Is American-Chinese strategic cooperation possible?
Looking at the economic landscape at the end of 2021, one cannot help but notice the emergence of new obstacles to a robust recovery. The United States, Europe, China, and others face a growing list of remarkably similar challenges in the short and long term.
The pandemic remains the most immediate concern. Without full global vaccination, new variants of Covid-19 will continue to emerge, potentially forcing governments to renew partial or full lockdowns. The coronavirus thus represents a permanent brake on the recovery.
A second challenge is the blockage of global supply chains, which, together with supply-side changes in labor markets, has created persistent inflationary pressures unprecedented for more than a decade. Without cross-border efforts to address bottlenecks and supply shortages, central banks may be forced to curb the current sharp increase in demand by tightening monetary policy.
Another common problem is the complex task of properly regulating the digital technologies and sectors that now represent a growing share of most economies. Regulators in Europe, the United States, China and India have stepped up efforts on this front, writing new rules for data security, access and use, and launching investigations into abuse potential market power, especially through mega-platforms. As the financial industry turns to digital payments and currencies, and new entrants emerge in the credit, insurance and asset management markets, there is an urgent need to adapt regulations to ensure competition fairness, access to valuable data and financial stability.
It’s no secret that a substantial part of the additional wealth creation over the past decades has occurred in technology sectors such as e-commerce, payments, fintech, and social media. The result has been high concentrations of new wealth, which in turn raises concerns about undue influence on politics. Such concerns are particularly evident in the United States and China, even though the two countries have very different systems of governance, and therefore different channels through which influence is exerted.
Likewise, although the terminology differs in the United States and China, the two countries are struggling to reverse rising income and wealth inequalities and declining social mobility. In the United States, many politicians talk about more inclusive growth. In China, the government has launched a new campaign to achieve “common prosperity”. The heated debates in the two countries over how best to pursue these goals reflect concerns that an excessive or too narrow approach to redistribution could undermine economic efficiency and dynamism.
The similarity between these domestic policy-making efforts suggests that the United States and China have a common interest in establishing new rules of engagement in the global economy and financial sector. Both must adapt to the new realities implied by the digital revolution and the evolution of global power relations. There is also a clear need for new agreements to limit the offensive use of digital and cybernetic technologies, and to free benign cross-border flows of technologies (in health, education and other sectors) that risk being blocked. by national security. considerations.
Finally, there is the global challenge of climate change. Without the free and frictionless movement of the necessary technologies and finance, the world will have no chance of limiting global warming to 1.5 degrees Celsius above pre-industrial levels. Here, too, success will depend on the ability of the United States and China to work together.
With so many common challenges, one would have expected the major world powers to seek a difficult but reasonable balance between strategic competition and strategic cooperation. After all, China and the United States would benefit from recognizing that they have compelling common interests, not just inevitable disagreements.
But, for the most part, that did not happen. Although US President Joe Biden and Chinese President Xi Jinping recently agreed to create a space for cooperation on climate change and energy transition, the United States has nonetheless doubled its strategic competition, citing national security concerns. We are still a long way from taking advantage of the free flow of technology needed to reduce global emissions to zero by mid-century.
Worse, attitudes on both sides are hardening, each government settling into a comfortable but unproductive certainty that it occupies the first moral place. In the United States, it is no longer assumed that the Chinese system of governance will fail or turn into a version of democratic capitalism. Policymakers from both major parties now believe that China owes its rise to its persistent refusal to play by the rules.
On the Chinese side, the US strategy is seen as an effort to hamper or even reverse China’s economic and technological progress. America’s partisan polarization and social divisions are presented as evidence of a failing political and economic system.
Meanwhile, the global economy continues to experience at least four major structural transformations: the multidimensional digital revolution, the push for clean energy and a sustainable environment, major breakthroughs in biomedical sciences and biology and the rise of Asia. The four developments offer major opportunities to improve global well-being in many different dimensions; but each will also involve disruptive transitions that require major adaptations to existing global institutions and frameworks.
In these circumstances, we don’t really have the luxury of focusing exclusively on competition or choosing fights for national political gain. The risks to global health and prosperity are too high. Escaping the dangerous path of uncooperative competition will require sustained leadership from both sides and from all sectors of society. There is no guarantee of success, but there is no other option but to try.
Michael Spence, Nobel Laureate in Economics, is Emeritus Professor of Economics and Former Dean of the Graduate School of Business at Stanford University, and Senior Fellow at the Hoover Institution. He sits on the Academic Committee of the Luohan Academy and co-chairs the Advisory Board of the Asia Global Institute. He was chairman of the Independent Commission on Growth and Development, an international body which, from 2006 to 2010, analyzed the opportunities for global economic growth.
Copyright: Project Syndicate