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Trade Is War, By Other Means

12:00 AM, Feb 18, 2012 • By IRWIN M. STELZER
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The president finds the part of Kagan’s argument that America is not in decline, has never been omnipotent in world affairs, and needs a strong economy if it is to retain its global leadership position ammunition to fire at any Republican who argues that he has presided over a decline in American power and influence.  

One reason Xi came to America is to protest Obama’s expansion of the American military presence in Asia. Hu Jintao had earlier complained that America is building “a wall of containment” around China, to use Kagan’s phrase. “What the Chinese find really upsetting,” he continues, “is the extent of American’s military alliances,” some fifty, whereas China has not a single ally in its region, with the exception of North Korea, as much a liability as an asset. To make American intentions at strengthening these alliance and its presence in Asia clear to Xi, Secretary Panetta timed congressional testimony detailing the expanding U.S. military presence and capabilities in Asia to coincide with the Washington visit of the future Chinese.

This new military emphasis on Asia, a so-called “Obama pivot,” is not unrelated to American insistence that China play by the rules in economic affairs. “The growth of China’s economy … [has] implications for American power in the future,” writes Kagan, “if the Chinese translate enough of their growing economic strength into military strength.” Which, of course, they are doing: building aircraft carriers that project power, developing missiles that can send American carriers to the bottom of the China Sea, increasingly the asserting various territorial claims, and hacking into U.S. government and corporate computer networks.

Which suggests that American efforts to persuade China to abandon its trade practices, in any event doomed to failure, has as much to do with power as with money. China’s currency manipulation, subsidization of its SOEs and other export enhancing practices provide funds to pay for an expanded military. They also create a voracious demand for oil and other commodities, a demand that is forcing China to extend its reach to Africa and to America’s backyard, Latin America. In addition, the earnings from trade are used to make loans that add to Chinese influence. The Financial Times reports that the $75 billion China has lent to Latin America since 2005 exceed the total made available by the Inter-American Development Bank, the World Bank, and the Export-Import Bank.

With that financial presence goes influence, influence to gather support for an assault on the free trade, liberal economic order until now underpinned by American power. If there ever was a prescription for big-power rivalry, rather than the “mutual respect” that Xi demands and the “strong relationship” Obama says he seeks, this is surely it.    

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