The confusion comes from having China as the final Yukon Huang assembly point and the shipping to the United States of Senior Associate, parts produced by other Asian countries. This makes it Carnegie Endowment difficult to determine which country is really responsible for the bulk of the value of finished products that end up in www.chinausfocus.com America. China’s foreign investment-led industrialization process created the capacity for it to become globally competitive, while membership in the WTO provided it access to Vol. 12 DECEMBER 2016 33

ECONOMYEconomic principles tell us that the current account balance of eachcountry is determined within its own borders, not by its trading partners,and that employment gains or losses are rarely a trade issue.Western markets. This led to a dramatic competitive reasons. However, there isincrease in China’s account surpluses by no direct link between the emergence ofthe time of the global recession, while America’s huge trade deficits and China’sthe U.S. and the EU were offset in part trade surpluses. Moreover, there is littlewith deficits with the rest of the world. evidence that an undervalued renminbiThe size of its trade surpluses with the played a major role in driving China’sU.S. has led to China to being blamed trade surpluses over the past decade.for lost jobs, unfair competition, and The fact that the U.S. and China’slow wage growth, although much of the trade balances are not directly linkedsurplus represents an “accounting” shift is clearly illustrated by the historicalamong countries in the Asian region. numbers using shares of global GDP asNonetheless, the fact that China the reference (see Figure 1). America’saccounts for the largest share of trade problems became significantAmerica’s trade deficit provides around the late 1990s when its currentcredibility for the storyline that Beijing account deficit, as a share of global GDP,has kept the renminbi undervalued for increased sharply and only began to34 Vol. 12 DECEMBER 2016 China-US Focus Digest

ECONOMY moderate around 2007. But China’s the global assembly chain. Thus, the account surpluses did not become appearance that U.S. trade deficits significant until around 2004-05. As are linked with China’s surpluses is China’s surpluses increased, the U.S. misleading. It is really about deficits deficit actually started to moderate. with East Asia where many of the How could China be responsible higher-value components are being for America’s trade deficits, when in produced. fact America’s huge deficits emerged long before China even became a Structural shifts, major export power? not an undervalued A trade deficit is often the result exchange rate, were of excessive government deficits the major factors and/or households consuming driving China’s beyond their means—both of which export capabilities. have characterized the American economy over the past two decades. The other major source of tension is In such circumstances, a large trade the perception that China’s export deficit is inevitable. The countries strength is due to its exchange rate that show up as being the source being deliberately undervalued. of the offsetting trade surpluses are China exchange rate was fixed at incidental. 8.27 to the dollar from 1994 to America’s bilateral trade deficits 2005. For much of this period, the were concentrated among the more renminbi was widely seen as over- developed East Asian economies valued, not under-valued. in the 1990s, most notably Japan, What eventually helped China South Korea, and Taiwan. But this to generate significant trade shifted to the Chinese mainland surpluses came from being able after it became the center of the to access Western markets more regional production line with easily after joining the WTO. its accession to the WTO in Membership provided incentives 2001. Figure 2 indicates that U.S. to ramp up productivity-enhancing manufactured imports from East Asia have decreased from about 45 percent of total U.S. manufactured imports in 1990 to about 20 percent in 2014. However, this a reflection of China gradually capturing an increasing share of the last stop inwww.chinausfocus.com Vol. 12 DECEMBER 2016 35

ECONOMYTechnological advances, shifting industrial expertise around theworld, and the availability of low-cost labor, if not in China thenelsewhere in countries like India, Mexico, and Vietnam, have madethe decline in manufacturing jobs inevitable in the United States.infrastructure investments that caused advances, shifting industrial expertiselabor productivity to soar. Structural around the world, and the availabilityshifts, not an undervalued exchange rate, of low-cost labor, if not in China thenwere the major factors driving China’s elsewhere in countries like India, Mexico,export capabilities. and Vietnam, have made the declineEven if China’s exchange rate becomes in manufacturing jobs inevitable inless of a concern, emotions in the United the United States. The process can beStates and Europe are likely to remain moderated but trying to stop it with tradestrong, thanks to the perception that barriers or restrictions on migration willmanufacturing jobs have been lost to ultimately prove to be ineffective withdeveloping countries like China and that the costs showing up in reduced growththe incomes of the middle class have and welfare for all countries. Nor wouldsuffered from globalization. This has higher tariffs bring many of these jobsderailed any prospects of ratifying the back.U.S. led Trans Pacific Partnership (TTP). What made the process seem like aThe decline in manufacturing jobs in the China issue is the speed and size of theUnited States is not strictly a China issue. loss in jobs that began as China becameThe share of manufacturing workers in the center of the East Asian productionthe United States has been declining for network. With the recent decline in Eastquite some time with the total number Asia’s trade surpluses, the pattern of jobof manufacturing jobs peaking in 1979. loss has changed. Contrary to today’sChina’s trade with the United States did popular perceptions, manufacturingnot take off until the early 2000s, well jobs have actually been increasing of lateafter the U.S. job decline began. in the United States. America’s exportsThe loss of American manufacturing to China are also becoming a majorjobs, however, has been driven by source of U.S. job generation with theforces largely beyond the control of Department of Commerce estimatingany leader or country. Technological that some 350,000 new jobs were created for this purpose during 2009-14. In contrast, the manufacturing labor force36 Vol. 12 DECEMBER 2016 China-US Focus Digest

