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US and China Bound by a Shared Fate

David Shorr
June 12, 2012
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Paraphrasing what existentialist philosopher Albert Camus said about suicide, most of the serious problems of contemporary world affairs are questions about interdependence. By now the realities of globalization are familiar to people throughout the world who are no longer surprised by the links and networks that connect them. Yet governments have struggled to come to grips with these changes.
 
If nations are truly bound together by a shared fate—for better or worse, richer or poorer—that must affect the conduct of statecraft. If broader global conditions inevitably hit nations’ own home fronts, the line between national interests and world community interests begins to blur. The international agenda is packed with issues demanding these kinds of adjustments. The challenge of attending to the greater global good is prevalent in US-Chinese relations and especially the G-20, where many of the key issues in the relationship are dealt with and which met in Los Cabos, Mexico on June 18-19.
 
At a recent speaking engagement in Central Illinois, one PowerPoint slide made an impression with many in the audience. The chart of GDP growth before, during, and after the 2008 downturn is a stark illustration of economic interdependence. In all three phases, the graphs of emerging and advanced economies move in close parallel, refuting any notion that Chinese prosperity comes at the expense of America’s or vice versa.

The chart also serves as a good representation of the G-20 agenda. Then-President George W. Bush invited his counterparts to the G-20’s first summit-level meeting when the GDP graph was on a steep decline. The G-20 leaders’ great accomplishment was to halt the economic freefall with a package of coordinated budgetary stimulus and the provision of emergency financing for the IMF. Since that dramatic moment of near-total financial collapse, the G-20 has been juggling important short- and longer-term agendas.

The immediate concern has been to sustain the recovery from the Great Recession. In terms of the advanced and emerging economies, this means seeking as much growth as possible from every corner. Indeed, the fairly strong recovery in key emerging markets has been helpful. And as an indication of the fluid political fault lines in our era of rapid change, the major controversy regarding near-term has been within the camp of leading industrial nations internally rather than between them and the rising powers.

The same debate that’s been taking place in the US about the source of weak economic performance—debt and deficit or reduced demand and consumption—also lies at the heart of the Eurozone crisis. The fight over budget-cutting austerity versus stimulus as a path to growth is a split between right and left political forces in the West. In fact, the US, China, and a broad consensus of experts all agree on one key point. Despite some brief excitement about the idea of a Chinese bail-out of the Eurozone, the dominant assumption is that the Europeans themselves will have to come up with their own solution. That doesn’t mean the G-20 discussions play no role. Because of the realities of interdependence and shared economic fate, meetings like the Los Cabos summit offer nations in other regions a forum to press European leaders for a solution.
 
As mentioned above, the G-20’s basic aim is to have enough economic growth from enough quarters to give the total global economy some momentum. With the European economy teetering at the brink, however, the other major players are weighing strategies to minimize the damage. First and foremost, everyone hopes that Europe will prevent a financial meltdown—and the risk of a Lehman-like contagion—by building a big enough firewall around the sovereign debt of the Eurozone’s so-called peripheral countries. But while the rest of the world has little interest in directly underwriting Europe’s financial stability, the G-20 is discussing damage control measures. The weaving of stronger international financial safety nets has been on the G-20 agenda for some time, but the heightened threat from Europe added new urgency to the issue in Los Cabos.

The G-20’s longer-term priorities aim to maximize the global economy’s potential for growth and achieve the kind of equilibrium that will make it less vulnerable to future slowdowns. Again with the perspective of a single interdependent system, the world cannot let itself become too divided into nations of exporters and nations of consumers. At a certain point, mounting macroeconomic imbalances will throw the system seriously out of whack.

Rebalancing to prevent countries’ excessive dependence on exports or consumption is a signature agenda of the G-20. Until three years ago, the issue was kept off the table at China’s insistence. From Beijing’s perspective, exports have been too essential for the steady economic growth on which the Chinese leadership relies. Ultimately, though, China not only relented on a G-20 framework for rebalancing but made increased domestic consumption a key element of its official economic plan. China has yet to undertake the major structural reforms rebalancing will entail, but it has allowed its currency to appreciate somewhat in relation to the US dollar.

Governments’ slowness in adjusting to the realities of interdependence are not entirely a function of failure to recognize those realities. The steps being demanded of them are difficult in political and practical terms. Almost inevitably, progress will take the form of an incremental slog. The value of a process like the G-20 is the pressure it fosters for countries to keep sight of the bigger interconnected picture—and act on its behalf. And it has no doubt been easier for China to take cues from a multilateral forum as opposed to the bilateral relationship with the United States.

As a proponent of international cooperation and the potential of the G-20 as a test bed for rising and established powers to work together, I have argued that the summit meetings themselves should be as long as possible. The G-20 leaders should meet for at least two full days, if not three. The counterargument I hear in response is that political leaders are sensitive about the optics of jetting off to wine and dine with their colleagues instead of being on the job back at home. But that gives too little credit to their citizenry, who probably realize the importance for their own lives—on this shrinking planet—of having their leaders tackle global problems together.

David Shorr is a program officer at the Muscatine, Iowa-based Stanley Foundation and a longtime observer of high-level diplomacy.

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