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China Conference 2018

Not a zero-sum game: global governance must adapt to the new US-China equation

Daniel Russel says new models of global governance that promote healthy competition as well as cooperation on big challenges are needed to address the changing dynamics between the US and China, and that the latter’s new regional initiatives could be a road test of the country’s emergence as a world leader

PUBLISHED : Wednesday, 17 January, 2018, 10:32am
UPDATED : Wednesday, 17 January, 2018, 10:32am

Hong Kong is an ideal place to examine the issues of China, the US and global governance. Few places have benefited more than Hong Kong has from two of the major developments of our era: China’s emergence as an economic powerhouse and the globalisation of the world economy.

One of the reasons that Hong Kong has been effective in facilitating China’s integration into the international economy is its long-standing status as an international financial centre. That status is based on its openness to commerce and foreign investment, its independent and professional legal system, its robust and transparent regulatory regimes – and, of course, its open press environment and high-quality publications.

So not only has Hong Kong done well for itself, but its transparency, openness and adherence to international norms have also helped China navigate, and thrive, in the present-day international system.

Many of Hong Kong’s advantages derive from the “one country, two systems” framework, which aim to protect the core values of freedom, human rights, democracy, the rule of law and clean governance. Hong Kong has had to deal with some pressure from within and without on the high degree of autonomy accorded to it under the Basic Law. So, it’s important to bear in mind that both elements of Hong Kong’s status – the “one country” part and the “two systems” part – are essential to sustaining its comparative advantages.

How ‘one country, two systems’ is tearing Beijing and Hong Kong further apart

But the broader point is that since the launch of economic reforms in 1978, China, and by extension Hong Kong, have benefited immensely from the existing international system. Over time, China has become both a member, and a key beneficiary, of most international regimes. And it’s no accident that China’s economic boom accelerated following its accession to the World Trade Organisation in 2001.

But China is changing, and changing quickly. The world and its international institutions and regimes have sometimes been slow to adjust. China has sometimes been seen as reluctant to “pay its dues”.

There’s a lot for China to be proud of. But the expectations – and the challenges – are immense

China has gone from borrower to lender, from “hide and bide” to “national rejuvenation” and the “China dream”. Some 700 million of its citizens have been lifted out of poverty. China has sent astronauts to space, and is preparing to put a man on the moon. The People’s Liberation Army is rapidly modernising – its third aircraft carrier is reportedly under construction. China is also working to transform itself from the “world’s factory” to a centre of technological innovation and development.

There’s a lot for China to be proud of. But the expectations – and the challenges – are immense.

The interdependence of the Chinese and American economies is unprecedented. And yet, complementarity between the Chinese and American economies – which benefited both China and the United States – is decreasing, while competition for 21st century advantage in sectors such as artificial intelligence, robotics, nanotechnology, renewable energy technology, semiconductors, computer engineering and biotechnology is rapidly increasing.

As the economic complementarity of previous decades gradually dissipates, greater stress is placed on both the bilateral relationship and the global system. What that means is that upgrading global governance models to meet these new dynamics has assumed added importance.

To put this simply – we urgently need to develop models of global governance that allow the US and China to engage in healthy competition, while continuing to cooperate on big global challenges like climate change, global health, terrorism, non-proliferation, cyberspace and regional hotspots.

Global governance at a crossroads

One criticism of the current global governance system is that it has generally been slow to adjust, and slow to grant China a voice commensurate with its growing stature. As much as China has benefited from the global governance rules and institutions, Henry Kissinger pointed out that China is adjusting to an international system that was developed in its absence, on the basis of a programme it didn’t participate in developing.

So reform is needed, and needed for a number of reasons. The international system is under stress, not only due to China’s rise, but also from globalisation, automation, artificial intelligence and information technology, from changes so seismic we have only begun to grasp their impact. As a result of these changes, it is very much my view that global governance is approaching a crossroads.

For one thing, shifting attitudes in both the United States and China have contributed to dissatisfaction with the current nature of the global governance system. But the sources of US and Chinese discontent are different.

Today in the US, there is a new (and worrisome) scepticism about the benefits from global engagement, leadership, and participation in international institutions. Look at the US withdrawal from the Trans-Pacific Partnership and the broader rejection of multilateral trade arrangements. (Many countries are waiting with some trepidation to hear what President Donald Trump is going to say at Davos this month.)

