A stable and generally constructive relationship between the United States and China has been a central underpinning of peace and stability in the Asia-Pacific region since President Nixon visited Beijing in 1972, and a principal pillar of foreign policy beneficial to vital U.S. interests. But there is no room for complacency about the future of the relationship, or about the stability of the Asia-Pacific region.

Author

Jeffrey A. Bader

Senior Fellow - Foreign Policy, John L. Thornton China Center

Regardless of the outcome of the U.S. presidential election, there would have been irresistible pressure for sharpening American policy in response to the economic and security consequences of China’s rise. Frustration over Chinese trade and investment practices and inequities in the economic relationship featured prominently in the campaign and are expected to lead to retaliatory measures by the incoming Trump administration. On the security side, frictions between the United States and China in northeast and southeast Asia have mushroomed because of the clash of Chinese territorial and maritime claims with those of rivals, the need for Washington to reassure anxious allies and security partners through its military presence and activities, and the expansion of the People’s Liberation Army (PLA) navy’s capabilities and actions.

Whither Asia Policy under Trump?

The world is understandably preoccupied by the foreign policy directions of the incoming Trump administration. There are presently more questions than answers, not least with regard to Asia. Candidate Trump sometimes spoke of allies with disdain, suggesting that they are free-riding moochers who need to pay more for the privilege of American defense and should consider going nuclear. He has promised to renounce the Trans-Pacific Partnership and adopt protectionist trade policies, unsettling to a region that has prospered for a generation based on the open trade and investment policies the United States has sponsored. He has rattled leaders in Beijing by suggesting the United States could abandon its commitment to the “One-China” policy and take other steps to alter its unofficial relationship with Taiwan. Some of his advisors have written of the need to gear up for a trade war with China, whose negative effects would spread throughout the Asia-Pacific region. These are more than the usual rumblings that come with a change of leadership in Washington and are causing widespread uncertainty in the region.

These are more than the usual rumblings that come with a change of leadership in Washington.

On the other hand, there is hope that tax reform and deregulation could boost the American economy, which would benefit the economies of the region. Trump’s foreign policy and national security selections, though few in number so far, generally do not suggest indifference to alliances or support the isolationist messages in his campaign. Amidst Trump’s off-the-cuff remarks and tweets insulting China are occasional comments that he wants a good relationship with China and hints that all is negotiable.

Why China may not want to wait

I have written several articles over the last year with recommendations for U.S. policy toward China. Instead of trying to read the Trump team’s scattered tea leaves and proposing a new way forward, this article will lay out four major initiatives that China, rather than the United States, should take to prevent the all-too-obvious risks of a deteriorating spiral in U.S.-China relations from becoming a reality.

Ordinarily, thinking about major Chinese initiatives to improve the relationship would be a fruitless exercise. But circumstances have changed. The urgency of the situation requires that China’s leaders think and act much more seriously about major shifts in their foreign policy strategy.

Until quite recently, the United States has taken the initiative in the relationship, and China has reacted. This reflected the power disparity between the two countries, U.S. global activism, and the ensuing diplomatic habits. The United States often took the first steps to include or invite China, provided the framework for Chinese inclusion, and coaxed China to participate, as demonstrated by: Nixon’s opening to China; China’s participation in the nuclear nonproliferation regime; the negotiation and terms of China’s membership in the World Trade Organization; the vast array of bilateral trade, military, cultural, educational, and scientific agreements; and regional organizations, like Asia-Pacific Economic Cooperation (APEC) and the ASEAN Regional Forum

But times have changed. First, in the last several years, China has established an Asian Infrastructure Investment Bank grouping 57 countries. It has created a regional infrastructure investment plan called “One Belt, One Road” stretching from China through central Asia to Europe. It has hosted meetings of the G-20 and APEC, and put forward organizing themes for each event. It has initiated negotiations for a Regional Comprehensive Economic Partnership involving all the major economies of Asia. It has worked to internationalize its currency and persuaded the International Monetary Fund to include the renminbi in its basket of major currencies that the IMF uses to structure balance of payments and debt resettlement loans. It has rapidly become more comfortable with the idea of exercising leadership and initiative, unlike the previous era when it shied away from such activism because of incapacity, habit, or fear of arousing regional anxiety. Foreign Minister Wang Yi’s New Year’s Day interview amply illustrated China’s capacity and self-confidence in moving away from previous year-end laundry lists and in embracing a higher profile approach to global governance.

Second, the 19th Party Congress that will launch Xi Jinping’s second term will be held this fall. It will be the primary focus of Chinese Communist Party politics this year. Xi will want to enunciate policies, achievements, and initiatives that highlight his first term accomplishments and provide a roadmap for the next five years. While Xi will emphasize domestic issues and economic growth, he will not want to ignore the foreign policy steps he has taken or the future directions he wishes to undertake. China’s relationship with the United States arguably will be the most difficult and the most consequential of all foreign policy challenges for China in coming years. As Deng Xiaoping used the Communist Party’s 3rd Plenum in 1978 to launch economic reform and open China to the West, Xi could find a high-profile stabilization of relations with Washington an attractive option to complement his intended domestic policy direction.

Third, Chinese leaders legitimately wonder whether the Trump administration will be responsive to initiatives by Beijing, or if it is instead intent on confronting China and viewing Chinese proposals with suspicion. President Trump certainly will not uncritically adopt Chinese ideas, but he is transactional in his approach to relationships, which involves a readiness to engage in give-and-take. It is thus not in Chinese interest to simply await American initiatives that could frame the subsequent give-and-take discussions on highly disadvantageous terms to China, but instead to offer its own.

Four Proposals for Chinese Action

U.S. attitudes toward China are negatively affected by a host of issues, as are Chinese perceptions of the United States. But there are a limited number of decisive issues that could drive the relationship into one of acute rivalry. If Beijing can acknowledge that it bears some responsibility for how Americans think about China, then a virtuous rather than a vicious cycle could emerge. The ensuing discussion reviews the major issues that are driving suspicions on the American side and suggests ways that China can allay those suspicions while advancing in its own long-term interests.

These recommendations are explicitly designed to move beyond what the Chinese leadership currently considers feasible. None would be easy to achieve, and all would entail substantial risks and costs. They would require sacrifices and concessions by China and reciprocal actions by the United States, though this paper focuses on the actions that China needs to consider. These proposals seek to encourage a paradigm shift in Chinese thinking about managing relations with the United States, rather than rely upon cautious approaches that protect short-term interests but would lead to much larger dangers down the road. I have little expectation that they will be adopted in the short run. But I hope they will spur Chinese leaders and strategists to reflect upon ways to bring the same kind of creative and imaginative approaches to relations with the United States that they have demonstrated in economic institution-building in Asia in recent years.

Economic relations: Time for a new start

There is a widespread view in the United States (given loud voice in the presidential campaign) that the relationship between our two countries is highly unbalanced and damaging the American economy. Among the outcomes that have soured Americans on economic interaction with China are an American trade deficit of nearly $400 billion; shutdown of thousands of U.S. factories unable to compete with Chinese low labor costs; intellectual property violations estimated in the hundreds of billions of dollars; vast disparities in openness to and terms of foreign investment; state subsidies that distort markets and competition; and periodic manipulation of the renminbi to benefit China’s export sector. While there are disagreements among economists over the magnitude of the impact of these practices, there is little disagreement that substantial inequities need to be corrected.

China was admitted to the World Trade Organization (WTO) in 2001 through an accord negotiated over 16 years. Its accession was based on an unprecedented agreement to radically open a market and force market discipline upon a state-dominated economy. It was an impressive achievement that benefited both China and its trading partners. In the space of a decade, Chinese imports from the United States grew by 450 percent. (It is true that Chinese exports grew at an even faster rate, but the WTO agreement did not deal with Chinese exports, only with imports and Chinese market opening.)

The accession agreement, and the bilateral U.S.-China trade agreement on which it was largely based, were appropriate for the period when the Chinese economy had yet to fully take off. China was then the world’s sixth largest economy. It was not yet a dominant force in international manufacturing. Its accession agreement was agnostic on the question of whether China was a developed or developing country, essentially treating it as a hybrid. Those facts and assumptions are no longer valid. China is now the world’s second largest economy by a large margin, the world’s largest manufacturing country, the world’s largest exporting and trading country, a significant actor in global markets, and a major source of foreign direct investment. The United States imposes relatively few and targeted restrictions on foreign investment. China, for its part, still sticks to the investment commitments it made during the WTO accession negotiations, which in many key sectors (such as automobiles, telecommunications, information technology, energy, and financial services) cap foreign investment below 50 percent.

