Transcript 0:00 [intro music] Welcome to Trendlines, a podcast on global affairs brought to you by World Politics Review. My name is Peter Dirie. 0:12 We will talk with Hugh White about the very real risk of a major war between the US and China in this week's report. But first, it is time for a briefing on world affairs with WPR Editor-in-Chief, Judah Grunstein. 0:26 Okay, welcome to the show, Judah. Uh, what are we talking about today? Well, let's start with a briefing by Eduardo Arcos on the high-profile resignation of Mexico's finance minister, Luis Videgaray. 0:39 Uh, most coverage of the resignation linked it to Videgaray's central role in organizing the recent visit to Mexico of Republican presidential nominee Donald Trump, which was disastrous for the already very unpopular Mexican president, Enrique Peña Nieto. 0:58 Uh, as Eduardo explains, however, uh, the resignation had more to do with Videgaray's disappointing track record on a series of economic and structural reforms that were central to Peña Nieto's political agenda. 1:12 These included an energy reform package that opened up Mexico's energy market to private investment, another that increased competition in Mexico's telecom sector, and then tax reforms that sought to increase revenues for the Mexican government. 1:28 But so far, the reforms haven't had the intended effect, in part because of the economic hit from lower global oil prices. 1:37 Um, meanwhile, Videgaray abandoned Mexico's orthodox economic approach over the past two decades with regard to government debt, which rose to the detriment of its credit rating. 1:49 So the overall result has been a cooling economy, even, even though there are some bright spots, uh, such as consumer spending and confidence, but even there, it's mainly due to expanded credit. 2:00 Um, Videgaray's replacement, José Antonio Meade, is a former finance minister himself who was well-regarded during his previous tenure and has already announced a tighter budgetary approach for 2017. 2:13 Uh, the problem is that while that could reassure credit markets, it, it would probably further constrict growth for an economy that remains very vulnerable to external shocks and deeply embedded with that of the United States. 2:26 So a, a very interesting briefing that, uh, provides, uh, quite a bit of context and backstory on the, the resignation that was covered in, in the press, mainly with regard to Donald Trump's visit. 2:37 Yeah, it's really c- really astonishing how Donald Trump has the tendency to gobble up, uh, all, all reporting about everything that he touches. Definitely. 2:46 Meanwhile, other stories don't necessarily get the coverage that they deserve, and I know you wanted to speak about one of them. Yes. 2:53 You, you had another briefing, uh, by Alex Thurston, who is a very good writer on West African affairs, and he, he, he wrote a piece on the elections in Gabon, uh, which took place in late August and, uh, which were won, uh, relatively unsurprisingly by the incumbent, President Ali Bongo, uh, who is the, himself the son of the former president who was, uh, one of the longest ruling heads of state in, uh, office era. 3:20 And, uh, but what, what was surprising and, uh, what Alex, uh, acknowledged that what surprised him as well, um, was that the opposition had a, actually a really strong showing with the opposition candidate, uh, Jean Ping, a former African Union Commission chairman, uh, coming within, uh, 1.5%, uh, of the, of the votes of the incumbent. 3:41 And, uh, it is pretty clear that, uh, the government only managed to pull off a, a victory here because it, it have easily, uh, engaged in ballot box stuffing, so the home province of the president, uh, recorded a turnout of 99.93% of the electorate, uh, with 95% of the vote going to the president, uh, while the overall turnout was below s- below 60%, so it's pretty clear that there, that there has been widespread fraud, and that is the only reason why the incumbent has won. 4:13 The opposition has vowed to resist the government stealing the election, and, uh, uh, Alex identifies, uh, three separate strategies for doing so. 4:23 Uh, there have been, uh, demonstrations which have turned violent in some places like the capital, Libreville, um, although the government, uh, has, has, uh, countered this by deploying the military, including ordering a helicopter strike against the opposition headquarters, and that has really s- uh, sucked the, uh, the, uh, initiative from, from these protests, and they have subsided now. 4:45 There is a legal challen- challenge pending before the constitutional court, which is due to dec- to decide by September 23- 23rd, um, on the case of the opposition. 4:56 Uh, but again, this is, uh, Francophone Africa, where the president actually has a lot of, uh, s- influence over, o- over the, uh, y- judiciary, so the, the go- the opposition shouldn't get its, get its hopes up. 5:08 And, uh, then Ping has also called on the international community, uh, to, to, uh, keep an eye on the situation and probably, um, ask, uh, Bongo to, to, uh, step down or enter into negotiations with the opposition, perhaps thinking of how France stepped in to topple former President Laurent Gbagbo of Côte d'Ivoire after he, he engaged in electoral fraud in, in that country's election. 