Wednesday, January 29, 2020

Crossing the Pacific by feeling the stones

Nov 29. 2018
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By Andrew Sheng

The Chinese have a saying that arose from the Long March – crossing the river by feeling the stones. In a situation of grave uncertainty (how deep is the water?) you can only cross the river by slowly taking one step at a time, making sure that the next stone is firm enough before you advance. If you are wrong, you change course and feel for the another stone.

During the Long March, People’s Liberation Army soldiers had to cross many rivers, with the enemy behind them. But they made it by taking bold steps forward, but repeatedly retreating or re-crossing many rivers when the way forward was blocked.  

This pragmatic approach towards dealing with uncertainty is rooted in the Ming Dynasty philosopher-warrior Wang Yangming’s dictum “knowledge and action are one”. In a situation when existing theory and knowledge cannot guide you, only action can reveal the next steps forward.  

We have arrived at a moment in history when knowledge and theory cannot guide us. Bold steps are necessary to move forward or to retreat. Those who hesitate midstream will be swept away by the next flood. 

The last few months seem to have widened the river between the US and China into the Pacific Ocean, with escalations in words as well as actions. An October 4 speech by Vice President Michael Pence in Washington was seen as the opening salvo in a new Cold War, and the unprecedented failure this month to arrive at a joint communique at the Papua New Guinea Apec Summit was a clear signal that the gulf between the two countries is widening.  

Most analysts are looking forward to this week’s Trump-Xi meeting at the G20 summit to cool down the rhetoric and enable some progress.  But it is clear that Trump and Pence are only reflecting a widespread consensus that China is America’s strategic competitor, with a deeper swing towards a more inward protectionist trend as the US shifts away from globalisation.   

Steve Bannon’s Oxford Union speech this month summed up this mood. The American people are angry at their elites – the industry-financial-political complex – who spent $7 trillion in futile wars in Iraq and Afghanistan, lost 2.4 million jobs to foreigners, and printed over $3.4 trillion to keep the rich richer, making hard-working Americans poorer than ever. The Trump promise therefore is to restrict immigration and engage in a trade war with China in order to “maximise citizen value”, a variation of the corporate “maximise shareholder value”.  

There is little doubt that America’s trading partners, China as well as Europe and Japan, were wrong-footed by this profound change in direction.  From now on, it can be no longer business as usual.  America is dismantling the multilateral order that it built over the last 70 years and embarking on a bilateral negotiation stance that will force its allies to pay for their own defence, reduce bilateral trade deficits and play by US rules.   

America can do this not because it has the strongest militarily, but because it remains the largest consumer in value terms in the world.  The customer is always right, not the seller. As former Chongqing mayor Huang Qifan pointed out, a strong exporter is not a strong nation; a large importer is the real powerhouse. Strategically, China sees already that domestic consumption and imports will be the way to go.  

The Cold War of the 1960s is not an accurate analogy for today, since the Soviet Union was never a major global trader. China today is the largest trading nation in the world, with more partners than the US. A global supply chain centred on assembly of raw materials and components in China can be transformed – but not easily dismantled. The trade war is actually a disentanglement exercise in which there will be few winners in the short term, and unpredictable consequences in the long term. 

The best example of how difficult it is to disentangle cross-border relationships is Brexit.  After two years of hard negotiations, the Brexit deal proposed by PM Theresa May is lose-lose. The UK cannot keep the benefits of free trade with Europe without yielding its sovereign rights to jurisdiction by the European court. Europe cannot afford to let Britain leave easily without itself being hurt by leavers.   And there is no way that either Europe or America can exit their Middle East entanglement without hurting Israel and themselves. A failed Middle East and North Africa will increase the annual flood of migrants to Europe by millions.  

Francis Fukuyama famously predicted the “End of History” at the close of the last Cold War, writing that the West had conquered history through democracy and rule of law. What we have witnessed instead is the revenge of history, geography, demography and climate change. At a time when the world should be cooperating to deal with worsening climate change, social inequality and disruptive technology, the divide in views is even wider than the Pacific Ocean.

Seen from this side of the Pacific, Asians have for the last 70 years been chasing the American dream, realising that they have wasted their youth, natural environment and health chasing dollars that may be worthless if war is declared. The American rhetoric that Asian trade has been unfair should be seen from the Asian perspective. Copying the consumption habits of the average American has been terrible in terms of carbon emissions and destruction of natural forests, rivers and marine reefs.   

Asking Asian exporters to choose between America and China is like trying to disentangle a tapestry woven over many years at many levels. This side of the Pacific, no one wants to cut the threads that bind us all. But if America wants to go it alone, then the Asian narrative will be spun very differently from now onwards. – Asia News Network

Andrew Sheng writes on global issues from an Asian perspective. 

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