An eminent scholar of both Japan and China, Professor Ezra Vogel is Henry Ford II Professor of the Social Sciences Emeritus at Harvard University. In the recently published book, Rebalance: Japan, China and the United States in the New Era, he and co-author Yoshikazu Kato, Adjunct Associate Professor at the Asia Global Institute, reflect on the changing dynamics of the trilateral relations among China, Japan and the US. Included in the book is a conversation between them about the biggest challenges for US-China relations amid an escalating trade war. They also discuss what the Chinese government and companies could learn from Japan’s trade friction with the US in 1980s.
Yoshikazu Kato: Forty years have passed since the normalization of diplomatic relations between the United States and China. During this time, their total bilateral trade exceeded US$500 billion. More than 350,000 Chinese students are studying in the US. Many Chinese seem to have accepted the American culture and lifestyle, including Hollywood movies, the English language, McDonald’s and Starbucks. Interactions between the two countries and their citizens has deepened. Yet there is mutual distrust at the strategic level. Washington’s complaints include a huge trade deficit; cyber-attacks; interference in universities, media, think-tanks, civil society; unfair technological competition; and other possible threats to US national security. China, on the other hand, perceives current US policies on trade, technology, the South China Sea, Taiwan and other issues as part of a strategy to contain China. What are the biggest problems or challenges for bilateral relations now and into the foreseeable future?
Ezra Vogel: Of the many problems between the United States and China, two have been most critical. One is leadership in world affairs. Another is Taiwan. Both leaders are eager to be the strongest leader in the international political and economic order. The United States and China are rivals but are not enemies. This perspective exists in both countries. The trade war that has strained US-China relations should be understood as part of this rivalry. The concern of the US side and the measures it has taken regarding China's policies on industry, defence, science and technology, cyber security and so forth are ultimately about a competition between strategic rivals.
Kato: Even if competition may be good, the possibility of conflict is still a concern. War would tear apart the global order. In his book “Destined for War”, your colleague Professor Graham Allison discussed how existing powers and emerging powers have historically entered or avoided war. In the 19th century, Japan and the Qing Dynasty China fought a war. In the 20th century, Japan came into conflict with both Russia and the US. While they engaged in a Cold War, the Soviet Union and the US avoided any military confrontation. From your perspective, could the US and China as today’s dominant power and emerging power, respectively, avoid the so-called Thucydides trap?
Vogel: Both China and the United States realize that a nuclear war would be devastating to both countries and the rest of the world. There is a little chance of a nuclear war, but a nuclear war is not impossible. One scenario is for a small incident to occur in the Taiwan Strait. As Allison discusses in his book, many wars between major powers, including World War I, were triggered not by the great powers but by a third country, including small powers. In the 1930s, it would have been unthinkable for Japan to fight the US, but they both eventually went to war. Given history, it cannot be said with 100-percent certainty that war will not occur between the US and China in the future. It is for this reason that Allison and I are cooperating to try to help put US-China relations on a stable basis where we are rivals but not enemies.
The Soviet Union and the US during the Cold-War era both understood the danger of nuclear weapons. However, since Trump is a different person, I cannot completely rule out any possibility of a war breaking out.
Kato: The Trump administration argues that the longstanding US policy of engaging China has failed. Should US regard China as a strategic competitor and move on to a containment policy to protect its fundamental, long-term national interests? Has engagement failed? Is the approach of deepening contact and interdependence with China in all fields and encouraging its transition to a more free and open society no longer workable?
Vogel: Kurt Campbell, who served as US assistant secretary of state for East Asian and Pacific affairs, wrote in an article [in Foreign Affairs last year] that the US engagement policy towards China has failed. I do not agree with him. I don't think our policy has failed. There is no doubt that both the US and China participate in international organizations such as the United Nations and the World Trade Organization and that they behave based on rules and norms, which are valid in the world and are beneficial to both countries and the rest of the world.
