War of Economies

  • One may ponder that probably the US is fielding its new strategy to counter China’s Belt and Road initiative and the China-based Asian Infrastructure Investment Bank.

The supreme Union of Soviet Socialist Republic disintegrated into fifteen independent countries. The world-acclaimed it as a victory of freedom and supremacy of democracy. The USSR was an epitome of a socialist economy that was centrally planned and commanded. December 1991, the declaration of Supreme Soviet-led to lowering down Soviet flag last time.

The radical reforms wreaked havoc on the already stagnant economy. A declined growth and lower productivity of the Soviet economy were indicating the sluggish behaviour of their leadership. The political and economic propagandas to gradually attrite the superpower was led by none other than the emerging United States. The country avoided direct military confrontation but fueled speculation of an imminent Afghan war creating a mess of uncertainty thus giving birth to Russia. The war ended but the Afghan Taliban existed and later dubbed as the masterminds behind 9/11 terrorist attacks.

China and the US are the two largest economies in the world. They are large not only in GDP but also among the largest in international trade, production and manufacturing. Undisputedly, the relationship between the two countries will have huge good or bad impacts on not only their economies but also globally on the small economies.

Over the years, the United States-China relationship has been through a bumpy road. The countries never supported each other as the diplomatic institutions were constantly emitting signals of rivalry and conflict. China gradually rose to prominence as one of the growing economies with a good reach in the global technology market. Around the globe, countries are investing a massive amount of funds into the development of technology hence acquiring the digital market space.

One of the crucial issues in today’s international trade is contention in free trade between the United States-China. In fact, this is a trade war where top-two largest world economies participate in pitching their economic potential as swords drawn to protect their interests. It is an economic conflict when one country attacks another by raising tariffs or considering trade barriers on imports. It was launched first by the US imposing an additional 25% of tariffs on many goods imported from China, and then China retaliated by imposing additional tariffs on several imports of the US. The feud did not stop here, and the two countries went to another round of tariff escalations.

The allies of the United States also have displayed a non-friendly attitude in driving policies and investments towards the Chinese economy. Clearly the political scenario signals risk to partners in trade with the United States if they enter into trade agreements with China. China has a global influence in exercising soft power that is the ability to shape the regional and global environment without overt military involvement, thus It does not seek to conquer lands so far.

The most comparable event from this perspective is the Cold War between the United States and the Soviet Union. This term has already crept in use for the US-China Economic and political rivalry. The United States and the Soviet Union conflict was played through intentional strategies related to shutdowns of technology and markets for one another, rivalry to expand the circle of influence having diplomatic and bilateral relations with other developed nations, tossing over unfriendly governments and sponsoring proxy wars.

US-China rivalry is following the same trajectory. The rapidly increasing denials of US technology to Chinese firms, notably the expanded assessments of Chinese investments in the technology sectors of United States denotes the friction between the two. Laying an embargo on Huawei US exports of technology to China that was developed in the United States is the recent case to cite.

One may ponder that probably the US is fielding its new strategy to counter China’s Belt and Road initiative and the China-based Asian Infrastructure Investment Bank. Imran khan’s visit to Donald Trump was an attempt to revitalize their diplomatic relationships. Either on exit or extending its presence in Afghanistan, the United States require the cooperation of Pakistan. If in case Pakistan delivers an honourable exit from Afghanistan, United states might give a nod to revive the military aid and grants to Pakistan. China has waited for the United States to make a move and the Geostrategic position of Pakistan has raised its credulity for the United States.

Chinese interest is mostly around about improving communications for which Gwadar Port attains utmost importance hence the security, reputation and stability of Pakistan are essential to Chinese investment. US took the lead in the Financial Action Task Force (FATF) to put Pakistan on the grey list while it had further strained bilateral ties.

China is Pakistan’s largest creditor; the Chinese developmental projects and efforts have proven more beneficial and fruitful. It is since the Pak-China partnership is based on development and cooperation while the US-Pakistan partnership is security-driven.

China has always built a peaceful environment and has been opened to the world including the United States, rather than having an inconclusive militaristic and belligerent indulgence in competition for a superpower. This is apparently one of the major lessons the Chinese learned from the fall of the Soviet Union. China suggested to the United States that “seeking common ground while reserving differences” is possible. In long-run it might be a win-win for Pakistan as it would benefit being a bridge between both US and China, hence we are expecting a Chinese delegation, or another high profile visit to Pakistan soon.

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Anam Khan

Anam Khan

The author is a writer and an economist based in Islamabad.