5:33 So, um, but, uh, Alex makes the case, and I would wholeheartedly agree with him, um, that none of these strategies are, are particularly promising from the standpoint of the opposition, uh, given, uh, the government's hold over, over important, uh, uh, sectors of power in, in Gabon and also the, the international community's unwillingness, as of late, to get involved in these kinds of disputes. 5:56 I mean, one, one ha- only has to look to Burundi or South Sudan to see how f- how much the international community is willing to put up with in exchange for not having to deal with the situation. 6:07 You could almost say that it's an unwanted crisis in the sense that Gabon was not on anyone's radar, uh, before the election. 6:15 Uh, the system was working comfortably for Gabon and its international partners, uh, most prominently France. 6:23 Uh, and so it's almost, uh, it's almost, uh, inconvenient to have such a strong showing by the opposition and such a, like you said, ham-handed, uh, last-minute effort to rig the, to, to, to stuff the ballot boxes. 6:38 So there's not a whole lot of appetite, uh, among the international community to, to really engage with yet another electoral crisis in Africa. 6:48 There is some movement by the African Union, which has, uh, sig- which has presented itself as an observer for a ballot recount, uh, that Bongo has so far resisted. Um, so we'll see where that one goes. 7:03 Uh, but it's, it's definitely not promising for the opposition for a variety of reasons. Okay. 7:08 To, to come to another well-established and very comfortable for most, uh, uh, actors involved, uh, system, uh, let, let's talk about the, uh, the I- Irish tax system. 7:18 [laughs] Well, in- indeed, we had an article by, uh, WPR's associate editor, Maria Savell, on the recent European Union ruling ordering Ireland to seek back taxes from Apple, the tech giant. 7:35 Um, as you suggest, Ireland has long used a very low corporate tax rate to attract corporate investment and especially headquartering, uh, for the European market. 7:46 Uh, its corporate tax rate is 12.5% compared to between 25 and 35% average among other EU members. 7:55 Now, the EU ruling centers around Apple's effective tax rate, which was 1% in 2003 and gradually fell to 0.005% by 2014, so barely above zero. 8:12 Uh, and the EU ruling basically considers that this actually represents an unfair state subsidy to Apple that distorted trade and is demanding that Ireland seek $14 billion in back taxes. 8:25 That presents the Irish government with a thorny political problem because the country is still implementing some austerity measures as an aftermath of the recent debt crisis and recession. 8:35 And while it has returned to growth, the growth has been uneven and largely unfelt by many of the people who suffered the most from the recession and subsequent austerity. 8:46 Uh, the government ended up deciding to appeal the ruling, although there's already a movement to pressure it to change that decision. 8:53 Uh, as Maria explains, the larger issue surrounding the ruling is the re- the, is the EU's recent resolve, uh, in challenging tax avoidance by large multinationals, and in particular, US tech giants, including Google and Amazon. 9:08 So that's raised some alarm in the US, both in Silicon Valley and Washington, uh, but also some attention to the US tax environment for, uh, multinationals at a time when the Transatlantic Trade and Investment Partnership, the, the E- the US-EU free trade deal, is being increasingly contested in Europe. 9:28 So definitely a, a, a interesting topic to watch, both in terms of internal EU politics regarding tax rates, but also to the broader, uh, EU-US trade relationship. 9:42 One last thing I'd like to mention before we sign off, or two actually, uh, I've mentioned in the past, uh, the 9:50 s- the interview series that we've begun running, uh, uh, in terms of our global insider interview format, and we had two this week that I just wanted to flag. 10:00 One in our women's rights and gender equality series on Sweden's model for gender equality, and the other is part of our series on indigenous rights on Australia's indigenous peoples and their fight for socioeconomic and legal protections. 10:19 Excellent. Thanks for coming on the show again. Thanks. It's been a pleasure. 10:22 [Instrumental music playing] In many ways, the US and China depend on each other, and the current international order has benefited both countries in cer- certain ways. 10:34 But China is getting more assertive and increasingly develops a keen sense of what it perceives as its righteous place in world politics. 10:42 A risky situation when combined with a US foreign policy that values its military primacy in the Asia Pacific region, says Hugh White of the Australian National University in Canberra. My name is Hugh White. 10:59 I'm a professor of strategic studies at the Australian National University in Canberra and a long-term student and observer of strategic affairs, particularly in the Asia Pacific. 