Niall Ferguson is the Milbank Family senior fellow at the Hoover Institution, Stanford
Are the United States of America and the People’s Republic of China heading for a new Cold War? And if they are, what should we call it?
These may seem strange questions to ask just three days after U.S. President Donald Trump appeared to raise hopes of an end to the trade war he started against China last year – or at least a continued ceasefire.
On Thursday, Mr. Trump met Liu He, China’s vice-premier whose thankless task it has been to lead the Chinese side in the past year’s trade negotiations. Mr. Liu must have been relieved by what the President had to say to reporters. “We never really had a trade deal with China, and now we’re going to have a great trade deal with China,” Mr. Trump declared.
Well, maybe. It is certainly conventional wisdom in Washington that the President wants a trade deal with China. The gyrations of the U.S. stock market in the final quarter of 2018 gave him a nasty fright, and such a deal is widely seen as a way to soothe the nerves of investors. On the other hand, last week’s surprisingly diplomatic decision of the Federal Reserve to postpone further interest-rate increases has already given Wall Street all the soothing it needed. And if you listened to U.S. Trade Representative Robert Lighthizer last week – more importantly, if you compared what he wants and what Mr. Liu offered – you were left wondering how a trade deal could possibly be within reach.
Mr. Lighthizer wants radical changes in Chinese economic policy, including an end to the subsidies and other devices Beijing is using to accelerate its technological progress – the program known as “Made in China 2025”. Last week in Washington, the Chinese offered to buy 5 million metric tonnes a day of soybeans from the United States. Mr. Lighthizer looked as if he’d just swallowed a bowlful.
In any case, the trade war is no longer the war that matters. In the words of Ronnie Chan, the Hong Kong property developer and human dynamo: “Trade is insignificant … The bigger issue is technology.”
Amen. The lead tech-war story last week was the indictment of the Chinese telecoms equipment company Huawei for stealing American technology and violating U.S. sanctions. Coming soon: an executive order effectively banning American companies from using Chinese-origin equipment in critical networks. Meanwhile, the Trump administration is leaning hard on American allies (including the U.K., Germany and Poland) to ban Huawei from building their fifth generation cellular networks. Australia and New Zealand have already done this.
It’s not just the White House that is waging the tech war. Last year, as part of the National Defense Authorization Act, Congress passed the Export Control Reform Act and the Foreign Investment Risk Review Modernization Act, both designed to make it harder for Chinese companies to access U.S. technology. A pending review of the Department of Commerce’s Commerce Control List will almost certainly impose new restrictions on U.S. semiconductor exports to China, too.
Is anyone in Washington against this? Nope. One of the marvels of our age is the speed with which Mr. Trump’s once so deplorable China-bashing has become a consensus position, with a formidable coalition of interests now on board the Bash Beijing bandwagon. They may still feel a bit squeamish about his tariffs, but suddenly every foreign-policy wonk, national-security nerd and cyberwar punk agrees with the President: China is the new threat to United States. It’s as if the entire policy community simultaneously woke up to the strategic implications of China’s technological advance. In other words, even if Mr. Trump does call off the trade war, the tech war will go on. Too many people are now invested in it.
This will have big implications, not least for Silicon Valley. Do the tech companies now abandon their long-cherished dreams of breaking into the China market? Do they kick out all the Chinese doctorates they have employed for so long, just in case they’re actually spies?
In short, we can’t call this Cold War 2.0. The 40-year struggle between the United States and the Soviet Union was both ideological and thermonuclear. In terms of trade, the Soviets were inconsequential; in terms of technology, they never got close.
Back when China and America were the best of friends – or at least when their economic relationship seemed almost symbiotic – professor Moritz Schularick and I came up with the idea of calling the new rivalry Chimerica, which had the advantage of being a pun on the word chimera, signalling that we didn’t think it could last.
Well, Chimerica now looks well and truly dead. But what is taking its place? The hunt for a catchphrase continues. In the end, it too will probably be Made in China.
© Niall Ferguson / The Sunday Times, London.