Or take the withdrawal from the Paris agreement on climate change. Or the recently released national security strategy, which downplayed America’s support for universal values in favour of a return to “America first” nationalism. This is part of a broader backlash against globalisation.

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At the same time, today in China, new capabilities, new investments, along with a new nationalism, are feeding a more ambitious, self-interested global engagement. We see perhaps less humility and more entitlement – an understandable sense that China’s increasing strength entitles it to a greater say, or a leading role, in international institutions.

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This shift in attitudes has also has spurred China to push forward with alternative regional institutions. Both the Belt and Road Initiative and the Asian Infrastructure Investment Bank can be seen in this light.

China has been suspicious of Washington’s defence of a status quo that locks in US advantages. Some in China view US efforts and emphasis on “rules of the road” as attempts to contain China or threaten Communist Party control.

China also sometimes sees opportunism and hypocrisy in US efforts to use global governance, for example, the insistence that China abide by the terms of the UN Convention on Law of the Sea in the South China Sea when the US itself has not ratified the treaty.

How South China Sea ruling can be a ‘win-win’ for China and the world

These negative perceptions – the suspicion that global norms and institutions are being unfairly used to undermine Beijing’s interests – are exacerbated because China is a latecomer to global engagement and is excluded from some institutions and is under-represented in others.

The US, meanwhile, has been suspicious of what it sees as efforts by China to undermine global institutions, to “freeride” or exploit loopholes and protections, and to exempt itself from rules and norms.

The recent national security strategy bluntly declares that China seeks to displace the United States in Asia and reorder the region in its favour. It argues that past support for China’s rise, and for hopes for its integration into the post-war international order, were mistaken. That China is contesting America’s geopolitical advantages and trying to manipulate the international order.

Strong stuff.

Finding a common interest

So where does that leave us?

I don’t subscribe to the Thucydides Trap theory of strategic rivalry – that conflict between an established power and a rising power is inevitable. But the fact that it is “not inevitable” does not mean that it’s impossible.

Even Graham Allison says that avoiding the Thucydides Trap requires leaders to make good decisions. Exercising good judgment will be ever more critical if the US charts a more self-interested, some might say nationalist, foreign policy, at the same time that China increases its global engagement.

We face the risk of a shift towards a more zero-sum, ‘blood and soil’, cutthroat world – a world we don’t want to live in

To deal with these challenges and risks, both China and the US must find a way to surmount their mutual suspicions.

Specifically, they need to identify a common interest in building a global governance system that accommodates China’s legitimate interests, but also preserves the foundations of a rules-based international order that is respectful of universal rights and freedoms. Doing so is essential, because the alternative is so dangerous. We face the risk of a shift towards a more zero-sum, “blood and soil”, cutthroat world – a world we don’t want to live in.

Professor Joe Nye of Harvard made the point that the risk we should focus on isn’t really the Thucydides Trap. It’s the risk that the US might curtail its global leadership and participation in international institutions, while China approaches global engagement and international institutions largely as a means to satisfy so-called core interests and national goals.

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No country should be expected to ignore or abandon its own interests. But the world can’t afford for major powers to neglect their global responsibilities.

That means that now is the time for both the US and China to check their worst impulses when it comes to global governance. Because if the US were to back away from multilateral diplomacy and organisations, and if China were to engage selectively with an eye to tactical advantage and protecting “core interests”, we would find ourselves in a more unstable world.

The key here is that the US should not walk away from its global leadership responsibilities, and China should seek to ensure that its multilateral efforts complement, not undermine, existing global governance institutions.

It is clear that avoiding a zero-sum world is a project that will take concerted efforts in both Washington and Beijing.

Can China be trusted to do the right thing?

I’m the first to admit that there is a lot that the Trump administration will need to do to show that “America first” does not lead to “America alone” and that Washington is up to the challenges that automation and the knowledge economy pose to US prosperity and global leadership. There is plenty that the US should do. But since I am in Hong Kong, let me focus on China.

Xi Jinping has set high expectations at home and abroad. Domestically, he set ambitious twin centenary goals. Internationally, he’s set a high bar in his Davos speech last year and talk of a “community of common destiny”.

China has in fact begun to make greater contributions to multilateral organisations, and to international security efforts like anti-piracy patrols in the Gulf of Aden and the recently established standby force that the UN can draw on for peacekeeping operations.

Xi has also set in motion major international development initiatives that I’ve mentioned – the Belt and Road Initiative, the Asian Infrastructure Investment Bank, and the BRICS development bank. These and other commitments put China forward both as a model and a leader for the developing world.