Recommendation: China should propose a major renegotiation of both the bilateral investment relationship, including significant liberalization of caps, and of trade practices suitable for China in 2001 but no longer relevant to the economic powerhouse of today. In such a negotiation, China would commit itself to accepting the market discipline and practices accepted by the world’s developed economies. The current negotiations over a bilateral investment treaty could provide a base for some steps, but much more extensive liberalization of China’s investment regime—as well as elimination of barriers to imports—should be envisaged. China should make clear that it is proposing a comprehensive transformation of its trade and investment regime, not piecemeal actions limited to a few sectors.

The greatest political need may be for China to address American trade and investment concerns before the economic relationship becomes toxic.

There are compelling reasons for China to undertake a bolder approach. Its own leaders and top economic thinkers have said over and over that if China does not undertake the next major steps in economic reform, its development will stagnate and it will likely fall into the so-called “middle-income trap.” That is the thesis of the pioneering joint study by the World Bank and China’s Development Research Center published in 2013 and adopted by the Chinese Communist Party at its Third Plenum in 2013. China would also benefit by U.S. and European decisions to accord China market economy status under the WTO if it took the necessary steps promised in such an offer.

Additionally, such a proposal could be effective in warding off the inevitable barrage of trade actions likely to emanate from Washington and other capitals in the coming years. China’s leaders may judge that they have weapons available to retaliate against such actions, but it is far from clear that China has less to lose from a trade war with the United States, Europe, and Japan than they do from a world veering toward protectionism.

The greatest political need may be for China to address American trade and investment concerns before the economic relationship becomes toxic. These proposals would be best in the context of the WTO, which would allow China to respond to the concerns of other major trading partners, including the European Union and Japan. Such a proposal, however, should be tailored to address the urgent concerns of other major exporting countries, rather than reopening a global round of all 164 WTO members certain to take years and unlikely to produce results.

North Korea: The biggest security threat in Asia

North Korea presents a unique national security menace to East Asia and to the United States. It is the world’s most closed society, a brutal dictatorship whose self-perpetuated leadership is accountable only to itself and whose concern for its population seems restricted to keeping them from posing a threat to their rule. It is developing a nuclear weapons arsenal, with a current stockpile estimated at 10 to 20 warheads and growing. It is working hard to lengthen the range of its ballistic missiles so as to enable it to strike the United States with a nuclear weapon. Its ideology and rhetoric are rabidly hostile to the United States and our allies, South Korea, and Japan.

Many observers contend that North Korea’s leaders are not stupid or suicidal, that they know that a nuclear provocation against the United States or its allies would lead to the end of the regime’s existence, that their aims are defensive and limited, and that the kind of deterrence that has worked against other nuclear powers will work against North Korea. That may be so. But it is not an assumption that we can afford to make lightly. North Korea is run by a dictator in his early 30’s with no experience in the outside world, virtually no interactions with foreign officials, no foreign travel in his adult life, no commitment to or stake in relations with the rest of the world, and a record of bloodthirsty if not psychopathic behavior. We should look for a better way to ensure our security and that of our allies than to count on the hope of his growing maturity and restraint.

He sees North Korea as a time bomb on China’s border.

China has a strong interest in seeing a change in North Korea’s behavior and its isolation from the rest of the world. Xi Jinping clearly regards North Korean leader Kim Jong-un with disdain, and has yet to meet with the North Korean leader and China’s former ally. He sees North Korea as a time bomb on China’s border. North Korea’s provocations are undermining China’s national security by inviting ever-increasing American, Japanese, and South Korean military modernization, exercises, and build-up in China’s immediate neighborhood. No less than Henry Kissinger has opined that a major target of North Korea’s nuclear program is China itself. That should give Beijing pause. China has complicated interests in North Korea, but it cannot look upon the current situation with any comfort. Threats of escalation from incidents provoked by North Korea are a deep concern to China, and its preference for a denuclearized North Korea is not mere lip service. China also is uneasy about the possibility of U.S. imposition of sanctions upon Chinese entities that maintain commercial relations with North Korea. The status quo may be an easy day-to-day fallback for China, but it is not in its long-term interest, nor is the increasing security focus of the United States and its allies on its neighbor.

Recommendation: China should decisively move away from its long-term habit of balancing between North Korea and the United States, of valuing short-term but unsustainable stability in the Korean peninsula over addressing seriously the North Korean nuclear threat. To demonstrate its new thinking, it should put forward a comprehensive set of proposals addressing the security concerns of the United States and its allies, consistent with China’s own national security interests.

China should propose that the United States, South Korea, and China begin an ongoing private dialogue about a future nuclear-free unified Korea. The dialogue could begin with sharing of intelligence about North Korea’s weapons of mass destruction programs and proceed to policy and military coordination discussions to deal with possible North Korean collapse scenarios. It also could include questions relating to the U.S.-ROK post-reunification alliance and deployments, which would be of special interest to China and make such discussions more attractive.

Such talks should be accompanied by a more vigorous Chinese economic squeeze on North Korea. China lately has supported tightened sanctions against North Korea and has been enforcing U.N.-imposed measures, but as North Korea’s largest trading partner by far there is more than it can do. It could follow in the footsteps of South Korea, which in the last decade has dramatically curtailed a once modest but real trade and investment relationship with the North.

These pressures need not lead necessarily to the collapse of North Korea that China has long feared. They could instead serve to concentrate the minds of North Korea’s leaders, forcing them to realize that they truly have no path forward beyond absolute international isolation, disappearance of access to luxury goods for the Party elite, and national economic collapse that would imperil the future of the regime. Under such circumstances, North Korea’s leaders might decide to return to the negotiating table, with the offer of inducements such as American diplomatic recognition, a peace treaty, and a relaxation of the international economic embargo. History does not suggest they will make such a decision easily, but there are precedents, though short-lived, in the 1990’s and 2000’s. Or alternatively, if they declined to take the offered path, the regime could collapse. Either would be a more satisfactory outcome for the region and the United States than the current path.

South China Sea: A litmus test on China’s rise

Developments in the South China Sea do not present the same kind of security threat to the United States as does North Korea. But China’s actions in the South China Sea have done more to alter the regional security environment and perceptions of China’s rise than any other actions it has taken in the last decade.

The South China Sea has gone from being a relative backwater in international disputes to a storm center. There are six competing territorial claimants to the region’s thousands of tiny islands, reefs, rocks, and shoals and to associated or nearby maritime areas. The Law of the Sea Convention, whose principles should apply and which were reaffirmed in a ruling last year by the Permanent Court of Arbitration in the Hague, has been essentially ignored by China (and unfortunately not ratified by the United States). China has built seven military facilities on reclaimed land on various reefs and rocks, and is developing power projection capabilities and deploying sophisticated anti-aircraft and anti-missile systems. Washington has responded with an increasing rhythm of military exercises and operations, which has led to some dust-ups (e.g. the Chinese snatching of a U.S. underwater drone), warnings, and sharpened rhetoric.

The South China Sea has gone from being a relative backwater in international disputes to a storm center.

The issues in the South China Sea involve an intersecting mixture of territorial claims, great power rivalry, international law, regional interstate frictions, freedom of navigation rights and assertions, and squabbling over marine and energy resources. They will not be resolved comprehensively any time in the foreseeable future. But they can be managed much more constructively, in a way that provides reassurance rather than stokes tensions. All claimants—as well as non-claimant maritime powers like the United States—need to be involved in such a process.

However, China has a special responsibility to do so, because its footprint is so large and growing, its assertions of its maritime claims are inconsistent with international law, and its reputation as a responsible regional stakeholder depends on its demonstrated willingness to accommodate the legitimate needs of other actors. Its coast guard deployments in Indonesian waters, its stationing of oil rigs in waters disputed with Vietnam, and its recent bullying of Singapore demonstrate either clumsiness or a conscious decision that pressure and force are its preferred ways of obtaining results. (The recent China-Philippines reconciliation, whose permanence is far from guaranteed, dropped in China’s lap because of a 180-degree turn by the Philippine’s erratic President Rodrigo Duterte, not because of the strategic brilliance of China’s policy.) If such an approach continues, it can expect the United States, other claimants, and other regional powers to draw harsh conclusions about China’s intentions as its navy expands and to adjust their security and foreign policies in ways to check and constrain China.

Recommendation: If Chinese leaders wish to defuse tensions in the South China Sea, they should put forward a comprehensive proposal building on positions it has taken at various times but failed to pursue seriously. Such a comprehensive proposal could have the following elements:

1. An agreement limiting militarization of the South China Sea. This could involve limits on the kinds of weapons systems China and other claimants could deploy on land features. China also doubtless would want to see limitations on U.S. surveillance operations in areas sensitive to China. During his 2015 visit to the United States, Xi Jinping said China did not seek to militarize the Spratly islands. If he were to follow through on that statement, it would go a long way toward defusing tensions.
2. A timetable for negotiating a code of conduct among the claimant states. It should cover access to fishing and energy resources. With regard to fishing, China could propose that fleets from all countries could fish freely, within caps designed to prevent overfishing, without regard to geographic or maritime claims.
3. China has said it adheres to the Law of the Sea, but its claims and conduct in the South China Sea contradict that claim. It should state unequivocally that the so-called “nine-dash line” is solely for the purpose of delineating China’s claims to islands and other features, not to maritime rights in the South China Sea.