ECONOMYin China has been declining as workers’ play a role in the process by being moresalaries are now twice that of Vietnam sensitive to the external consequencesand four times that of Bangladesh. that their own structural shifts haveYet, the reality is that the “hollowing” out created in the West and among otherof the middle class in the United States developing economies.and Europe has given rise to frustrationsthat can no longer be placated by simplyappealing to the supposed virtues ofglobalization. There are uncompensatedlosers in the process. As many havenoted, political systems need to findways to address local interests withoutgiving up the benefits that globalizationcan bring. Countries like China need to Yet, the reality is that the “hollowing” out of the middle class in the United States and Europe has given rise to frustrations that can no longer be placated by simply appealing to the supposed virtues of globalization.www.chinausfocus.com Vol. 12 DECEMBER 2016 37

‘PIVOT TO CHINA’ Is Duterte Really Separating from the U.S. in Favor of China?What we are witnessing isn’tnecessarily a ‘Duterte wave’ ofdefections to China at the expenseof America. More likely, it is atemporary recalibration on thepart certain Southeast Asianstates that are unsure of Americancommitment to the region and eagerto avoid direct confrontation withChina, which in turn is offeringlarge-scale investment and tradedeals in exchange for strategicacquiescence.In a dramatic turn of events, two major that his country is set to sign “many newSoutheast Asian nations have recently indicated agreements and understandings [with China]their decoupling from America in favor of that will elevate the relationship between oura pivot to China. First came the Philippines’ two nations to even greater heights.” He praisedfirebrand leader, Rodrigo Duterte, who, China for offering “benefits not just for thebreaking with his predecessors, chose Beijing people of our two nations but also for regionalinstead of Washington or Tokyo as his first stability and harmony.”major state visit. To the delight of his hosts, Meanwhile, the Malaysian leader decriedDuterte announced “separation” from the West supposed Western interference in the affairsin favor of aligning with China’s “ideological of regional states, warning them againstflow.” At one point, he declared a self-styled “lectur[ing] countries they once exploitedBeijing-Manila-Moscow axis ‘against the world’. on how to conduct their own internal affairsNot long after, Malaysian Prime Minister Najib today.”Razak pulled off a similar stunt, declaring38 Vol. 12 DECEMBER 2016 China-US Focus Digest

‘PIVOT TO CHINA’ A careful analysis shows that what we are witnessing isn’t necessarily a ‘Duterte wave’ of defections to China at the expense of America. Richard Javad Both the Philippines and Malaysia we are witnessing isn’t necessarily Heydarian supported China’s longstanding a ‘Duterte wave’ of defections to preference for bilateral (rather than China at the expense of America. Author of “Asia’s New multilateral) settlement of South More likely, it is a temporary Battlefield: US, China disputes. Kuala Lumpur recalibration on the part certain signed a defense agreement with Southeast Asian states that areChina, and the Struggle China, including the purchase of unsure of American commitment for Western Pacific” advanced naval vessels. Manila, to the region and eager to avoid in turn, is exploring a 25-year direct confrontation with China, military deal to allow the purchase which in turn is offering large- of Chinese weapons on favorable scale investment and trade payment terms. These are deals in exchange for strategic astonishing developments when acquiescence. one considers how, just few months Business as Usual ago, both the Philippines and Three factors explain the Malaysia were openly criticizing Philippines’ and Malaysia’s recent China’s maritime assertiveness in strategic maneuvers. The most the South China Sea. Under the obvious one is economics. During Benigno Aquino administration, their back-to-back visits to Beijing, Manila not only likened China to Duterte and Najib secured tens of Nazi Germany, but also became billions of dollars in investment the first country to take China to and business pledges. international court over maritime On the part of private sector, disputes. Southeast Asian businessmen In fact, recent years also saw the are interested in gaining wider Najib administration adopting a market access to China’s billion- tougher stance on China’s supposed strong consumer market, which ‘intrusion’ into Malaysian- is rapidly approaching the high- claimed waters. During Malaysia’s income level. Amid rising labor chairmanship of the Association of costs in China, local manufacturers Southeast Asian Nations (ASEAN) are interested in tapping into last year, Najib openly called for lower production costs in labor- more regional unity on the South rich Southeast Asia; so, there China Sea disputes, a departure is huge room for expansion of from Kuala Lumpur’s ‘keep it quiet’ opportunities for bilateral business- approach to the maritime spats. to-business relations. No wonder A careful analysis shows that whatwww.chinausfocus.com Vol. 12 DECEMBER 2016 39

