The downward spiral

10 June 2020

US-China relations in the Covid-19 era may well further a process of deglobalisation

Mark Roden

This article explores the downward spiral in relations between the US and China, both before and during the COVID-19 crisis, and asks what this means for globalisation in the contemporary era. It explores these themes in three parts:

  • Firstly, by giving an overview of a trade war, only partially resolved before the onset of COVID-19, which has moved the US approach to China from that of cooperation to one of confrontation;
  • Secondly, by analysing the far right US conspiracy theories which have driven a further wedge between the two countries, and which are based on anti-scientific conjecture that is total anathema to progressives;
  • Thirdly, by viewing the COVID-19 crisis and the downturn in US-China relations as potentially precipitating deglobalisation, and a concomitant retreat from interdependence, just when cooperation is most needed to navigate the post-pandemic world.

US-China relations prior to the COVID-19 crisis: a growing trade war

Since China’s accession to the World Trade Organisation in 2001, its economy has been growing exponentially and by 2008 it had become the largest foreign creditor to the US – holding $600 billion of US debt. Moreover, by 2010 China had become the second largest economy in the world with a total GDP of $5.88 trillion. It was in this context that the Obama Administration made its historic ‘pivot’ towards the Asia-Pacific region in order to counter China’s rise and to direct US trade and investment towards that region.

Donald Trump fought the 2016 Presidential Election with bellicose campaign rhetoric against China vowing to label it a currency manipulator and to impose punitive tariffs on Chinese goods. This was part of a wider assault on globalisation as the source of economic pain for US manufacturing and was accompanied by threats to ‘rip up’ international agreements on free trade – a promise he has fulfilled in the cases of the North American Free Trade Agreement (NAFTA) and the Trans-Pacific Partnership (TPP), the latter of which was terminated before being ratified.

This tilt towards economic nationalism and confrontation with China was part of a hard right analysis that was pushed to the forefront by Trump’s 2016 campaign CEO, and later White House Chief Strategist, Steve Bannon, who believed China to be the “linchpin of Trumpism” and that the emerging world of US foreign policy would be about war with China across the realms of commerce, trade, culture, and diplomacy.[i]  It seemed for a while that this language of confrontation would be diluted by the reality of two economies that are very much interdependent. Indeed, when President Trump hosted Chinese leader Xi Jinping at Mar-a-Lago in April 2017, he claimed that the meeting, which largely discussed bilateral trade, had led to ‘tremendous progress’. A month later, US Commerce secretary Wilbur Ross announced a ten-apart agreement with China which sought to augment the trade in products and services i with respect to beef, poultry and electronic payments.

This ‘high’ in relations was short-lived, however, as the US imposed tariffs on Chinese goods worth $50 billion in March 2018 responding to alleged Chinese theft of  US technology and intellectual property. In July 2018 President Trump accused China of ‘ripping off’ the US by taking advantage of free trade rules and imposed $34 billion in tariffs on Chinese goods. China responded with $34 billion of tariffs on US goods.  Up until January 2020 the US had imposed a total of $360 billion of tariffs on US goods and China had retaliated with tariffs on $110 billion of US goods.

Again, the trade war has to be seen within a wider context of an incipient hard-right world view among policy ‘hawks’ in Washington. This view was underscored when, in a speech on 4 October 2018, Vice President Mike Pence stated that the US would prioritise ‘competition over cooperation’ with China to combat “economic aggression” including the theft of intellectual property.

An ephemeral truce in the trade war seemed to have been reached in January 2020 when the ‘Phase-1’ agreement’ committed China to purchasing at least $200 billion in US goods over a two year period while the US agreed to cut by half the tariff rate it had imposed on a $120 billion list of Chinese goods on 1 September 2019 to 7.5%.  The agreement also included a Chinese commitment to enhance intellectual property rights covering legal protection for patents, trademarks, and copyrights; agreement not to pressure foreign companies in China to transfer technology as a condition of market access; and an agreement not to manipulate its currency through competitive devaluations.

The Phase-1 trade deal came into effect in mid-February but was soon overshadowed by the COVID-19 crisis which has opened up a new front in the Trump Administration’s approach to China based on the prosecution of anti-scientific and irrational conspiracy theories which, incredibly, mutated into the basis for its de facto China policy for some time.

The Wuhan lab theory: conspiracy theory as foreign policy.

China’s initial decision to cover up the COVID-19 outbreak in Wuhan has had far-reaching consequences for US-China relations by lending undue weight to nascent conspiracy theories that claim the virus was either a biological weapon, released on purpose by the Chinese government, or else a man-made virus incubated in a lab and released ‘accidentally.’ These far-right theories, particularly the latter, had reached the mainstream media by mid-April propelled by Senator Tom Cotton of Arkansas in particular – a politician obsessed with the China threat and formerly part of Steve Bannon’s inner circle.

As deaths in the United States from COVID-19 spiked, the Trump Administration increasingly sought ways to deflect from its own mishandling of the situation by looking to apportion blame for what Trump has referred to  as the ‘China virus’ onto the US’s main economic rival.  As stressed above, the far right Senator Cotton has played a seminal role in spreading the Wuhan lab theory, claiming on Fox News in mid-February that the Chinese were responsible for the outbreak escaping accidentally from the Wuhan institute of Virology and infecting the general population.  By 14 April US Intelligence Services announced that they were actively investigating the theory saying that they had ‘increasing confidence’ that they virus had come from the lab.

