Trump, China and the Future of the Asian Century: Living with Uncertainty

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Keynote Speech at Conference on US Policy towards China and the Region, Victoria University, Wellington, 4th May 2017

The over-arching strategic issue in East Asia is the search for a new modus vivendi between the US and China. The US knows that the status quo in which it is dominant must change, but wants to preserve as much of it as possible; China knows that the US will not disappear from East Asia, but wants a new East Asian order in which its new power will be recognised, and preferably one in which it will be preeminent. All other countries in the region are watching the US and China very carefully, and deciding how to position themselves.

It will be many decades before the US and China reach a new accommodation. The inauguration of a new administration is but an episode in the long sweep of history. The vagaries of the American electoral cycle routinely confront us with uncertainty and discontinuity. But the 45th President of the US is nothing if not unorthodox, and this administration could have a greater than usual impact.

How will the Trump administration affect East Asia and in particular, the strategic adjustments underway between the US and China? Will it be an ‘Asian Century’ or a ‘Chinese Century’?

When considering these questions we should not let Mr Trump’s out-sized and volatile personality and his penchant for spontaneous pronouncements on social media get in the way of analysis. What the President says makes for good copy; what the administration does is more important. Mr Trump is not shy about saying one thing and doing something else, which is not always a bad thing. In any case, while the personality of a President is certainly an important influence on policy, it is not the only influence and not necessarily always the most important influence.

The day after the election, the magazine Foreign Policy – which sometimes reads like The National Enquirer –published an article headlined “China just won the US election”. This was an extraordinary conclusion. Clearly Mr Trump does not have a monopoly on extravagant statements. But that was also the general drift of many more soberly expressed assessments.

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I doubted that anyone responsible in Beijing was breaking out the Maotai just yet: The Chinese value predictability over all else and Mr Trump’s campaign rhetoric had injected significant uncertainties into US-China relations. The conclusion that China had gained an advantage was a reflection of the American foreign policy establishment’s psychological trauma; post-election shock rather than considered judgement – premature but understandable given the emotions of the circumstances. I expected that the establishment would, after a period of teeth gnashing and hand wringing, calm down.

That mood has, however, proven remarkably, and dangerously, persistent. I visited Washington DC in March – five months after the election — and spoke to many old friends, mainly Asian experts of both parties. None, irrespective of party affiliation, and whether in or out of government, had much good to say about him. I came to the conclusion that Donald Trump was actually a unifying figure!

My friends feared that an unprepared and disorganized administration would be rolled by China at the summit with Xi Jinping in April. They pointed to the Chinese Ambassador’s close relationship with the President’s son-in-law and complained that Secretary of State Tillerson had ignored the talking points prepared by his officials and echoed Chinese set phrases – “mutual respect” and ”win-win cooperation” — during his visit to China the previous month. The Washington Post, perhaps reflecting the views of some of my friends, concluded that he had handed China a “diplomatic victory”.

I thought this was too much carping over very little. Which Ambassador from any country would not want to get close to a powerful figure with the President’s ear? That’s what Ambassadors are supposed to do. And how was Mr Tillerson supposed to describe the relationship with China – ‘lose-lose’ and ‘mutual contempt’? He did not use the key Chinese phrase “core interests” which if he had, would have been cause for concern. Nor did he talk about a ‘new model of major power relations’.

The American media seems to have abandoned all pretence of objectivity. If you only read the NYT and Washington Post you would get the impression that nothing the 45th President does is right – from the way he eats steak to his reaffirmation of the One China policy during his first telephone call with Xi Jinping in February, which the NYT depicted as weakness and a retreat.

There is always something to criticize about every new administration, and there is perhaps more to criticise about this administration than some others. But to criticise and mock everything Mr Trump does is to say more about oneself than about his administration. So he chooses to eat his steak well-done and with ketchup: So what? How is this relevant? And how is reaffirming a policy that has held since 1972, weakness? The summit with Xi Jinping conformed to the general pattern of first summits with China: nothing very much happened. Like previous first summits, the two Presidents took each other’s measure and concentrated on creating a good atmosphere. How US-China relations will subsequently evolve is still to be determined.

The Trump administration has been in office for only slightly more than three months. Every administration I can remember has at this stage in office been in some degree shambolic in its own way. Some administrations – the first Reagan administration and the first Clinton administration for instance – have been worse.

