China is unfairly subsidising industries, expanding its military ambitions and using debt traps to build influence in developing countries, according to Jake Sullivan, the US national security adviser.
He and others have also warned that Beijing wants to replace the “rules-based” international system to take over the world, starting by dominating the Asia-Pacific and its neighbouring nations. It is, presumably, trying to restore the 21st-century version of the vassal-Middle Kingdom system of interstate relations in ancient times.
Yet he said: “We are not looking for confrontation or conflict” with China. Sullivan has been the most articulate of top US officials in formulating the counter-strategy of the Joe Biden administration – by doing all of those things it accuses China of committing, except on a much grander scale.
For example, the Biden administration has promised to mobilise trillions of dollars to “help” developing countries, much of which will involve heavy debts, to buy influence in countries the United States has long neglected, such as those in Africa and the South Pacific.
Under the guise of fighting inflation and protecting the most advanced semiconductor supplies, it is committing hundreds of millions of dollars to subsidising the US private sector. The tools it uses are known officially as the Inflation Reduction Act (IRA), and the CHIPS and Science Act.
Washington’s full containment strategy may yet succeed in slowing or reversing China’s rise, but it is already subordinating the interests of key allies and forcing them to fall in line as dictated by Washington.
Beijing has long made this argument. An increasing number of Western analysts, politicians and former statesmen are coming to the same conclusion. US policy priorities now risk mortgaging the future prosperity and security of its Western allies.
The title of the 21-page paper is, “The art of vassalisation: How Russia’s war on Ukraine has transformed transatlantic relations”. It is co-authored by Jeremy Shapiro, the ECFR’s research director, who was previously a member of the US State Department’s policy planning staff and senior adviser to the US assistant secretary of state for European and Eurasian affairs; hardly your typical anti-American leftist critic from the developing world.
And the paper doesn’t mince words: “In the Cold War, Europe was a central front of superpower competition. Now, the US expects the EU and the UK to fall in line behind its China strategy and will use its leadership position to ensure this outcome … It has instead embarked on a process of vassalisation.”
Under the section headed, “The vassalisation this time”, it explains how Biden’s industrial policy to meet domestic challenges and its foreign policy to counter Russia’s war in Ukraine and China have created the perfect storm to “vassalise” Europe.
“Conceptually, European allies have a role in this geoeconomic struggle with China, but it is not, as during the Cold War, to become rich and contribute to the military defence of the central front,” the paper argues.
“To the contrary, their key role from a US perspective is to support US strategic industrial policy and to help ensure American technological dominance vis-a-vis China. They can do so by acquiescing to US industrial policy and by circumscribing their economic relations with China according to American concepts of strategic technologies.”
This means the US will make no distinction between economic, political and military issues – all will be “securitised” under the category of US national security.
The authors observe that “importantly, in this new geoeconomic struggle with China, there will be no purely economic issues. The technological and economic nature of the conflict with China means that the US can and will securitise nearly every international dispute.”
The authors call it “The Americanisation of Europe” and cite the case of Huawei: “As many have noted, banning Huawei sales in Europe also creates an opportunity for US firms to establish greater technological dominance.”
The US pressure comes at a particularly bad economic time for the EU and Britain. In the short term, they face the prospect of a recession this year and next. But as a long-term trend, both have been declining economically relative to the US economy. Washington’s industrial policy will only worsen this trend for Europeans. The numbers speak for themselves.
Measured by GDP, in 2008 the EU (inclusive of the UK) was collectively the world’s largest economy, with a combined US$16.2 trillion, against America’s US$14.7 trillion. Last year, the EU and the UK economies together reached US$19.8 trillion, compared to America’s US$25 trillion.
Meanwhile, the US dollar accounted for roughly 88 per cent of global foreign exchange transactions in 2022, a level that has remained relatively stable over the past two decades. The euro, however, peaked in 2010 at 39 per cent and dropped to 31 per cent last year. It’s the same story if you compare the reserve currency statuses of the dollar and the euro, at 60 per cent and 21 per cent, respectively.
America’s new policies will only make things worse for the EU, according to the paper. European leaders are well aware, but internal divisions and over-dependency on US security provisions – as shown by the Russian invasion of Ukraine – make them powerless to fight back.
The paper concludes: “As these policies have the potential to reduce economic growth in Europe, cause [further] deindustrialisation, or even deny Europeans dominant positions in key industries of the future, they might be expected to generate serious opposition throughout the EU.
“The [IRA and CHIPS] have caused much gnashing of teeth in Brussels and elsewhere about how Europeans can preserve their own strategic industries.
“Europeans may whine and complain, but that their increasing security dependence on the US means that they will mostly accept economic policies framed as part of America’s global security role. This is the essence of vassalisation.” [My italics]