Look at the relations and exchanges between the US and China. More than 350,000 Chinese people are studying in the US. There are many exchanges in all fields such as visits by scholars. Although their political systems and ideologies differ, they share many rules and norms, including the ways of thinking, working and behaving. There is an increasing number of situations when the US and China have common interests and goals, including dealing with climate change. The engagement policy has led to cooperation in many areas. Engagement has not failed but has supported the development of US-China relations.
Of course, it was a mistake that the US, which has been promoting engagement policies in recent years, used military force to achieve its goals in Vietnam, Iraq and Syria. Those US policies were unsuccessful and left negative legacies. I am concerned that US patriotism could lead to a repetition of these problems in the future because of the reliance on military power to manage its external relations.
Kato: Are you concerned about China making the same mistakes as the US has done by using military force to pursue its interests?
Vogel: Yes, I am concerned about that danger. The greatest dangers of conflict now come in the South China Sea and over Taiwan. China is expanding its capacity and facilities in the area by using military power with increasing confidence. At present, China does not have a strategy to send troops all over the world, but it is hard to be sure that China will never do that in the future.
China's military power has grown rapidly over the years. In 2019, China's defense budget increased by 7.5 percent from the previous year, exceeding the economic growth rate target of 6.0 to 6.5 percent. Americans responsible for our national security are concerned about China’s intentions and its lack of transparency and accountability. Of course, this is the nuclear era, and if nuclear powers use atomic bombs, it means a full-scale war. The world is over. I believe China is aware of this and will not abandon caution when developing and exercising military power. But that doesn't mean that China will not develop its military power, bringing uncertainty and risk to world politics.
Kato: With the US-China trade war, structural problems and strategic competition between the two countries have surfaced. There has been a tit-for-tat escalation of tariff action. In your 1979 book Japan as No. 1: Lessons for America, one of the topics you explore is US-Japan trade friction at the time. What are the differences between the current US-China trade war and the one between the US and Japan? Are there any lessons that apply?
Vogel: The relationship between the US and China differs from that between the US and Japan during the Cold War. The US and Japan were allies, while the US and China are competitive. That's why any easy comparison should be avoided. But there are three perspectives from which China today could learn from Japan at the time, the lessons Japan learned from facing the US.
First, Japanese companies, including Toyota and Nissan, moved their production plants to the US. Since then, Japanese factories have been found in almost all the US states. They made great efforts to take root in the regions, established good relationships with local communities, and worked to integrate with them.
Let me share two examples. Honda established its first factory in Marysville, Ohio, less than 20 miles from my home town. I have visited their factory several times. The Japanese have done an excellent job as citizens of the local community. I also know [the Japanese zipper, hardware and machinery company] YKK which built a factory in Georgia. President Jimmy Carter [whose home state is Georgia] and the YKK president were very close. I met the president of YKK in 1979 and then got to know his son, who was his successor. YKK has built deep connections with American political leaders through its business in Georgia.
Here's another episode from when I was an official in Washington. When the Japanese emperor visited the United States in 1994, President Bill Clinton hosted a welcome party, which I attended with my wife. About 140 to 150 people attended. There were three Japanese people there. Everyone came from [Clinton’s home state of] Arkansas. They were businessmen of Japanese companies which had factories in the state.
Those Japanese companies in Arkansas maintained close contact with President Clinton, who was twice elected governor of the state. These Japanese businessmen contributed to the local economy and the livelihoods of citizens in Arkansas. So, President Clinton cherished these relationships and invited those businesspeople to the banquet. Such efforts by Japanese companies and their exchanges with US politicians, societies, localities and citizens are noteworthy.
When I went to Nebraska to give a lecture, there was a Kawasaki Heavy Industries factory. When I visited Indiana, people talked about Subaru. In Kentucky, they talk of Toyota. Over time, Japanese companies have become deeply rooted in many parts of the United States.
By contrast, there are almost no Chinese companies that have done this in the US today. Of course, this is understandable since China's industrial power has not developed as much, and Chinese companies today may not yet be as outstanding in technology compared to American companies as Japanese companies were at the time. However, if China wants stable economic and trade relations with the US in the long run, it would be important for Chinese companies to build deep relationships and friendships with local politicians, civil society and the general public.