‘PIVOT TO CHINA’As a relatively new player in the regional investment landscape,which has been traditionally dominated by Japan and Westerncountries, China is offering huge packages of technical skillsand soft loans for turbo-charged infrastructure projects.that practically every single Filipino business ‘China Card’tycoon, many of whom are of Chinese descent, Moreover, both the Philippines and Malaysia areaccompanied Duterte during his visit to Beijing. wary of continued confrontation with China overOf bigger concern is the potential for China the South China Sea disputes. Uncertain aboutto become the premiere supplier of affordable America’s commitment to the region, exacerbatedpublic infrastructure for neighboring countries. by the countries’ respective polarizing domesticIt is a prospect that has gained credence with the politics and continued economic troubles,emergence of Chinese telecommunication giants Southeast Asia partners doubt they can hold theirsuch as Huawei and ZTE, and their drive to ‘go ground against China for long. This is especiallyabroad’ at a time of overcapacity at home, coupled true in the case of the Philippines, which haswith the timely establishment of the Asian struggled to secure sufficient military assistanceInfrastructure Investment Bank (AIIB), which is and commitment from America over the Southintent on filling the massive infrastructure gap in China Sea disputes.Asia. According to the Asian Development Bank, Duterte has correctly pointed out that Washingtonthe region confronts an $8 trillion infrastructure- never clarified whether it would come to its ally’sspending gap. rescue over the disputed land features in the area,For instance, Beijing could play a critical role in and Manila laments the relatively limited and low-developing the basic infrastructure of Mindanao, quality military assistance it receives from its chiefDuterte’s war-ravaged home island, which is in defense partner. So, they’d rather cut deals withdire need of capital infusion, technology, and China than risk a confrontation without clearconnectivity. As for Malaysia, Beijing is expected American backing.to help build a $15 billion high-speed rail project More importantly, both Duterte and Najib havebetween Kuala Lumpur and Singapore. As a more personal reasons to engage in tiradesrelatively new player in the regional investment against America and openly flirt with China.landscape, which has been traditionally On his part, the Malaysia leader confronts adominated by Japan and Western countries, massive corruption scandal, which may lead toChina is offering huge packages of technical skills a showdown with the U.S. Justice Departmentand soft loans for turbo-charged infrastructure authorities. As for Duterte, he is facing increasingprojects.By dangling the ‘China card,’ both Southeast Asian leaders aresignaling that they have alternative options and would proceedwith full reorientation of their foreign policy, if necessary.40 Vol. 12 DECEMBER 2016 China-US Focus Digest

‘PIVOT TO CHINA’It is premature to declare the Obama administration’s “Pivot toAsia” policy as a failure, since Washington has made huge strategicheadway and China continues to face problems in its near periphery.vocal American criticism of his controversial war closer to the West and Japan, while fellowon drugs. Communist states, such as Vietnam, have rapidly developed robust military cooperation withFurthermore, there are signs that America is America. Even China’s erstwhile ally, Northbeginning to reconsider some of its aid to the Korea, has begun to openly defy its patron likePhilippines on human rights grounds. Prominent never before.members of the U.S. Senate are also beginningto chime in. By dangling the ‘China card,’ both Nevertheless, it is clear that China has at leastSoutheast Asian leaders are signaling that they managed, so far, to avoid the formation of ahave alternative coherent counter-options and would coalition in theproceed with full ASEAN, with majorreorientation of members such astheir foreign policy, Malaysia and theif necessary. Philippines opting for direct engagement with China andFluid Landscape reconsideringThe bigger strategic their relations withpicture reveals a America. The Obamamix of strategic administration’sgains and setbacks successor will havefor both American to deal with thisand China in fluid and uncertainrecent years. It Philippine President Rodrigo Duterte (left) and Chinese President strategic landscape,is premature to Xi Jinping shake hands after a signing ceremony in Beijing, China, which demandsdeclare the Obama Oct. 20, 2016. Duterte’s visit aimed at seeking trade and support patience, commitmentadministration’s from China by setting aside a thorny territorial dispute. (Xinhua and a depth of Photo)“Pivot to Asia” understanding.policy as a failure,since Washington has made huge strategicheadway and China continues to face problemsin its near periphery. In Taiwan, China confrontsa pro-Independence ruling party, which isexpanding defense cooperation with Japan andAmerica. China’s charm offensive towards SouthKorea has rapidly soured in recent years.Traditional allies such as Myanmar have movedwww.chinausfocus.com Vol. 12 DECEMBER 2016 41