11:10 I think one of the most significant risks, perhaps the most significant risk the world faces today, is the risk of a shooting war between America and China. 11:18 It's not that I think that's inevitable the way some observers do, but I think the risk is higher than many people think because I don't think they focus, either in Washington or in Beijing, o- on the deeper dynamics that are driving the sorts of incidents we're seeing, for example, in the South China Sea. 11:38 I think what's at stake in the South China Sea today is not just a dispute over rocks and reefs or maritime jurisdiction, but a much deeper question about the roles of the United States and China in Asia. 11:50 And I think on those issues, the US and China have fundamentally different views, and that if they're not very carefully handled, these are the kinds of issues which, throughout history, have caused ma- major powers to go to war. 12:02 And I think that's the, that, that possibility is something that need to be very carefully borne in mind in managing the problem, and I don't think we're yet seeing that. 12:10 [Instrumental music playing]China is building on coral reefs in the South China Sea, turning them into islands. 12:19 The structures are located in the Spratly Archipelago, and China asserts a 12-mile nautical exclusion zone around them. 12:27 The United States has now breached that zone, deliberately probing how far China will go to defend its disputed claims. 12:35 The United States says the mission only lasted a few hours, but added it's just the first in a series designed to test China's territorial claims. 12:45 [instrumental music] I think the fundamental disagreement between America and China is over their respective roles in Asia and the nature of the international order in Asia. 12:58 And essentially, the difference is, is America wants to remain the dominant power, the primary power in Asia, as it's been for many decades, and China wants to replace it as the dominant power in Asia, and to become itself the leading power in Asia. 13:12 Now, that's a very stark difference. It's not, of course, that, that, that difference is unreconcilable. It's possible that the US and China could find a way to reconcile those conflicting positions. 13:22 But I don't think that reconciliation has yet occurred, and I think it's that fairly fundamental difference which raises the risk that, um, that if the issue's not carefully managed, the two countries could find themselves in conflict. 13:35 I think the feature of the situation which causes me the most worry about the risk of conflict between America and China is the way each side seems to me to underestimate the resolve of the other. 13:47 So that if we do see a crisis, for example, if China decides to start developing an, an island based on Scarborough Shoals, or if China decides to declare an air defense identification zone over the Spratly Islands, 14:00 then in that kind of situation, there's a significant risk that both the United States and China will underestimate the resolve of the other to respond to that forcibly. So, the United States would push... 14:10 might well push back against China militarily, believing that the Chinese would back off, and the Chinese would respond to that, uh, believing that the United States would back off. 14:21 Both sides seem to believe they can achieve what they want in Asia without a conflict because they believe the other will step back, and they both could easily be wrong about that. 14:30 And if they are both wrong, then the two sides would, so to speak, march together into a confrontation that either side... that neither side really wants. 14:38 Neither side wants a conflict, but they both believe they can get what they want in Asia without a conflict because they assume the others will back down. 14:45 And if they're both wrong, then the risks of a conflict become quite high. 14:49 China, of course, has benefited enormously from the peace and stability that American leadership in Asia has delivered, particularly since 1972 when, uh, Nixon met Mao in Beijing, and the U- the, the contemporary US-China relationship was first established. 15:07 And it would make sense in some ways to imagine that China would want to see that continue so that its growth can continue and so on. But I think it's... 15:15 uh, there's a very big change in the way China thinks about its place in the world. 15:18 Back in 1972 and in the decades after 1972, China was very conscious of its weakness, very conscious of American strength, very aware of the need to preserve a stable relationship with America if its growth was gonna continue. 15:33 But the stronger China has become militarily, and the, and the more significant it's become economically to the global economy and to the United States itself, the more I believe China has, has thought that it can now afford to push back and to start reclaiming what I think in China is regarded as its rightful place, uh, i- in the leadership, uh, in the leadership of Asia. 15:58 Uh, I think China was always, if you like, a reluctant, um, acquiescer to US leadership in Asia. 16:06 And now that China believes it's strong enough to be able to push back and reclaim its leadership in Asia, uh, it feels its time has come. 16:15 And, you know, for a long time, uh, Chinese policy was guided by Deng Xiaoping's dictum that, you know, that China should, should, um, bide its time and hide its power, uh, until the time when its challenge could be irresistible. 