6 A POLITICAL-GEOGRAPHY FORECAST OF THE US-CHINA

TRADE WAR

The Covid-19 virus has accelerated existing trends in the landscape of world trade and investment. The outcome is greater geographic separation in a world that was already trending towards fragmentation. The global production chain is divided into three major production systems: North America, Europe and East Asia. The value of US-China trade has decreased, and the US has been replaced by the Association of Southeast Asian Nations (ASEAN) as China’s No.1 trading partner. As noted above, the processes of re-defining the post – World War Two global trade regime are likely to be protracted. However, the disruption to economic activity from Covid-19 has pushed the world-economy to the edge of global economic depression as witnessed in 1930s. As the paired Kondratieff cycle and hegemonic cycle model tells us, economic depression accelerates hegemonic decline, and ushers in a period of restructuring and transition. Therefore, our forecast is that the US-China ‘trade war’ will not stop, and will be an ongoing component of the restructuring of the global geopolitical order.

For China, the period from the ninetieth Party Congress (2017) to the twentieth Party Congress (2022) was a historical convergence that realized ‘Two Centenary Goals’ – the first one hundred years refers to 2021, the 100th anniversary of the founding of Chinese Communist Party, and the second 100 years refers to 2049, the 100th anniversary of the founding of PRC. It can be seen that in the current and future historical period, China needs to cope with the transition period defined by declining US hegemony. China is deeply thinking and actively planning the ‘Two Centenary Goals’. The US is also thinking deeply and actively planning a major historical juncture so as to become ‘great again’ in 2026, the 250th anniversary of its founding. The US-China ‘trade war’ has broken in such a historical context. How the two great powers choose to act will have a significant bearing upon world peace and human well-being.

Thinking about these major long-term issues and whither the current USChina ‘trade war’, we need to have a prescient judgment on the general trend, which is defined by global economic and hegemonic cycles. Although it is still controversial whether there is a definite linkage between the economic and hegemonic cycles, we tend to believe that the global economic cycle significantly affects the rise and fall of great powers (including hegemons). The key to judging the hegemonic cycle is how many long economic cycles the hegemon has experienced. A hegemonic power is most likely exhausted after experiencing three long economic cycles. From the history of British hegemony, after the second long cycle, the decline of hegemony has already appeared. By the third long cycle, thetrend has become very obvious. The US hegemony has gone through two long cycles and is currently in the third one.

Here we have two interpretations resulting from the different interpretations of the timing of the current Kondratieff wave. Flint and Taylor’s (2018) interpretation identifies an A-phase starting around 2005/2008 and continuing to date. However, a transition to a B-phase is expected and perhaps the disruption to economic activity caused by Coronavirus disease 2019 (COVID-19) will act as a catalyst to global economic stagnation and restructuring. Global growth rates have been somewhat similar in comparing the period from 1980 through 2005 and post-2005 to present. However, growth rates in what the International Monetary Fund (IMF) identify as emerging markets and developing countries are consistently higher from around 2003 to 2013 than prior to 2003, and have remained slightly above pre-2003 rates in the past six years. Annual Gross Domestic Product (GDP) growth rates for the IMF’s advanced economies paint a murkier picture as it is hard to discern a clear pattern of periods of higher and lower growth from 1980–2019. The case of China itself is also of interest. Compared to the rest of the world it has experienced very high annual GDP growth from 1980 to the present day, but its growth rate has declined in the past eight years. It is erroneous to identify the timing of Kondratieff waves through the economic trajectory of just one country. Instead, we can interpret China’s impressive economic growth over the past B-phase and in to the current A-phase as a successful strategy of maneuver within the world-economy that took advantage of global economic restructuring in Kondratieff IV B, and has maintained that growth in Kondratieff V A through seeking new core processes (Flint and Dezzani, 2018).

For Zhang Xiaotong and other Chinese scholars, the third Kondratieff cycle of US hegemony ends in 2025/30 (Figure 1). Their argument is based upon moderate economic growth and the absence of significant growth in wages in many countries. Hence, there is valuable discussion of whether the classification of the contemporary temporal context as a B-phase by Chinese scholars is valid (Yao et al, 2016; Chinese Academy of Governance, 2017). It should be emphasized here, though, that A and B-phases are defined at the scale of the capitalist worldeconomy. Hence, we would expect some countries to be experiencing relatively lower rates of growth, or even stagnation, even though the aggregate level of global growth reflects an A-phase. Despite the disagreements on whether we are currently living through a Kondratieff A or B-phase, both interpretations agree that 2025/2030 is a critical juncture since it marks a geopolitical transition and a shift in geopolitical order.