GLOBALIZATION China-US Focus Digest A Survival Guide to Interesting Times Today, from American voters in an ugly U.S. election season to the rhetoric of newly elected Philippines President Duterte, we are hearing widespread anger against the governing structures of our time, against inequality and elitism. This sense of disempowerment is real and understandable. Our challenge, as individuals in this era of discontent, is to ensure that we can still come together to move forward and improve the lives of all.42 Vol. 12 DECEMBER 2016

GLOBALIZATION That blessing, or curse, of interesting times might not bode well for U.S.-China relations, as nations turn inwards to address the challenge of relatively slow to no-growth economies. Curtis S. Chin From Beijing to Brexit, we find impact on the economies of Asia.Former U.S. Ambassador to ourselves in interesting times. Yet, as Asia analyst Meera Kumar And as Europe is showing, there and I have argued in opinion Asian Development Bank may well be no near-term exit in pieces appearing across Asia, how sight, as the world’s economies Brexit unfolds will have serious continue to muddle along. implications on attitudes toward That blessing, or curse, of international agreements, the role interesting times might not bode of the nation state, open borders well for U.S.-China relations, and trade, among other issues. regardless of the outcome of All this is of consequence to U.S. elections, as nations turn China and the United States, as inwards to address the challenge well as of the entire Asia and the of relatively slow to no-growth Pacific, a region still struggling economies. in its own efforts toward greater Just more than a hundred days regional economic and political have passed since Theresa May cooperation. took office as Great Britain’s More critically, an even broader Prime Minister [on July 13]. Yet, question has come to the there and elsewhere, many critical forefront. Are people demanding questions remain unanswered. a new global order – on both The economic implications of sides of the Atlantic and across Brexit and its implementation are the Pacific in China as well? still emerging as businesses seek Brexit has shaken many clarity to make decisions that will assumptions. Globalization’s impact numerous jobs and lives. benefits, the power of open This includes many Chinese and borders and free markets, American companies who have existing development models, set up European operations in and the sense that a new, more London. “progressive” identity was being Britain’s exit from the European created can no longer be taken for Union will have limited direct granted.www.chinausfocus.com Vol. 12 DECEMBER 2016 43

GLOBALIZATIONToday, from American voters in an ugly U.S. root of this? Are there other underlying causes?election season to the rhetoric of newly elected The jury is still out on these questions.Philippines President Rodrigo Duterte, we arehearing widespread anger against the governing Amid widespread angst and discontent, instructures of our time, against inequality and developed and developing nations, the gapelitism. between city and country, rural and urban areas, is growing so rapidly that citizens may wonderOur world has entered an era of global if indeed they belong to the same nation state.discontent. Brexit is just one of many signals of Chinese President Xi Jinping’s battle againstthe deep divisions – economic and social – that corruption was a critical topic, reportedly, amidcharacterize many countries today. A sense of the back-room discussions and maneuveringdisillusion is felt increasingly across the world at the most recent meeting of the Chinesethat the much-touted benefits of globalization Communist Party’s central committee.have left large swaths of people behind. Chinatoo has not Inequality has alwaysescaped the existed, even in self-challenge described socialist orof rising Communist nationinequality. states, such as China. But today’s connectedGlobalization citizenry is less willingis under to accept the statusattack for the quo of inequality.inequalities it Generations inhas created, quick touch with thethe sense of realities of the worldmarginality through televisionamongst and social mediaworking are less resigned toclasses of destiny and fatalism Demonstrators chant slogans “not my president” as they march in New York during the anti-Trump protest, Nov. 13, 2016.developed and are challengingcountries, and the existing economican alienating order.feeling that no community controls its owndestiny. Power had been ceded to an elite that in This is as true in China or Brazil as in Britainmany places is losing its mandate to rule. or the United States. The demands of a restive population need to be addressed.This sense of disempowerment is real andunderstandable. But is globalization really the How Britain manages the fallout of its exitMore critically, an even broader question has come to theforefront. Are people demanding a new global order – on bothsides of the Atlantic and across the Pacific in China as well?44 Vol. 12 DECEMBER 2016 China-US Focus Digest

