Economic Interrelatedness


In a separate post, I’ve outlined the amazing growth of the Chinese economy. In this post, I’ll highlight it’s resultant impact on the region and the world. To the left is a fantastic image pulled, I think, from a Wall Street Journal article from last month. It depicts the relative level of trading between China an eleven of the G20 nations. Between 2000 and 2010, China has grown to become the top trading partner of 6 G20 nations,
and the second trading partner of another 5 (including the United States). That’s quite a shift. Especially when one looks at India and South Africa (10th to 1st), and Russia (6th to 1st), and Brazil (10th to 2nd). That carries with it a considerable amount of leverage, that, I think, even the Chinese are just beginning to comprehend. In Chairman Mao’s era, it seems that China often sought to export ideology in the Asia-Pacific; now, China is moving economic goods much more successfully.

When one looks at the above image, it’s clear to see there’s a cluster at the far left that has something in common…they all have security guarantees with the United States. In fact, the US has 5 of it’s 7 total Mutual Security Treaties in the PACOM AOR:

Japan – security treaty with US in 1951/1960 – #1 trading partners with China.
South Korea – security treaty with US in 1953 – #1 trading partners with China.
Australia – security treaty with US in 1952 – #1 trading partners with China.
Philippines – security treaty with US in 1951 – #2 trading partners with China.
Thailand – security treaty with US in 1954 – #2 trading partners with China.

Wow. All the countries in the famed, San Francisco/Hub and Spoke system have significant economic relationships with the People’s Republic of China. Even Taiwan, with the ambiguous security guarantee the US has provided…their largest trading partner is the mainland!

What does this mean for the United States? Really, there are two answers to this question, two wrinkles – it can be answered for our own relationship with the Chinese, but also how we act vis-a-vis our allies and partners in the region.

First, for our own relationship with the Chinese: they are now our second largest trading partner, and hold, according to the US Treasury, $1.14T of US debt (out of roughly $14T). Although that does not in and of itself provide the mutually assured economic destruction that would completely preclude military confrontation, it certainly makes military conflict harder (in that both economies would suffer greatly). The economic reality is that we are good business partners; the relationship is beneficial for both parties. The way that the US has, in the past, looked away from the ways in which the Saudi’s differ from American values…seems to apply to the Chinese (even more so considering the depths to which trade has expanded). That doesn’t mean that the US cannot and should not, from time to time, speak up…but the volume will have to get lower the more the economic relationship grows in size and importance.

Second, our relationship with our security allies in the region. This debate is going strong in Australia right now (see the Lowy Institute debates and Hugh White’s Quarterly Essay), and is certainly an issue in Tokyo and, to a lesser extent, Seoul and Taipei. While it’s not clear to me yet what should be done (which means muddling through for the time being), there is clarity on what should not be done. The US should avoid, at all costs, forcing choice on our allies in the Asia-Pacific region between the US and China. It would be detrimental to our individual relationship with China as well as our relationship with our allies. Frankly, from what I’ve read and understand, this is what our allies fear the most and seek to avoid.

Author: ML Cavanaugh

Unequal parts strategist, assistant professor, wordsmith, runner, wine-o, reader, philosopher of firepower, and hopeless lover of three ladies named Rachel, Grace, and Georgie.

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