Introduction
China, which is a rising market, has shocked the whole world in terms of its pace of monetary development. There is a high probability of the country continuing to characterise the manner in which its globalisation efforts open up in the 21st century. For this reason, as DG Trade confirms, the speedy growth of the Chinese financial system has the implications of resulting in a worldwide feel of trade affairs and contracts between China and different nations or local areas of international commerce such as the European Union (EU)1.
China is undergoing immense number of changes, including social, economic, and political modifications that are deemed pivotal in enhancing its integration in the global trade. Some of the changes such as the increased industrial activity in China produce some impacts on the environment. Thus, it is likely that the trade agreements and collaboration treaties, which are made with China, will take different dimensions compared to accords that the US has with other nations.
The liberalisation of doing business and its subsequent impacts will demand an analysis to be conducted with particular focus on China, Europe, and the US. The three countries outline a large team of expenditure bazaars. They also hold enormous manufacturers. This effort is perhaps well exemplified by the instigation of the European Union and China’s PCA consultations, which reflect the intention of the two trade partners to intensify and/or broaden their commercial links2.
Nevertheless, as it will be revealed in this dissertation, regardless of the fact that profound investments in mutual business associations between China and the US create myriads of opportunities, the affiliation has also developed some overriding disputes. How then maintainable is the US-China business affiliation? Can China step into the shoes of the US? By considering two case studies, the paper confirms that China is neither able nor ambitious to step into American’s shoes.
Background
According to Meer, Geest, and Evans, China continues to realise an impressive growth rate. However, there have also been some economic imbalances3. Their implication means that even though the Chinese financial system is quickly rising, it is also dependent on overseas sales to various nations, contrary to home expenditure. This situation makes China experience some troubles in the overseas bazaars.
The repercussion for this situation is the surfacing of commercial pressure between China and its mutual partners, as it has been the case for the business dealings between China and the EU. As Alavi says, for mutual commercial dealings to flourish, it is crucial to have equilibrium of imports and exports to and from partners that participate in the commercial association4.
Regrettably, this anticipation seems contrary to the situation between China and the US upon considering Dreyer and Erixon’s words that the US business shortfall with China has enlarged speedily in the previous decades from approximately 50 billion EUR 13 years ago to around 200 billion EUR eight years ago5.
The difference marks a more than three times boost. This business shortfall develops nervousness concerning the financial amalgamation of the mutual business between the US and China, especially by noting that the main trading associates of China include Europe and the US.
Although the aggravation in the mutual trade association emanates from both sides, China may end up being the major loser if the business connection between it and the US becomes unpleasant. For instance, according to Razeen, China holds the awareness that the US does not value business dealings that are of reciprocal advantage to both parties6.
Therefore, it is discouraged by persistent demands by the US for China to put in place business defensive strategies. As Foot confirms, the US encounters enormous challenges while attempting to access the Chinese market7. For the US, the most difficult challenges in fostering the bilateral trade relationships with China arise due to the reason that the US bumps into the substantive bazaar accessibility issues in regions where its merchandise and services are aggressive in China.
Upon considering the issue of overdependence on the foreign markets in the US due to some of the Chinese-made products, the main interrogative is whether China is able or is ambitious enough to step into America’s shoes. Amid the economic boom in China, the US remains highly influential in the international trade and global relations.
Hence, if China needs to enhance further growth of its economy, it must retain a positive relationship with the US. However, can it convert its economic power to military supremacy in an attempt to occupy the position of a superpower that is currently occupied by the US? This question is considered in the sections on case studies and their analysis.
Cases 1
Animosity between China and the US came out publicly in 1971 during the presidency of Richard Nixon. He announced that bad relations between the two states had amounted to a matter that was hard to resolve. Nixon added that he was prepared to engage in dialogue with China to improve the relationship between the US and about 750 million people living in China. The US also objected to improve the relationship between China and the rest of its trading communities.
In 1970, many Americans regarded the trip of President Nixon as equivalent to visiting the moon. Indeed, Dong reported that the bad relationship was a major concern to the US since it was later indicated by fiscal policies8. Towards the end of 1971, President Nixon considered devaluing the country’s currency by 8% in an effort to address the problems of unemployment and increased challenge of inflation.
Consequently, many other nations embarked on floating their currencies against the US currency. However, Shanghai experienced little impacts, if any. China held that the economic policy for the US did not influence it in any way. Dong quotes the government of China responding that no open proof was available in the industrial regions of China concerning anyone who might have demonstrated the least concentration to Washington’s fresh financial guiding principle.
