How should Israel navigate the US-China rivalry?

Bayport, as it is known, is a marvel of productivity. It is sited north of Haifa Port, which has for decades been a cesspool of featherbedding, strikes, delays, long queues of ships awaiting unloading, and bad labor practices. Haifa Port has now been privatized, sold to Adani Ports of India and Gadot, an Israeli logistics firm, for 4.1 billion shekels ($1. 245 b.)

In contrast to Haifa Port, the new Bayport terminal is highly automated, and will employ only 100 people. It will handle 800,000 container movements yearly, with planned future expansions to add an additional 700,000. It cost $1.7 billion (5.6 billion shekels).

Ashdod’s South Port container terminal is currently under construction. It too was built by China – China Harbor Construction firm – and its Quay 21 was completed in February.

The new terminal has caused me to ponder my frequent trips to my office at Technion from Zichron Ya’acov. My route takes me through the Carmel Tunnels, under Mount Carmel, which opened to traffic in December 2010. The tunnels were bored by China Civil Engineering Construction Corporation, on budget and on time, and they save me time and traffic jams. There are two sets of twin tunnels; the east tunnels are 3.6 km. (2.2 miles) long and the west tunnels 1.8 km. (1.1 mile).

In just a few years, China has become the world’s premier infrastructure expert, using modern technology, diligent workers, deep pockets and skilled engineers. But there is a fly in the ointment. China leveraged its own huge domestic infrastructure projects to create a superior competitive advantage globally, and geopolitical advantage, notably in its ambitious Belt and Road projects, a revival of the ancient Silk Road.

It was Napoleon who two centuries ago famously observed, “China is a sleeping giant, let her sleep, for when she wakes, she will shake the world.”

China has indeed awakened, and its rivalry with the US is rapidly heating up. For Israel, stuck between these two giants, this creates a tough dilemma. When these two elephants rumble, the mice at their feet face danger. My Neaman Institute colleague, Dr. Gilead Fortuna, has initiated a research project, in which I will participate, to explore more deeply this dynamic, evolving relationship.

Truthfully, the US-China conflict was inevitable. The honeymoon had to end. American consumers benefited massively from offshoring low-cost manufacturing to efficient Chinese plants. Israel has received substantial Chinese investments. (See Box).

In June 2017 ChemChina acquired the remaining shares of Adama (formerly Makhteshim Agan); Adama now trades on the Shenzhen Stock Exchange. Adama produces agrochemicals and has proved a highly successful acquisition for ChemChina, with annual sales of $4 billion.

In contrast, in May 2014, a controlling interest in Tnuva (originally, a kibbutz cooperative for marketing farm products, formed in 1926) was bought by the Chinese firm Bright Foods. The company paid $2.5 billion for a 56% holding, purchasing the shares from Apax and other investors. This acquisition has not proved profitable for Bright Foods, and, it emerges, Tnuva was highly overvalued.

China has also invested in Oramed (pharmaceuticals), Ahava (skincare), Innoviz (sensors) and others. However, Chinese investments in Israel in total remain only a small fraction of those from US and Europe

Israel’s trade with China is decidedly unbalanced. In 2021 Israel exported $4.4 billion to China, while imports from China totaled $16.6 billion.

But with China’s increasingly autocratic leader about to win a third term, and the inevitable clash of interests and values, Israel faces a major challenge: how to navigate the rough waters between the US, a vital ally, and China, a rising economic and military superpower.

When Bayport opened, Dan Catarivas, a senior official with the Manufacturers’ Association, told Times of Israel that the “US-China rivalry is here to stay and will accompany us for many years.”

Bilahari was director-general of Singapore’s Foreign Ministry, with vast experience in navigating his little city-state in the turbulent waters of Asia and the world.

Here are his key points of advice for Israel, of which he is highly knowledgeable and very fond:

“First of all, while recognizing the dangers, don’t be paralyzed by the risks: a sense of fatalism is fatal to small states. This ought to come naturally to Israelis, but I’m constantly puzzled that it doesn’t – or at least it doesn’t come naturally to enough Israelis, particularly your politicians whose instincts are clouded by greed, and whose view of China is obscured by dollar signs.”

Bilahari continues:

With the fall of the Berlin Wall on November 9, 1989, a global economy arose, with free flow of goods, services, labor, capital and technology. China benefited enormously, doubled its economy four times, and pulled other nations along with it.

“China remains a key component of this global system. It is not at all like the US-Soviet Cold War – US, China and Europe are bound by an umbilical cord through trade and investment. All have much to lose through conflict.”

Finally, Bilahari notes that ‘either-or’ (either US or China) need not be the case.

“Third, in complexity there is agency: there is always something that can be done, and our choices are not always only binary – there is absolutely no need to neatly line up all your interests across all domains in one direction or another. Neither China nor the US is going to like this, but we are not put on earth to bring joy to either American or Chinese hearts. Of course, I do not mean by this that we should go around poking either of them in the eye. But the diplomatic art is to judge how far we can go without angering either so much as to irrevocably damage relations with either.

“Don’t forget that while China’s rise is a geopolitical fact of great significance that cannot be ignored, China is not an invincible juggernaut, and faces serious structural issues. In other words, it is a country like any other with its own strengths and weaknesses.”

“Peaceful reunification can only be achieved through consultation and discussion as equals. The long-standing political differences between the two sides are the fundamental obstacles to the steady improvement of cross-straits relations,” the White Paper states. So far, so good.

It continues: “... but we should not allow this problem to be passed down from one generation to the next.” This is somewhat alarming. It puts a time limit on China’s goal to annex Taiwan. And China’s military is formidable.

One final key observation by Bilahari Kausikan:

“One last point, which is the summation of the three: when we say ‘we don’t want to have to choose’ between the US and China, what we really mean is that we have already chosen in favor of our own interests. Sometimes that may appear to tilt us in one direction or another, but that is only appearance – it is still our own interests. Important as the US is to Israel (or to Singapore), I don’t think either Israel or Singapore has ever expected the US to shed blood for us – but only to sell us the weapons so that we can maintain a technological edge and defend ourselves. China certainly won’t. No great external power is to be relied on. Southeast Asia understood this half a century ago because of the Vietnam War.

“For many countries in the Middle East – Israel included, although to a much lesser degree than your Arab neighbors – that’s a hard conclusion to accept. For many years, your essential strategic posture has been to identify the strongest external power and cling to it. But we are now entering an age when no great external power is going to have either the will or the capability to intervene in regions – unless its own existential interests are at stake. Hence regions have to rely more on themselves – that’s the larger meaning of the Abraham Accords in the Middle East.

“You are on your own, babe!”

I do know that Kausikan was eminently skilled at strategizing “how far (Singapore) can go” for years. But I am not certain Israel has the diplomatic savvy to do the same. And his last words echo strongly.

We are indeed on our own.

Postscript: Writing for the Axios website on August 17, Barak Ravid reported that a top Chinese diplomat warned Israel “not to allow US pressure to damage Israel’s relations with Beijing.” Ravid notes this was “the most unequivocal and direct message Israel has received from Beijing, about the US-Israel-China triangle.” ■