Trade vs geopolitics

Hussein Haridy
Tuesday 11 Jul 2023

The visit by US Secretary of the Treasury Janet Yellen to Beijing last week stressed the importance of continued US trade and investment relations with China, writes Hussein Haridy

Less than a month after the official visit of US Secretary of State Antony Blinken to Beijing on 18-19 June, US Secretary of the Treasury Janet Yellen also visited China from 6 to 9 July.

 

During her official visit, her first since 2021, Yellen held separate talks with Chinese Prime Minister Li Qiang and Deputy Prime Minister He Lifeng, described by the UK Financial Times newspaper as the “economic tsar” of China and a protégé of Chinese President Xi Jinping in its edition of 8 July.

 

Yellen’s talks in Beijing lasted approximately ten hours in total and reflected a common desire to move ahead despite the major disagreements between the two sides, not only on questions related to geopolitical competition but also on trade, investment, and technology.

 

Yellen sounded positive about the future of US trade and economic relations with China. She emphasised at the outset that there was “ample room,” as quoted in the Financial Times, for US and Chinese companies to boost trade and investment despite growing security tensions between Washington and Beijing over the last three years and since the Biden administration took office in January 2021. This was a message that was well-received by Chinese officials.

 

Following in Blinken’s footsteps after his visit to China last June, Yellen stressed the importance of communication between the two countries. She said that in the context of a complicated global economic outlook there was a pressing need for the world’s two largest economies to “closely communicate and exchange views on various challenges”.

 

She admitted that there were US disagreements with China, however, but said that there was a joint responsibility to avoid misunderstandings and in particular misunderstandings due to a lack of communication. This “can unnecessarily worsen our bilateral economic and financial relationship,” she said.

 

Yellen’s visit to China came amid reports that the Biden administration will soon decide on curbs on investment by US companies in the development of technology in China, particularly in the fields of artificial intelligence (AI) and quantum computing. The Chinese government has expressed its concerns that the objective of these curbs is to slow the path of economic growth in China. The Chinese officials met by Yellen during her visit also raised the issue of the restrictions that the US administration has ordered on the sale of advanced computer chips to China.

 

Yellen defended these restrictions, saying that they were “narrowly targeted measures in order to defend American national security.” The Chinese side may have asked itself why, if this is the case, the Biden administration has pushed other Western governments to follow suit.

 

In her discussions in Beijing, Yellen encouraged China to shift to a market-oriented system and insisted that the US wants a “dynamic and healthy global economy that is open, free, and fair” and not a world economy that is “fragmented” or one in which other countries are forced to take sides.

 

One of the most important messages that came out of the four-day visit is that the US does not want to see an economic rupture with China. It goes without saying that China does not want to see such a rupture with the US.

 

Decades ago during the administration of former US president George W Bush, the US and China took part in a Strategic Economic Dialogue that held two sessions per year. It would be difficult, at least at the present stage, to speak of resuming such a dialogue between the two governments at the moment, even as Yellen’s discussions in Beijing demonstrated that despite the serious geopolitical competition between the US and China the two sides recognise the importance of developing their trade and economic relations.

 

This is not only from the standpoint of their respective national interests, but also for the sake of the global economy as a whole and in the presence of a “complicated global economic outlook,” as Yellen put it in her talks in Beijing.

 

The challenge ahead for Washington and Beijing is to build on the positive results of the visits by the US secretaries of state and the treasury to China over the last three weeks and shield them from any possible fallout from the ups and downs of geopolitics. The first test of this could come in Vilnius in Lithuania this week when the NATO Summit takes place. In June last year, the Final Declaration of the NATO Summit in Madrid mentioned China as a competitor for the first time since the establishment of the organisation in 1949.

 

The dilemma facing US policymakers in managing relations between the US and China in the medium and long term resides in maintaining a fine equilibrium between constructive and sustainable economic relations and geopolitical considerations.

 

On 7 July, the Washington Post newspaper published an abridged version of a lecture by William Burns, the Director of the CIA, at the annual Ditchley Foundation in England on 1 July. The main theme of the lecture was that the post-Cold War period is over, and the “task” before the US now is to shape what comes next. According to Burns, US success in this regard will depend on navigating a world with three distinctive features. The first, as he articulated it, is strategic competition from a “rising China” and from Russia, which he called a “declining power.”

 

If this represents the global vision of the Biden administration, then the question is whether it will be able to maintain an easy equilibrium between booming trade and investment relations with China and the forced imperatives of fierce US-Chinese geopolitical competition.

 

With this in mind, the US administration may not push for an explicit reference to China in the Final Declaration of this year’s NATO Summit in Vilnius.

 

 

 

The writer is former assistant foreign minister.

 


* A version of this article appears in print in the 13 July, 2023 edition of Al-Ahram Weekly

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