Trump’s Secretary of State, Secretary of Defence and National Security Advisor are good appointments from the mainstream. It is true that most third and fourth level appointments at the Assistant Secretary and Deputy Assistant Secretary level have yet to be filled. These are important appointments because they deal with the day-to-day routine of diplomacy. It would have been preferable, for example, if the USS Carl Vinson had actually changed course before announcing that it was en route to Korean waters and the mistake can probably be attributed to the lacuna at this level. It gave the media another opportunity to mock the administration. Still, ordering the Carl Vinson to Korean waters in response to Pyongyang’s provocations was the right thing to do.

Getting the machinery of government right is crucial to setting clear directions and a strategy, the lack of which is a weakness. But I would be far more concerned if these appointments were still vacant and the administration had not got its routines in place by, say, the end of the year. We shall see.

I told my American friends that rushing to judgement risked becoming a self-fulfilling prophecy. They should not assume that everyone in Southeast Asia understood their weird and wonderful politics as well as they may fondly believe, and if fed a steady diet of unrelieved negativity based on the assumption of failure, may well come to wrong conclusions and therefore make wrong decisions which could be difficult to reverse. There are many uncertainties, but it is factually untrue that everything the Trump administration has so far done in East Asia is wrong.

At present, the main risks are in the economic field, particularly in trade. Abandoning the TPP was undoubtedly a blow to American credibility. Projecting strength, as President Trump wants to do, is not just a matter of maintaining a favourable military balance. It also requires a favourable psychological balance: maintaining confidence in America. Cancellation of the TPP reinforced China’s basic talking-point: that the US is an unreliable partner. But to conclude as did the NYT in November shortly after the election, that the TPP’s “defeat” was “an unalloyed triumph for China” is an exaggeration.

The RCEP, which does not include the US, is now the only multilateral trade liberalization negotiation underway in the Asia-Pacific. But the RECP is not, as many commentators have called it, a ‘Chinese initiative’. It is an ASEAN initiative intended to connect ASEAN’s existing free trade agreements with six of its Dialogue Partners. Three out of the six – Japan, the ROK and Australia – are US treaty allies. New Zealand maintains close ties with the US. The fifth, India, is hardly a Chinese stooge.

Three RCEP members – Australia, Singapore and the ROK –have bilateral FTAs with the US. Trump has so far said nothing about the first two, although he recently threatened to renegotiate – renegotiate not abandon – the South Korean FTA. But that seems another spontaneous statement intended to pressure the ROK to pay for the THAAD deployment, and it remains to be seen whether he will follow through on either the threat or its objective.

President Trump wants a bilateral trade agreement with Japan, suggesting that he is not unaware of the importance of trade in East Asia, even if he rejects multilateral trade deals. The Trump administration may want to replace the TPP with a ‘hub-and-spokes’ trade architecture. The emphasis on bilateralism gives the US an advantage but is something less than outright protectionism. China does not have, and for the foreseeable future cannot have, a bilateral safety net on trade with the US.

The chief concern is the possibility of a trade war between the US and China in which all of us will suffer collateral damage. That risk has somewhat receded following the meeting between Trump and Xi Jinping in Florida last month, during which they gave themselves a hundred days to work out some sort of arrangement on trade. Trump has backed-off from the more extravagant of his campaign threats on trade with China. There is a struggle for influence between what could be called ‘economic nationalists’ and the ‘Goldman Sachs crowd’ within the administration. For now at least, the latter group seems to have gained influence.

A receding risk is not no risk. I do not think that any advantage the Goldman Sachs crowd may have gained is yet irreversible. The Trump administration must do something to redress what it considers unfair trade with China. The administration has launched an investigation into whether foreign dumping of steel poses a national security threat that is obviously aimed at China. Chinese protection of SOEs is a thorny issue – intimately connected to the stability of Chinese Communist Party (CCP) rule – which the administration cannot ignore because it directly affects American corporations. Beijing does not want trouble ahead of the crucial 19th Party Congress later this year, but for the same reason cannot afford to appear weak. Although for now the administration’s main target seems to be NAFTA, China is by no means off the trade radar. I don’t think that Beijing assumes that it is off the hook.

On security and foreign policy, there has been a reversion to the norm. This is not surprising because the range of realistic options is not wide. Apart from reaffirming the One China policy – and it is important to note that the US interpretation of ‘One China’ has never been, and cannot be, the same as the PRC’s interpretation because of the Taiwan Relations Act – the Trump administration has reassured its East Asian allies about its treaty commitments, continued patrols in the SCS, and during his visit to Indonesia in April, Vice-President Pence announced that President Trump would attend the APEC, ASEAN-US and East Asian Summits in November.

