Context: The intensifying head-to-head clash between the United States and China has set alarm bells ringing. The beginning was with a trade war in 2018, U.S. policy towards China has morphed into a draconian technology denial regime aimed at hobbling China’s rise. Further the USA is preventing any Chinese military venture to capture Taiwan, for which it has taken major steps across the Indo-Pacific to shore up its military edge. Both China and US are jostling for power and influence across the world. It is to understand that “Extreme competition” over technologies may have initiated the conflict, but their insecurities are increasingly bringing their military and nuclear instruments to the fore.
USA’s approach towards China
The United States today is seeking wider international consensus on the new economic approach from its allies and partners, including India. The Unites states is pushing its efforts to build a “New Washington Consensus” as the Washington Consensus has started showing fissures and the lacunas in the approach which are highlighted by the following reasons:
- The conviction that the “markets know best” approach led to the hollowing out of the US industrial base. It was argued that in the name of oversimplified market efficiency, entire supply chains of strategic goods along with the industries and jobs that made them moved overseas. It was realised that deep trade liberalisation though helped America export goods, but not jobs and capacity.
- Secondly the notion that “all growth was good growth”, led to the privileging of some sectors like finance “while other essential sectors, like semiconductors and infrastructure, atrophied”.
- Thirdly, the old assumption “that economic integration would make nations more responsible and open, and that the global order would be more peaceful and cooperative”, also led to distortion wherein Unites States referred to the premise underlying China’s admission into the WTO in 2001 wherein admitting countries into the rules-based order should have incentivised them to adhere to its rules”. However the problems triggered by the integration of a “large non-market economy” like China into the WTO.
It was realised that the America’s economic policy must confront the urgent need for a “just and efficient transition” to green economic growth and the political imperative of reducing economic inequality at home that has undermined American democracy. Thus for this purpose the United States has offered a five-fold policy framework under the New Washington Consensus
- The first is to return to industrial policy that was the hallmark of US economic development historically, but dismissed by economic neoliberalism in the last few decades. For this the US has restored the role of the state in pumping investments into semiconductor production and promoting the development and deployment of green technologies.
- Second, the United States under its new approach is not seeking autarky or promoting protectionism. The US is not going alone, and wants to develop a joint effort with US allies and partners, including India.
- Third, United States wants its friends and partners to look beyond traditional trade policies. Wherein he highlighted the US-proposed Indo-Pacific Economic Framework is not a free trade agreement.
- Fourth, the US is trying to mobilise “trillions in investment into emerging economies with solutions that those countries are fashioning on their own, but with capital enabled by a different brand” of US economic diplomacy. This primarily involves offering an alternative to China’s Belt and Road Initiative, addressing the global debt crisis, and reforming multilateral development banks.
- Lastly United States is also pushing the efforts to develop a new set of export controls on sensitive technology that will limit national security threats from China and other rivals.
However International Scholars believe that the new Washington Consensus will face some of the critical challenges as it marred with variety of challenges like
- CURTAIL NOT CONTAIN: Experts believe that while export controls may slow China, it is impossible to prevent it from developing its own technologies. The Russian experience shows too that sanctions are not easy to work either.
- UNEQUIVOCAL CHINESE STAND: China does not see much difference between “de-risking” and “containment”. Its immediate response to the G-7 was to order its infrastructure companies to stop buying from American companies.
- FISSURES WITHIN WEST: The United States will also face much challenge from its allies as the French President Emmanuel Macron’s has refused to be a vassal state of the U.S., which represents a tip of the iceberg of the worries of its partners in Europe and allies such as South Korea.
- ECONOMIC DEPENDENCE: China made up roughly one-third of the U.S. industry’s market and would be “impossible to replace as both a source of components and an end market for its product
- POLITICS OVER ECONOMICS: While the old Washington Consensus was largely in the area of economics, the new suffers from an overdose of geopolitics which is also feeding into local U.S. politics as well.
United states and China seem to be involved in what the Americans call a game of “chicken” which comes with a high risk of miscalculation, war or a messy global economic breakdown.
However, U.S. estrangement with China enhances India’s geopolitical value, something that India wants to capitalise on. But there is also a caution that while the Sino-American hostility may bring benefits to India, a breakdown would be catastrophic, for not just India but also the world.