3 THREE MISNOMERS
There exist three misnomers about the US-China trade war: one is ‘trade war’, the second is ‘US-China’, and the third is seeing the trade war as a war between unitary state actors.
The idea of a ‘trade war’ distracts attention from underlying economic processes that are antecedent to policies and tension over trade. Furthermore, theterm ‘war’ leads us to think the current situation is episodic and unusual, rather than an expected and historic process of economic decline and competition driven by hegemonic decline and economic innovation (Flint and Taylor 2018, pages 57–59). More accurately the ‘trade war’ is over the geographic capture of new core processes and the construction, maintenance, and securitization of the flows that will sustain new city-based spatial fixes (Flint and Zhu 2019; Harvey 1982; Yeung 2016). The policy of ‘Made in China 2025’ is the most visible opening gambit in this conflict, though it is just one moment in the much longer process of the peripheralization of the previous round of new core processes, and China’s internal economic re-organization and the initiation of the ‘Going Out’ strategy (Yeh and Wharton 2016). The conflict is over who will capture new core processes.
The second misnomer, is the construction of the issue as a bi-lateral, USChina, relationship. Instead, the correct unit of analysis is the social system of the capitalist world-economy (Wallerstein 1979 and 1984). The key transformations that are driving US-China tensions are occurring within the worldeconomy as new forms of economic activity are emerging and existing ones are being peripheralized. In sum, new economic geographies and forms of connectivity are being made (Yeung 2016). All countries in the world are involved as complex webs of investment, trade, and migration are created. In their mutual engagement, the US and China are operating within, and trying to create, contexts of regional cooperation (Medcalf, 2020) and economic connectivity (Flint and Zhu, 2019) within the hierarchical arrangements of the world-economy (Wallerstein 1979). Though the US-China relationship may be the most significant bi-lateral relationship in today’s world, the relationship is formed through myriad relations, both economic and political, with other countries and global businesses.
A third way in which the US-China war is a misnomer lies in our ‘geopolitical imagination’ of countries as unitary and homogenous actors (Agnew 1984 and 2003). Instead, and by focusing on economic processes and their intra-state spatial fixes, we can identify the current economic flux as one being driven by and affecting cities, provinces and regions within all countries of the world (Harvey 1982). In other words, the geography of winners and losers in this ‘trade war’ should be addressed at a lower scale than that of the nation-state.
Identifying these three misnomers allows us to shift the analysis away from the processes and actors identified in the dominant Thucydides and Kindleberger traps (Allison 2017; Nye 2017). Instead of prioritizing military capacity and bi-lateral inter-state relations, we can identify the current politics of trade as a product of the temporal shifts in production and trade that are conceptualized as the interaction between economic and hegemonic cycles.
4 FROM ‘TRAP’ TO ‘CAPTURE’: A POLITICAL-GEOGRAPHY
EXPLANATION OF HEGEMONIC CYCLES
The ‘trade war’ is a a moment in the trajectory of US hegemony that can be explained by the political economy approach of world-systems analysis. The central contribution is theorizing the connection between the economic processes of Kondratieff cycles and the rise and fall of great powers or hegemony. Kondratieff waves are driven by the emergence of new core processes and the broad social changes they create (Flint and Taylor 2018, pages 22–25). Core processes are new forms of economic activity that produce high value goods and services, high profit, and are related to high salaries and consumption patterns (Flint and Taylor 2018, pages 20–21). The geography of where these new core processes emerge and are enacted is the basis for competition between states. To enhance their position in the hierarchy of the world – economy, states try to ‘capture’ core processes within their boundaries (Flint and Dezzani, 2018). They do so by enacting policies such as government investment in R&D, which often involves industrial espionage.
Our theoretical framework identifies the beginning of the twentieth century as a historical moment in which industrial innovations in Germany and the United States led to their growing political power. The framework suggests we are now in a similar historical context. The trade tensions between the United States and China are a manifestation of the competition over the control of all facets of the emerging core processes, such as artificial intelligence (AI) technology. Mining rare earth minerals, computer chip manufacturing, and patents for new apps are all parts of this competition. In the past, the new hegemonic power has been the country that has most effectively captured the high value end of emerging technologies (Arrighi 1990). Only hindsight will allow us to see whether one country will capture the lion’s share of AI and other new technologies or whether a multi-polar scenario comes in to play.