Taiwan

The status of Taiwan is the most sensitive issue for China and its leadership. It is an issue on which the United States has a long-standing position dating back to the three joint U.S.-PRC communiqués—indeed even to the period when the Republic of China was the recognized government of China. U.S. intervention on the issue of Taiwan’s status is welcomed neither on the mainland nor in Taiwan, and President-elect Trump’s offhand comments questioning it would be best forgotten and not repeated. But even without Mr. Trump’s maladroit musings, there is reason to worry about stability in the Taiwan Strait in the next few years. Beijing’s suspicion of the intentions of Taiwan President Tsai Ing-wen is just the tip of the iceberg. The larger risk is the divergent directions in popular sentiment on the two sides of the Strait. China’s leaders believe, perhaps correctly, that over time the popular mood is turning against reunification and toward independence. This would be a wholly unacceptable outcome for Beijing. The logic of its “One-China” principle could drive it more toward a policy of pressure and threats against Taiwan, leading ultimately to the use of force if all hope is lost for peaceful reunification. Given U.S. responsibility for Taiwan’s security under U.S. domestic law, that could lead to a test of wills and potential confrontation that would be in no one’s interest.

Viewed against this backdrop, there are clear risks in the next several years. Taiwan’s executive and legislature are now led by the historically pro-independence Democratic Progressive Party (DPP). Tsai Ing-wen, who serves as Party leader as well as president, has refused to accept the One-China principle, which was the basis on which cross-Strait talks were held prior to her election. But she has declared her commitment to the status quo (e.g., no change in Taiwan’s constitution, and no referendum on status). China, in turn, has broken off formal contact with the DPP government, resumed a campaign to isolate Taiwan diplomatically, and could take further steps to pressure Taiwan in the absence of dialogue.

Recommendation: Beijing seems to feel that time may not be on its side, but they cling to an approach to cross-Strait issues that is frozen in time and oblivious to the changes they fear. Consequently, trends are not in their favor, and their approach invites an ultimate Hobson’s choice between acceptance of Taiwan’s permanent separation and the use of force to prevent such separation. It also makes more likely a confrontation between Chinese nationalism and U.S. security responsibilities. Beijing should consider bold ways to change the dynamic, both in their own interests and in the interests of regional peace and stability.

Beijing’s formal position on Taiwan’s future status remains the “one country, two systems” formulation proposed by Deng Xiaoping for Taiwan and Hong Kong in the 1980s. There is no support in Taiwan for “one country, two systems.” China’s continued adherence to it simply serves to isolate it from Taiwan and to entrench hostile views toward the mainland.

The Chinese leadership should consider a reformulation of its Taiwan policy, putting forward an approach consistent with its principles but designed to reach out to Taiwan’s people and change the current negative dynamic.

1. Instead of repeating the “one country, two systems” model, Chinese leaders should indicate they are open to a cross-Strait relationship much more in keeping with a Taiwan that has ruled itself for decades. In the 1990s, senior Chinese officials and scholars talked openly about concepts such as confederation, including the relevance of examples like the European Union, expanded international space for Taiwan, or even membership in the United Nations under the concept of One-China. China’s leadership should make clear that concepts for Taiwan’s status more in keeping with existing realities can be discussed.
2. Taiwan has been choosing its own leadership through democratic elections since the 1990s. China should understand that it cannot decide who will speak for Taiwan, and a roller-coaster ride in which Beijing turns on and off formal contacts depending on the elected government’s identity is a sure way to sour attitudes in Taiwan. Beijing should look for ways to resume overt contact with Taipei.
3. If China were to propose that Taiwan be permitted to join the negotiations on a Regional Comprehensive Economic Partnership (RCEP) currently including 16 countries, this would send a powerful signal about Beijing’s attitude toward Taiwan’s economic future and international identity. The same would be true if China were to invite Taiwan to participate in the Asian Infrastructure Investment Bank using nomenclature acceptable to Taipei. Neither would require a sacrifice of principle by Beijing.

Bold leaders, and Xi Jinping is one, need to get ahead of the wave, and not wait to be swamped.

Why China Needs a New Strategy

It is almost always easier for a country’s leaders to stay the current course and avoid risk. In Xi Jinping’s case, the course on which he is embarked in foreign policy has involved trade-offs with other senior leaders and assertion of his strength to achieve the present consensus. So change of direction could be painful. China’s foreign policy has created favorable results in some areas, e.g., its building of regional economic institutions that project China’s leadership and a strategic partnership with Russia. But the current trajectory would be filled with perils for China even without an unpredictable American policy under Donald Trump. The apparent collapse of the international consensus on globalization; the rise in protectionism and xenophobia in the West; anxiety and resentment about China’s rise among countries large and small in the West and in Asia; and the likely negative impact of China’s slowing growth rate on its international influence could all play out in ways that degrade China’s international standing. Bold leaders, and Xi Jinping is one, need to get ahead of the wave, and not wait to be swamped.

It would be foolhardy to predict that the ideas in this essay will be adopted by China’s leaders. But they are all in China’s long-term interest, even though that may not be readily apparent to those invested in the status quo. They also would advance China’s relations with the United States, one of China’s most important strategic interests. Chinese and American leaders and experts need to look for opportunities for policy changes that fundamentally change skeptical attitudes on the other side. If they fail to do so, there will be plenty of people on each side with proposals to score at the other’s expense. It is in the spirit of avoiding more worrisome outcomes that I offer these suggestions.

      

 

 

The backstory

Since the establishment of diplomatic relations between the United States and the People’s Republic of China (PRC) in 1979, no U.S. president or president-elect has had a face-to-face or telephone conversation with his Taiwan counterpart. This was an implicit part of the arrangement Washington accepted when it recognized the PRC as the sole legal government of all of China and agreed to conduct its relations with Taiwan on an unofficial basis.

Over the years, there have been tactical adjustments to ensure that U.S. officials can interact with Taiwan counterparts to pursue and protect our interests and to show proper respect for Taiwan and its democracy. However, our top-level officials—particularly the president—have always shown great care not to upset the post-1979 arrangements. There have been quiet, non-visible written communications between the top leaders of the United States (including presidents and presidents-elect) and Taiwan, but it has always been understood that direct conversations would cross a line not worth challenging.

China’s claim to Taiwan is, and has long been, the most sensitive issue in U.S.-China relations. It was the principal obstacle to our getting together with Beijing before President Nixon’s 1972 trip, and negotiation of how to handle the issue—the handiwork of Presidents Nixon and Carter and Secretary Kissinger, Secretary Vance, and National Security Advisor Brzezinski—was the central feature of the three Joint Communiques laying the basis for our relationship. On every aspect of the U.S. relationship with Taiwan—whether it be U.S. arms sales to Taiwan, high-level meetings, military-to-military contacts, visits by senior officials, transits of the United States by Taiwan leaders, or bilateral U.S.-Taiwan agreements—there is a long history about what the United States can do consistent with its commitment to an “unofficial” relationship with Taiwan. The U.S. government does not suddenly, without preparation or reflection, change essential features in a framework that has served our interests, those of Taiwan, and those of the U.S.-China relationship. And most importantly, that has kept the peace in the region.

A break with the past

Unfortunately, President-elect Trump has waded into the thicket of U.S.-Taiwan relations without any apparent briefings by senior State Department officials intimately familiar with this long history. This phone call will likely to be interpreted by Beijing as something much more than a personal chat. The Chinese, unfortunately, are likely to see this as threatening a cornerstone of the edifice on which U.S.-China relations are built. The Chinese rarely overlook what they perceive a potential alteration in U.S. policy toward Taiwan. A look back at their conduct in 1995, when they undertook ballistic military exercises that threatened Taiwan in the wake of an unprecedented U.S. invitation to Taiwan’s president to speak at Cornell University, illustrates the Chinese mindset. We may neither like nor admire this, but we cannot ignore it.

This phone call will likely to be interpreted by Beijing as something much more than a personal chat.

