as President Trump demonstrated: China is too large and too dynamic to be suppressed and few, if any, other countries would join the United States in an effort to do so. The effort would indeed be counterproductive as it would simply motivate China to push even harder to achieve economic superiority, and America’s traditional allies to tilt increasingly toward the rising power.
The United States, along with its traditional allies, should instead pursue a policy of “conditional competitive cooperation,” through which it would seek to work informally but cooperatively with the rising superpower to lead a stable and prosperous world economy. Competition would characterize the day-to-day interactions between the two economies. Conditionality would require both countries to implement the leadership commitments they make to each other and to fulfill their international obligations more broadly. The other key countries, especially the Europeans and Japanese, would be integrated into the process as well.
Systemic cooperation will probably require modifications in the international rules and institutions to satisfy Chinese preferences. It will certainly accord China a larger voice in international decision-making circles. But the essential “conditional” part of the strategy will require China to significantly alter policies and practices of its own that undermine, and thus jeopardize, the relatively open trade and investment regime on which China itself, as well as the United States, depends so heavily.
The purpose of this book is to fill a critical gap in the otherwise voluminous literature on the rise of China and on relations between China and the United States: the contest between them for global economic leadership. Is there an economic equivalent of the Thucydides trap, through which that competition between the rising and incumbent powers inevitably leads to conflict – much worse than the trade war that already erupted in 2018, perhaps a new Cold War? Will the world economy be left without any effective leader at all and thus exposed to a replay of the early 1930s, when incumbent Great Britain no longer had the capacity to fend off the international spiral that produced the Great Depression and the rising United States was unwilling to step in – and, indeed, made the situation worse? What type of leadership is feasible in today’s intensely competitive but also highly interdependent world economy?
Many studies of China’s rise, of course, include its economic dimension. So do many analyses of China – United States relations. But very few have focused primarily on the economic aspects of these issues, including whether it would be feasible or desirable to decouple them from the even more contentious security and political dimensions of the relationship – rather than to decouple the United States and China more broadly.
Fewer studies still have been devoted to the implications of the competition for the functioning of the global economic order. That system was created under US leadership at the end of the Second World War and has underpinned both the stunning economic progress and the “long peace” among the great powers that characterized the succeeding 75 years. Does rising China seek revolutionary or merely revisionist changes in that order? This book attempts to fill these gaps from the perspective of the United States, China, and the international economic system as a whole.
The book is divided into three parts. The first two chapters set the stage by analyzing the challenges facing the global economic order due to the rising capabilities of a new superpower and the declining will of the incumbent leader; the current and prospective global positions of those two superpowers; and the meaning and requirements of global economic leadership. The next four chapters examine the capability and will of China and the United States, respectively, to exercise such leadership.
The following three chapters assess the possible systemic alternatives: a G-0 world with no effective leader at all, which could turn out to be either stable (G-0s) or unstable (G-0u); a new G-1 “with Chinese characteristics” that might involve a Chinese “dash for dominance”; and a G-2 based on systemic co-leadership between the superpowers. Chapter 10 closes with conclusions and recommendations for a policy of conditional competitive cooperation, advocating policy steps to seek a G-0s in the short run, and an informal but effective G-2 over the longer term.
The book seeks to draw on the author’s unique experience as both an active participant in, and a continuing observer of, the evolution of global economic leadership for almost 60 years, and especially the roles of the United States and China in the enormous transformation of the world economy that has occurred over that period. As economic deputy to Dr. Henry Kissinger at the National Security Council (1969–71) and Assistant Secretary of the Treasury for International Affairs (1977–81), and later as an advisor to the US and a number of other governments, especially in Asia as Chairman of APEC’s Eminent Persons Group, I had the opportunity to play a modest role in the numerous global economic leadership efforts of this era. As Founding Director of the (now Peterson) Institute for International Economics for over 30 years, I was able to lead a team of superb economists that sought to develop ideas to promote a stable and prosperous global economic order. As a scholar myself, I have written numerous books and articles on these topics, and two explicitly on the rise of China with its international implications. Completion of this book was deliberately postponed to take account of the US elections of November 2020 and the first six months of the Biden Administration.
My acknowledgments begin with my colleagues at the Institute, many of whom provided invaluable comments and insights on succeeding versions of the manuscript through several seminars and innumerable brainstorming sessions. Special thanks go to Nicholas Lardy, one of the world’s leading experts on the Chinese economy; Ted Truman, with his enormous experience with global economic governance; Jeffrey Schott, our expert on the crucial trade policy aspects of the issue; Steve Weisman, Vice President for Communications and Publications, who provided moral support and wise guidance throughout; and Adam Posen, my successor as CEO who strongly encouraged the project from its outset. My particular gratitude is extended to the Smith Richardson Foundation, which provided initial funding.
I am particularly grateful to the members of the Study Group that the Institute convened for the project. My greatest appreciation goes to those who read all or parts of earlier drafts of the manuscript: Thomas Christensen, the late Richard N. Cooper, Joseph Nye, David Shambaugh, Robert Zoellick (in addition to Lardy, Schott, and Truman), and three very conscientious anonymous reviewers.
This book would not have been possible without the ongoing support of the Peterson Institute for International Economics. David Xu provided superb research assistance. My executive assistant, Jill Villatoro, prepared the initial manuscript and shepherded the bulk of the project. Meseret Ayele took over for her in the final stages, and Madeleine Weisman, Michael Welch, and Charlene Mui completed the typing. My publishers at Polity Press, especially Louise Knight and Inès Boxman, were indispensable in bringing the volume to completion. Needless to say, none of those cited bears any responsibility for the views expressed in the book, which are wholly mine.
C. Fred BergstenSenior Fellow and Director EmeritusPeterson Institute for International Economics August 2021
Notes
1 1. The recent conclusions of the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) of 11 nations, and the Regional Comprehensive Economic Partnership (RCEP) of 15, mean that more than half of APEC’s original goal has now been achieved – without the United States.
Abbreviations
ACTAmerican College TestADBAsian Development BankAIartificial intelligenceAIIBAsian Infrastructure Investment BankAPECAsia Pacific Economic Cooperation (forum)ASCMAgreement on Subsidies and Countervailing MeasuresASEANAssociation of Southeast Asian Nations: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, VietnamASEAN+1ASEAN