16:29 And it seems that the Chinese leaders over the last few years have decided that that time has come, that China can now afford to step forward with the power that it's built up over the last few decades and reclaim what it sees as its rightful place as the leading power in Asia. 16:44 [instrumental music] The president's trip was marked by an awkward opening moment, in fact, when he was forced to exit the belly of Air Force One. Some observers described it as a Chinese snub. 16:59 On the tarmac, a Chinese minder tried to block US press access, screaming at a White House aide, "This is our country. This is our airport." 17:08 Then he yelled at National Security Advisor Susan Rice and tried to prevent her from entering the president's motorcade. The Secret Service had to intervene. 17:16 President Obama downplayed the incident, saying his sizable entourage can be overwhelming for host nations, but he acknowledged the tension. 17:24 The seams are showing a little more, uh, than, than usual in terms of some of the negotiations and jostling that takes place. But there is plenty of very real tension behind closed doors. 17:36 President Obama says he's concerned by growing anti-American sentiment here, China's aggressive military expansion, and its unfair trade practices. 17:46 [instrumental music] Certainly, China's power today is much greater than that of any adversary that the United States has faced in the past, uh, e- even the Soviet Union. 18:03 Now, obviously, China is not as well-armed as the Soviet Union was at the height of the Cold War. 18:09 But if we look at the size of China's economy, which is in the end the, the deepest foundation of national power, that China today is far more powerful, probably twice the size of, of, of economy, uh, compared to the United States that the Soviet Union was at the height of the Cold War. 18:26 So, in that respect, China is the most formidable- adversary the United States has ever faced. I think a lot of observers looking at China today see the very significant problems that China's economy has 18:40 and believe perhaps that the Chinese economic miracle has been a kind of a mirage and it will disappear. I think that's a big mistake. 18:48 China's economy is now on one measure bigger than the United States in purchasing power parity terms. On another measure, will soon overtake the United States. And it's, and it's not going away. 18:59 China will be the world's biggest economy for most of the 21st century, and that gives a- gives it a strategic weight which makes it a very formidable competitor for the United States. 19:11 On the military side, the, the, the issue is a little bit different. The United States does remain by far and away the world's strongest military power taken overall. But, 19:22 but China has built over the last couple of decades in particular, a vastly increased capacity to do one very important thing very well, and that is to find and sink American ships. 19:33 And so there's an asymmetry today between US power and Chinese power. The United States can project power far better than China can anywhere else in the world. 19:41 But China's focused very strongly on, on its capacity to stop the United States projecting power into the waters around China. 19:49 And I think that has raised the cost and risks to the United States of projecting power and military operations around China to the point where it's no longer as clear as it once was that the United States would be willing or able even to, to prevail in a conflict with China the way it would have been, say, 20 years ago. 20:08 [upbeat music] US President Barack Obama is pursuing his pivot strategy on a three-day tour of Asian countries, which comes less than two weeks after his re-election victory. 20:21 He's clearly reorienting US attention more towards Asia-Pacific relations. One of the very big questions is whether the United States is today willing to bear the risks and pay the costs required 20:39 to resist China's challenge to its primacy in Asia. Uh, m-most members of what we might call the American foreign policy establishment more or less take it for granted that of course America is willing to do that. 20:50 Uh, they see America's leadership in Asia as vital to its global position. They see sustaining its alliances with key, uh, uh, Asian partners like Japan and South Korea and Australia as being an i- you know, in- 21:04 i-inelectable part of America's global posture. But I think, uh, those judgments are often made without really carefully reflecting on how costly rivalry with China could be. 21:15 And if we look back over the US strategic experience of the last decade or so, with some very significant strategic and costly strategic failures in, in Iraq, i-in Afghanistan, um, a-and with real doubts in the United States, as we can see in the presidential campaigns on both sides of the aisle, both the Republicans with Donald Trump, but also on the Democrat side with Bernie Sanders, I think we've seen the, the emergence of a very strong, a strand in American public opinion that does question whether America any longer needs to play the kind of leadership role which most, uh, members of the foreign policy establishment have taken for granted ever since the end of the Cold War. 21:56 So I think there is a real question whether 22:00 w- the w- if the United States really understands the scale of the risks and challenges that it faces, it will in the longer term be prepared to bear the costs and the risks of a serious, sustained strategic confrontation with China. 