Was the US experiencing negative impacts from the then bad relationships with China? The paper confirms that it was encountering terrible effects. By 1971, China was almost insulated from other parts of the world. After 36 years, in 2007, Shanghai stock market experienced massive decline (9%) in its stock exchange.
Up to date, the affairs between US and China have incredibly been upgraded. In 2009, China emerged the third largest purchaser of the US produced products. On the other hand, the US became the second largest export destination for China-produced products9. Can China engage in conflicts, which may destroy this economic relationship with the US in a bid to replace it as a superpower?
Case 2
Economic power is critical in enhancing a nation’s geopolitical power. The immensely growing economic status of China raises the question of whether it (China) can transform its economic wealth into military power in a bid to improve its geopolitical power so that it can take critical roles in global decision-making processes. The case of dominance of economic giants in the UN Security Council and other international organisations evidences this assertion.
For instance, in the WB and IMF, the voting authority is a function of opinionated supremacy that nations reflect on international platforms and the amounts of capital donations. The G7 parties assume the most momentous position in strategy improvement. While the US, Japan, France, the Great Britain, and Germany have one manager for each, 19 other managers are designated from about 150 affiliated states.
The convention for the selection of the MD for the WB is essentially to fix an American individual while that of the IMF is to fix a European. In case of IMF, the G7 selection influence is 46 percent as Gretchen confirms10. An effective international system must promote political, profitable, and collective impartiality.
With the governance of the most influential nations in the management and setting of policies in the intercontinental organisations, the question that emerges is whether indeed the intercontinental humanity, as suggested by the English school of thought, can precisely reveal the interactions of states in the current world order. Considering the growing economic wealth of China, it is debatable that it has the desire to acquire a stronger position in decision-making processes in international organisations, including the UN Security Council.
However, can it accomplish this goal with objective of competing with the US-established stronger position? Layne asserts that from the late 1980 until 1990s, China’s economy grew by an average of 10%11. Later, it grew by 8% to about 9% until 2005. In 2006 to 2007, this growth rose to 11%.
This finding implies that economic growth can translate into the rising of China as a great power. As nations grow economically, some of them gain power while others lose it to the growing nations. As such, the growth of China into an economic power means loss of power to the existing superpowers, including the US. Layne reveals how these virtual financial adjustments have signalled the coming up of fresh grand authorities, which will soon have a significant influence on the martial/protective command12.
China understands the relationship between its economic power and geopolitical weight. Measured from the context of GDP, if it continues with its current growth rate in this decade, it will surpass the US economy, thus making it the largest economic giant of the world. Indeed, as Layne confirms, the US military intelligence agency projects that China will have become a first class-military power by 2020, thus qualifying as a rival to the US13. However, is China determined to achieve this status? This question remains a puzzle even to date.
Comparison and Evaluation of the Two Cases
Nations do not want to lose their dominance in the global decision-making process. They want to retain their ability to influence others to behave in certain ways. The two cases are similar in the extent that they depict the US as a more powerful nation than China, although the two countries are also mutually dependent on one another for economic propriety.
Kurlantzick supports the probability that the US will remain more powerful than China well over some unpredicted period in the future14. Minimal evidence is available for scholars to believe that that China will develop to become the global superpower, as it will most probably experience some future turmoil in its current economic growth15. The likelihood of the ‘one child’ policy will lead it into some social burdens. Shrinkage of labour forces compared to the total population translates into increasing salaries and wages.
The situation causes the depletion of a nation’s competitive advantage. The suggestion is that China may lose its competitive advantage that it experiences today due to the availability of cheap and readily available labour supply in its industries.
Toppled economic success of China is probable upon considering that the one-child policy will make the Chinese labour force constitute the elderly in the near future. Their sole daughters or sons, akin to the one-child policy, will only replace such people. This situation will constrain household savings to the extent of compelling China to create an expensive social welfare scheme, which will deplete most of its current gains.
Consequently, even if it can currently fight for the superpower position with the US, it may soon lose the power to sustain the position. Considering that its good relations with the US will be lost, China will remain in a tricky position since it may never recover its economic success.
The two cases are similar in the extent that they indicate uncertainties that are accompanied by a low probability of China engaging in confrontations with the US to the level of destroying its diplomacy relationships. However, Kurlantzick reveals China’s increased involvement of in cyber crimes that are aimed at destroying their enemies16.