Second, the Japanese government and Japanese businesses did have protectionist policies at the time, but they generally operated within a legal framework at home and abroad. The Japanese government did take measures to protect its home market, industries and goods especially when they were just beginning to develop. The US was unhappy with them. However, the policies and measures that Japan had taken were generally not against the law. The Chinese government and companies should learn from this. Whether Chinese companies are to enter the US market or foreign companies are to enter the Chinese market, the Chinese government should follow legal procedures, particularly in the field of intellectual property rights, and treat foreign companies fairly.
Third, Chinese officials have made it difficult for foreign companies once Chinese companies have learned the foreign technology. Previously, China was eager to attract foreign investment to boost economic growth. However, since China has grown, improved its technology, and become more confident, it feels less need to gain the cooperation of foreign companies. The situation and circumstances of China today and Japan at that time are not necessarily comparable. But China should continue to provide fair opportunities for foreign companies in a legitimate manner. China should not do anything to expel foreign companies but rather take positive measures to keep them in the Chinese market.
Kato: The trade war is more than about trade and economics. This is a strategic competition for national power and pride, a contest between political systems and development models. The US is more and more wary about China’s technological advancement and Beijing’s industrial policy and subsidies for companies. The charging of the Huawei CFO, which led to her arrest in Canada, may be viewed in this context. How do you assess the policies and responses of the two leaders and governments? Is there any room to adjust their policies and tactics to maintain a relatively stable bilateral relationship rather enter a long period of strategic competition?
Vogel: Trade friction between the US and China has developed into a trade war, and each country has repeatedly imposed tariffs on the other. In addition, the US government has subjected private companies such as Huawei, China's largest telecom company, to export controls. China has shown little willingness to compromise with the US. There are concerns about a series of retaliations against US companies. Unlike Japan and the US during the Cold War, there are also security conflicts and contradictions between the US and China today.
China has been ready to retaliate against American trade reactions, but in general it has avoided escalating the conflict to a higher stage. The Chinese are consistent in taking an “eye-for-an-eye” approach, that is, applying the same size and degree of retaliation to US sanctions on Chinese companies and products. The decision not to buy US soybeans and airplanes is an example of how Chinese leaders try to match US sanctions but not escalate beyond that level.
If I were a Chinese leader, I would have responded to Trump’s pressures with the same approach as they did, although I would have tried harder to make sure that Chinese companies were not disobeying rules about the protection of intellectual property. Foreign companies should be treated fairly in the Chinese market. China should not create an environment from which US companies want to withdraw.
Even in the Xi Jinping era China is still trying to resolve problems through negotiations. Trump, however, is a single-minded bargainer, constantly pressing China to compromise. Obviously, trade imbalances are determined by economic circumstances. Chinese goods are cheap, and US consumers want to buy them. Ignoring this point and trying to force concessions by political manipulation creates difficult problems for the international trading system.
Kato: Are you worried that the US-China dispute could widen from trade to security issues, particularly Taiwan? Could Trump move on from dealing with trade to focusing on Taiwan?
Vogel: I do worry about it. If the trade war escalates, this may spark structural contradictions between the US and China. First is the security problem surrounding Taiwan. If Trump uses the Taiwan issue as a transaction card, for example, sending a high official such as John Bolton, his national security advisor, to Taipei, then the Taiwan Strait becomes dangerous. In the worst case, the US and China could have a military confrontation. The risks are undeniable.
I am concerned that Trump, John Bolton, [trade and manufacturing policy adviser] Peter Navarro, and other unskilled people who do not understand the situation may destabilize the US-China relationship. Of course, there are also people on the US side, such as former secretary of defense James Mathis, who believe that the US and China should not change from having a competitive relationship to a hostile one. It would be nice for the US and China to compete but not to be hostile towards each other. They are rivals, but they should not be enemies.
Fortunately, there are some people in both governments who analyze and understand the bilateral relationship accurately. I do hope that the top leaders, who have less knowledge about the issues, will listen to these experts.
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