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The Sino-American cold war’s collateral damage

Minxin Pei
Minxin Pei • 3 min read
The Sino-American cold war’s collateral damage
SINGAPORE (Oct 29): The escalating trade feud between the US and China is increasingly viewed as the opening campaign of a new cold war. But this clash of titans, should it continue to escalate, will cost both parties dearly, to the point that even the wi
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SINGAPORE (Oct 29): The escalating trade feud between the US and China is increasingly viewed as the opening campaign of a new cold war. But this clash of titans, should it continue to escalate, will cost both parties dearly, to the point that even the winner (more likely to be the US) would probably find its victory Pyrrhic.

Yet it is the rest of the world that would pay the steepest price. A new cold war would undoubtedly produce collateral damage so far-reaching and severe that the very future of humanity could be jeopardised.

Already, bilateral tensions are contributing to an economic decoupling that is reverberating across the global economy. If the end of the Cold War in 1991 launched the golden age of global economic integration, the beginning of the next cold war between the world’s two largest economies will undoubtedly produce division and fragmentation.

The global financial system would also unravel. US President Donald Trump’s administration has shown just how easy it is for the country to hurt its foes by ­using sanctions to deny them access to the US dollar-denominated international payment system. Given this, the US’ strategic adversaries, China and Russia — and even its ally, the European Union — are trying to establish alternative payment systems to protect themselves in the future.

Such economic fragmentation would devastate the world’s technological landscape. Restrictions on technology transfers and linkages, often justified by national security concerns, would give rise to competing and incompatible standards. Innovation would suffer. And the first area to be struck by deep fragmentation would be global supply chains.

Yet, if the US and China actually decided to engage in a prolonged cold war, the economic consequences — however dire — would be dwarfed by another consequence: a lack of sufficiently strong action to combat climate change.

As it stands, China and US are the world’s top two largest carbon dioxide emitters with 38% of the global total. If they cannot find common ground on climate ­action, it is all but guaranteed that humanity will miss its last chance to prevent catastrophic global warming.

A Sino-American cold war would make such an outcome far more likely. The US would insist that China drastically cut its emissions, because it is the world’s No 1 polluter in absolute terms. China would counter that the US bears more responsibility for climate change, in both cumulative and per capita terms.

Locked in geopolitical competition, neither country would be willing to budge. International climate negotiations, already monumentally challenging, would end in deadlock. Even if other countries did agree on measures, the impact would be insufficient without the US and China on board.

The one hope humanity would have would lie in technological innovation. Yet such innovation — including the rapid progress in renewable energy over the last decade — has depended crucially on the relatively free flow of technologies across borders, not to mention China’s unique ability to scale up production and reduce costs quickly.

Amid cold war-fuelled economic fragmentation — especially the aforementioned restrictions on trade and technology transfers — urgently needed breakthroughs would become much more difficult to achieve. With that, a technological solution for climate change, already a long shot, would effectively become a chimera. And the greatest existential threat humanity faces would be realised. — © Project Syndicate

Minxin Pei is a professor of government at Claremont McKenna College and the author of China’s Crony Capitalism

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