It is too soon to tell if the Chinese will overreact by taking steps against either Taiwan or American interests. So far, it would appear that cooler heads will prevail in Beijing. They seem to be blaming Taiwan’s leadership, rather than publicly asserting that Trump or the United States was responsible. They may judge that they should show restraint in order to avoid rocking the boat too soon in their relationship with the incoming Trump administration. That is not an experiment, however, that Trump should have conducted. It will put Beijing more on edge to react harshly to future challenges by Trump . Additionally, relations between Beijing and Taipei are especially sensitive right now, since the election of the candidate of the historically pro-independence DPP party earlier this year. That prompted Beijing to cut off political ties with Taiwan until President Tsai recognizes the “one China principle” that, under various interpretations, underlies previous contacts. President Tsai cannot do that for reasons of politics and conviction, and before the Trump-Tsai conversation there was a risk that Beijing might increase pressure on a recalcitrant Taiwan in damaging ways. That risk can only be compounded by this gratuitous phone conversation.

The triangle of interests

It is not in Taiwan’s interest to see the framework of the U.S.-PRC-Taiwan relationship fundamentally altered. Restraint across the Taiwan Strait on the part of Beijing is essential for Taiwan’s security. Arms purchased from the United States and U.S. assurances of support under the Taiwan Relations Act passed after the lapse of the U.S.-Republic of China (Taiwan) security treaty in 1980 are valuable, but Chinese continued intention to resolve cross-Strait issues peacefully is at least as important. Thumbing our noses at Beijing on its most sensitive national and security issue may feel temporarily satisfying, but provoking it when it has many cards to play makes no strategic sense. One can empathize with President Tsai’s desire to establish contact with and gain respect from the incoming U.S. president. What is incomprehensible, however, is how the incoming U.S. president could casually ignore the historic and strategic factors that all eight presidents since Nixon have understood and acceded to the call.

There are many Republican officials who understand this history well and have been involved in managing it. They know the importance of the U.S. relationship with China, with Taiwan, and how we have protected both despite the sometimes contradictory challenges. A number of them declared their opposition to candidate Trump, and wounds may be slow in healing. President-elect Trump would be well-advised, however, to reach out to this large reservoir of talent, both for advice during the transition and to staff his administration, as well as to draw on the great expertise of State Department and intelligence community officials, who have years steeped in these problems. President-elect Trump is free to disregard their advice, but it is profoundly contrary to American, and his, interest to ignore it.

      

 

 

China presents unique challenges for the United States in formulating a coherent, effective policy. It is woven into the fabric of the global economic and trading system and is a major and frequently constructive player in international organizations. But it also has large gaps in its adherence to global rules.

There are three broad options for the United States to respond to the China challenge: 1) accommodation; 2) containment, confrontation, or untrammeled strategic rivalry; and 3) global cooperation paired with regional resolve. The third option is best, in my view, because we need to find a middle course that would safeguard the array of conflicting interests we have. U.S.-China cooperation is possible on many global issues, which has already been demonstrated on climate change, cooperation in the P5+1 negotiations to roll back Iran’s nuclear weapons program, and foreign assistance, for example.

The United States will need to seek a balance between accepting a larger global role for a constructive China while building barriers and coalitions against coercion in China’s neighborhood. On global issues, a sensible approach should look for issues on which China, because of its own evolving interests, can and should play a greater role in supporting the global system. Examples include cybersecurity and cyber innovation, protecting the rights of foreign investors, central bank coordination, and protection of intellectual property rights. This middle policy may lack the bracing shock value of accommodation or untrammeled rivalry, but the burden is on their advocates to explain how a radical lurch in either direction would secure the complex range of U.S. interests in our relationship with China.

Introduction

Serious people understand that the manner in which the United States deals with China will be a critical, if not the critical, overseas challenge for the United States in the 21st century. China will likely be the largest economy in the world within one or two decades; the second or third strongest military soon, if not already; and competitive with the United States and Europe in global economic, and perhaps political and cultural, influence in some regions. China is ruled by a Communist Party resistant to political liberalization at home and wedded to nationalist rhetoric and behavior in dealing with its neighborhood, enhancing the chances for rivalry with the United States.

For those students of history who see conflict as the likely outcome when rising powers encounter dominant powers, these are precursors of a dark future.

How should we deal with China? What policy framework best optimizes our interests, which are multiple and not always consistent with each other? Americans are in the midst of an ongoing presidential campaign that, in a better world, would be asking and answering such questions, but this is not such a campaign.

The Balance Sheet

Elsewhere, I have described how China’s leader, Xi Jinping, sees the world and its governance.¹ Xi is a strong and innovative leader, but not someone who stands apart from modern Chinese history in his objectives. He appears different from his predecessors, however, because the China he rules is very different in its capacities and capabilities. Xi is moving more rapidly and assertively toward achieving some of China’s goals, but he is generally operating along well-traveled paths within post-1949, and especially post-1978, China. These goals include, inter alia:

• Maximizing Chinese influence in the Western Pacific;
• Building Chinese economic ties with and leverage over the countries of the region;
• Seeking reunification with Taiwan and asserting Chinese territorial claims (especially in maritime areas) against competitors;
• Strengthening the military and the military’s reach;
• Pursuing regional economic policies designed to increase inter-connectivity with China while playing a larger role in existing multilateral mechanisms; and
• Maintaining a positive and beneficial relationship with the United States while preparing for possible strategic rivalry.

Xi’s actions broadly have been within these parameters, but with China’s expanding capabilities have come actions that have greatly unsettled its neighbors and called into question whether its rise will be peaceful or threatening. Its construction of artificial islands in the South China Sea and deployments of radars and surface-to-air (SAM) missiles have compounded anxieties about its intentions. Its challenge to Japan’s control of the Senkaku islands in the East China Sea has had a similar impact. While supporting denuclearization of North Korea, it has failed to assert significant pressure on Pyongyang to roll back its nuclear program, indeed focusing its anger instead on South Korea for plans to deploy a U.S.-supplied missile defense system (THAADS) designed to protect the South against missile attack. While narrowing space for political dissent at home, it has signaled tighter limits to democratic development and political heterodoxy in Hong Kong and warned Taiwan of the consequences of deviation from the one China principle under its incoming president. Its navy is expanding in capacity and geographic reach. Its cyber-hacking and cyber-espionage are on a scale that alarms governments, militaries, and corporations. It has developed a strategic partnership with Russia that goes well beyond the transactional relationship the two powers enjoyed before.

…with China’s expanding capabilities have come actions that have greatly unsettled its neighbors and called into question whether its rise will be peaceful or threatening.

These are the goals China is pursuing, and some of the things it is doing. It also is important to note what China is not doing, or at least has not yet done:

• It is not seeking wholesale revision of the global order. Its creation of an Asian Infrastructure Investment Bank (AIIB) rivaling the World Bank and Asian Development Bank has launched a host of narratives premised on that thesis, but why then is the AIIB open to the major economies of Europe, hiring Americans and Europeans from World Bank backgrounds in many of its key management positions and eagerly voicing its determination to live up to the highest international standards? And why is China not structuring the AIIB’s rules to give it an effective veto power over loan decisions?
• It has not sent military forces to intervene in any foreign conflicts in over three decades.
• While it may resort to strong-arm tactics against Taiwan’s new government, the chance that it will use military force to seek re-unification in the near- to medium-term future is very slight.
• It has not attacked any island in the South and East China Sea occupied by another claimant.
• It asserts it has no intention to challenge the United States for global supremacy and has not built an alliance system to support its goals.

Above and beyond the troubling things China has done, and the troubling things it has not done, it is important also to take note of the contributions it has made, either by design or by sheer presence, to global prosperity:

• It has become the largest trade and investment partner of virtually every country in Central Asia and the largest trade partner of every country in East and Southeast Asia.
• It rivals Canada as the number one trading partner of the United States.
• It has become a significant global investor, including in the United States.
• It has provided substantial bilateral economic aid to numerous countries in Asia, Africa, and Latin America.
• Its currency will soon be included in the global reserve currency basket utilized by the International Monetary Fund for balance of payments transactions.

Policy Options for the United States

China presents unique challenges for the United States in formulating a coherent, effective policy. It is woven into the fabric of the global economic and trading system and is a major and frequently constructive player in international organizations. But it has large gaps in its adherence to global rules. Its rapid rise from poverty and the margins of the international system mean it is still a work in progress, with an unpredictable trajectory. Uncertainty about its future aims and ambitions creates legitimate debate about U.S. choices, especially since the choices we make will influence how China views the United States and its own opportunities and challenges.

There are three broad options for the United States to respond to the China challenge. All have their prominent advocates in the current policy literature:

1. Accommodation. Its proponents see the rise in Chinese influence, particularly in the Western Pacific, as inevitable, producing a China that is the region’s center of gravity, an inevitable outcome that they say the United States should accept. Some who advocate this view believe Chinese ambitions are considerable but limited—national unification including Taiwan and the land features and associated waters of the South China Sea; a diminished role for U.S. alliances; and reduction in U.S. basing, patrols, and military presence in the Western Pacific. In their eyes, U.S. resistance to these ambitions will prove fruitless but will feed China’s hostility and ambitions. They contend that the United States will need to make hard choices among its global and domestic priorities and that maintaining military preeminence in the Western Pacific should be abandoned.