GLOBALIZATION Today, from American voters in an ugly U.S. election season to the rhetoric of newly elected Philippines President Rodrigo Duterte, we are hearing widespread anger against the governing structures of our time, against inequality and elitism. from the European Union remains The call of nationalism has become a a work in progress, but the world is powerful one. In an age of fractured already reacting as leaders reshape media and financial crisis, it is their approaches to integration, refreshingly simple to attract a hard immigration and nationalism. core of passionate voters with a Brexit has taken the romance out populist, nationalist message. Witness of regional integration projects that election politics in the United States might have used a once-rising and today, the ascendance of Duterte inclusive Europe as a model. The in the Philippines, and the rise of 10 nations of the Association of Marine Le Pen in France. Southeast Asian Nations are a case Nationalism can be a unifying force in point. The not quite one-year-old for good. History, however, has shown ASEAN Economic Community – that the forces of nationalism, once akin to but much less ambitious than unleashed, are not easily contained. Europe’s grand experiment – is touted Blaming shadowy foreign powers now as showing the wisdom of a go- and immigrants is much easier than slow and ultimately wiser approach to analyzing the root cause of economic regional integration and cooperation. problems and devising a strategy to Brexit’s victory at the ballot box also overcome them. has strengthened “right wing” and Another implication of Brexit parochial tendencies in large parts is a generational one. With of continental Europe. Politicians technology’s growing disruptive taking a lesson from the Brexit force, the millennial generation of campaign’s rhetoric must now be the developed world has lost the more circumspect about “open certainties that the post-World War immigration.” II generation enjoyed: security of jobs and an ever-expanding economy.Our world has entered an era They face an uncertain future. Radical of global discontent. promises whether on the left or right offer a siren’s call. In democracies, voters may well choose to look beyond the hypocrisy and inconsistency of anti-elitewww.chinausfocus.com Vol. 12 DECEMBER 2016 45

GLOBALIZATIONNationalism can be a unifying force for good. History,however, has shown that the forces of nationalism,once unleashed, are not easily contained.politicians. In countries ruled by other Our challenge, as individuals in this eraforms of government, the pressures and of discontent, is to ensure that amid theconflicts may be less seen or discussed, madness, our own sanity endures. Evenbut they also exist. No matter how Brexit more so, our shared challenge is also tounfolds or the U.S. election concludes, ensure that we can still come together tothe sense of betrayal by and distrust of move forward and improve the lives of all.the elites is likely to endure there andelsewhere.What remains to be seen is how ourleaders will address this discontent andanger. Witness the Philippines, whereDuterte has, at least in words, turned hisnation’s domestic and international politicsupside down with his growing embrace ofChina. Pro-Brexit demonstrators protest outside the Houses of Parliament on November 23, 2016 in London, China-US Focus Digest England. (Photo by Jack Taylor/Getty Images)46 Vol. 12 DECEMBER 2016

GLOBALIZATION‘Make Globalization Great Again’Despite populist reservations in the US and UK, the international community has becomeintertwined and interdependent, thanks to global free trade and investment. Cooperationto tackle global challenges will continue while more efforts will address the “globalgovernance deficiency” in promoting social justice and fairness. He Yafei There have been upheavals in globalization in the last few years, Former Vice Minister, culminating in the British referendum to withdraw from the European State Council Office of Union and the recent election of Donald Trump to be the nextOverseas Chinese Affairs President of the United States. Their rippling effects are still being felt across the globe, puzzling many as to the future of globalization. Is it a rollback or rather a new era looming on the horizon? On the other hand, China has plunged herself into global governance with a greater determination. The G20 Summit in Hangzhou in September has produced a shining report card with many new ideas for furthering globalization while overcoming its “negative impact” on social justice and fairness. President Xi Jinping recently deliveredwww.chinausfocus.com Vol. 12 DECEMBER 2016 47