The American foreign policy establishment, media and human rights organizations have been dismayed by the Trump administration’s de-emphasis of democracy and human rights promotion and criticized the President for engaging President Duterte of the Philippines and inviting him to visit the US. They saw this as acquiescence in extra-judicial killings. But Obama’s moralistic approach only hardened Duterte’s position and reinforced the anti-American streak of Filipino nationalism. A less sanctimonious attitude may not be more unsuccessful. Since Trump’s election, Duterte has abandoned talk of ‘separation’ from the US. And why was it wrong to invite the Chair of ASEAN to visit the White House?

The Trump administration may not display the same degree of patience as the Obama administration with ASEAN diplomacy, which stresses process over outcome and form over substance. But President Obama was something of an outlier in historical terms. The American priority in East Asia has always been on bilateral engagement rather than multilateral diplomacy.

There are good reasons why ASEAN works the way it does: ASEAN’s basic consensus is to always have a consensus, even if it is only a consensus of words or form. Any other mode of decision-making risks breaking up the organization. Despite occasional tensions and minor skirmishes, ASEAN has kept the peace between its members for fifty years. This was not to be taken for granted given the Southeast Asia of 1967. Despite its short-comings, we are all better off with ASEAN than without ASEAN. Arguably, however, over the last decade or so, ASEAN has drifted too much into privileging form over substance. To keep a more transactional Trump administration engaged, ASEAN should rethink its processes to see how they can lead to tangible outcomes more immediately relevant to American interests. Whether we will do so is of course yet to be seen.

There has been no mention of the ‘pivot’ or ‘rebalance’ but this is not a bad thing. The policy was welcome but it could have been better described because these terms connoted inconstancy – what ‘pivots’ one way could easily swing another. It raised expectations that, given the global nature of American commitments, could never have been wholly met. What should have been stressed instead was the essential continuity of US policy towards East Asia over many decades. The US is not going to withdraw from this region.

Beyond reverting to the norm, the Trump administration has begun to correct some of the mistakes of the second Obama administration. China’s favourite tactic is to pose false choices and force one to choose. The second Obama administration fell into the trap and was reluctant to emphasise the competitive aspects of US-China relations for fear of jeopardising Chinese cooperation on such issues as climate change, reportedly going so far as to forbid the use of the word ‘competition’ to describe relations with China.

Mr Trump clearly knows that China will not cooperate on any issue unless Beijing decides that it is in its own interest to do so and that de-emphasising competition is not going to make China any more cooperative. President-elect Trump’s telephone conversation with Taiwan leader Tsai Ing-wen last December and his subsequent tweet posing a rhetorical question – had China bothered to seek America’s agreement when building a “massive military complex” in the SCS or “devalue[ing] their currency”? – was unorthodox but got across a fundamental point: If China expects the US to consider its interests, it cannot ignore American interests. Bombing Syria while at table with President Xi Jinping was a brilliant move. It sent a powerful message which did much to erase the damage to American credibility incurred when Obama drew a ‘red-line’ but failed to enforce it.

One serious political risk is that the Trump administration may come to be regarded as Islamophobic. Terrorism is certainly a threat and it is understandable that the US would want to protect itself. But an undifferentiated approach towards the threat could contaminate attitudes of Muslim communities in South and Southeast Asia towards the US. Southeast Asian Islam is already becoming ‘Arabized’ and an element of anti-Westernism is already becoming an element of Muslim identity. If this trend is accentuated by the administration’s approach towards terrorism and its Middle East policies, over time this could make it difficult for political leaders in Indonesia and Malaysia to maintain a friendly attitude towards the US. This will have long-term consequences for the sustainability of the US presence in the region. In this respect, the decision to include Indonesia in Vice-President Pence’s tour of East Asia was a very important step in the right direction.

Mr Trump’s election – and other developments such as Brexit, the EU’s travails and the election of unconventional political leaders in a number of countries including several in Asia — were symptoms of the fraying of the global order that the US created and led after the Second World War. Mr Trump was not the cause, but as he seems less committed than previous American leaders to up-holding the current order, he may well accelerate its unravelling. If this occurs, we will all lose. In January, President Xi Jinping delivered an eloquent defence of the current global order at Davos. Many saw that as a signal of China’s willingness to lead now that the US seemed reluctant to do so. But despite its confident tone, President Xi’s speech was as much a tacit acknowledgement that there is no real alternative to the current order and nervousness at what it’s unravelling might imply for China.

At Davos, President Xi drew attention to China’s role as an engine of the global economy and outlined his vision of ‘One Belt, One Road’. This is an ambitious vision with potentially profound geopolitical consequences for the world. But it rests on the foundation of the current order, as does China’s growth. It is not an alternative to the current order. And a vision is only just that: an aspiration and not yet an actual reality. Whether the aspiration can be realised remains to be seen.