2. Containment, confrontation, or untrammeled strategic rivalry. This school argues that China’s ambition is to dominate the Western Pacific and its periphery. It aims to expel the United States from the region, or at least marginalize the U.S. military, attenuate or destroy U.S. alliances, and bring the other countries of the region into submissiveness to Chinese preferences and interests. It believes that U.S. and Chinese interests regionally, and perhaps globally, are fundamentally incompatible, and we should acknowledge this if we are to adopt a coherent strategy. Usually, but not always, advocates of this approach emphasize the dominant role of the Chinese Communist Party, internal repressiveness, and clashing values with the United States. They point to China’s rapid expansion of its military capabilities and foresee a day before long when they will be used to achieve its nationalist goals, either through military force or intimidation. Therefore, they call for the United States to marshal its political, military, and economic tools to prevent China from becoming the preeminent regional power and to maintain U.S. regional dominance.

3. Global cooperation, regional resolve. People in this camp believe that there are elements in approaches 1 and 2 that are sound but that aggressive and exclusive pursuit of either option is neither required nor desirable. In the eyes of advocates of option 3, the accommodation option would accept a second class status for the United States in the region by choice, not necessity. The untrammeled rivalry option would deprive us of the benefits of a constructive relationship while locking in a destructive competition that would fail to enhance our security. Supporters of option 3 believe that the relationship with China cannot, and should not, be reduced to one of pure rivalry, nor should we overlook the very real strategic differences in the Western Pacific between us.

Problems with Accommodation and Untrammeled Rivalry

Both the accommodation and the untrammeled rivalry frameworks focus largely on security issues. In today’s interconnected world, the notion that the world’s largest and second largest economies, with massive interdependencies in markets, trade, and investment, can build a relationship serving their national interests treating these economic relationships as a footnote is absurd. So a logical starting point for thinking about our relationship with China is to pay as much attention to the economic relationship as to the security relationship. Our economic relationship is likely to have dissonance as well as harmony, but it is important for Americans and Chinese alike in thinking about their interests to understand that fundamentally this is an area where we are bound together and which we need to make work.

The United States has done much to accommodate China since President Nixon’s visit. We have recognized the People’s Republic of China (PRC) as the sole legal government of all of China, despite the fact that it does not control Taiwan. We have terminated our mutual security treaty with Taiwan and closed our bases there. We have opened up the United States to exports from China exceeding those from any other country and given a green light for American investment in China, fueling its economic growth. American universities have provided education for hundreds of thousands of Chinese students, bringing science, technology, and expertise to a nation that desperately needed them. We have helped bring China into most of the world’s institutions where we are the gatekeeper. We have done these things not as a favor to China but because we judged them in our national interest.

But there are sensible limits we need to impose on how far accommodation should go. We cannot endanger the security of our allies in the region without paying an unacceptable cost, regionally and globally. Our alliances with Japan and South Korea not only bring mutual benefit, but are foundations of regional stability that would leave a dangerous vacuum if they were weakened. We should not accept a transformation in which Chinese economic dominance translates into security submission by its neighbors. Signals to the region that the balance of power is shifting, with American encouragement, from the world’s most open, democratic, and pluralistic country to a country whose political system remains repressive; whose adherence to global norms on human rights, the law of the sea, corrupt practices, and transparency is weak; and whose nationalist ambitions are threatening to many would be destructive and destabilizing. Indeed, most of the countries are more interested in demonstrations of American strength and staying power than in signs of U.S. restraint and modesty.

Untrammeled strategic rivalry with China may become a reality if Chinese conduct requires it, but it is not something we should encourage, nor embrace lightly without understanding the costs. In a world filled with chaos, terrorism, nihilism, civil war, and anarchy, Asia is a relative beacon of stability, economic openness, and dynamism. It is not in U.S. interests to end or undermine that by launching a new cold war, which would raise regional tensions, fail to gain support of regional powers, and dampen economic growth. Given the array of challenges the United States faces globally, especially in the greater Middle East, the kind of single-minded focus we brought to bear in facing the Soviet challenge cannot be repeated. In any case, China has not been creating an empire of satellite states, using force to conquer or destabilize neighbors, or subverting other countries as the Soviets did. Its challenge is more subtle, and so should be our response.

…most of the countries are more interested in demonstrations of American strength and staying power than in signs of U.S. restraint and modesty.

In their extreme versions, the strategies of accommodation and untrammeled rivalry make assumptions about American resilience and Chinese strength that are dubious.

The accommodation argument, much like the contention in the 1970s that the United States needed to accommodate radically to an emerging multipolar world, seems to project a United States that remains static, that fails to innovate, and that proves unable to maintain its military, political, economic, and cultural advantages. As Lee Kuan Yew said, those who bet against the United States in the 20th century didn’t come out so well, and we have it in our power to ensure, through domestic rejuvenation, that the America short-sellers in the 21st century meet the same fate. A central premise of accommodation also seems to be that China’s rise has a kind of inevitability about it, and that the trajectory of U.S. and Chinese economic strength and national power are converging. Recent weakness in the Chinese economy and signs that systemic reform will remain very challenging undercut the notion that we can make straight line projections from China’s success in the last 20 years in moving from underdevelopment to medium income status.

The argument for embrace of untrammeled strategic rivalry makes more confident assumptions about U.S. strength and adaptability. But it does not persuasively explain how the United States will be able to subordinate other demanding domestic and foreign priorities to confronting the ambiguous challenge that China poses. Like the proponents of accommodation, its advocates sometimes postulate a China that is 10 feet tall and whose nefarious intentions and secret master plan lie behind normal developments. It dismisses, incorrectly in my view, the wisdom in the trope that if we treat China as an enemy, it will surely become one. Security rivalries lead to security dilemmas and distort destructively the behavior of those trapped in them. If we conspire to make China an enemy, then every problem we deal with, including Iran, North Korea, climate change, and global terrorism, will become orders of magnitude more difficult to manage. Finally, confrontation with a country that will be our number one trading partner, the major trading partner of many of our friends in Asia and elsewhere, and a foundation of the global economy will impose considerable costs on our own economy and those of numerous other countries and create severe strains with friends who would be negatively impacted.

Elements of a Successful Option 3

State Department lore—derived from an observation by Henry Kissinger—has it that an option memo for decision by the secretary of state should always have three options: 1) Nuclear war; 2) Surrender; and 3) A sensible middle-of-the-road diplomatic solution. Just because it’s a joke, and just because option 3 lacks the clarity of options 1 and 2, does not mean that option 3 is just an easy escape from hard thinking. Sometimes, indeed often, the option 3 template provides the right way of thinking about the issue, even in cases where options 1 and 2 are less extreme. In the case of U.S. policy toward China, I believe it does.

In this instance, option 3 is not entirely alien to options 1 and 2. U.S. policymakers will have to recognize that some degree of accommodation of China’s rise is necessary, and so is some degree of strategic rivalry with China. The goal should be to find a middle course that would safeguard the array of conflicting interests we have.

U.S.-China cooperation should be possible on many global issues. The recent bilateral agreement on climate change, in which the world’s two largest emitters of greenhouse gases acknowledged their responsibilities for action, illustrates the possibilities in one domain. China’s cooperation with the United States in the “Permanent 5+1” negotiations to roll back Iran’s nuclear weapons program offers another example. In the area of foreign assistance, China’s programs have a different focus than America’s, and this offers potential qualitative and quantitative benefits for recipient developing countries.

Since China’s opening to the outside world began in earnest in 1978, U.S. policy has been built around the objective of bringing the PRC into the major international economic and security institutions and demanding of Beijing that it accept and play by the rules of these institutions and associated international norms. This strategy has had major successes, as China has become an active and necessary actor in the United Nations, World Trade Organization (WTO), International Atomic Energy Agency, nonproliferation regimes, World Health Organization, and a host of other international organizations. In that process, Chinese companies and individuals have emerged as if from a deep sleep and played an important role in driving global economic growth. On the security side, China’s record has been mixed, but on global issues it has not been a provocateur.

The picture in East and Southeast Asia, however, is not so comforting. As noted above, China’s actions in the South China Sea, the East China Sea, and vis-à-vis Taiwan and Hong Kong keep the region on edge. While Beijing opposes North Korea’s nuclear weapons program and has occasionally supported actions to condemn and limit it, it has often indulged North Korean provocations and weapons tests with a morally obtuse and strategically dubious even-handedness between North Korea and the United States. Its military buildup has radically altered the balance between China and its neighbors and created anxiety all along its periphery.

