Beware trade wars becoming cold wars

WHEN discussing the history of the Cold War with students during a class on American diplomacy, I always stress that unlike the other two World Wars of the 20th century, we cannot pinpoint a date on which the geo-strategic confrontation between the United States and the Soviet Union started - or for that matter, ended.

Did it all begin when the Soviet Union, violating agreements signed with the Western countries, forced communist regimes on Poland, Hungary and Czechoslovakia?

Or when US President Harry Truman pledged during a speech to Congress on July 12, 1948, to contain Soviet threats in Greece and Turkey - what became known as the Truman Doctrine?

When Nato (the North Atlantic Treaty Organization), a US-led military alliance aimed at containing the Soviet Union and its satellites, was established on April 4, 1949?

Or perhaps it happened three years earlier, on March 5, 1946 when former British prime minister Winston Churchill stepped up to the podium at a tiny college in rural Fulton, Missouri, and warned that an "iron curtain has descended" across Europe, separating the Soviet Bloc from US-led Western Europe.

In reality, a series of diplomatic and military disputes between Washington and Moscow in the aftermath of the end of World War II had created a momentum - a vicious circle of actions and reactions in the late 1940s - and so one day we discovered suddenly that... oops... we were in the midst of a Cold War.

In retrospect a global struggle that lasted for more than four decades, that brought about a costly and dangerous arms race, that ignited a series of regional wars in Korea, Vietnam and elsewhere, and that almost led to a nuclear confrontation between the two superpowers and the ensuing destruction of the human race, seemed to be inevitable, although it was not.

Moreover, it is not an exaggeration to suggest that the Cold War not only dominated the policy agenda in Washington in the form of a strategy of "containment" of the Soviet Union, but that it also became a centre of American politics, economics and national culture for more than 40 years.

So perhaps before Americans stumble into another long and costly Cold War - this time with China - their representatives in Washington need to take a short break from their constant beating of the war drums and instead consider pursuing less dangerous strategies in dealing with the challenge of a new geo-strategic and geo-economic competitor.

In fact, not a day passes now in Washington without officials, lawmakers and pundits warning that we need to prepare for the coming global confrontation with China as they compare themselves to the Cold Warriors of the 1950s and employ fashionable terms from that era.

Hence much of the talk in Washington these days is about the need to come up with a "containment" strategy to manage the relationship with Beijing that is increasingly being seen as a zero-sum-game in the economic and military arenas.

From that perspective, all of this would end only when one side wins and the other side loses, suggesting that the long-term goal of the United States should be the "breakup or the gradual mellowing" of China, to borrow the terms used by George Kennan, an American diplomat in Moscow, who outlined the main elements of the containment strategy in a telegram he sent to Washington in 1946.

Former US Secretary of the Treasury Henry Paulson has warned of an "economic iron curtain" that may come to divide China and America, while Vice-President Mike Pence delivered an address at the Hudson Institute last October that depicted China as America's new global adversary and (not unlike the Soviet Union) is not only threatening American national interests but is also challenging Western values.

Not surprisingly Mr Pence's address was compared to Churchill's 1946 "Iron Curtain" speech and to Truman's 1948 address before Congress. Not a formal declaration of war, but something close to that.

While critics of President Donald Trump at home and abroad tend to blame him for the deterioration of the Sino-American relationship, one should note that the notion that the US needed to re-examine the economic co-dependency between the two powers - celebrated for a while as "Chimerica" - was becoming a conventional wisdom of sorts in Washington before he took office.

Moreover, while then-candidate Trump bashed Chinese trade policies and accused the country of "stealing" American manufacturing, he refrained from using Cold War terminology to describe the Chinese economic challenge.

In fact, he has accused China of violating trade agreements, and stressed that the purpose of using tariffs was to apply American economic power to build leverage in order to press it to open its markets to US exports and investment.

And like a traditional mercantilist, he seemed to be preoccupied with the size of the deficits between the two economies, which suggested that - like in the case of the trade disputes between Japan and the US in the 1970s - he would declare victory if and when the US trade deficit with China shrinks.

Similarly, there was nothing strategically earth-shaking about the way a national security paper issued by the Trump administration described China (and Russia) as a "great power competitor". Indeed, his Democratic predecessor in office, Barack Obama, had called for a geostrategic US pivot to East Asia in response to China's growing military power.

But what started as a noisy but manageable trade war has gradually acquired Cold War attributes, as politicians, bureaucrats and business executives began taking steps to force their agendas on Mr Trump's evolving China strategy.

While initially the Trump administration pledged to prevent Chinese companies from stealing American technological secrets, under pressure by the Pentagon and hawkish lawmakers - who argued that when it comes to advanced technology the line between commerce and national security become blurred - a somewhat obscure government agency, the Committee on Foreign Investment in the United States (CFIUS) was tasked with reviewing foreign stakes in "critical technologies".

That meant that in practical terms Chinese investment in, and cooperation with, America's high-tech sectors would be restricted. Recently US senators pressed Washington, DC, not to buy trains made in America by a Chinese state-owned company warning that it could install security cameras to spy on passengers.

Chinese global business competitors like Huawei are now described as outlets of Beijing and therefore constitute a national security threat. The FBI and the CIA have joined the "let's-get-China" chorus, warning of a rise in Chinese espionage in the US, while conservative Christian groups have proposed that expanding religious liberty in China be placed on the top of America's China strategy.

But it is the long-term implications of these and similar moves - coupled with the continuing trade battles and the vicious circle of tariffs and counter-tariffs - that should worry Americans.

A Cold War that could gradually lead to the decoupling of the world's two largest economies, as American manufacturers of iPhones, cameras and clothes move production from China and other leading locations and Chinese investors sell their stakes in Silicon Valley companies, and Chinese scientists and students find it more difficult to get visas into the US, depriving Americans of their contributions.

Even if one discounts the potential for a military confrontation, the long-term costs for the US and China would therefore be enormous, and are bound to play into the nationalists on both sides. Perhaps all of that should be considered before we discover suddenly that... oops... we are in the midst of a new Cold War.