President Trump added his weight to the conspiracy theory on 30 April when he told reporters he had ‘a high degree of confidence’ the virus emanated from a Chinese lab. What we have to bear in mind here is that no evidence has ever been offered for the claims which have been debunked by leading scientists across the US. Indeed, even as Secretary of State Mike Pompeo pushed the theory at the beginning of May, the Chairman of the Joint Chiefs of Staff, General Mark A Milley, declared it ‘unlikely’. Kristian Anderson, Professor of Immunology and Microbiology at Scripps Research, who has published what is considered definitive research on the origins of natural viruses. said: ‘we do not believe any type of laboratory based scenario is plausible’ having compared all available genome sequence data for known coronavirus strains.

The claims have to be understood within the framework of Trump’s race-baiting presidency, whereby most problems are blamed on foreigners or minority groups, rather than any rational analysis or empirical evidence. Sinophobia has become the agreed response of the Administration to its own catastrophic handling of Coronavirus, as it deflects domestic criticism by reifying the ‘yellow peril’ in the minds of its xenophobic electoral base. Indeed, leaked guidance from the Republican National Senatorial Committee, on how to respond to COVID-19 in a Presidential election year, instructs Republicans to blame China and the World Health Organisation (WHO) while praising Trump for curtailing travel from China.

The anti-China stance of the Republican Party has bolstered the economic case for ‘decoupling’ the United states from reliance on Chinese supply chains and has once again raised the spectre of further deglobalisation in the global economy and a drift towards conflict with China on a range of issues – especially with regard to the forward march of Chinese technological prowess symbolised by Huawei’s global reach.

The new ‘Cold War’ as a pretext for further deglobalisation.

Globalism is the bête noir of far-right figures such as Steve Bannon and opposition to liberal internationalism formed the basis of the ‘America First’ stance enunciated by Donald Trump at his presidential inauguration.  The downward spiral in US-China relations during the COVID-19 crisis may well further a process of deglobalisation given that many of the supply chains impacted by the virus have been largely reliant on China. For US consumers, the pitfalls of dependency have been illuminated by delays in I-Phone deliveries as Chinese factories shut down in February and, more importantly, a realisation that some 72% of pharmaceutical ingredients for US consumption are located overseas – rising to 97% for antibiotics. The precarious nature of these supply chains has seen arguments develop for the reshoring of manufacturing as companies looked for alternative suppliers in the US – even if they were more expensive. Moreover, such arguments have fed into the nationalist narrative of the Trump Administration even if, from a progressive perspective, creating local supply chains can be preferable to outsourcing jobs to privatised and democratically unaccountable foreign companies.

As outlined above, the Trump Administration is increasingly framing the election in 2020 as revolving around a reckoning with China and this includes trying to hamper China’s development of technological supremacy throughout the globe. It was in this vein that, on May 15, the US administration resumed its ongoing campaign against the Chinese telecoms giant Huawei by announcing that US machines, tools, and other products would no longer be allowed to take part in Huawei’s chip production anywhere in the world – a move that Huawei claimed threatened its very existence. This exemplifies the way in which US nationalists see competition with China as a zero-sum game in which it becomes legitimate to almost destroy flagship companies by delimiting their scope for global production. The Chinese President Xi Jinping responded on May 21 by outlining a plan to invest some $1.4 trillion in building 5G networks and Artificial Intelligence over the next six years to make China technologically independent.

Viewing globalisation only in terms of trade and finance is to be guilty of economic reductionism.  The reason that globalisation has benefitted some in the West so greatly is that it has also been about the movement of information, people and ideas around the world – which has included democratic ideals.  By viewing the world simply in terms of economic or military competition the US is stymieing the recovery from the COVID-19 pandemic and setting back cooperation on the environment and on global health. This has been compounded by President Trump’s withdrawal from the WHO, which he blames for helping China to cover up the initial COVID-19 outbreak, but which is also so pivotal in the development, production and distribution of an eventual vaccine.  Indeed scientists from Columbia University have been undertaking collaborative research on a COVID-19 vaccine with their Chinese counterparts despite the conflict between the two governments, again demonstrating that cooperative international linkages remain vital to scientific progress and often exist at the level of civil society, where they are sometimes at their strongest.

Much needed US-China cooperation on assisting the poorest nations in battling the virus, as well as managing debt defaults in the developing world when it is over, look less than likely at the time of writing given the WHO’s greatly diminished role and the precariousness of multilateral institutions governing world trade and finance. It is worth noting that a key feature of Joe Biden’s Presidential campaign thus far has been its propensity to castigate President Trump for being ‘soft’ on China over COVID-19.  This is making many progressives nervous that he too may sleepwalk the US into a new Cold War rather than seeking cooperation on shared interests such as pandemics and the environment.

Rather than cooperating with China by bringing the country within the orbit of international institutions, which has been the goal of US Administrations since President Nixon opened the door to Beijing in 1972, the strategy followed by the Trump Administration is that of mimicking China’s model of authoritarian capitalism by integrating big-tech monopolies within the machinery of the state and by deploying militarised police to maintain order. This was very much in evidence as the National Guard were utilised to violently suppress protests in the wake of the killing of George Floyd just at the moment when, perhaps ironically, the US was criticising China for a new security law designed to quell democratic opposition in Hong Kong.

The spectre of fascism in America, and increasingly repressive measures in totalitarian China, represent a mountainous challenge to progressives throughout the world. What is clear is that there exists a profound need to reinvigorate global institutions so that they are not merely puppets of US or Chinese interests, nor enforcers of neoliberal economics, but harbingers of democracy, universal human rights and global equality.

[i] Michael Wolff, Fire and the Fury: Inside the Trump White House, London, Little, Brown, 2018, p.297.