So it appears for the immediate future that there is an imbalance between the China regional challenge and the China global challenge. In the East Asian region, China’s policies and ambitions increasingly conflict with U.S. interests and threaten the region’s equilibrium. On the global stage, China’s actions and role are less potentially disruptive, even stabilizing.

What kind of actions should the United States take to achieve a balance between acceptance of a larger global role for a constructive China while drawing lines against coercion in China’s neighborhood? While individual actions will be enormously important, it is less useful in looking ahead to prescribe specific steps that will depend upon particular situations and more useful to think about the big picture, the framework in which these steps will occur.

In the East Asian region, China’s policies and ambitions increasingly conflict with U.S. interests and threaten the region’s equilibrium. On the global stage, China’s actions and role are less potentially disruptive, even stabilizing.

Some of the most important actions the United States can take have nothing to do directly with China but will arguably have greater impact than our actions in the region. The reality and image of the United States as a properly functioning democracy, which have suffered greatly with our national political dysfunctions on display, can have a multiplier effect on our foreign policy—as does our willingness to offer international leadership, to provide the necessary resources to support a serious foreign policy, and our demonstrating that we are neither turning inward nor reducing foreign policy engagement to simply fighting terrorists.

On global issues, a sensible option 3 approach should look for issues on which China, because of its own evolving interests, can and should play a greater role in supporting the global system. This should not be a matter of the United States browbeating a resistant China into adopting our practices and standards contrary to their interests, but rather figuring out where China can alter its practices for its own purposes and act as a constructive global citizen.² A few examples:

• Cybersecurity, and cyber innovation. China does not want its cyber networks to be hacked, and it should not wish to see its development of cyber capabilities isolated from global innovation. China of course has vastly different conceptions from the United States on cyber issues—emphasizing control and national sovereignty—but these areas of potential overlap should be explored and developed.
• Protection of the rights of foreign investors. With China rapidly becoming one of the world’s leading sources of overseas capital, it should be increasingly concerned about the rights of investors, not merely ensuring that it can attract foreign investment and squeeze advantage from it.
• Adoption of the standards of the Foreign Corrupt Practices Act. China has long seen it as a competitive advantage in its overseas projects to have loose standards about bribery and payoffs to foreign officials. But with Xi Jinping now engaged in a high profile campaign against corruption at home, it would make sense for China to reexamine its overseas practices to make them conform to what Xi is trying to do domestically. Otherwise, toleration of corruption in one setting inevitably will lead to toleration in other settings.
• Central bank coordination, especially at times of global market instability. China should be brought more into the coordination among the G-7 central banks and finance ministries than it has to date, since its impact on global markets, and the impact of global trends on its market, greatly accede that of some other G-7 members.
• Fisheries treaties and conservation. China is the biggest fish-catching and fish-eating country in the world, with some 14 million people earning their living from fishing. China should have a concern about overfishing and depletion of stocks. Historically, Chinese fleets have been a source of overfishing. They should see an interest in transforming their activities. This could be a good place as well to start in confidence-building in the South China Sea.
• Protection of intellectual property rights. As the number of Chinese patents grows, and as the number of Chinese companies going global expands, China’s interest in protection of intellectual property should converge with those of Western innovators.

There is important historical precedent for affecting Chinese practices on similar issues. For example, beginning in the 1980s, under pressure from the United States, China began to change its behavior in the area of proliferation of weapons of mass destruction, transforming from one of the world’s chief problem countries to one that respected international norms. Similarly, more recently, China has altered its approach to climate change issues, aligning with the United States in bilateral and multilateral settings in taking the issue much more seriously after years of resistance.

Other steps the United States should take in the global arena to protect our interests in the face of the Chinese challenge include:

• Exercise U.S. leadership in addressing regional areas of tension and instability, such as Syria, Iran, Afghanistan, Libya, and the Israeli-Palestinian conflict, while inviting Chinese active participation in efforts to resolve them and respecting Chinese interests.
• Support robust market-oriented economic reform in China that levels the playing field for private and foreign companies, including by negotiating a bilateral investment treaty or agreement that imposes commercial disciplines on state-owned enterprises and by granting China “market economy status” under WTO rules (note: this will be challenging during a presidential campaign but should be done as soon as it is politically feasible).
• Aggressively use the dispute settlement mechanism in the World Trade Organization and unilateral actions to protect technology and intellectual property of American companies.
• Restrict access to the U.S. market for companies that benefit from cyber-espionage directed at U.S. companies.
• Welcome a role in international institutions such as the World Bank and International Monetary Fund for China commensurate with China’s economic strength.

In the Asia Pacific area, elements of an option 3 strategy could include:

• Clarity about the solidity of U.S. alliance commitments, with diplomacy that sustains allies’ domestic support for these alliances, especially in Japan and South Korea. We should be unambiguous that the U.S. global and regional alliance system is a vital national interest, and challenges to it will be met firmly.
• Reinforcing U.S. military presence to demonstrate our ability to maintain our commitments and expanding the scope of bilateral military exercises and operations with allies and security partners.
• Seeking larger contributions to the U.S. security presence on the part of allies and partners in the region.
• Stressing to Beijing that North Korea’s nuclear and missile programs are a direct threat to U.S. national and regional security that compels stronger joint actions by the U.S. and China to ensure dismantling of these capabilities. Make clear American preference to work with Beijing to achieve this goal, but also that if Beijing fails to help, the U.S. will take necessary steps to defend its own security against North Korean WMD programs.
• Trilateral coordination among the United States, China, and South Korea on policy toward North Korea. Strengthened efforts to persuade China to use its influence more effectively to pressure North Korea to accept denuclearization combined with credible assurances to China that Korean reunification will not negatively affect its security interests.
• A Taiwan policy based on the maintenance of peace and stability in the Taiwan Strait, the U.S.-PRC Communiques and Taiwan Relations Act, our traditional “one China” policy, support for cross-Strait dialogue and economic and other exchanges, and security assistance to Taiwan that reduces the risk of coercion. Making clear to Beijing that the U.S. interest in the ability of Taiwan’s people to live free from intimidation is unchanged, regardless of who governs in Taiwan; but at the same time respecting the special sensitivity of the Taiwan issue in the PRC by refraining from bringing Taiwan into broader regional security arrangements.
• Active and visible U.S. Navy presence in the South China Sea through operations, exercises, and challenges to claims contrary to international law and norms. Maintain neutrality on territorial claims, pursue diplomacy aimed at eliciting conformity of Chinese maritime claims with the U.N. Convention on the Law of the Sea, and with the important ruling by the Permanent Court of Arbitration in the Hague relating to China’s dispute with the Philippines. Support negotiation of differences between China and the Philippines consistent with the UNCLOS and maritime law. Encourage accelerated negotiation of a code of conduct in the South China Sea.
• A human rights policy that makes China pay a price for extraterritorial seizures of citizens abroad and for interference with legitimate activities by U.S. information technology companies and citizens, while articulating U.S. values but making clear that China’s political system is for its citizens, not Americans, to decide.
• Working with Chinese-established institutions like the Asian Infrastructure Investment Bank to bring needed development projects to the region.

It is easier, of course, to state objectives than to realize results. Figuring out how to accomplish these objectives will depend heavily on particular circumstances. But that is not our purpose here. Rather, it is to describe the outlines of a comprehensive policy that has a balanced combination of resolve, especially in the Asia Pacific, and reassurance of our acceptance of China’s rise. The policy just described may lack the bracing shock value of accommodation or untrammeled rivalry, but the burden is on their advocates to explain how a radical lurch in either direction would secure the complex range of U.S. interests in our relationship with China.

Read more in the Brookings Big Ideas for America series »

      

 

 

On rare occasions, international issues are resolved by a dramatic, decisive development—the collapse of the Soviet Union and the reunification of Germany come to mind. Much more often, progress is incremental. Or as President Obama has said, an administration hits more singles and doubles than home runs. Under Obama, that has been the nature of the American achievement in Asia.

Asia’s success stories

Unlike the Middle East, which is in seemingly permanent turmoil and crisis, or Europe, whose unity and institutions are threatened, Asia is economically dynamic and generally stable and peaceful. It is the fastest growing region in the world, the home of many of the companies and much of the technology driving the global economy, and the source of hundreds of billions of dollars in trade and investment, as well as accompanying jobs in the United States.

This positive state of affairs is the product of bipartisan policies under both Democratic and Republican administrations that built strong alliances, a high level of economic interaction with Asian partners, constructive relations with a rising China, and a robust military presence in the region.

Obama believed U.S. interests lay in deeper engagement in a part of the world marked by success stories rather than failed states, much as throughout our history our deepest overseas ties have been with a prosperous and dynamic Europe. That has meant neither lazy affirmation of the region’s status quo nor efforts at destabilizing transformation. It has required the right balance in dealing with a China whose growing economic, military, and political strength is viewed with anxiety by many of the region’s peoples and as a potential strategic rival by Americans.

