Weaponising Trade and Its New Enemy

us china trade war

“Weaponising trade”, i.e., using trade as a tool of foreign policy aspirations and marginalizing rivals instead of as an opportunity for economic growth, is not new.

It is well known that among most countries, “the United States bears a good share of responsibility” for increasingly weaponizing trade. The US and its allies have used trade embargoes and sanctions against countries, such as diverse as Cuba, Iran, Venezuela, and recently against Russia, that have been/are deemed ‘unfriendly’ to them.

In recent times and with the rise of China as a dominant economic power, “weaponizing trade” has gained new impetus and focus, especially in the context of the US/China relations.

Long presented as a benign tool to advance economic growth and prosperity, Free Trade Agreements (FTAs) are now increasingly used to advance the geopolitical interests of powerful nations. While geopolitical considerations of powerful countries influence the choice of contracting partners, smaller countries are lured (coerced) into FTAs with carrot and stick of ‘inflated’ economic gains (losses).

Pivot to Asia, Containing China

First announced in November 2011, Barack Obama’s ‘pivot to Asia’ policy strategy sought to check China’s sustained economic growth and technological progress, seen as a national security threat to the US.  The economic centrepiece of re-elected Obama’s new US strategy was the Trans-Pacific Partnership (TPP). In an interview on 27 April 2015 with Jerry Seib of The Wall Street Journal, President Obama made his case for the TPP by warning, “[i]f we do not write the rules, China will write out the rules for that region [Asia-Pacific]”.

When the TPP agreement was finalised on 5 October 2015 among 12 nations, Obama claimed the Partnership “reflects America’s values”. He emphasised that the TPP agreement “strengthens our strategic relationships with our partners and allies in a region that will be vital to the 21st century”.

China was not among the initial group of countries negotiating the TPP. This is despite Obama’s conciliatory language in his November 2009 Tokyo speech during his first visit to Asia as President that “in an inter-connected world, power does not need be a zero-sum game… the United States does not seek to contain China”.

However, Obama sought a new relationship with China to be balanced by strong alliance relations, such as with Japan, South Korea and Australia. Thus, after the US Congress ratified the Korea-US FTA (KORUS) in October 2011, Obama’s National Security Advisor, Susan Rice, invited China to join the TPP in November 2013.

The geopolitical intent of the TPP became clear when Obama said on the day the agreement was reached, “we can’t let countries like China write the rules of the global economy. We should write those rules, opening new markets to American products”.

Five years after Trump had withdrawn from the TPP, President Biden revived Obama’s pivot strategy with his Indo-Pacific Economic Framework (IPEF), saying “We’re writing the new rules”.

Security alliances

“American prosperity and security are challenged by an economic competition playing out in a broader strategic context… We must work with like-minded allies and partners to ensure our principles prevail and the rules are enforced”, observed President Trump’s national security strategy.

Thus, the Quad – Quadrilateral Security Dialogue – among the US, Australia, India, and Japan for maritime cooperation that began after the Indian Ocean tsunami of 2004, has turned more into a common security front against China’s rise by 2021. Navies from all four countries participated in their first joint exercise in over a decade in November 2020.

Meanwhile, Japan, under the recently assassinated Shinzo Abe, radically transformed its pacifist security policy by bolstering deterrence through an expansion of the Japan Self-Defence Forces’ roles, missions, and capabilities within and beyond the US-Japan alliance.

The latest attempt to bolster US security partnership is AUKUS (Australia, UK and USA) alliance. The clear intention of AUKUS is to tip the military balance in the Indo-Pacific in favour of the US, and is arguably the most “China-focused” of all the regional security-related arrangements.

Defence cooperation has also been enhanced by country-to-country arrangements, such as the recent signing of the Japan-Australia Reciprocal Access Agreement, as well as the earlier Japan-India Acquisition and Cross Servicing Agreement.

Facing off China Outside Asia  

The US is also looking to emulate Asian experience in Africa and Latin America to link trade with its national security and more precisely to contain China.