He also reckons, “China has begun to challenge the United States’ militarily, sending attack submarines to patrol closely American warships, and launching a missile as a test for destroying satellites, potentially boosting the militarisation of space”17. Although this situation poses a threat to the US security, the significance of the threat when analysed in time domain depends on the ability of China to experience continued economic growth to support investment in military equipment, training, and development of more technologically enhanced military confrontation strategies.
However, Kurlantzick says that such capability remains unclear18. The two cases show that for a nation to become a superpower, it must pose a significant threat to other nations so that it develops the capability to influence global policies. In 2009, Pentagon claimed to have used about 100 million dollars in less than seven months in the effort to counter to and/or refurbish the damage that had accrued from cyber threats and other inconveniences of computer systems.
On 1st April 2009, as Rid confirms, the US policy developers campaigned for the engagement of a White House virtual safety ‘czar’ to radically raise the US resistance in opposition to cyber assaults by designing suggestions to authorise the administration to lay down and implement defence principles for classified business for the initial instance19. On issues on cyber attacks, the emerging Asian economic giants, including China, are becoming a major threat to the safety of many nations.
At the beginning of 2012, startling allegations of India’s involvement in hacking one of the United Sates’ commissions systems of e-mail communication hit many local and international media headlines. The communication system essentially dealt with security and economic relations between China and the US.
Many reports contended and confirmed that Indian government spy hackers succeeded in placing an Indian cyber spying military intelligence document on the internet. The document discussed mechanisms of targeting China-US communication processes with the help of expertise from mobile phone manufacturers of the western world. Reportedly, email transcripts of the mails changing hands between the commission members were also included in the document.
Among many other cases of operating system’s software hacking, an attack was speculated on 21st November 2011 in the US. It was claimed in the media that a trespasser had cracked a Curran-Gardner’s municipality water siphon in the state of Illinois. Nevertheless, it was afterwards revealed that the message was bogus.
The two incidents exemplify an ongoing trend of access of organisations and states’ internet computer resources without authenticity. Many of such attempts are suspected to originate from the emerging Asian economies. The first case evidences that good the international relation between China and the US has experienced some challenges in the past.
However, after 1970s, the two nations considered resolving their diplomatic issues so that they could support each other in their economic growth. However, as suggested in the second case, improved relationships between the two nations increased the economic growth of China to levels that the US is now suspecting it of attempting to overthrow it from the superpower position.
This issue raises the fear concerning whether the relationship between China and the US will follow the same path that was followed by the trading relationship between China and the EU. The EU accused China of producing counterfeit products and damping them in the EU member states. Based on the aforementioned allegations, in 2008, several China exports antidumping cases were established.
The cases were linked to the merchandise that originated from China such as steel and candles20. In his book, Chinese Foreign Relations, Sutter investigates the course that was adopted by the EU-China business associations21. The main technique he uses is to examine the rulings of the cases where Chinese businesses have often been caught up in standoffs involving the indictment of engagement in indecent antidumping exercises.
Sutter studies more than 40 scenarios that have been put forth by the EU targeting the Chinese businesses based on the antidumping indictment22. The results of Sutter’s work indicate that China observes that its businesses are not handled reasonably during the EU antidumping examinations. This awareness originated from the participation of Chinese businesses in more than five antidumping examinations in 2007.
In fact, as Sutter observes, out of the six examinations that led to the setting of conditional responsibilities in 2007, Chinese businesses featured in almost of them. Surprisingly, out of the eight new explorations that led to the campaigning of unambiguous consequences, Chinese bazaars took the biggest portion by being held responsible for over 60% of the cases.
Considering that the US currently occupies the position of a superpower by default, it can also raise issues that can destroy its trading relationship with China as witnessed in the case of EU so that it reduces the size of the Chinese market in the US in a bid to lower its economic growth rate. Unfortunately, China is now targeting to build trading relationships with developing economies in Africa and other Asian nations. Consequently, the US may fail to herald the economic boom in China. However, upon considering the US military capability, China may not be able or even be ambitious to step into the US shoes.
Analysis of Issues in the Cases
The speculation on local business dealings is dated back to the early 1950s when Johnston posited in 1954 that in case states do not participate in business treaties, they would endeavour to levy business in the attempt to ensure that they exploit the worldwide market within their reach as Giovanni says23. Following these developments, the established symmetry often translates into a business conflict between nations as evidenced by the two scenarios.
Worldwide business contracts act as a tool for ensuring that such business disagreements are alleviated. This line of opinion was further established by the work of Bagwell and Staiger in 200024. They extended the frameworks in situations where the government was subjected to various political pressures. Politically stimulated administrations also opt to take part in trade concords to the extent that they can promise that their business entities are corrected.