China cannot lead the current global order because to lead an open order, one must oneself be open. After the first phase of reforms, China is now deeply ambivalent about further opening up because it is unsure about what that may mean for the stability of CCP rule. The next phase of reform essentially requires giving the market a greater role in key sectors to make them more economically efficient — hence loosening control over them — while maintaining central Party rule. It is unclear how this circle is going to be squared. So far the CCP has opted for stability and tightening its control. Yet without further reform to put growth on a more sustainable basis, CCP rule might well be at risk. The ambivalence and the contradictions were on display at the last session of the National People’s Congress.

Social and labour unrest have become endemic in China. This is not in itself unusual given the rapid transformations that China has undergone in a relatively short time. But there are also signs of disquiet within the Party itself. About five years ago, I asked a Chinese friend what he thought about his new boss. His answer surprised me. We cadres, he replied, fear a new Cultural Revolution. I thought that he was making a joke to deflect my question and did not pursue the matter. I did not then understand his hint. But last October and again in January this year, about a thousand PLA veterans in uniform demonstrated outside the Defence Ministry in Beijing. It is impossible for such a large and conspicuous group to have gathered at such a sensitive location without the connivance of senior cadres unhappy with President Xi’s accumulation of power.

I do not assume that China will fail any more than I assume America will fail. The CCP is the latest and most successful iteration of a series of political experiments in search of wealth and power that have been underway since the end of the Qing Dynasty. The CCP has proved to be an extremely adaptable organization that has survived traumas that would have wrecked a more rigid structure. Indeed we should all hope that the CCP succeeds because there is no good alternative to CCP rule. But this should not blind us to the real problems confronting the Party. The 19th Party Congress is going to be more than usually crucial.

US-China relations are complex and encompass both cooperative as well as competitive elements. It is not a simple zero-sum game. Let me conclude with the issue that best illustrates the complexities: North Korea.

President Trump has justified the easing of his approach towards China by the need to enlist Beijing’s help to stop Pyongyang’s nuclear and missile programmes. China certainly has an important role to play, but while American and Chinese interests overlap, I do not think their interests are similar and neither has sufficient leverage to stop North Korea. Pyongyang has the initiative and has no reason to relinquish it. We are on the cusp of a very significant shift in the Northeast Asian strategic equation.

North Korea does not yet have nuclear-armed missiles capable of reaching the continental US; it has probably not yet weaponised its nuclear devices to make them deliverable by missiles. But Pyongyang is determined to acquire survivable, nuclear armed ICBMs. While electronic interventions such as those that President Obama reportedly ordered three years ago may delay missile development, I do not think they will deflect Pyongyang from its goal.

Pyongyang is convinced that the DPRK and the current regime will not survive unless it acquires survivable ICBMs. Dissuading a state from proceeding with a course of action it considers existential is impossible. Pyongyang must be persuaded that the cost of proceeding is higher than the cost of not proceeding. But if you believe that the cost of not proceeding is the end of your state and regime, then you might as well go ahead because the cost of proceeding will always be lower.

The failure rate of North Korean missile tests seems higher since these interventions were said to have begun. But it has also conducted successful tests. Pyongyang will persist and it will eventually succeed — unless the US and its Northeast Asian allies are willing to fight a full-scale war to stop it.

I do not think they are prepared to pay the price. China certainly does not want war. Since the DPRK already has nuclear devices, all it has to do is detonate them on its own territory near the DMZ, which is only about 60 km from Seoul, to raise the cost of war to unacceptable levels. It could conceivably also do so on the border with China. Even if such extreme contingencies could be pre-empted, Pyongyang will certainly retaliate in any way it can, and there is no way of ensuring that all of its retaliatory capabilities can be simultaneously neutralized.

Seoul is within range of conventional artillery and South Korea and Japan are within range of North Korea’s existing missiles. Prime Minister Abe has warned that North Korean missiles could be armed with Sarin, a nerve agent. Unilateral military action by Washington would thus impose serious direct risks on its allies at a time when the US itself does not yet face a direct threat.

If the US acts unilaterally, it will in effect force its allies to immediately bear the very heavy costs of mitigating threats to itself that are still theoretical or putative as far as the US is concerned. This would cause grievous political damage and could permanently undermine trust in America well beyond Northeast Asia. Only if North Korea already had nuclear-capable ICBMs and there was credible intelligence that a launch targeted at the US was imminent, would unilateral action be politically justifiable or at least understandable. But the point is to prevent North Korea from acquiring such a capability in the first place.

