Thursday, April 26, 2012

US faces fiscal and economic challenges similar to the EU vs. China...

US faces fiscal and economic challenges similar to the EU VS. China...

EU-China relations send US mixed lesson....
By Benjamin A Shobert

The United States Congressional Economic and Security Review Commission (USCC) turned its attention last week to what may have been one of the more Freudian questions it has explored in some time: what, if anything, the United States can learn about China as Beijing leverages its economic strength amidst the European Union's economic struggles.

Not lost on most familiar with this hearing is the concern that the EU's struggles in many ways presage similar ones the United States appears headed into. How China responds to the EU's problems is of interest given that the same dynamic may well be set in motion several years down the road if the American government is equally unable or unwilling to address its own fiscal imbalances.

Equally of interest last week is how the EU manages the increasingly complex economic and security nexus that has
emerged between China and its European trading partners. Not without its own difficulties that are in many ways similar to those frustrations Americans also have with China's trade policies, Beijing's relationship with the EU provides an opportunity for American policy makers to consider how China presents itself when its trading partner is not as large nor as much of a strategic competitor as that of the United States.

As commissioner Carolyn Bartholomew opened Thursday's hearings and stated, "Like the United States, the EU has been running increasingly large trade deficits with China for many years. Coupled with China's continued use of trade-distorting subsidies, this trend has led to growing economic frictions."

Representative Dana Rohrabacher (Republican - California), a well-known China hawk, put forward the idea that the EU's position towards China has long been more conciliatory than what the United States would like to see. During Thursday's hearing he stated,
After the bloody suppression of protests in Tiananmen Square in 1989, both the United States and the European Union imposed an arms embargo on the People's Republic of China. But the embargo has always had holes in it from the European side. Even as staunch an ally as the United Kingdom has defined the embargo to apply only to lethal weapons or those than can be used for internal repression. Thus, the British can sell radar systems to China.
His statement glosses over the long-standing difficulties every nation has - including the United States - in distinguishing between dual-use technologies that have both civilian and military uses; however, Rohrabacher also believes that the EU's willingness to do business with China in these areas reflects a strategic decision by European leaders to, as he puts it, "aggressively pursu[e] civilian markets, such as passenger aircraft (Airbus/EADS) and commercial ships hoping that in the future these may evolve into military orders as the Chinese arms budget is increasing by double digit amounts each year as military spending in a bankrupt EU continues to fall."

Why can the EU afford to take this position? Because, at least as China hawks like Representative Rohrabacher would have Americans believe,
The European interest in the China arms market is about money, not strategy. Neither the EU nor its members are Asian powers any longer. They do not fear having to face Chinese military strength, or so they believe.
Admittedly, this assertion comes from a congressman long known for his strident positions against China; yet, as with much of the research and testimony that comes from the equally hawkish USCC, it would be a mistake to entirely overlook either the content of Rohrabacher's statement or the influence this panel has on other more historically moderate congressmen.

One of the more nuanced presentations from last week's panel on how American should view the developing Sino-EU relationship came from Christina Lin, a visiting scholar at the John Hopkins' Center for Transatlantic Relations. Lin stated
China as a US's peer competitor and its ambitions of extending power projection capabilities make it a partner whose importance merits engagement. China and the West have different interpretations of sovereignty and global commons, thus this drives competing global interests and creates political friction.
These differences may cloud the ways in which the interests of the EU (and thereby the North Atlantic Treaty Organization largely as a surrogate of the EU), the United States and China overlap, but these differences should not preclude partnership where mutual interests align.

More importantly, these overlapping areas of shared concern provide the best areas for all parties to focus on in the interests of avoiding future conflict. As Lin said,
In addition to meeting China fighting overland terrorism in AfPak, NATO also meets China in fighting maritime terrorism of piracy in the Gulf of Aden and coast of Somalia ... All these trends point towards closer engagement and cooperation between NATO and China.
In response to the question of whether China pursues a "divide and conquer" strategy within the EU, Gudrun Wacker, a Senior Fellow at the German Institute for International and Security Affairs, answered that such an approach "should not be overestimated in its actual effect, at least not in the foreign policy field. Such a strategy would not work to begin with if the EU and its member states would consistently speak with one voice."

As Wacker sees it, the larger issue within the EU is that it wishes to project power collectively while having very unique regional and nation-specific interests. According to him,
European member states have different economic interests, have different historical backgrounds (eg as colonial powers), and are divided over many international issues. All this leads to a lack of coordination and/or solidarity.
In written testimony submitted for the USCC's hearing, Michal Meidan, a China analyst with the Eurasia Group, focused on how the various EU interests have responded to the growing chorus of voices against Iran. Specifically, whether the EU has been able to reinforce the position held by the United States, or whether the EU's commercial relationships with both China and Iran has somehow negated the full weight of the United Nations' led sanctions.

On the whole, Meidan believes "European member states have managed to maintain a united front in their efforts to adopt an oil ban on Iran, despite resistance from some member states." However, Meidan is equally quick to point out that
while Europe is united in the recognition that concerted efforts need to be made to engage China in order to ensure the effectiveness of international efforts to denuclearize Tehran, its ability to coordinate with Beijing on the matter remains limited.
Meidan presented three reasons for the limited ability of the EU to engage China over its policy towards Iran. Two of the reasons seem to be quintessential problems almost any policy of engagement towards China must address: the varied number of Chinese ministries that must be engaged in order for a policy conversation to be effective coupled to the fact that real decision-making power seems to reside in the hands of a select few at the absolute top of the Chinese government.

This combination of diffuse power at the ministry level coupled to near-unitary decision making at the top, has long bedeviled policy makers eager to engage China on multiple matters, and the EU's difficulty triangulating between its own interests and that of China's and that of the United States should come as no surprise.

What is perhaps most interesting related to the question of why the EU has not been more effective pressuring China over the UN led sanctions of Iran is, as Meidan put it,
while Europe has some leverage over China on economic questions, it is far more limited on foreign policy issues. Europe is not part of China's neighborhood and has never been a strategic actor in Asia, and it does not have the strategic leverage of the US.
Seen within the specific context of what America should learn from the EU's posture towards China, this is an important governing factor to keep in mind: while the EU has obvious commercial interests with China, it does not see Beijing as a threat to its base of power globally in the way some in the United States see China. Consequently, the EU has what some might see as the luxury of not needing to incorporate all of the strategic imperatives that are coming to define, and be more problematic for, US-Sino relations.

Should America come to need Chinese financing in a similar moment of weakness as has the EU most recently, it remains to be seen whether the United States will be able to accept and acknowledge the need for Chinese help as sanguinely as has the EU.

Unlike the EU, which has long ago come to understand its place in the world economically and militarily versus the United States, this same perspective does not exist within America, and is likely never to. Instead, should America find itself in need of additional Chinese investment like the EU has, the world would likely watch as an insecure former hyper-power sought to go to greater and greater lengths to somehow blame China for the very reason it now needs Beijing's assistance.

Similarly, a broader crisis such as many in Washington and Tel Aviv seem intent on setting in motion with Iran could well draw additional focus on the ways in which American and Chinese interests continue to diverge in ways that are inconsistent with either party seeing the other as a partner.

In these differences, the EU's more diffuse and economically oriented relationship may be a poor analog to the more complicated and intertwined relationship that has come to define US-Sino relations over the past 30 years.

Benjamin A Shobert is the Managing Director of Rubicon Strategy Group.

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