The US 2021 Trade Policy Agenda Annual Report notes, “The Biden Administration is conducting a comprehensive review of U.S. trade policy toward China as part of its development of its overall China strategy”. It also notes, “[a]ddressing the China challenge will require a comprehensive strategy and more systematic approach than the piecemeal approach of the recent past”.

Consistent with his trade strategy, Biden’s Interim National Security Strategic Guidance emphasises, “The United States must renew its enduring advantages…; modernize our military capabilities …; and revitalize America’s unmatched network of alliances and partnerships”. He identifies “growing rivalry with China, Russia… reshaping every aspect of our lives”.

Biden “will make sure that the rules of the international economy are not tilted against the United States. We will enforce existing trade rules and create new ones…will strengthen our enduring advantages, and allow us to prevail in strategic competition with China or any other nation”.

Trump outraged African nations by describing Africa as “a continent full of shithole countries”. On his 16th day in office, Biden sent a video message to African leaders at the 34th African Union Summit promising American partnership and solidarity. Secretary of State Antony Blinken made his inaugural visit to the African continent in mid-November, 2021 starting in Nairobi, the capital of Kenya, an American ally, but a country which also received substantial financial and technological assistance from China.

The new Biden administration announced a review of all trade negotiations under Trump, such as the US-Kenya FTA, to succeed the African Growth and Opportunity Act, a trade preference scheme of President Clinton, offering enhanced market access to qualifying African countries since 2000 but is due to expire in 2025.

In April 2021, Blinken confirmed that talks with Kenya would proceed. Observers believe that the US-Kenya FTA, initiated in 2020 by Trump, should provide the launching pad for expanding US ‘carrot and stick’ trade and security policies in the continent to balance China, as did the KORUS in Asia.

The US has 6 FTAs with 12 Latin American and Caribbean countries. On 8 June, Biden unveiled a new US economic partnership with Latin America aimed at countering China’s growing clout.  He called it “a ground-breaking, integrated new approach”, hinting to weaponise FTAs.

But “Americas Partnership for Economic Prosperity” still appears to be a work in progress, which stops short of offering tariff relief, and will initially focus on “like-minded partners”.

Biden’s regional Summit of the Americas was marred by discord and snubs over the guest list that omitted countries seen friendly to China.

The response so far has been less than enthusiastic, revealing America’s waning influence in its own backyard.

Accommodate China

The US and its allies are increasingly pushing FTAs far beyond liberalising trade in goods and services, encompassing factors such as protection of labour standards, investor rights, intellectual property rights and the environment. These are often wrapped in “liberal democratic values”, emphasising a high level of “normativity” to cover up security and strategic vision of the US and its allies in the context of a hegemonic rivalry of the US against China.

However, China now possesses commercial, financial and technological capacities and aptitudes to implement rules which are seen by many countries in the Global South as less hegemonic and mutually more beneficial. They view a post-American world order based on pragmatic integration, centred on principles that are malleable and adaptable to national issues and interests, as potentially a more secure way to promote economic development in the face of an unstable world economy.

Thus, instead of trying to contain China in disruptive trade wars, the US and its allies should accommodate China’s participation in the global economy aspirations and stabilise the global economic order for the benefit of all.

Dr Anis (Anisuzzaman) Chowdhury is Adjunct Professor, School of Business, Western Sydney University (Australia). He was Director of Macroeconomic Policy and Development Division and Statistics Division of the UN Economic and Social Commission for Asia and the Pacific (UN-ESCAP, Bangkok) and Chief, Financing for Development Office of the UN Department of Economic and Social Affairs (UN-DESA, New York). Prior to joining the United Nations in 2008, Dr Chowdhury was Professor of Economics, Western Sydney University. He also taught at the University of Manitoba (Canada), National University of Singapore and the University of New England (Australia). He has published over two dozen books and close to 100 academic articles on development and macroeconomic issues. He has also edited two books on Moulana Bhashani.

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