On July 6, 2018, China and the United States levied tariffs on each other, ushering in a trade war between the two nations. The trade war may not result in a significant impact on the scope of trade between the two countries, as the Chinese Communist Party (CCP) will likely back down. Nonetheless, this historical event has had a dramatic impact on the relationship between the two countries.
Winston Churchill, one of the greatest political leaders of the 20th century, visited the U.S. 72 years ago and gave his famous Iron Curtain Speech, also known as the Sinews of Peace, at Westminster College in Fulton, Missouri. The world did not recognize it at the time, but Winston Churchill’s impassioned speech warned of a new era that eventually led to a Cold War with the Soviet Union that lasted for over 40 years.
On July 6, 2017, U.S. President Donald Trump gave his first speech in Europe in Warsaw, Poland. He was full of praise for the Polish people who fought against the Nazis during World War II and who stood against Communism in the 1980s. In his speech, President Trump highlighted: “We must keep out all powers that can damage our traditional values.” He gave another speech at the United Nations General Assembly in September 2017, where he stated: “Wherever true socialism or communism has been adopted, it has delivered anguish and devastation and failure.” At first glance, these two speeches may seem like a small wave in the sea of history, but they represented the staging of a significant policy shift.
A trade war and the response of the CCP
Change is taking place in China. Even before the trade war began, the Chinese economy had a rocky start in 2018. The stock market crashed, the bond market has lost value, the RMB drastically tumbled in June, and Forex (FX) currency reserves fell.
One observer noted that the complicated internal economic crisis in China was akin to a simmering volcano, and the trade war between China and the U.S. can be described as a seismic wave that may lead to an eruption.
On July 6, U.S. tariffs on US$34 billion worth of Chinese goods kicked in, escalating a war of words between the world’s two largest economies into a full-blown trade conflict. The 25 percent duties were applied on 818 products produced in China worth US$34 billion. If the CCP tries to exact revenge, the U.S. administration will levy another 10 percent import tariff on products worth an additional US$200 billion. In response, the CCP has announced it would levy the same amount of import tariff on U.S. products, but did not explain how it would respond to the additional tariffs worth US$200 billion, which exceeds the total amount of China’s imports from the U.S. by US$70 billion.
During this trade war between China and the U.S., the tariffs, worth hundreds of billions of dollars, can serve as a quantitative index, but their impact is similar to small arms fire. What troubles the CCP most is a heavy weapon known as non-tariff barriers to trade (NTBs). In a word, the CCP must fulfill the request to perform equal and fair trade just as other foreign nations. Most nations are in a position to conform to such as request; however, for the CCP, it is an impossible task since it requires the reform of its economic system and the removal of Internet restrictions. China’s economic system is intertwined with its political system, and once its people have free access to the Internet, CCP governance will eventually collapse.
Recently, the White House launched a report entitled How China’s Economic Aggression Threatens the Technologies and Intellectual Property of the United States and the World, which pointed out that China’s growth was achieved by unfair economic aggression. In December 2017, the White House announced the publication of another report entitled National Security Strategy, which warned that the CCP is using economic means to export its influence worldwide.
To defend the country from the CCP’s economic aggression, the United States is using other weapons in its arsenal other than just relying on tariffs.
The U.S. Senate and House of Representatives are working together to promote the Foreign Investment Risk Review Modernization Act (FIRRMA), and to reinforce reviews of foreign investment to prevent the CCP from stealing U.S. intellectual property rights from Chinese companies. One of the perpetrators, ZTE Corporation, may have escaped sanctions, but the Senate and House have resorted to legal measures to ensure that ZTE will be held accountable.
The change in China is a crisis that can be likened to a rumbling volcano, and the international community’s attitude toward the CCP has changed in response to these internal rumblings.
Disclosure of CCP infiltration in the U.S.
On June 28, 2018, Republican Senator Marco Rubio and Democrat Senator Catherine Cortez Masto introduced a cross-party bill to ask the U.S. administration for disclosure of CCP influence on U.S. politics. The bill is grounded in the Cold War era in 1985 when Congress asked the State Department to disclose how Soviet Communism had been distorting information and manipulating the media in the United States. The senior senators from both political parties proposed the bill, which reflects a growing perception of the CCP as an immediate threat, similar to how the U.S. viewed the Soviet Union during the Cold War era.
The president of the National Endowment for Democracy (NED), Carl Gershman, who testified before Congress on June 14, stated that the CCP: “is the most serious threat faced by the United States in 2018 today.” He likened the CCP to Nazi Germany ruled by Hitler and the Soviet Union ruled by Stalin.
Distinguishing between China and the CCP
On June 4, 2018, while the world expressed its commiserations for the 29th anniversary of the Tiananmen Square massacre, the U.S. House proposed a cross-party draft bill to stop the CCP’s interference in U.S. politics and institutions. The draft bill stated that the United States should distinguish between the people of China, Chinese culture, and the CCP, and provide measures to stipulate a strategy to block the CCPs infiltration into U.S. politics and institutions.
In February of this year, Senator Marco Rubio and Congressman Dana Rohrabacher, along with several other members of the Congress, told the press: “The people of China are the best allies of the United States,” and “The United States supports the people in China, but will not support the CCP’s political power.” At a public hearing on human rights also in February, Senator Rubio said that the United States does not mean to stop the development of China, but to address a point — how the CCP government treats its people.
The CCP “Long Arm” strategy has infiltrated the economies, culture, diplomacy, academics, and defense of many countries across the globe. At a Senate hearing in February 2018, the FBI stated that investigations into scores of Chinese government-funded Confucius Institutes across the U.S. are taking place following concerns that they are part of covert spying and influence operations that make “use of non-traditional collectors, especially in the academic setting.”
