No Cold War With China, Please

Thucydides had it right 2,500 years ago, when he said that rising powers challenge the established international order. Back then, he was talking about Athens and Sparta. Today, it would be China and the U.S. Brilliant on the Peloponnesian War, Thucydides failed to ask what Sparta could have done to peacefully integrate a rising Athens into the Mediterranean "world" system of that era. That is the question America must now ask itself of China. Is it friend or foe?

The very posing of the question reflects the dangerous state of relations between the two countries. Without strong leadership in either country, extremist posturing and a dialogue of mutual misunderstanding are taking hold. Preachy moralism from the U.S. and prickly nationalism from China substitute for serious discussions. Both sides are tone deaf to one another and awash in emotionalism. It is at moments like this that nations stumble into hostility. For the U.S. and China, it may be just weeks away. On Mar. 23, Taiwan will vote for a new President and perhaps for greater de jure independence. No one knows if China will react militarily or how the U.S. will respond. Willy-nilly, U.S. policy toward China is sliding from engagement to containment. It is time to craft a strategy based on realpolitik and mutual national interests.


It started as a tale of two markets. By opening its market to Chinese exports, the U.S. believed that it could do for China what it did for Japan and Korea--generate a fast-growing private economy that fostered political democracy. China, in turn, believed that by opening its huge market, it would raise living standards and national wealth. A wonderful trade.

Slowly it all began to sour. There were the harsh sentences handed out to human-rights activists, Chinese exports of missiles and nuclear-weapons materials to Pakistan and Iran, and a spending spree by the People's Liberation Army. In recent months, China appeared to challenge the economic assumptions of a free-market economy. It limited key economic sectors to homegrown companies, demanded technology transfer in return for plum contracts, and became world headquarters for software piracy. Its huge trade surplus with the U.S. fanned flames of anger over job losses in America. China was fast becoming a rogue mercantilist threatening the global economy.

China's disappointment with America is equally deep. Washington opposed its bid for the Olympic Games in 2000, broke a promise to help China get into the World Trade Organization, and threatened its one-China policy by allowing Taiwan's President to visit Cornell University after insisting he would not be issued a visa. U.S. hectoring about orphanages, Tibet, and human rights was seen as hypocritical, given America's record on race, crime, and drugs. The U.S. accepted software piracy in Taiwan and military dictatorships in Korea and Taiwan for decades. Where was the even-handed justice China deserved from a friend?

An Asian cold war will benefit neither the U.S. nor China. Beijing's leaders are desperate for economic growth. There is no way they can keep China stable without it, and that means access to the U.S. market. The U.S., for its part, is desperate to take advantage of the greatest economic opportunity of the next century. Exclusion from China's market would mean a huge loss of profits and jobs. It is foolish for America to make an enemy out of a nation that isn't one now.


Bold action is needed. The contradictions and suspicions that are poisoning relations today should be swept away with a new Shanghai communique, signed in Beijing by President Bill Clinton and President Jiang Zemin. Shanghai II would build on the first communique signed in 1972 by President Nixon and Premier Zhou En-lai that set the stage for 20 years of peaceful relations and mutual economic benefit.

Shanghai II would commit the U.S. to bringing China into the WTO immediately as a developing country, with the understanding that its status would switch within two years to that of a developed nation. This move would shift strained U.S.-China bilateral trade issues into a multilateral framework. Europe and Japan would have to accept their responsibilities and hold China to accepted norms of intellectual-property rights and technology transfer. The U.S. would stop playing the fool--smashing barriers, only to see European and Japanese companies reap the benefits. China would gain the prestige it seeks in entering the WTO, buy 24 months to deregulate, convert its currency, and pass commercial laws. Both sides would get the international integration they seek for China.

Shanghai II would recommit the U.S. to a one-China policy and recognize the legitimacy of China's goal of national reunification with Taiwan. China would publicly renounce the use of force to gain reunification. In side letters, Washington would promise not to encourage Taiwanese independence. Here, President Clinton must be forceful enough to keep congressional conservatives at bay. He must be equally forceful in telling Beijing that the U.S. would defend Taiwan militarily, as it would any democratic market economy where it has vital interests.

Finally, Shanghai II would recognize the legitimate security rights of both nations in Asia. The U.S. would accept China's right as a rising power to modernize its military, export certain weapons, and claim disputed territories, as India does. China would accept the nuclear nonproliferation treaty and end any export of nuclear materials.

For Shanghai II to work, both Clinton and Jiang must truly lead. From 1972 to 1992, every American and Chinese head of state battled domestic pressures threatening the U.S.-China relationship. Neither Clinton nor Jiang has proved willing to do so thus far. They must run their own foreign policy.

Clarity, precision, and consistency are missing in current U.S.-China relations. Only a bold stroke can end the slide into cold war and containment.

Before it's here, it's on the Bloomberg Terminal.