US, WASHINGTON (ORDO NEWS) — Governments all over the world have faced a terrible choice: saving lives from Sovid-19 or protecting their sources of income and livelihood. It’s no secret that China and the US have not been getting along lately. But America must understand that there is little strategic sense in its escalation of rivalry with China, the authors say.
Governments around the world were faced with a terrible choice: save lives by sovid-19, or to protect their sources of income and existence. Economic indicators only emphasize the acuteness of this dilemma. Unemployment has risen sharply, foreign trade has plummeted, the global economy is on the verge of the worst recession since the Great Depression. And there is only one way to mitigate the economic consequences of the pandemic – to develop Sino-US cooperation.
It’s no secret that China and the US have not been getting along lately. Since President Donald Trump settled in the White House, his administration has pursued an aggressive policy of containing China, using trade barriers as its preferred weapon.
The Sovid-19 crisis not only did not change these sentiments, but, apparently, on the contrary, strengthened the Trump administration’s desire for hostility – to the point that blaming China for the pandemic looks more important to it than protecting the Americans. In a new document, entitled “A Strategic Approach to the People’s Republic of China,” the Trump administration once again cites its rationale: a supposedly “sober” assessment confirmed that China is a strategic competitor in the field of economy, ideology and national security.
The United States, the document says, does not “seek to stop the development of China” and “welcome the expansion of cooperation with China and work on common tasks.” However, America’s interaction with China will be “selective and result-oriented,” as well as always promoting the US national interests.
In a situation where the death toll from Sovid-19 in the United States exceeded 100 thousand, America has no more significant interest than the fight against the coronavirus pandemic. Moreover, in a situation where over 38 million Americans have applied for unemployment benefits over the past nine weeks, collaboration is becoming especially valuable in terms of limiting the economic costs of a pandemic.
Make no mistake: confronting a threat that does not know national borders and protecting an economy that is deeply integrated with the rest of the world is impossible alone. But it is far from obvious that for the United States these vital tasks will become a higher priority than geopolitical rivalry.
On the contrary, in April the US Department of Commerce introduced new technological restrictions against the Chinese giant Huawei, and the Senate passed a law that could lead to delisting of some Chinese companies whose shares are traded on US exchanges. Recognizing the existence of a “broad scientific consensus that the virus was not created by humans or genetically modified,” US Secretary of State Mike Pompeo, however, recently stated that there is “a mass of evidence” indicating his origin from a Chinese laboratory.
Against the background of acute emotional and economic trauma, the desire to find and punish the perpetrator may, of course, seem extremely tempting. For Trump, this topic has become central to his campaign – and this is a convenient way to evade accusations of mistakes made by his own administration in the fight against the pandemic. But history shows how reckless this approach is: the decision to punish countries that lost in the First World War created the conditions for the outbreak of the Great Depression, and eventually led to a new world war.
Today the stakes are just as high. The pandemic has accelerated turbulent political and economic trends — from nationalism to digital inequality among workers and enterprises. Rising unemployment, coupled with natural disasters caused by climate change and disease outbreaks, will only exacerbate discontent.
Many governments hope that large-scale monetary and budgetary incentives will be enough to save the economy. According to estimates of the International Monetary Fund, developed countries (primarily the US and Europe) have already committed to providing budget support totaling $ 9 trillion. In the US, the Congressional Budget Office predicts that by 2020 the country’s budget deficit will be $ 3.7 trillion, or 17.9% of GDP.
China also uses fiscal incentives, albeit to a much lesser extent. These measures, which are more related to reducing taxes and fees from businesses and households (totaling 2.5 trillion yuan, or $ 350 billion), will increase the budget deficit only slightly – up to 3.6% of GDP.
And while the U.S. Federal Reserve is conducting monetary easing on an unprecedented scale (by mid-May its balance increased by almost $ 3 trillion), the People’s Bank of China did not follow this example, but prefers to require commercial banks to expand lending to enterprises and local governments. In the first four months of the year, the total volume of lending denominated in RMB increased by 10.7% (year to year). In addition, local government budgets will receive support through the sale of coronavirus bonds in the amount of 1 trillion yuan.
Despite colossal incentive measures, America’s real GDP is expected to decline by 39.6% in the second quarter of 2020 and by 5.6% for the year. All this is explained by an uncomfortable truth: most of the implemented monetary and budgetary measures solve only temporary problems with cash flows. The world needs to change business and employment models, equipping them with new tools for the post-pandemic era, and this will require large-scale investments at the local, national and global levels.
Unlike the United States, China clearly understands this. Speaking recently at the opening of the third session of the All-China Assembly of People’s Representatives of the 13th convocation, Prime Minister Li Keqiang did not name the target level of GDP for this year, noting that the government will always adhere to the “People First” approach. Lee also promised to work with the United States to implement the “first phase” trade agreement signed in January.
America must understand that there is little strategic sense in its escalation of geopolitical rivalry with China. As the past few decades have shown, global cooperation – especially in the field of trade – is a real, mutually beneficial strategy, and trade wars and zero-sum geopolitical competition undermine prosperity for all.
In addition to conducting a two-way strategic game, the US – a long-standing global leader – has a moral obligation to help the rest of the world avoid the Covid-19 depression trap, which is more dangerous and relevant than the so-called Thucydides trap. However, judging by the latest signals, we should not count on this.
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