China and the U.S.: Competing corporates in the international arena

The US government may have its reasons to believe that global institutions and treaties aren’t always working for its benefit, and that some of them are in crucial need for change.

By ROTEM OREG
October 5, 2019 12:27
4 minute read.
China and United States flags

China and United States flags. (photo credit: REUTERS)

The “strategic competition” between the US and China is, among other aspects, an economic competition. Using concepts and methods from economics, we can depict the strategic competition as a struggle between corporations – and in order to win, the US must take back the lead in the international arena.

Think of a market, consisting of about 200 individuals. Most of them are consumers, but around 20 of them are producers, providing goods and services for the consumers in exchange for money. While most of the producers are local, with limited access to consumers beyond their immediate reach, two of them are giant corporations, reaching all possible consumers and struggling for market dominance.

Throughout time, the consumers understood that this was a troubling situation. The producers had an unfair advantage over the consumers, and this led to a structural change.

They created institutions and established norms that determine what individuals can and can’t do to one another. Some of the producers joined the effort and implemented regulations in order to maintain their advantage.

This same issue can be seen in the geopolitical realm, but with different names. Not consumers, but countries; not producers, but powers. Rather than providing goods and services in exchange for money -  assistance, protection and global leadership are exchanged for political support and access to markets. Instead of corporations, two superpowers, one existing and one emerging, competing for global hegemony.

In the seven decades since World War II, the US has been the leading country in creating a liberal, capitalistic world order based on global institutions, treaties and norms. This world order has encouraged international cooperation, reduced military tensions and expanded capitalism, thus ensuring that the US keeps its economic advantage. US President Donald Trump's administration is actively working against that world order. It sees institutions like the World Trade Organization (WTO) and treaties like the Trans-Pacific Partnership (TPP) as burdening regulators, working for small or developing countries at the expense of the US. That perspective leads to policy moves –  withdrawing from treaties, imposing tariffs, questioning the very need of those institutions and undermining them globally.

China, on the other hand, uses this to take the US’s place as the leading global economy, which can be best demonstrated by China’s economic activity. China is following the corporate play book for taking over a market.

First, China reads the change in demand and invests in the relevant sectors to ensure its dominance as a supplier in those sectors in the future (renewable energy is the best example).

Second, every industry has a specific kind of capital that those who own it enjoy improved manufacturing capabilities and enormous revenues. In a globalized world, a world that counts on the free and fast flow of goods and information, this capital consists of physical and communication infrastructure. The Chinese government invests tremendous amounts of money to ensure its grip on those, with the ambitious Belt and Road Initiative and the aggressive expansion of the tech-giant Huawei (including in strategic US allies, like South Korea and Germany) being the notable examples, eroding US dominance in transportation and telecommunication.

Third, like every expansionist corporation, China doesn’t limit its activity to the economic realm, and simultaneously invests in the regulators. China is pursuing a structural change in global institutions so they will “appropriately represent” China – representation China believes it deserves due to its economic capabilities. Besides, Beijing is investing money and manpower in order to be represented in those institutions, while also creating “competing” financial institutions, like the Asian Infrastructure Investment Bank (AIIB), with “Chinese characteristics” (and Chinese control).

Eventually, and from a US-perspective most alarmingly, is China’s spreading reach to new countries, including those within with the US orbit. From slightly growing political involvement in regional conflicts to taking the lead on climate change, China is positioning itself as an alternative beacon to the US, providing an alternative model of government to the liberal world order.

The US government may have its reasons to believe that global institutions and treaties aren’t always working for its benefit, and that some of them are in crucial need for change. But a continuation of this non-engaging policy creates a vacuum, which China will take advantage of so it can continue its global spread and build the international architecture to its liking – probably at the expense of liberal and democratic values. A massive change of the institutions and norms of the global economy, for the benefit of China and without American countermeasures to balance it, will replace the free market in which powers are competing for influence and resources with a different model – a model that works pretty well for the corporations and not so well for everyone else: a monopoly.

The writer is a student in the Philosophy, Politics, and Economics (PPE) program at the Hebrew University of Jerusalem. He is also a reservist in the IDF Intelligence Corps and the author of the 2016 Hebrew novel Lion Heart.


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