To meet the high expectations set forth by Xi, China will have to make a sustained effort to win the trust and confidence of its international partners.

Is China willing to take on significant responsibility for providing global goods and shouldering international burdens?

I have no doubt that China has the material capacity to achieve Xi’s ambitious agenda, but some big questions are outstanding: Is China willing to take on significant responsibility for providing global goods and shouldering international burdens, often well beyond the specific needs of China as a nation? Is Beijing willing to show restraint, accept limits, and abide by international standards, even at the expense of some short-term advantage to China?

And, while I’m on sensitive ground here, let me raise a point that many of China’s friends in the West find particularly troubling: what will be the impact on prospects for regional or global leadership of Beijing’s use of technology and big data for repressive political and social control at home?

I ask these questions with humility because the answers are going to matter. These are prerequisites for other countries’ acceptance of an expanded Chinese leadership role in global governance over the long term.

According to the most recent Pew Poll in Asia, the response throughout major countries in the region to the question “How much confidence do you have in the Chinese president to do the right thing regarding world affairs?” was worryingly low – I’m talking single digits in many cases.

It’s important to get those numbers up. And my own belief is that it’s the decisions and behaviour of the Chinese government and companies that can do that, rather than speeches and white papers and paid inserts in foreign newspapers.

A Rorschach test of international attitudes to China

At the China Conference, we had a good session on China’s highest-profile multilateral project – the Belt and Road Initiative. This initiative is a key indicator of whether China’s growing international engagement is primarily about satisfying its national interests, or whether Beijing seeks to create a more prosperous, interconnected and win-win Eurasia through multilateral cooperation.

Now, not all of the international scepticism about the Belt and Road Initiative may be justified. There are some significant cultural differences at play. In the US, initiatives are launched with blueprints and handouts and detailed specifics and frequently-asked questions. In China, initiatives are presented as broad strategic directives from the political leadership with policy specifics to be developed over time. So in many cases, the opacity of new Chinese initiatives is met with scepticism in the West, and their vagueness and lack of transparency means that people are free to let their suspicions run wild.

This makes the Belt and Road Initiative something of a “Rorschach test” of international attitudes towards China.

Is the Belt and Road Initiative about co-opting and coercing its neighbours? Or is it about promoting connectivity and commerce based on mutual interest and mutual benefit?

Is it neocolonialism? Part of a Chinese sphere of influence via state capitalism? A geostrategic play to establish military bases for a blue-water navy and political leverage through crushing debt?

Or is it a sensible – even generous – investment of China’s excess capital and capacity? A programme to build up both China’s underdeveloped western regions and create more dependable supply lines and smoother trade networks to bring its goods to market?

Is it a 21st century version of the Marshall Plan that will improve infrastructure and connectivity throughout Eurasia that benefits everyone?

The ‘Belt and Road’ projects China doesn’t want anyone talking about

It makes sense for China to work to prove the positive case, and for the US and other international partners to help steer the Belt and Road Initiative in that direction. And to be successful, we have to remember that there is both a practical and a moral component to leadership.

The vision of the initiative – connectivity and integration – must be credible and embraced by other countries

For the Belt and Road Initiative, that means first demonstrating that China can deal successfully with the complex challenges of managing risk, local politics, financing, and that it can successfully operate in areas that others – Russia, India, the Association of Southeast Asian Nations, the European Union – may consider to be within their “spheres of influence”. That is the practical side.

Secondly, it means that the vision of the initiative – connectivity and integration – must be credible and embraced by other countries.

It also means that the initiative mustn’t be marred by projects that are tainted by problems and scandals. As we’ve already seen in Nepal, for example, where a US$2.5 billion deal for a hydroelectric plant was scrapped because the contract was awarded in an extra-legal manner, practical and moral considerations can present quite a challenge.

Just recently, I read a good editorial in the Post citing Belt and Road Initiative problems throughout South Asia and urging sensitivity and respect in approaching China’s neighbours.

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Going beyond a geopolitical power play

There are important steps that China can take to avoid these pitfalls and prove that the Belt and Road Initiative is more than geopolitical power play.

These include establishing responsible financial, environmental and labour standards for projects under the initiative, and ensuring that projects are transparent and inclusive with open, competitive bidding. Clear criteria for project selection and the establishment of anti-corruption standards commensurate with the Communist Party’s own domestic policies would go a long way to enhancing the initiative’s credibility.

