The Foreign Service Journal, July-August 2019

THE FOREIGN SERVICE JOURNAL | JULY-AUGUST 2019 43 If all this persists, I fear that big parts of the global economy will be closed off to the free flow of investment and trade. And that is why I now see the prospect of an economic “Iron Curtain”—one that throws up new walls on each side and unmakes the global economy as we have known it. A U.S.-China Divorce? But here’s the problem for those in the United States who advocate a U.S.-China “divorce”—decoupling is easier when you’re actually a couple. The United States can try to divorce; but what if others, especially in Asia, don’t want to follow suit? As a function of geography, economic gravity and strategic reality, I do not believe that any country in Asia can afford to divorce China, even if it wishes to. So in its effort to isolate China, America risks isolating itself. But let’s also be clear that if Beijing wants to keep its rela- tionship with the United States from spinning out of control, it’s going to have to look hard at some of its policies. Above all, China will need to rediscover the spirit of market-driven reform. 2018 marked the 40th anniversary of “reform and opening” in China, the remarkable transformation launched by Deng Xiaop- ing and other leaders in 1978. It’s been a good run for China over these years. And it’s been an especially good run for China since it entered the WTO in 2001. Its $1 trillion economy in 2001 has become a $14 trillion behemoth today. Its $220 billion in foreign exchange reserves ballooned to a staggering $3 trillion. But what China has lost, especially over the last decade and a half, is the bold impulse to reform that led leaders like Zhu Rongji to undertake significant changes to the state-led sector in the 1990s, as Beijing prepared for its WTO accession. Today, the prevailing view in the United States is that China is increasingly content to pursue its own standards, privilege its domestic rules, and erect rather than demolish walls for foreign competitors. So I continue to encourage China’s leaders to pursue mean- ingful competitive and commercial reforms, and to do more to foster and protect innovation. The key to avoiding an economic “Iron Curtain” is for China to see its interest in making these reforms and changes. If China doesn’t move quickly, divorce is a real risk. Considerations for Both Sides While the current trajectory cannot be easily reversed, I offer these considerations for both sides. For China: First, do no harm. For example, implement robust rules of engagement to prevent People’s Liberation Army Navy captains from undertaking the kind of maneuver that nearly resulted in a collision in the South China Sea last September. Second, work constructively with America’s allies. Third, be bold. Open your economy. Have confidence that your firms no longer need to hide behind a wall of government protection. Fourth, be proactive in protecting proprietary foreign know- how and end policies that compel technology transfer. Fifth, work with the United States on its top strategic priori- ties, especially North Korea. As for the United States: First, dial down the rhetoric. Stra- tegic competition is a fact. China does not pose an existential threat to American civilization. In the 243rd year of our great democratic experiment, we should have more confidence in America and the resilience of our system. We should prepare for the obvious challenges from China. But let’s not sacrifice those values that have made us the strongest, most competitive and most admired country in the world. Second, enlist partners. And then, working in coalition with these partners, try to foster some workable understandings with Beijing. The World Trade Organization is perhaps the best example. It is in desperate need of an upgrade. So, China and the United States could be part of leading efforts to bring the WTO into the digital age. In a similar vein, I wish President Trump would reconsider the withdrawal from the Trans-Pacific Partnership. A TPP 2.0 would offer a ready-made vehicle to shape the trade environ- ment in which Beijing operates. Third, negotiate with China and find frameworks to resolve issues. Fourth, invest in America—big time. A strong military. A strong economy. Strong educational institutions. Strong invest- ments in science and engineering. Openness to the world. Investment in alliances. Investment in security and economic partnerships on every continent, but especially in Asia and Europe. Getting our own policies right is essential to competing with China and to thriving in the 21st century. The United States can try to divorce China; but what if others, especially in Asia, don’t want to follow suit?