GLOBALIZATIONa much-welcomed speech at the Lima governance if President-elect Mr. TrumpAPEC Leaders Meeting outlining translates his repeatedly uttered “makeChina’s continuous efforts to promote America great again” by pursuing de-global free trade and investment with globalization. Of course that is still inparticular reference to quicken the pace the domain of unknown, and futureof negotiation on an APEC Free Trade American policy toward globalizationAgreement. needs to be closely observed.The US is no doubt a major moving What can almost be safely predicted isforce in the future of globalization. that the US under Trump’s leadershipAs one American once commented, will backpedal in some critical areas of“globalization is Americanization”. Two global governance such as existing freethings appear to be influencing the trade arrangements and the AmericanAmerican engagement in globalization commitment to the Paris Agreement onand global governance. The feeling that Climate Change. This has already createdglobalization is no longer on the track much uncertainty around the worldof “Americanization” is quite obviously about the future of globalization andrunning deep in the US, prompting it global governance.to change the rules in global economic On a positive note, we can restgovernance with TPP and its likes. The assured that globalization per se willother is an overall American strategic not disappear overnight or be rolledretrenchment that focuses more on back across the board. Why? It hasdomestic political and economic promoted global economic growth to anconcerns with an ever more inward- unprecedented degree and knit nationslooking approach to international affairs. into an interlocked and interconnectedThat started in earnest early in 2009 web of networks with ever greaterwhen President Obama stepped into interdependence and common interests.the White House and will supposedly The question that ought to be answeredcontinue under a Trump administration. is not about the death of globalization,History will surely not repeat itself, but rather it is about “re-globalization” orsimilarities do often occur. The world “globalization reborn”. In other words,is witnessing very likely another round the international community is enteringof American strategic retrenchment a new era of globalization whereinand further withdrawal from global global free trade and investment andengagement which will create new cooperation to tackle global challengesparadigms for globalization and globalExpectations are on the rise as to what China shouldand could do to “make globalization great again”.48 Vol. 12 DECEMBER 2016 China-US Focus Digest

GLOBALIZATIONWe can safely say that fundamentals of the overall bilateralrelationship between China and the US would be firmno matter who resides in the White House. will continue while more efforts climate change and counter-terrorism. will address the “global governance We all know that consensus and deficiency” in promoting social justice cooperation by the US and China and fairness, such as the widening as two major economies and key gap between rich and poor both players in globalization have been domestically and among nations. essential in determining the pace With possible continued American as well as direction of globalization. retrenchment and partial withdrawal We can safely say that fundamentals from global engagement and the of the overall bilateral relationship resultant shifting paradigm of between China and the US would globalization and global governance, be firm no matter who resides in the China’s role becomes more prominent White House. As to possible new and decisive. Expectations are on trade frictions and other differences, I the rise as to what China should believe that they can be minimized as and could do to “make globalization much as possible through the timely great again”. This will not only be and frequent consultations that have an onerous task for China, but also become a regular feature in China-US have a great impact on the future relations. of globalization. Therefore a few Second, China can lead global efforts suggestions may be in order for China through the United Nations, G20, to play a greater role in globalization BRICS, APEC and other international and global governance. and regional platforms to combat First, China should continue engaging climate change, promote free trade the US as the new administration and investment as well as implement comes into office and the process of the Sustainable Development policy review starts in earnest early Goals (SDGs, also known as the next year. Enhancing cooperation Global Goals) for the benefit of both bilaterally and multilaterally developing nations. Leadership will continue to be important on in this connection includes more issues of common concern such as proactive discussions about and trade, investment, energy security, negotiations on safeguarding global governance system while advocatingwww.chinausfocus.com Vol. 12 DECEMBER 2016 49

GLOBALIZATIONneeded changes to make the system and downs and not moving in a linearbetter-suited for the emerging new era fashion. What we are witnessing todayof globalization. For example, the Paris is not “the toss-out of globalization”,Agreement on Climate Change will see but a new era or phase of globalizationits support being undermined should the wherein greater and more complicatednew US administration go back on its challenges become the order of the day.commitment. Therefore we need concerted efforts moreThird, China must continue to provide than ever to ascertain the big trends asnew ideas about global governance well as individual difficulties and workincluding new models of international out consensus and solutions for collectivecooperation. The “Belt & Road Initiative” actions to “make globalization greatfits neatly into such a framework where again”.common development and prosperityare the key. China’s experiences andsuccesses in modernization and fasteconomic growth by themselves are asource of new ideas for other countries,particularly developing ones.In sum, globalization is always anevolving process with inevitable ups50 Vol. 12 DECEMBER 2016 China-US Focus Digest