The ‘trade war’ between China and the US is a moment in the the process of decline of US hegemony and the erosion of its ability to maintain a free trade order. The decline of US hegemony is closely related to the evolution of the economic cycles of the world economy which to a large extent, reveals the deep economic drivers for international politics and demonstrates the rhythm of the rise and fall of US hegemony (Flint and Taylor 2018, pages 54–56; Goldstein 1988). The long cycle of the world economy refers to the fluctuations of fifty to sixty years, divided into two phases of A (economic growth) and B (economic stagnation and restructuring), each of which is about twenty to thirty years in length. It was proposed by the former Soviet economist Nikolai Kondratieff, so it is also known as ‘Kondratieff Wave’. The reasonsfor this fluctuation are still controversial. According to Schumpeter, it is mainly innovation, including technological and institutional ones. Thus, it can be understood why Washington in particular dislikes ‘Made in China 2025’.
The paired-Kondratieff model of hegemony posits that the rise and fall of hegemonic powers spans a period of roughly 100 years, and can be explained by the processes of two consecutive Kondratieff waves (Flint and Taylor 2018, pages 54–56). For example, British hegemony began around 1780 (the first Industrial Revolution) and the period of decline was in the B-phase of Kondratieff II; though decline is not abrupt and the subsequent waves ae ones in which Britain tried to manage its post-hegemonic role (see Figure 1). The model is not deterministic. Hence, it remains to be seen how many K-waves the hegemony of the US will go through. But since the US grew into the world’s largest economy in the 1890s, the hegemony of the US has gone through two Kondratieff waves, and is now in the B-Phase of the third long wave (see Figure 1), i.e. the fifth phase of a K-wave. If the US follows the pattern of British hegemony then the interpretation is that US has already reached a point of decline, and we are witnessing processes in which its leadership is weak but no new hegemon has emerged (the manifestations of the Kindleberger Trap (Nye 2017)).
Figure 1 The Evolution of the Kondratieff Cycle and Hegemonic Cycle
The world-systems approach is a ‘broad brush’ approach that is designed to identify and explain large scale trends (Wallerstein 1983). This is especially true of Kondratieff waves that identify economic processes in a broad time frame and, most importantly, at the global scale. In the economic stagnation and restructuring phase of a Kondratieff wave some countries may experience growth as they take advantage of investment opportunities in a period of global economic shift. On the other hand, an A-phase means global growth in which most, but not all, countries will experience sustained economic growth. Perhaps it is for this reason that there is a difference of interpretation in the timing of Kondratieff waves between scholars, particularly the different timing proposed by Chinese scholars, which we discuss later.
The important driving force for the long-term changes in the world economy is technological innovation. In order to gain or maintain political primacy states compete fiercely around science and technology. The A-phase of a Kondratieff wave is driven by new products and production processes, that promise to be the most-profitable sector of the world-economy. In the preceding B-phase existing core processes are peripheralized. The new core processes are the ones in which the highest amount of value is added in the process, garnering the most profits, generating the highest rewards (including salary) for those employed in the sector, and consequently generating high levels of consumption. States try to ‘capture’ the production of these processes within their borders and minimize the ‘capture’ within other countries. Of course, such ‘capture’ is never total. The process also generates new ‘spatial fixes’ (Harvey); or the construction of new urban and regional landscapes that are the sites of new production processes (Yeung, 2016). New cities and regional clusters of innovation emerge, and this dynamic becomes an important part of intra-state economics and politics (Harvey 1982).
From the history of British and American hegemonies, the ‘capture’ of new core processes makes imperative the construction of an international free trade regime. The state, or states, that have captured new core processes want to benefit by being able to sell them as broadly and cheaply as possible, while also minimizing costs though tariff free importation of component parts (Taylor 1999). However, in turn this open system allows and encourages the flow of science and technology across borders. Therefore, other countries (labeled as ‘emerging’ in contemporary discourse) can try to implement a ‘catch-up strategy’. This strategy may involve attracting the previous round of core processes, and is unlikely to result in a dramatic rise up the hierarchy of the worldeconomy. An alternative strategy, and one being pursued by China and India is to try and capture new core processes in the hope of becoming one of the dominant powers in the world.
In the US, for example, the manufacturing industry formed during World War Two brought post-war prosperity to the country, creating high wages and high consumption. However, these core and high-end core processes are gradually shifting to the fringe. With the rise of the catching-ups and the Phase-B of the world economy entering into the recession, the loss of manufacturing cannot support the high-wage labor force, and thus cannot support high consumption. (Flint and Zhang, 2019)1 At the same time, some of the former periphery countries have gradually become emerging economies and rising powers, gaining new manufacturing, for example, Japan and Western Europe in the 1960s, China and India after the 1990s. The translocation of the core-periphery zones will inevitably bring about conflicts of interest and trigger a ‘trade war’.
