New approaches needed to handle Sino-US rivalry

By Kim Sang-woo

Mainly due to security concerns, a new and more diverse globalized economy is both required and being built. The transition is ongoing, and its final form is yet to be determined.

China views the current rules-based global order as not compatible with its political system and presents new interpretations to the norms of human rights, transparency, democracy, and the rule of law.

The ongoing changes in China including the increased emphasis by the Chinese Communist Party (CCP) on the role of the state and economic self-reliance seriously affect the geopolitical and geo-economic global environment.

The state and particularly the CCP are in control of China's economic policy and consequently, it is less oriented toward being a market-driven economy. It reflects a Mao-era requirement: all enterprises must persevere in putting proletarian politics at the fore as well as ideological and political work first.

It is as U.S. Treasury Secretary Janet Yellen said, "increasingly difficult to separate economic issues from broader considerations of national interests including national security." This has generated revised trade and investment policies for the United States with respect to China.

The difficult challenge in establishing an effective strategy regarding China is to reconcile the fact that it is a major global trading partner, while also posing a serious security threat.

The goal for the U.S. and its close partners should now be on providing content to the concept of "free but secure trade." Doing so will require a combination of selective decoupling to offset security, and economic challenges and the development of strategic supply chains outside China to resolve the current over-dependence on China.

The idea of limiting economic relations largely to friendly and liberal democracies has been growing. The new globalization argument is that countries should link economic relations with political values, which overturns the idea of the uniform treatment of trade partners, which has been the basis of the GATT/WTO system for 75 years.

The West thought that it could have its cake and eat it too by bringing China into the WTO and lifting people out of poverty without accepting a trade-off in terms of China's geostrategic position in the world.

The Western democracies believed that prosperity would lead to more pluralistic and humane political regimes and that economic interdependence would prevent war, it spent 30 years building interdependence. But now, the relationship between the world's liberal democracies and authoritarian regimes seems more adversarial.

Unfortunately, U.S. domestic politics appears to make it difficult to provide the necessary trade liberation in the U.S. market so as to rally democracies to get on the bandwagon. And thus, putting the U.S. in the awkward position of wanting its allies and partners to adopt particular policies or stances but offering little in return.

Nevertheless, the 21st century will be defined by the U.S.-China rivalry. While the two sides once talked of cooperation, now they talk more of competition, which extends from the military to the economic sphere.

The 2022 U.S. National Security Strategy identifies China as presenting a very significant challenge as "the PRC is the only competitor with both the intent to reshape the international order, and increasingly, the economic, diplomatic, military, and technological power to do it."

What does this mean for middle powers like South Korea that are caught up in this increasingly tense superpower competition?

Seoul has long tried to balance itself between Beijing and Washington, relying on the former for economic development and on the latter for security protection. But this is becoming increasingly difficult to do as the U.S.-China competition becomes more intense.

South Korea discovered how difficult the balancing act can be when in 2016 it announced that it was deploying the Terminal High Altitude Area Defense (THAAD) system and China responded with economic coercion that inflicted a heavy cost on the Korean economy. According to the Hyundai Research Institute, it resulted in a $7.5 billion loss in the South Korean economy in 2017 alone.

As a result, or at least in part, South Korean public opinion has turned sharply against China ever since. According to a Pew Research Center poll, eight out of ten South Koreans polled in early 2022 held negative views of China.

Moreover, the value of Chinese trade needs to be re-evaluated in light of the fact that South Korea's trade surplus with China has been in a steady decline since 2019. More importantly, South Korea had hoped for Chinese support concerning North Korean denuclearization, but this has not been forthcoming.

China has been explicit in its support of North Korea and recently it has been increased by way of not strictly enforcing UN sanctions or not approving new sanctions to punish North Korea for its unprecedented missile tests.

Therefore, South Korea needs a more realistic and less optimistic approach in its dealings with China. South Korea needs to acknowledge the obvious fact that China is a communist state. It is a country that upholds values and an ideology that is not compatible with those of a democracy.

The reality is that China will not change as long as the CCP remains in power, and will continue its ideological struggle with democratic countries. This means that it will try to decouple alliances that it perceives as a threat, and seek ways to push out U.S. forces and try to dominate the Indo-Pacific region.

As the U.S. formulates its strategy against China, it should, at the same time, reach out to other democracies with assurances about how economic consequences will be addressed and impacts lessened. Allies and partners should be able to make suggestions regarding the application of sanctions in order to reduce the adverse effects while securing compliance.

Clearly, China is still and will remain an important participant in the global economy. For democratic economies, however, interactions with China needs more serious consideration and an appropriate degree of circumspection.

Kim Sang-woo (swkim54@hotmail.com), a former lawmaker, is chairman of the East Asia Cultural Project. He is also a member of the board of directors at the Kim Dae-jung Peace Foundation.