Are we on the brink of a new Cold War? The United States is the sole reigning superpower, but it is being challenged by the rising power of China, much as ancient Rome was challenged by Carthage and Britain was challenged by Germany in the years before World War I. Should we therefore think of the United States and China as we once did about the United States and the Soviet Union, two gladiators doomed to an increasingly globalized combat until one side fades?
Or are we entering a new period of diversified global economic cooperation in which the very idea of old-fashioned, imperial power politics has become obsolete? Should we see the United States and China as more like France and Germany after World War II, adversaries wise enough to draw together in an increasingly close circle of cooperation that subsumes neighbors and substitutes economic exchange for geopolitical confrontation?
This is the central global question of our as-yet-unnamed historical moment. What will happen now that America's post-Cold War engagements in Iraq and Afghanistan have run their course and U.S. attention has pivoted to Asia? Can the United States continue to engage China while somehow hedging against the strategic threat it poses? Can China go on seeing the United States both as an object of emulation and also as a barrier to its rightful place on the world stage?
The answer is a paradox: the paradox of cool war.
The term cool war aims to capture two different, mutually contradictory historical developments that are taking place simultaneously. A classic struggle for power is unfolding at the same time as economic cooperation is becoming deeper and more fundamental.
The current situation differs from global power struggles of the past. The world's major power and its leading challenger are economically interdependent to an unprecedented degree. China needs the United States to continue buying its products. The United States needs China to continue lending it money. Their economic fates are, for the foreseeable future, tied together. Recognizing the overlapping combination of geostrategic conflict and economic interdependence is the key to making sense of what is coming and what options we have to affect it.
In the first decade of the twenty-first century, the major international question was the relation between Islam and democracy. In this second decade of the still-young century, the great issues of conflict and cooperation have shifted. Now U.S. leadership and Western democracy are juxtaposed with China's global aspirations and its protean, emergent governing system.
The stakes of this debate could not possibly be higher. One side argues that the United States must either accept decline or prepare for war. Only by military strength can the United States convince China that it is not worth challenging its status as the sole super-power. Projecting weakness would lead to instability and make war all the more likely. The other side counters that trying to contain China is the worst thing the United States can do. Excessive defense spending will make the United States less competitive economically. Worse, it will encourage China to become aggressive itself, leading to an arms race that neither side wants and that would itself increase the chances of violence. Much better to engage China politically and economically and encourage it to share the burdens of superpower status.
What we need, I believe, is to change the way we think and talk about the U.S.-China relationship-to develop an alternative to simple images of inevitable conflict or utopian cooperation. We need a way to understand the new structure that draws on historical precedent while recognizing how things are different this time. We need to understand where the United States and China can see eye to eye, and where they cannot compromise. Most of all, we need a way forward to help avoid the real dangers that lie ahead.
That way lies through recognizing that we have entered a new historical period. What future historians will call the "post-Cold War" era of unquestioned U.S. global dominance is over. In this new period, the interests of the United States and China often overlap in the realms of trade and economics yet still diverge dramatically when it comes to geopolitical power and ideology. This situation of simultaneous cooperation and conflict needs a new name-cool war-to capture its distinctive features and new, developing rules.
We also need a more sophisticated understanding of the Chinese Communist Party. No longer ideologically communist, the leadership is pragmatic and committed to preserving its position of power. It seeks to maintain legitimacy through continued growth, regular transitions, and a tentative form of public accountability. It aims to manage deep internal divisions between entitled prince lings and self-made meritocrats via a hybrid system that makes room for both types of elites.
The emerging cool war will have profound significance for countries around the world, for institutions that exist to keep the peace through international cooperation, for multinational corporations that operate everywhere-and for the future of human rights. The complicated interaction between the United States and China will shape war and peace globally and reveal whether the dream of peaceful international cooperation embodied, albeit shakily, in the European Union-can be extended to countries with less in common. It will determine the future of democracy as a global movement, structure the international strategies of growing powers like India and Brazil, and guide the movements of companies and capital. It will influence the United Nations, the future of international law, and the progress or regress of human rights. Ultimately, like the Cold War before it, this new kind of international engagement will involve every country on earth.