The Belt and Road Initiative is also an area where we could potentially see a marriage between China’s infrastructure development prowess and the United States’ strengths in services: risk management, financial services, information technology, and so on. China can also show that the programme is inclusive by ensuring that foreign companies, both manufacturers and service providers, are involved.

These new initiatives serve as laboratories where China can learn to work successfully with foreign partners

I’ve used the Belt and Road Initiative as an example of how China can take positive steps to deepen its global engagement through new initiatives. And these new initiatives serve as laboratories where China can learn to work successfully with foreign partners in an international environment.

But at the same time, it’s important to avoid undermining the existing regional and global institutions that have widespread international support.

Yes, our models and mechanisms for global governance should be updated to reflect changing international realities and new challenges of the 21st century, but not at the expense of the important first principles that drove the creation of these institutions in the first place.

My friend and colleague, Kevin Rudd, the former prime minister of Australia, made some important points on this topic in a speech at Peking University last month. He was building on recommendations in an Asia Society Policy Institute report on “Preserving the Long Peace in Asia”.

How can we best preserve the peace in Asia?

The first is that such institutions should play a binding role, drawing states to greater convergence around shared interests.

Second, is that international institutions should seek to mitigate historical distrust and circumvent historical patterns, such as the Thucydides Trap, by fostering opportunities for strategic dialogue.

Third, is that institutions should work to facilitate better management of crises and disputes.

And finally, that these institutions should develop the capacity to set forward-looking agendas to deal with future challenges.

These recommendations are a good reminder that there are both preventive and progressive rationales for good global governance. The US and China can work together in multilateral institutions, and work to improve them, not only to prevent problems but also to make progress on shared global objectives.

But to do this, the US and China must manage the differences in perspective and the mutual suspicions that have hampered our ability to achieve consensus on global governance issues in the past.

New areas in need of global norms

Let me give you an example of a domain that is desperately in need of global norms: cyberspace. This is a void that urgently needs to be filled, but the US and China differ even on the definition of the problem, let alone the solution: Is the goal to protect cross-border information flow or to block it?

Is our goal a free and open internet or cyber sovereignty and data localisation? For the US, cybersecurity doesn’t include control of content. For China, controlling content is the whole point. It is no easy matter for the US and China to find common ground sufficient to forge international consensus on cyber norms.

Let me give you another example that doesn’t involve technology: maritime resources. Like climate change in 2016, US-China cooperation on ocean sustainability can form the nucleus of meaningful international cooperation. Overfishing, much of it illegal and unreported, has depleted fish stocks in the Pacific and is propelling the world towards a major food crisis. It’s not just that China has 1.3 billion people. It’s that so many of them have discovered sushi!

To make things worse, in addition to competing commercial considerations, China and its neighbours have sensitive political disputes over sovereignty claims – disputes that have resulted in large-scale environmental damage as claimants compete to strengthen shoals and reefs by dredging and reclamation on a huge scale and at the expense of regional security and stability.

Dead zones: How our oceans are losing their breath

Cyberspace and maritime space present tough issues, but they are important examples that remind us that strong institutions and international arrangements, which are valuable in the own right, also serve as a hedge against strategic rivalry.

Let’s make sure we distinguish between healthy competition, which tends to brings out the best in all parties, and strategic rivalry, which tends to bring out the worst

And let’s make sure we are distinguishing between healthy competition, which tends to brings out the best in all parties, and strategic rivalry, which tends to bring out the worst. No country benefits from US-China strategic rivalry.

Our approach to global governance has to be rooted in recognition that all of us share a deep interest in effectively managing global challenges: that means safeguarding cyberspace, sustaining the ocean’s resources, preventing macroeconomic instability and financial upheaval, promoting trade and investment, dealing with global public health risks like pandemics, slowing and mitigating climate change, countering weapons of mass destruction proliferation, and combating terrorism and piracy.

My own career in diplomacy, including service at the United Nations, and my experience at high-level multilateral meetings with president Barack Obama and Secretaries Hillary Clinton and John Kerry have all taught me this: global governance is not an abstraction, and good global governance will not come about of its own accord.

The US, China and the community of nations need to work in multilateral forums and work on multilateral instruments, both to prevent a dangerous future and to build a better one.

Daniel Russel, a former assistant secretary of state for East Asian and Pacific affairs at the US State Department, is currently diplomat in residence and senior fellow at the Asia Society Policy Institute. This article is based on his speech last week at the annual China Conference hosted by the South China Morning Post