As Mitra asserts, this claim suggests that the pursuit of achieving political potential does not essentially act as basis of enthusiasm during engagements in the business contracts, particularly with politically influential countries such as the US25. This finding raises the subject of China’s inspiration to take part in business associations with the US so that the US becomes the second largest market for the China-produced products.
China has an interest in forming business associations with countries, which will provide a clarification to all international matters, including the repercussion of the international monetary crunch that began in 2008-2009. However, its intention to step into the shoes of the US in a bid to overthrow it as a superpower nation is not backed by evidence.
Since China has the benefit of low cost of manufacturing its products, it sounds imperative to deduce that through business collaboration with the US, it is possible for it (China) to take incredible advantage of this potency to successfully benefit from on the US market to place its commodities and services. Being a nation of low manufacturing charges justifies why China is considered a sufficient answer to the monetary catastrophe as Chaudhuri observes26.
Following the friction in business associations between China and the US in the early 1970s, the US will not appreciating parting ways with China as an economic associate. China will also aim at inducing a conflict with the US by stepping into its shoes at the expense of losing its established markets for its (China) products.
Given the large manufacturing aptitude of China and the size of expenditure bazaar for the US, Chaudhuri says that China cannot pause to determine various matters that hamper its business dealings with the US27. If China is to give up on business discussions in the US-China conferences, it implies that it has to resort to reinforcing its fiscal and commercial dealings with the EU and other trade associates.
However, the search for guaranteeing that it does not put all its eggs in a single creel acts as a delicate motivator for the nation to continue perusing the means of lessening its business connections issues with the US, but not offending it. The above expositions provide insights that both China and the US have a large number of common interests to share through trading relationships. Nevertheless, this observation does not imply the absence of areas in which conflicts of interest can arise.
In this extent, Hanso asserts that China, which is an upcoming country, regards the US as an imperative financial associate, although it also deploys it to offset the supremacy of the US that China considers a premeditated competitor in the international matters28. By gaining economic power, it implies that China becomes even more assertive in fighting for her position in the international trading treaties.
Consequently, in comparison with the US, Europe presents a less threatening trading partner to China. This situation exposes the EU to tough trading relationship choices between it and China in the future, as China becomes more economically powerful and wealthy. Unfortunately, China cannot step into the shoes of the US due to the US’ already strong competitive position in the global affairs.
China can rise to the same current economic position of the US. However, it may take time to overcome the US-established global dominance and acceptance of its ideologies. By attaining almost equivalent monetary competitive benefit, parties that take part in trading conformity often come across some issues.
Chaudhuri reinforces this claim by providing an insight that profitable collaboration paves a way for the two parties to labour jointly for their collective advantage, even if disparities in opinionated administrations and significant philosophies and estimations of relative growth lead to troubles in the joint dealings29. This matter is more considerable upon noting that the US has been struggling to handle the upshots of the worldwide fiscal catastrophe.
The connotation of this claim is that the negotiation authority of the US relative to that of China in the US-China trading association is severely destabilised. The US has to hold and discover the immense responsibility that China is assuming in the worldwide market. Subsequently, the US needs to adopt practical schemes to ensure that it is not disadvantaged in the trading contracts between the two.
However, the claim does not mean that cessation of the US-China business association is an option. The position that is held by China in the worldwide markets makes several nations and local trading associates seek collaboration with China. Therefore, it is not urgent for the US to lose the prospect of seeking business incorporation with the upcoming universal moneymaking giant.
According to Giovanni, local business contracts will not cease to exist in the near future30. Hence, China and the US will want to engage in conflicts that can destroy their trading agreements that have been benefiting them mutually. Almost 50% of the international business takes place via local trade contracts. These unions can be two-sided, meaning that they are established between two states.
They can also be multilateral as McMillan reveals31. The comprehension of the pressure that business deals have in terms of boosting the sales volumes of a nation’s commodities translates into the certifying of a myriad of local commercial contracts across the globe. For instance, with reference to the worldwide economic crunch, almost 30 RTAs were reported to the World Trade Organisation at the close of 2009 as Freund confirms32.
This state of affairs brought the sum of local business unions to 300 by 201033. Subsequently, an enquiry arises on whether business localisation acts to impede the many-sided trading scheme. This issue equally disturbs research intellectuals such as Freund and Ornelas who further worry whether local business contracts need to be distinguished or they are a bother to the intercontinental society34.
The aforementioned intellectual probing of the impact of local contracts creates impressions that business dealings or relationships between diverse nations of different geographical areas may develop issues or lead to monetary donations of both parties coming into the business associations.