Obama’s policy toward China has built on the efforts of every presidential administration since Richard Nixon. It has been grounded in several principles: accepting increased influence for a China that rises peacefully and plays by international rules; building an extensive network of interconnections and ties with Chinese elites and ordinary people; providing assurance to allies and partners in the region of enduring U.S. security commitments and presence that will meet any foreseeable challenge; and creating a formal framework of multilateral cooperation encompassing the United States, China, and various regional states.

Major achievements have included the establishment of democracy in Myanmar (Burma); the American decision to join the East Asia Summit and begin efforts to turn it into a significant regional security forum; the measurable strengthening of security relationships with Japan, South Korea, and other allies; and deepened relations with the 10 countries of the Association of Southeast Asian Nations (ASEAN).

With China, Obama has taken steps to improve cooperation and transparency, along with measures to strengthen the security of the United States and its regional allies. The United States and China have concluded military-to-military agreements designed to avoid incidents on the high seas and in international air space. The Obama administration has worked with China to successfully freeze Iran’s nuclear weapons program; place caps on growth of greenhouse gases that cause climate change; and halt cybertheft of the intellectual property of U.S. companies. But the United States also has also ramped up its naval presence in the South China Sea and laid out comprehensively for the first time our principles there, largely validated by the 2016 Permanent Court of Arbitration ruling on the China-Philippines dispute. It has overseen a transfer of some of the United States’ most advanced naval and air force systems to the Pacific theater, and it has reaffirmed U.S. defense assurances to Japan covering Japanese-administered islands in the East China Sea challenged by China.

Unfinished tasks

With President Obama soon to hold his last meetings with Chinese President Xi Jinping and other Asian leaders, there are two principal challenges to the generally positive trajectory of U.S. policy toward Asia.

The first is the continuing difficulties in managing and reacting to China’s rise. Will China address territorial conflicts peacefully in the South China Sea; cooperate in rolling back North Korea’s nuclear weapons program; build a positive, normal relationship with Japan; and manage its differences with Taiwan without military conflict? Will China work toward a politically more sustainable trade and investment regime and dismantle nationalist and mercantilist policies that encourage other countries to erect retaliatory barriers and decrease global prosperity? China, not the United States, will answer these questions, but the kind of relationship the United States has with China will help shape the answers. Neither an American policy of containment nor one of isolationism will produce the desired outcomes to these challenges. None have been resolved during Obama’s time, but he has made ample progress and laid out a realistic and balanced framework that the next president would do well to heed.

The second is the domestic mood in the United States. Casual proposals by Donald Trump to allow Japan and South Korea to acquire nuclear weapons, to abandon our alliances if our partners don’t pay their “fair share,” to impose 45 percent tariffs on China, and to turn away from promotion of free trade would individually and collectively undo the achievements of President Obama and his predecessors in helping to build a prosperous, peaceful Asia that well serves American interests. The Trans-Pacific Partnership trade agreement (TPP), negotiation of which was one of the signature achievements of President Obama’s Asia policy, may be a casualty of American domestic politics. If TPP cannot be approved by Congress this year, it is essential that it, or a satisfactory modified agreement, be approved quickly under the next administration. Otherwise, people in Asia who have long looked to the United States as an essential partner may conclude that our interests do not include them.

      

 

 

The decision upheld and strengthened all of the principles articulated then and since—the need for maritime claims to be based on legitimate land-based claims, the need to conform maritime claims to the rules of the U.N. Convention on the Law of the Sea (UNCLOS), the conflict between maritime claims based on China’s nine-dash line, and international law. A ruling of particular importance to the United States was the decision that no features in the South China Sea’s Spratly Islands can validate a 200-mile exclusive economic zone (where the littoral state enjoys fishing and mineral exploitation rights). This prevents any legal basis for carving up the South China Sea into walled-off spaces, which would have been utterly impractical and laid the basis for endless conflict, but also undercuts any future attempt to restrict the freedom of navigation for American naval vessels.

But of course the decision will not implement itself, and China, unwisely and unfortunately, has already made clear it has no intention to accept it. China’s growing naval power in the area cannot be offset by the other claimants, individually or collectively. Only the United States can restrain it from excesses, and continuous confrontations between the United States and China in an area important but not central to U.S. national security would be an undesirable path forward. 

The mood in China in the wake of this decision will be one of humiliation and anger. These are not sentiments that generally lead to sound decisions. So how can the United States best proceed in a way that upholds the principles the tribunal affirmed but allows Beijing to get out of the corner it has painted itself into? The United States should do some things, and China will have to do some things, more things.

Philippine Foreign Secretary Perfecto Yasay gives a brief statement regarding the tribunal ruling on the South China Sea during a news conference at the Department of Foreign Affairs headquarters in Pasay city, metro Manila, Philippines. Photo credit: Reuters/Romeo Ranoco.

Washington’s move

While properly welcoming the decision, Washington has been restrained in self-congratulatory rhetoric. The Philippines has as well, even though it is the victor in this litigation. That is an important posture and a first step in incentivizing the Chinese to look for a constructive way forward.

Washington should make clear to Beijing that it strongly supports dialogue between China and the Philippines to reach a modus vivendi, the elements of which are not hard to envisage: shared fishing rights in and around Scarborough Shoal, removal of the Philippine marine platoon from the rusting hull of a ship beached on Second Thomas Shoal (ruled by the tribunal to lie within the Philippines’ exclusive economic zone), and Chinese economic assistance and infrastructure support to the Philippines. Beijing wrongly believes that Washington encouraged Manila to bring the case to the tribunal in the first place. U.S. support for a China-Philippines deal would undercut Beijing’s belief that the United States is the source of all their problems in the South China Sea.

U.S. support for a China-Philippines deal would undercut Beijing’s belief that the United States is the source of all their problems in the South China Sea.

The U.S. Navy has undertaken a high rhythm of freedom of navigation exercises, some just off the coast of China-occupied features in the Spratly islands. These were necessary to prevent the international community’s rights from being extinguished by failure to exercise them. With the tribunal having made clear that no Spratly feature enjoys more than a 12-mile territorial sea, the need for so many or such visible exercises in the face of the Chinese has diminished. The United States should avoid exercises right up against Chinese installations that will be seen in Beijing as gratuitously provocative, since our rights are now clearly recognized by the principal international body responsible for adjudicating such issues. At the same time, Washington needs to make clear that the tribunal’s decision does not mark the end of U.S. interest or military presence in the South China Sea, which needs to be continuous.

Some have suggested that other claimants, with U.S. encouragement, should bring their own cases to the tribunal. This would not be in the United States’ interest, however. The tribunal has already decided most of the issues of concern to the other claimants to be in their favor, by implication. The additional benefit of an explicit tribunal blessing would not be worth the likely escalation in tensions that would be brought by such a strategy.

The Tribunal was bold in laying out its conception of the high bar that a feature, in the South China Sea or anywhere in the world, must clear in order to be deemed an “island” rather than a “rock” meriting a 200-mile exclusive economic zone. The United States has several features in the Pacific that meet the tribunal’s definition of a “rock” that we currently consider “islands.” It would give the United States the moral high ground and set an example for South China Sea claimants if we announced that we were reconsidering the status of those features.

Finally, the U.S. administration—and the Clinton campaign—should make clear that they are prepared to expend political capital to seek Senate ratification of the U.N. Convention on the Law of the Sea. We have based our policy in the South China Sea on UNCLOS’ validity. Countries are right to point to our hypocrisy in insisting on their acceptance of the convention’s strictures while we stand apart from it. Every former secretary of state, the Navy, former secretaries of defense, and the business community all support accession to UNCLOS as overwhelmingly in the United States’ interest. We should make this a national priority. We cannot expect China and others to pay attention to UNCLOS if we continue to say: “do as we say, not as we do.”

Countries are right to point to our hypocrisy in insisting on their acceptance of the convention’s strictures while we stand apart from it.

Beijing’s move

China needs to make clear that it will not undertake military or paramilitary actions against the Philippines or the territories or facilities of other claimants. In recent months it seems to have reconsidered its apparent plan to fortify Scarborough Shoal. If it reverses that, it will rekindle the sense of crisis in the region and in Washington. The Chinese also should not impose either formal or informal economic sanctions against the Philippines, which will heighten nationalism and undercut attempts to start a dialogue.

China also should refrain from further land reclamation projects on features that have been ruled to be “low tide elevations” that one cannot claim in another country’s exclusive economic zone. Of course it would be best for China and other countries to refrain from all land reclamation projects in the Spratlys, but such a complete moratorium may be unrealistic to expect.

