25.04.2023 Author: Salman Rafi Sheikh

The Big Failure of the US Policy of “Decoupling” from China

The Big Failure of the US Policy of “Decoupling” from China

When the Trump administration announced a policy suggesting a “decoupling” from China in the sense that the world’s two biggest economies will no longer do business together, his idea was to turn “America into the manufacturing superpower of the world, consequently ending its “reliance on China once and for all.” This was thought to be crucial for maintaining the US hegemony in the world in the face of proactive attempts by China – and Russia – to shift the global political and economic system towards multipolarity. In forming this policy, policymakers in Washington relied on the belief that the US decision to “decouple” from China will automatically lead many countries across the world – especially, in Asia – to do the same, i.e., minimise their trade ties with China and thus end Beijing’s global ambitions. Policymakers in the US also believed that the activation of the policy of “decoupling” from China will also require another parallel policy: an increase in the US trade ties with Asia, including Southeast and East Asian nations.

Many years have passed since this policy was activated, but the results show a drastic US failure in achieving even its primary objectives, i.e., Asian nations decreasing their trade ties with China. In fact, as the data shows, the opposite has happened, i.e., many Asian nations have increased their trade ties with China, showing how these nations, instead of uncritically accepting US dictates, are actively resisting Washington.

As  The Wall Street Journal reported in December 2022, between 2018 – when the so-called ‘trade war’ was started by Washington – and November 2022, China’s trade with 10 of its neighbours – mostly ASEAN countries – grew by a whopping 71 percent, reaching an all-time high level of US$979 billion. During the same time, China’s trade with India – one of China’s main rivals in Asia and an ally of Washington as well – grew by 49 percent.

The growth in bilateral trade points to the continued operation of what many call a universal economic logic i.e., countries tend to trade with big economies and economies in close geographical proximity. In other words, the fact that China is located very close to ASEAN and that it happens to be the second-largest economy renders the economic logic much more powerful than the geopolitical logic that various US administrations have been advancing for the past decade or so, with the so-called “Asia Pivot” of the Obama-Biden administration being the pioneering act in the series of steps culminating in “decoupling” and a potential military conflict, as projected by the US, around Taiwan.

This response is also a logical result of years of work that China undertook, since the 2008 financial crisis, to establish its deep economic roots in ASEAN and elsewhere. The US, it seems, completely underestimated the strength of the bilateral system. It was in the early 2000s when China took over Japan, Taiwan, and the United States as the supply hub of value-added exports for the ASEAN nations. China concluded a free trade agreement with ASEAN and put it in force in 2005. Existing pacts were reinforced by the November 2020 signing of the Regional Comprehensive Economic Partnership Agreement (RCEPA). It was always naive on the part of the US policymakers to expect the ASEAN countries to reverse these arrangements in favour of establishing similar trade ties with the US, especially when Washington didn’t have – and still doesn’t have – any viable plan or programme of similar nature and magnitude to offer to these countries.

Enter the anti-Containment BRI

The absence of a well-defined and well-targeted economic and trade plan allowed China to reinforce its own existing trade ties with its own anti-containment strategy: the Belt & Road Initiative (BRI). Consider this: if the core purpose of the “Asia Pivot” and “decoupling” was to contain the rise of China to ensure continued US hegemony, Beijing responded by massively expanding its global economic outreach to make it nearly impossible for the US to either contain or roll it back. Through the BRI, China was able to expand much more rapidly than the US could put its own plans into action.

The scale of BRI tells the story. As the data shows, at least 147 different countries – accounting for two-thirds of the world’s population and 40 percent of the global GDP – have signed projects with China. Apart from ASEAN and many countries in Asia and Africa, China’s trade ties, via BRI, have exponentially increased in Latin America as well. As the data shows, China’s trade ties with Latin American countries in 2021 amounted to US$450 billion, registering a 41 percent increase from 2020. This growth rate thus clearly defies the US logic of “decoupling.” In 2022, this trade reached US$486 billion. With the BRI logic at play, six Latin American nations – Argentina, Brazil, Chile, Ecuador, Peru, and Uruguay – have already joined the China-dominated Asian Infrastructure Investment Bank.

China, in simple words, continues to grow in the face of Washington’s resistance and projection of China as a bad economic partner. As the data shows, this is just an element of US propaganda, which explains why no countries bought it. More recent data shows, China’s engagement with these countries is far from what Washington calls a Chinese “debt trap.”

On the contrary, the data shows, China is using the same playbook to advance its interests and expand its economic – and eventually geopolitical – reach that the US and its allies have always used. More crucially, China has already emerged as the international lender of the very last resort, helping its BRI partner countries overcome their economic problems through, for instance, debt restructuring and rollovers.

These findings – the obvious rise in global trade volume with China and the actual, no “debt-trap” nature of China’s trade ties with its partners – combine to explain the failure of the US policy of “decoupling” from China and effecting a structural shift towards US unilateral dominance in the world.

Salman Rafi Sheikh, research-analyst of International Relations and Pakistan’s foreign and domestic affairs, exclusively for the online magazine “New Eastern Outlook.

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