22:15 And I think that's what China's betting on. 22:17 I think China looks at the United States, which has had a tough time in the Middle East in recent decades, and which is facing, um, a v- a very divisive debates at home in the United States, and, uh, says... 22:30 And I think in Beijing, they think this country won't be willing to take those steps. Now, I'm not sure they're right. 22:36 I think it's possible that the United States will be willing, but I can understand why in Beijing they might have their doubts. 22:42 I think a really critical step for both sides, uh, to, to reduce the risk of conflict and confrontation between them is first of all for both sides to recognize and acknowledge what is at stake between them. 22:56 And secondly, for each to recognize that they can't achieve everything they hope, that the other side is not just gonna back off. 23:04 And to s- s- in other words, for the, for both sides to start seriously negotiating with one another about the nature of their future relationship. 23:12 You see, I think in the United States, uh, there's an, there's an assumption, uh, certainly a hope that China can be persuaded simply to go back to the old days when China accepted US primacy as the basis for the Asian order. 23:26 And therefore, I think few people in the United States have started asking, "What kind of deal could we do with China to accommodate China's ambitions, but still maintain a very strong US role in Asia?" 23:37 And likewise, on the Chinese side, I think there's a tendency to think that the United States can be persuaded or cajoled or perhaps forced to withdraw from Asia. 23:47 And so the Chinese aren't asking themselves the question, "What kind of relationship with the United States could we negotiate if the United States is not willing to step back?" 23:57 See if they can build a, conceive a new relationship and build that relationship in which they share power in, in Asia. 24:04 Now, that would be by far and away the best outcome for the US and China, certainly far better for Asia than one in which the US and China find themselves in an ever-escalating rivalry with ever-increasing chances of confrontation. 24:18 It would also be better for the rest of Asia, and I would say for, for America, than for, than for the United States to simply step back from Asia and withdraw from the region entirely. 24:27 So I think finding a way to keep the United States engaged in Asia in a way which is in the end acceptable to China. 24:34 So with the United States playing a, a lower role, a lesser role than it's played hitherto, but still a significant role in Asia. 24:41 That's gotta be possible, but working out what it might look like and how we might get there and what it might involve in practice is a really urgent diplomatic task, a really urgent task of policy creativity, and I don't think either side has really started to work on that. 24:57 In particular, I think it's important that they start addressing the nature of their future relationship directly rather than allowing it to be played out through the kind of proxy conflicts that we have in places like the South China Sea. 25:08 This makes the risk of a confrontation, I think, much higher. 25:13 It is a little bit like the situation we saw in 1914, where the deeper rivalries between the great powers of Europe, between Germany and France and Russia and Austria and so on, were played out in the context of the problems in Serbia with the Austro-Hungarian Empire, which made the conf- the, the issues harder to manage and, and increased the risk of confrontation, and as we saw, of course, from history, uh, degeneration into a terrible, um, devastating conflict. 25:46 Many thanks to Hugh for sharing the, his insights into this alarming but incredibly interesting situation. 25:52 He has written a piece for WPR outlining his thoughts on the need to relearn the skills of power politics in US-Chinese relations, which you can find on worldpoliticsreview.com. 26:05 There, you can also subscribe to the World Politics Review newsletter, while you should visit iTunes or a smartphone app of your choice to subscribe to this show. Just search for Trendlines. 26:16 Trendlines is produced and edited by me, Peter Durrie. 26:18 You can follow me and World Politics Review on Twitter, and you can find links to pieces covering the issues we talked about in the show notes on worldpoliticsreview.com. 26:26 [outro music]