The nine-dash line has been an albatross around China’s neck, a symbol of its vague but excessive maritime claims that no one outside China can defend. The tribunal has made clear that China cannot claim historical rights to fish in the Spratlys on the basis of the nine-dash line. If China cannot get itself soon to clarify the nine-dash line consistent with UNCLOS, at a minimum it should stop talking about it in a way that suggests it conveys any maritime rights. Similarly, the tribunal explicitly rejected China’s recent suggestion that it could claim maritime rights within the Spratlys based on the notion that the Spratlys is a “unit” rather than a series of unconnected rocks. China should drop that assertion, and abandon any intentions either to draw “straight baselines” contrary to UNCLOS around the Spratlys or to establish an air defense identification zone in the Spratlys.

China should accelerate hitherto lackluster efforts to negotiate a “code of conduct” for actions in the South China Sea with the other claimants. The code should embody key principles outlined by the tribunal, allowing China the opportunity to demonstrate its adherence to international law without requiring its overt acceptance of the ruling to which it objects. It also should lay the basis for establishing a fishing regime in the South China Sea that allows the fleets of all claimants, and others, to fish without regard to maritime boundaries that the tribunal has ruled illegal. Under such a construct, parties would only be constrained by a multilateral commission whose role would be to prevent overfishing.

Moving forward together

Finally, the United States and China should follow up on President Xi Jinping’s statement during his visit to Washington last year that China does not intend to militarize the Spratlys by conducting a serious dialogue on what “militarization” means. The two governments should talk about what kinds of force projection and weapons have dangerous escalatory potential, and agree to refrain from or restrain their deployment. This obviously will be a difficult conversation, since the U.S. concern is with what weapons systems are deployed on land features in the Spratlys, while China’s concern is with U.S. naval deployments in the Spratlys that we consider part and parcel of our normal operations. It may be that clear and binding agreements will prove impossible, but a dialogue could produce agreement on the need for restraint that would provide reassurance for all the parties in the region.

U.S. policy to date has been a mixture of military signaling, diplomatic rallying of like-minded states, reliance on international law, public articulation of principles, and dialogue and warnings to the Chinese. All of these have been important, and none can be abandoned. But the tribunal’s decision provides a chance for all the parties to step back and rethink their strategies based on the new reality created by its far-reaching ruling. 

It offers us an opportunity to move toward a resolution of key issues based on more serious inter-state consultations founded on international law. But it also creates the risk of higher tension if the Chinese reaction is driven by hyper-nationalism. A mid-course adjustment is necessary, building on the real achievements to date highlighted by this decision but mindful that legal decisions will not by themselves compel all the actors to behave wisely and peacefully.

       

 

 

Think tanks like the Brookings-Tsinghua Center have been playing an important role in this bilateral and multilateral exchange of views. On March 22, in celebration of the 10th anniversaries of the Brookings-Tsinghua Center and the John L. Thornton China Center at Brookings, Tsinghua University hosted a conference to examine how China can realize the 2016 G-20 theme of “an innovative, invigorated, interconnected, and inclusive world economy.” The event began with introductory keynote remarks on the substantive advancements China and the United States have made in think tank development and people-to-people diplomacy, followed by an additional set of keynote remarks and panel discussions presenting Chinese and American perspectives on the G-20 agenda and the state of global governance.

      

 

 

The Xi-Obama meeting will come at a time of more than usual friction in the U.S.-China relationship, highlighted by an uplifting U.S. presidential campaign (not…) in which shots at China are about as common as disparaging remarks about Mexican immigrants.

In the U.S. relationship with China, there are at least two levels of perception. One is the hyperventilating punditry chatter, which mixes Chinese aggressive behavior in maritime disputes, repression at home, Chinese economic woes, Chinese protectionist and anti-business measures, and its military modernization into a toxic stew demanding firm U.S. remedies. 

In decided contrast, there is the official U.S. view of the relationship, which tends to emphasize the positive and areas of potential cooperation. Within the U.S. government beneath the official line there are a wide variety of perceptions spanning the spectrum, with the U.S. Pacific Command of late occupying the most hawkish perch.

The to-do list

The meeting between Presidents Obama and Xi is likely to focus a good deal on the South China Sea. A decision by the International Tribunal on the Law of the Sea on a complaint by the Philippines challenging China’s maritime claims could be forthcoming in April or May. Xi stated publicly during his September visit to Washington that China did not seek to militarize the South China Sea’s Spratly islands, but increased deployments and installations in the Spratlys and in the Paracel Islands suggest that China’s definition of militarization may have a high threshold. 

There is concern in Washington and the region about how China might react, beyond formal rejection, to a decision by the tribunal—specifically, whether China will further challenge (militarily) Filipino claims. Since the Philippines is a U.S. ally, President Obama may warn Xi of the risks of escalation in the tit-for-tat that all parties, especially China, have continued to pursue.

Barack Obama shakes hands with Xi Jinping during the Asia Pacific Economic Cooperation (APEC) forum, at International Convention Center at Yanqi Lake in Beijing. Credit: Reuters/Kim Kyung-Hoon.

Other issues in the relationship will get attention, but they will take a back seat to the South China Sea. The United States and China are more closely aligned in opposition to North Korea’s nuclear program than they were a few months ago, having jointly negotiated a U.N. Security Council resolution that imposes unprecedentedly rigorous sanctions on Pyongyang. After some months of exploring whether it should warm its chilly relations with North Korea, China has turned sharply against its one-time ally in the wake of the North’s nuclear and missile tests, and the possibilities for strong enforcement of sanctions have significantly improved.

While there will be the usual assortment of contentious bilateral economic disputes to discuss, the two presidents will be cognizant that the world economy remains fragile and the state of the Chinese economy is a major factor in determining global economic health. So President Obama will emphasize that the United States wants to see China’s economic rebalancing succeed and its market-oriented reforms accelerate. He is expected to warn the Chinese not to manipulate the value of the renminbi for the purpose of favoring Chinese exports and will again raise business concerns over market access barriers, industrial policy, and intellectual property protection.

Cybersecurity and the risk of cyberattacks remain neuralgic issues on both sides, though the concerns of Washington and Beijing vary (the United States more preoccupied with thefts of corporate intellectual property, the Chinese with the magnitude of U.S. espionage revealed by Edward Snowden). But the commitment by the Chinese last September not to engage in corporate intellectual property theft has led to an improvement in Chinese conduct and steps to shut down cyber spying, so the issue will not be particularly contentious at this meeting.

Looming uncertainties

The two presidents will have several more opportunities—at the G-20 in June and the Asia-Pacific Economic Cooperation (APEC) forum gathering in November—to meet before Obama leaves office. It would be good for both sides if they can use this year to stabilize the relationship before it is turned over to Obama’s successor next January. All the candidates, characteristically, are making noises about a tougher stance toward China. History suggests that tough words in election years do not carry over when the next administration assumes power. Reality has a way of intruding on campaign rhetoric. 

But history may not prove a reliable guide if there are miscalculations in the South China Sea that drive opinion on both sides toward greater mistrust and preemptive actions. President Obama’s remaining time in office should give indications whether the South China Sea will be managed constructively or be increasingly a venue of dangerous strategic rivalry.

      

 

 

By examining China’s goals, what China is not doing, and its contributions to global prosperity, Jeffrey Bader outlines three broad policy options for the United States to respond to the China challenge:

1. Accommodation;
2. Containment, confrontation, or untrammeled strategic rivalry;
3. Global cooperation, regional resolve.

Options 1 and 2 have their prominent advocates in the current policy literature, but each would jeopardize important U.S. interests—the former by putting at risk U.S. allies and values, the latter by demanding a greatly expanded U.S. military presence in the region without ensuring greater security. So what kind of actions should the United States take to achieve a balance between acceptance of a larger global role for a constructive China while drawing lines against coercion in China’s neighborhood? On global issues, a sensible option 3 approach should look for issues on which China, because of its own evolving interests, can and should play a greater role in supporting the global system. A few examples might include:

• Cybersecurity and cyber innovation;
• Protection of the rights of foreign investors;
• Adoption of the standards of the Foreign Corrupt Practices Act;
• Central bank coordination, especially at times of global market instability;
• Fisheries treaties and conservation;
• Protection of intellectual property rights.

In addition, there are political, economic, and security measures the United States should adopt, globally and regionally, to protect its interests in the face of the Chinese challenge, including projecting clarity about our commitments to allies, defending principles and international norms in maritime areas, and restricting access to the U.S. market for companies that engage in cyber-theft. But there are opportunities as well for U.S.-China cooperation, such as along with South Korea in constraining the North Korean nuclear weapons program and with the Chinese-sponsored Asian Infrastructure Investment Bank on worthwhile projects.