A powerful argument can be mounted that despite its economic rise, China will not try to challenge the position of the United States as the preeminent global leader because of the profound economic interdependence between them. Trade accounts for half of China's GDP, with exports significantly outstripping imports. The United States alone accounts for roughly 25 percent of Chinese sales.9 Total trade between the countries amounts to a stunning $500 billion a year. The government of China holds some $1.2 trillion worth of U.S. Treasury debt, or 8 percent of the outstanding total. Only the Federal Reserve and the Social Security Trust Fund hold more; all U.S. households combined hold less.11
As of the most recent count, 194,000 Chinese students attend U.S. universities; some 70,000 Americans live and study and work in mainland China. We are not in the realm of ping-pong diplomacy: we are in the world of economic and cultural partnership. These many cooperative projects require trust, credibility, and commitment-all of which were lacking between the United States and the Soviet Union.
In the long run, China would like to rely less on exports and to diversify its customer base, and the United States would prefer a more dispersed ownership of its debt But for now, each side is stuck. For the foreseeable future, the U.S.-China economic relationship is going to remain a tight mutual embrace.
Yet in the past, close economic ties between rising and dominant powers have not always managed to stave off conflict between them. The great powers of Europe traded extensively with one another in the years before World War I. Germany, which was conceived by Britons as the most significant potential challenger to their global position, was an important trading partner of the United Kingdom.
The extent of trade between Germany and imperial Britain was still substantially less than that of the United States and China today. Germany's economy was not dependent upon exports. The British economy, which was export-driven, had a highly diversified customer base, of which Germany was only a proportionate part.
In this same era, the United States, another rising power, did trade with Britain on a scale comparable to the U.S.-China trade of our time. The United States sent roughly half of its exports to Britain between 1885 and 1895. Over the next two decades the propor tion declined, but it still remained at around one-quarter on the eve of World War I and held steady during the war years. Britain, for its part, exported between 10 and 15 percent of its products to the United States during the same pre-World War I period.
Economically, the current relationship between the United States and China is even deeper than was that between the United States and the United Kingdom. Governments of earlier eras did not typically own the debts of other sovereign nations. The central banks of the United States and Britain rarely held each other's treasury bonds. The idea of a sovereign wealth fund that would seek simultaneously to make money in capital markets and advance its owners' national interests was still far in the future.
But there was no ideological divide between the United States and the United Kingdom, two liberal democracies commit ted to capitalism and free trade. If anything, British imperialists saw the potential American empire as a kind of adjunct to their own, sparing them the expense of expanding still further. The United States and China, however, are ideological opponents. Although the pragmatism of the Chinese Communists means that the main source of ideological conflict is the United States, the values of the rule of law, democracy, and human rights are all core elements of the Western idea of governance - and China rejects all three in practice, if not in theory. Over time, this could change. But for now, the united States could not tolerate the broader spread of the emerging Chinese model of governance around the world.
In essence, then, the argument that the United States and China will not find themselves in a struggle for global power depends on one historical fact: never before has the dominant world power been so economically interdependent with the rising challenger it must confront. Under these conditions, trade and debt provide overwhelming economic incentives to avoid conflict that would be costly to all. Over time the mutual interests of the two countries will outweigh any tensions that arise between them.
Appealing as this liberal internationalist argument may be, seen through the lens of realism, China's economic rise, accompanied by America's relative economic decline, changes the global balance of power. It gives China the means, opportunity, and motive to alter the global arrangement in which the United States is the world's sole super power. According to the logic of realism, the two countries are therefore already at odds in a struggle for geopolitical dominance. One is the established superpower, the other its leading challenger. Under the circumstances, a shooting war is not unavoidable-but conflict is.
Of all the potential flashpoints for real violent conflict between the United States and China, Taiwan is the scariest. In 2012, Tsai Ing-Wen's Democratic Progressive Party won 47 percent of the vote on a platform of active independence. If she or another like-minded politican were to be elected in the future, and Chinese leaders wanted to shore up their legitimacy by distracting their public from a lagging economy, a hawkish Chinese leadership with close ties to the People's Liberation Army could send a new aircraft carrier into the strait. The president of the United States would then face an immediate and pressing dilemma: to respond in kind, inviting war, or to hold back and compromise sole global superpower status in an instant. The Cuban missile crisis looked a lot like this.
Moreover, to alter the balance of power in a fundamental way, China does not need to reach military parity with the United States - and once again, Taiwan is the demonstration case. From China's standpoint, the optimal strategy toward Taiwan is to build up its military capacity and acquire Taiwan without a fight. The idea is that the United States might be prepared to tolerate the abandonment of its historic ally out of necessity, the way Britain ceded control over Hong Kong when it had no choice.
To see why this scenario is so plausible, all that is required is to ask the following question: Would the president of the United States go to war with China over Taiwan absent some high-profile, immediate crisis capable of mobilizing domestic support? If the United States were to abandon Taiwan, it would have to insist-to China, to Japan and South Korea, and to its own citizens-that Taiwan was in a basic sense different from the rest of Asia.