On June 28, Australian lawmakers overwhelmingly passed a series of bills to crack down on foreign interference, with Prime Minister Malcolm Turnbull saying they’re needed to stop reported meddling by China and other nations in the nation’s government, media, and universities.
Disrupting the CCP economic strategy
It has been a bad year for the CCP. The Belt and Road Initiative to reinstate the world economic order is stumbling. Several neighboring countries — like Malaysia, Pakistan, Nepal, and Myanmar — have begun to boycott the CCP. Even European countries have come up with new measures to respond to the Belt and Road Initiative.
Professor Chiu-ching Kuo, who teaches at the Institute of European Studies of Tamkang University, said at the end of June that the European Union is working on ways to stipulate the Euro-Asian networking strategy to boycott the CCP’s Belt and Road Initiative. Kuo said many countries — such as the United Kingdom, Germany, and France — have doubts about the initiative and consider it a political tactic of the CCP.
Critics suspect that the Belt and Road Initiative is an asset trap to pay off debts from China’s “New Imperialism.” The latest example is Sri Lanka, which formally handed over a strategic port on the coast of the Indian Ocean to China in July 2017 after struggling to pay its debt to Chinese firms. In order to strengthen its presence in the Indian Ocean, the CCP has invested heavily in the region and has rehabilitated the facilities at the port as part of the Belt and Road Initiative.
In addition to the Belt and Road Initiative, the “Made in China 2025” is another strategic plan under scrutiny. This policy appears to be a legitimate industrial goal, but in fact, the CCP uses unfair tactics to deceive other countries in order to obtain foreign technologies. It does this by pirating foreign intellectual property rights and creating domestic trade barriers for the purpose of achieving a leadership role in technology. Several countries are becoming increasingly aware of the tactics employed by the CCP to achieve its goals and have started to boycott the policy.
The German State Secretary at the Federal Ministry for Economic Affairs and Energy, Matthias Machnig, said early this year that Germany is working with France and Italy to come up with a draft bill asking the European Union to launch stricter laws to prevent the CCP from acquiring corporations in Europe, and to reduce the outflow of technologies and knowledge to China. The Minister for Foreign Affairs, Sigmar Gabriel, also stated that the German government must protect its key technologies and noted the existence of a “Cold War in Technology.”
Containing CCP influence in the Pacific
In 2015, the U.S. administration launched the Asia-Pacific Rebalancing Strategy, which allocated 60 percent of total Navy assets to the Pacific Fleet and increased ground troop levels in the Asia-Pacific region. The U.S. global strategic matrix changed with the current administration as the Asia-Pacific Strategy was replaced by the Indo-Pacific Strategy. The intent is to counter recent moves by the CCP with an Indo-Pacific Strategy that includes the support of India, Japan, Australia, and the ASEAN countries.
In November 2017, President Trump addressed the Indo-Pacific Strategy (Free and Open Indo-Pacific Strategy) during his Asia tour, with the countries of India, Japan, Australia and the U.S. forming the hedge of the strategy. The U.S. administration made it clear in a National Security Strategy Report in December 2017 that China and Russia are strategic competitors to U.S. national security interests. In January 2018, the Pentagon’s new National Defence Strategy stressed the Joint Force to carry out the strategy and for the first time, Inter-state strategic competition from China, Russia, Iran, and North Korea was the primary U.S. national security concern rather than terrorism, as was the case during previous administrations.
On May 30, 2018, Defense Secretary Jim Mattis announced that the official name for the U.S. Pacific Command was to be the U.S. Indo-Pacific Command. In announcing the change in the name of the U.S. military command, Jim Mattis made a point of saying that the Indo-Pacific region has “many belts and many roads,” underscoring the concerns of the administration has about the CCP and its intentions. The new command is in line with the Indo-Pacific Strategy and emphasizes the importance the U.S. military places on moving between the Pacific and Indian oceans as a counter move to the CCP’s Belt and Road Initiative.
The U.S. Rim of the Pacific Exercise (RIMPAC) is a large-scale bi-annual navel exercise with more than 20 countries taking part, including Japan, Australia, Britain, and France. China has been invited to the rehearsal twice, once in 2014 and another in 2016. However, there’s no place for the CCP in this year’s exercise. At the same time, Vietnam and several ASEAN countries also joined the exercise, as did India and Sri Lanka, two South Asian countries that grew close to the CCP in recent years.
Amidst the high tensions in Russia-U.S. relationships, President Trump decided to meet Russian President Vladimir Putin in a summit held in Finland on July 16, despite the CCP endowing the “Order of Friendship” on President Putin on June 8 in an attempt to convince him to stand by China. This is not China’s first attempt to foster a stronger China-Russian alliance. In 1991, former CCP leader Jiang Zemin signed the “Russia-China Boundary Agreement,” which transferred approximately 1.6 million square kilometers of Chinese territory to Russia.
Still, President Putin, this former KGB foreign intelligence officer and Communist Party member, has proven himself to be a dangerous and disruptive actor, and it’s hard to predict where he will stand at the critical moment.
From a strategic point of view, by offering an olive branch to President Putin, the U.S. administration hopes to convince him or his successors that Russia needs a better relationship with the West — that the price of confronting the U.S. and its European allies is simply too high — and that a more moderate posture is warranted. Goodwill to Russia can be seen as giving them a choice, but for Russia to stand aside from the Iron Curtain and to join the West in containing China, it must first conclude that it can’t beat the West by cooperating with the CCP.
Written by Jian He