Sanctions do not work. North Korea is already one of the most heavily sanctioned countries in the world. Yet the speed of its advances in missile and nuclear technology have surprised experts. There is room for additional sanctions and for tightening the implementation of existing sanctions. But this will at best only buy time. Time for what? North Korea is a brutal but functioning state. Repeated predictions of its demise have proven premature. We cannot assume that it will conveniently collapse before it achieves its goal.

China cannot stop North Korea. Beijing is certainly very angry with Pyongyang whose nuclear and missile development programmes have created new risks for China, for example through the deployment of THAAD in South Korea. Beijing has signaled its displeasure by stopping coal imports and allowing an unprecedented public debate on whether it should continue with its present approach towards North Korea.

But these are only symbolic actions. China may well go along with further sanctions, but I think Beijing’s actions will always fall short of being effective because anything Beijing does that would inflict enough pain to change Pyongyang’s behavior would also jeopardize the stability of the regime.

At a time when the CCP is itself feeling insecure, can Beijing be complicit in the destruction of another and neighboring Leninist system without giving the Chinese people inconvenient thoughts about their own system? This is an unacceptable risk. The most vital of all the CCP’s interests is its own survival. From this perspective, a nuclear North Korea is the less bad option. Foreign policy professionals in the Trump administration know this. But statements by Tillerson and Trump himself nevertheless seem to display a level of expectation that China is bound to disappoint. How the administration will react when disillusionment dawns is unclear.

So what is to be done? There are no good options. Denuclearization is a pipe-dream. Any realistic approach must accept that the DPRK is here to stay and will eventually have a nuclear-capable ICBM. One approach is to give Pyongyang what it essentially wants – an assurance of regime survival. This could be done by negotiating a US-DPRK peace treaty in return for a verifiable freeze on warhead and missile development. China will, I think, go along with such an approach.

This approach however carries two major uncertainties. First, at what level of warhead and missile development would Pyongyang feel secure enough to agree to a freeze with robust verification measures? Second, would such a deal be politically saleable in Washington, Tokyo and Seoul? Unfortunately, the two factors contradict each other: what makes Pyongyang feel secure would probably be politically unacceptable.

What is left is the means by which every nuclear weapon state has hitherto been dealt with: Deterrence. North Korea may be very bad, but it is not mad. It is rational. Once it has acquired the survivable ICBMs it believes are needed for regime survival, it can be deterred since Pyongyang will then have no reason to court destruction.

However, deterrence has its own complications. When North Korea has nuclear-capable ICBMs able to threaten the US, the question is bound to be asked – will San Francisco be sacrificed to save Tokyo? Since the answer is obviously ‘No’, Tokyo will have to seriously consider its own nuclear options. Japan has the capability to develop an independent nuclear deterrent very quickly and has in fact been quietly developing this capability — with American aid and acquiescence — for thirty years or so.

North Korea is nevertheless is more a catalyst than a cause. China is modernizing its own nuclear forces and will sooner or later acquire a credible second strike capability vis-à-vis the US. THAAD may make this even more urgent. When China has a credible second strike capability, the same harsh logic will operate and may do so even before North Korea acquires nuclear-capable ICBMs. One way or another therefore, American extended deterrence in Northeast Asia will eventually be eroded.

The decision will be politically very difficult. But Japanese public opinion has changed very abruptly several times in modern Japanese history, and since the alternative is to accept subordination to China, I believe it is only a question of when and not whether Japan will become a nuclear weapon state.

I do not think the US is eager to see Japan become a nuclear weapon state. Neither do I think that Japan is keen to become a nuclear weapon state. But for both this will eventually be the least bad option. Where Japan goes, South Korea must follow since Seoul is bound to wonder whether it will be sacrificed to save Tokyo.

A balance of mutually assured destruction in Northeast Asia will not be a satisfactory situation for anyone. But it will not necessarily be unstable – in fact it may well be more stable than the current situation — and it may be of some small consolation to Washington, Tokyo and Seoul, that the implications for Beijing are somewhat worse.
A balance of mutually assured destruction will freeze the status quo and is an absolute obstacle to Beijing’s goal – which is implicit in the essentially revanchist narrative of the ‘Great Rejuvenation’ of China by which the CCP legitimates its rule – of recreating an East Asian order with China at its apex. If the ‘American Century’ must eventually end, neither will its successor be unambiguously an ‘Asian Century’ or a ‘Chinese Century’. There will be no clear denouement and we will all have to learn to adapt to structural uncertainty and navigate it for the foreseeable future.

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