The accord may also serve to create prosperity for only one nation, which forms the business union. This situation may form fertile grounds for China’s attempt to step into the shoes of the US. However, China cannot be willing to follow this path since both nations equally benefit from one another.
Conclusion
Political scholars see China’s growing economy as a major threat to the sustained position of the US as the world superpower. As suggested in the two cases, operating in an environment of uncertainty about the future of the Chinese economy, it is most improbable that China will attempt to step into the shoes of the US.
Any sliding from the economic growth curve means destruction of the existing good trading relationships between the two nations. After threatening to overthrow the US from a superpower position, China will be the overall loser. Besides losing its competitive advantage, it will lose its second largest market for its products. Consequently, the paper holds that it is neither able nor ambitious to step into the shoes of the US.
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Footnotes
1 DG Trade, Study on the Future Opportunities and Challenges in EU-China Trade and Investment Relations, Oxford University, Oxford, 2007, p. 11.
2 DG Trade, p. 13.
3 M. Meer, W. Geest, & D. Evans, EU-China trade SIA: The Negotiations of Partnership and Cooperation Agreement between the EU and China, Oxford University Press, New York, NY, 2009, p. 6.
4 R. Alavi, An Overview of Key Markets, Tariffs and Non-tariff Measures on Asian Exports of Select Environmental Goods, International Centre for Trade and Sustainable Development, Geneva, 2007, p. 21.
5 I. Dreyer, & F. Erixon, ‘An EU-China Trade Dialogue: A New Policy Framework to Contain Deteriorating Trade Relations’, ENCIPE policy briefs, vol.5 no.3, 2008, p. 2.
6 S. Razeen, Looking East: Europe’s new trade negotiations in Asia, European Centre for International Political Economy, Brussels, 2007, p. 57.
7 R. Foot, ‘Chinese strategies in a US-hegemonic global order: accommodating and hedging’, International Affairs, vol. 82, no.1, 2006, p. 79.
8 W. Dong, ‘China’s trade relations with the united states in perspective’, Journal of current Chinese affairs, vol. 39, no.3, 2010, p. 165.
9 Dong, p. 169.
10 J. Gretchen, ‘The Violent Consequences of The Nation: Nationalism and the Initiation of the Interstate War’, Journal of Conflict Resolution, vol. 56 no. 5, 2012, p. 825.
11 C. Layne, ‘China’s Challenge to US Hegemony’, Current History, vol. 1 no.1, 2008, p. 14.
12 Layne, p. 13.
13Ibid, p. 13.
14 J. Kurlantzick, ‘The Asian Century? Not quite yet’, Current History, vol. 1, no.1, 2011, p. 26.
15 Kurlantzick, p. 28.
16 Kurlantzick, p. 26.
17 Kurlantzick, p. 28.
18 Kurlantzick, p. 28.
19 T. Rid, ‘Will cyber war take place?’ Journal of Strategic Studies, vol.3 no.1, 2011, p. 332
20 Dreyer, & Erixon, p. 4
21 R. Sutter, Chinese Foreign Relations, Rowman and Littlefield Publishers, Maryland, 2008, p. 6.
22 Sutter, p. 8
23 M. Giovanni, A Political-Economy Theory of Trade Agreements, Princeton University, Princeton, 2007, p. 35.
24 K. Bagwell & R. Staiger, ‘An Economic Theory of GATT’, American Economic Review, vol.89 no.1, 2000, p. 215.
25 D. Mitra, ‘Endogenous Political Organisation and the Value of Trade Agreements’, Journal of International Economics, vol.57 no.13, 2002, pp. 480
26 P. Chaudhuri, ‘Against a Great Wall’, Hindustan Times, 19 May 2010, p. 11.
27 Chaudhuri, p. 12.
28 H. Hanso, ‘Partners and Rivals: The EU and China’, European Foreign Affairs, vol.5 no.4, 2012, pp. 102.
29 Chaudhuri, p. 13.
30 Giovanni, p. 105.
31 J. McMillan, Does Regional Trade Foster Open Trade? Harvester Wheatsheaf, London, 2004, p. 34.
32 C. Freund, ‘Regional Trade Agreements: Blessing or Burden?’ Annual Review of Economics, vol.3 no.1, 2010, p. 123
33 Freund, p. 123.
34 C. Freund, E. & Ornelas, ‘Impacts of Regional trade treaties’, Annual Review of Economics, vol.2 no.1, 2010, p. 145