We tend to believe that the US-China trade war will last until the critical juncture of 2025/30. From now till then, the biggest risk of US-China ‘trade war’is driven by the political-geographic idea of ‘capture’, that could provoke both the ‘Kindleberger Trap’ (Nye 2017) and the ‘Thucydides’ Trap’ (Allison 2017). The competition over the ‘capture’ of new core processes has led to policy changes in both the US and China. President Trump has vowed to bring manufacturing jobs back to the US, and his victory in the 2016 election was a result of gaining support in parts of the country that had experienced loss in manufacturing jobs. However, it is still to be seen whether if such jobs are created they are based within new emerging core sectors, or are past wave of core jobs, now being peripheralized. In conjunction with this call for manufacturing investment, the US economy still hosts significant global sites of cutting-edge economic activity (such as Silicon Valley) and uses its military budget to promote innovation (Scharre and Horowitz 2018). In turn, China’s policies, especially Made in China 2025, and its policies towards technology transfer for foreign companies are aimed at making Chinese cities the location of emerging core processes.

The US and Chinese economic policy initiatives are responses to the emergence of new core processes in the world-economy and the realization that economic growth and relative strength will depend upon capturing these processes within cities and regional agglomerations. It is such competition that has manifested itself in the language and practices of a ‘trade war’. One such manifestation is the question of whether existing trade institutions and regimes are ‘fair’, meaning do they advance the interests of one’s country. Hence, competition between the US and China involves questions of whether existing economic institutional arrangements to manage the world-economy can remain in place, or whether new ones will be formed. Interestingly, the challenge to existing institutions of global management comes from the US; the country that made them a key act of becoming the hegemonic power. China is supportive of existing institutions as it values them in its pathway of economic growth and international engagement.

The varying attitudes towards global economic institutions is an early sign of the processes of the Kindelberger trap (Nye 2017). If President Trump’s words and actions renouncing some rules and norms of the post-World War Two economic order are sustained and become realized, then the US would have prematurely renounced the leadership of the free international trade order, unwilling to bear its economic and political costs. If China, or any other country or multi-national group, would then be unwilling or unable to take the reins then the worldeconomy would be in a state of having no leader. The potential implications of this situation include the emergence of multiple trade groups and security communities, who compete and fight among themselves. The geo-economic competition might finally spill over to geopolitical conflicts.

Among these potential trade groups, it is likely that China will be excluded from a US-led transatlantic trading group, and the Pacific Rim trading group,while China would build its own trading and security groups. The initial stepping stones down such pathways have already been put in place. China and the US might face the extreme situation of ‘economic decoupling’, which may lead to a new Cold War. Under the pressure of the decline of its hegemony, the US may choose to create a ‘Coalition of the Willing’ in the field of trade, and exclude China. At that time, parallel competition in the economic field or an ‘economic cold war’ may occur. China is not going to replace the US as a new hegemon, or assume the economic primacy in the near future. China’s GDP accounts for two thirds of American one and its GDP per capita is much lower. In the meanwhile, China’s economy is more dependent on the US than American dependence on China. What is in China’s interest is to work with the US and other trading nations to maintain the current free trade order. This also means that China does not want to see the rapid decline of US hegemony. China would prefer the decline to be a slow and gradual and historical process. Hopefully, this process will be as smooth and safe as possible, just like a safe airplane landing.

Finally, a discussion of possibilities of the on-going trade war must include the frightening possibility of warfare, or the triggering of the Thucydides trap (Allison 2017). The South China Sea has been identified as the most likely venue for hostilities between China and the US, and their allies (Medcalf 2020). The South China Sea is part of the vital maritime trade networks that enable the flows of the world-economy (Rumley et al. 2016; Medcalf 2020). China has transformed the landscape by controlling disputed territory, making islands out of reefs, and fortifying them (Biddle and Oelrich 2016; Medcalf 2020). The US has responded through Freedom of Navigation Exercises to create a counter-claim that what China claims are national waters remain international. Using the pre-modern world as analogy, and using the restricted logic of realism, it has been claimed that we are approaching the moment of the ‘Thucydides trap’ in which a declining hegemon and a growing power will inevitably come to war (Allison 2017).

The world-systems approach does not deny the possibility of war. Indeed, the hegemonic cycle model identifies wars as crucial mechanisms in the process through which one state has become hegemonic (Flint and Taylor 2018; Goldstein 1988). But the mechanism is not as simple as the Thucydides trap in two ways. First, as noted above, the global wars that have ushered in a period of hegemony have been fought against attempts to create a world-empire (Wallerstein 1984). There is no evidence of any political entity trying to create a contemporary world-empire, with the possible exception of the Islamic State. Second, historic comparison suggests that any challenger to an existing hegemony ends up on the losing side of a conflict against an awesome coalition led by the declining hegemonic power (Arrighi 1990). The ‘united nations’ was a coalition that Great Britain needed to be formed to fight the Axis powers, and in the process thatcoalition asserted a new vision of the world in opposition to Britain’s desire to retain its empire and enabled the US’s rise to hegemony. Hence, a conflict in the South China Sea would run counter to a realist calculation by China, because it would pit itself against a much more powerful alliance and the cost-benefit analysis would not favour a decision to wage war (Medcalf 2020).

