When elephants fight: Stephen Jacobi reflects on US-China tensions and the implications for ASEAN.

Date01 July 2023
AuthorJacobi, Stephen

Our friends in ASEAN are worried about major power rivalry and the possibility for collateral damage. It was once rightly said--'When elephants fight, it gets tough on the grass'. Speaking at the recent Boao Forum in China, Prime Minister Lee Hsien Loong of Singapore said that 'any clash between [the United States and China] would have grievous consequences, for themselves and for the world'. (1) Prime Minister Anwar Ibrahim of Malaysia, speaking at the same forum, had this to say: 'rivalry can take on a productive or destructive tone ... unfettered competition must give way to spirited co-operation'. (2)

I will examine the potential implications for ASEAN of major power rivalry by looking at three aspects:

* What is happening between the United States and China?

* What are the current effects on ASEAN?

* What does this mean for New Zealand?

As 'the trade guy', I will concentrate primarily on the economic aspects, but it is important to recognise that there are complex political and security considerations in all of this, which should be borne in mind.

What is up with United States and China? I have previously described the relationship between the United States and China as a complex 'Game of Thrones'. It is a case of 'House of Dragon meets House of Eagle'. The world's largest economy and the second largest are increasingly coming head to head in a global competition for economic supremacy and influence. At the same time, they maintain the world's largest economic relationship in terms of trade and investment--whether they like it or not, they are both partners and competitors. Two-way trade between them is valued at around $700 billion and the stock of two-way investment is $160 billion.

Yet the two countries are finding it increasingly difficult to get on in this emerging multipolar world order. Whether or not bilateral relations are at the lowest point ever is hard to say--think back to the time of the tragic events at Tiananmen Square or to the height of Trump's not-so-easy-to-win trade war. Things have moved beyond the bluff and bluster of the Trump years with a more level-headed administration in Washington, but the problem is that the trajectory of the relationship seems to be on a downward spiral.

Contentious points

The United States points, not without justification, to continuing human rights repression in Xinjiang, Tibet and Hong Kong, to bellicose behaviour in the South China Sea and Taiwan Strait and to apparent economic coercion in a number of countries. China points to the United States' rallying of democracies in the G7, Quad and now AUKUS to seek to contain China, to instruments like the CHIPS Act and its $52 billion worth of subsidies, which seem directed to undermine their...

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