That does not mean a conflict in the South China Sea is not possible. It does mean that the causal processes driving the world to such a conflict are different to those identified as the Thucydides trap (Allison 2017). The ideological power of hegemony, or the Gramscian notion of hegemony that underpins the worldsystems political-economy conceptualization of hegemony, rests on the idea that its prime modernity is universal: It is applicable to the whole world, and the whole world wants to adopt it (Taylor, 1999). The ideological power of the world’s hegemony rests on the process of emulation as previous foes – such as Japan and Germany in the case of the US – adopt the basic principles of democracy and participation in a liberal world order. Yet, ideological power is never enough as hegemony is always contested to some degree or other. In the case of the United States, the ideology of communism, in its Soviet and Sino guises, was an immediate and significant ideological challenge. Ideological challenge manifested in to the political and military confrontation of the Cold War. The result was that the process of US military expansion across the Atlantic and Pacific oceans that was enhanced by the World War Two was made permanent in both the eastern and western hemispheres in the name of defending and expanding the geographical reach of the prime modernity.

The South China Sea is a potential arena for US-China conflict because China’s island-building counters the US’s militarization of the same part of the world during, and in the wake of, World War Two. The Chinese policy of ‘area denial’ is a geographic challenge to the military reach of the US, and is related to the decline of its institutional and ideological influence in the region (Biddle and Oelrich 2016). China is challenging the long-taken-for-granted universalism of the US, and the US finds it hard to see a new ‘common sense’.

China’s acts in the South China Sea is not simply defensive. The process of hegemony, so dependent upon becoming dominant in global trade and securing sea-lines of communication, has included a step-by-step policy of establishing maritime power. Admiral Alfred Thayer Mahan (1892), a hybrid theoretician and practitioner, recognized this process clearly (Doyle 2017). Securing the ‘near waters’ of the Caribbean, the Gulf of Mexico, and the Pacific seaboard was the necessary first step in enabling post-World War Two global naval power. Securing near waters diminished the ability of the existing hegemonic power, Great Britain, to set an agenda just over the horizon of the US coastline. Once control had been achieved the new secure context enabled naval resources to focus on power projection. China’s activity in the South China Sea can be seen as the contemporary manifestation of reducing the reach of the existing hegemonic power and providing a foundation for future naval power projection (Medcalf, 2020; Wirth 2019).

As with past hegemonic powers such naval power projection has gone handin-hand with creating new ‘spatial fixes’ across the world that have formed global production networks designed to promote the expansion of new core economic processes within the hegemon’s national borders (Harvey 1982; Yeung 2016). Capturing new core processes requires creating a global network of inter-connected ‘spatial fixes’ that, in turn, must be securitized (Flint and Zhu 2019). In the past, the outcome has been troops stationed abroad or sent as ‘expeditionary forces’ that have required naval power projection to get them there and support them, while also protecting sea lines of communication that underpin the trade networks exporting the manufactured products of new core economic processes. At the same time, the declining hegemonic power has failed to come to terms with its declining economic prowess and political/ideological influence and has been drawn in to war.

7 CONCLUSION

The ‘trade war’ between the US and China is, in fact, a global competition between states, but with firms as key actors, to capture emerging core processes in the capitalist world-economy. The capturing of new core processes will lead to growth of new urban and regional landscapes, that will have an impact on the cohesiveness of countries. New core processes require a global network of trade flows to sell new products and create a supply-chain that feeds the final high-value added manufacturing processes. The US and China are engaging in competitive R&D, the protection and violation of intellectual property rights, and the formation of new trade relationships, to drive forward the formation of new core economic processes. These new relationships come under the representational guise of ‘development’ and the material practices of foreign direct investment, building infrastructure, and establishing new multi-lateral institutions: Hence the emergence of the AIIB and the Shanghai Cooperation Organization (SCO), and phrases such as ‘south-south cooperation’. The geopolitics of creating new ‘spatial fixes’ as nodes in new networks of economic production and trade require new geopolitical arrangements of security; especially the control of sea lanes of communication (Flint and Zhu 2019; Harvey 1982; Yeubg 2016; Medcalf 2020; Rumley et al. 2016). This is likely to provoke serious military tensions between the US and China as the former’s geographic scope of military and politicalinfluence shrinks and the latter tries to establish control of its ‘near waters’ in twin defensive and future power projection strategies.

The US-China ‘trade war’ is driven by competition for new core economic processes, and the building of networks to produce and sell new products. The weapons include Foreign Direct Investment (FDI) to construct a new global infrastructure (the Belt and Road Initiative (BRI)), and the financial and security institutions to build and protect it. The competition also requires competing representations of new modernities to get others to buy-in to new economic relations. The economic competition feeds in to logics of power projection and security. Building a new generation of AI robots could lead to future human generations fighting on battlefields that whether portrayed as ‘modern’ or ‘smart’ will still result in a historically familiar scene of mothers and fathers burying sons and daughters.