Failure to do so credibly would transform capitulation on Taiwan into the end of American military hegemony in Asia. It would represent a reversal of the victories in the Pacific in World War II. It would put much of the world's economic power within China's sphere of control, not only its sphere of influence. In short it would mean that China was on a par with the United States as a global superpower.
That moment of imagination may already have arrived: although U.S. defense experts might think otherwise, many close watchers of U.S. domestic policy can conceive of a compromise on Taiwan that would restore Chinese sovereignty. The future is now. For the United States to concede Asia to China's domination would entail stepping down from being the world's sole superpower to being one of two competing superpowers. But notice what this means. The only way the United States can credibly commit itself to the protection of its Asian allies is for the United States to remain committed to sole-superpower status. China, for its part, need only grow its military capacity to the point where it would be big enough not to have to use it.
Military rise takes place over decades, not months. Too fast a buildup would spook the United States and encourage hawkish anti-Chinese sentiment there. Complete secrecy with regard to such a major buildup would be impossible. The party has done a good job of convincing the Chinese public that the nation's rise must proceed slowly, with economic growth first. It helps that the party is not subjected to the electoral cycles of democratic governments, with the limited time horizon that such a structure imposes.
Nevertheless, as most Chinese seem to realize, China's long-term geopolitical interest lies in removing the United States from the position of sole global super power. The reasons are both psychological and material. Like the United States, China is a continental power with vast reach. It has a glorious imperial history, including regional domi nance of what was, for China, much of the known world. In the same way that the United States is proud of democracy and its global spread, China has its own rich civilizational ideal, Confu cianism. During the years of China's ascendance, the cultures of Taiwan, Japan, Korea, and Vietnam-sometimes called the Sinosphere-were deeply influenced by Chinese ideas. Confucianism still plays a meaningful part in the thinking of at least 1.7 billion people.
The Chinese public is deeply nationalist, which matters to China's unelected political leadership as much as U.S. nationalism does to American politicians. As China becomes the world's largest economy, there is meaningful public pressure for its power status t.o advance in parallel. Any al ternative would be humiliating. And as all Chinese know, China has suffered its share of humiliation in the last two centuries.
This does not mean making Japan or South Korea into part of China. It does mean eventually replacing the existing regional security system that is designed to contain and balance it. The increasingly belligerent conflicts over small islands in the East and South China Seas are products of the fact that everybody knows it.
Lee Kuan Yew, the Singaporean leader who has been a mentor to every major Chinese leader since Deng Xiaoping, was recently asked if China's leaders intend to displace the United States as Asia's preeminent power. "Of course," Lee replied. "Why not? … Their reawakened sense of destiny is an overpowering force." Indeed, Lee explained bluntly, "It is China's intention to become the greatest power in the world."
There is plenty of hard evidence to support this interpretation. China's defense budget has grown by more than 10 percent for several years, rising officially to $116 billion in the most recent published reports, with actual defense spending as high as $180 billion. In 2011 China bought its first aircraft carrier (a refitted Soviet model), announced plans to build several more, and openly tested its first stealth aircraft. In 2012, party-controlled media acknowledged more ambitious plans to develop ballistic missiles that would carry multiple warheads-and therefore be able to get around the U.S. missile defense shield. China is also working on submarine fired missiles that would avoid U.S. early-warning systems left over from the Cold War. It is building up its space program on both the civilian and military sides.
Cyber war, a fast-developing new front in global conflict, is another facet of China's effort to change its power relationship to the United States. Cyber attacks are not what makes the cool war "cool." As a strategic matter they do not differ fundamentally from older tools of espionage and sabotage. (The same is true of drone strikes, which are just the latest varant on the use of air power.) But cyber attacks are just now an especially fruitful method from the Chinese perspective. Because they do not (yet) involve traditional military mobilization, they exploit a dimension in which U.S. and Chinese power are more symmetrical. They involve a certain amount of deniability, as efforts can be made to mask the origin of attacks, making attribution difficult. They may have a significant economic upside, especially if they involve theft of intellectual property from American firms. Cyber war takes place largely in secret, unknown to the general public on both sides. Best of all for China, the rules for cyber war are still very much in flux. That means public retaliation is still extremely unlikely, reducing the danger of public embarrassment if things go badly. Regular cyber attacks are therefore likely to be an ongoing facet of a cool war, even if they are not definitional.
The Cold War's major strategic developments, from Soviet expansion to containment, detente, and Nixon's opening to China, all clustered around the question of who would be aligned with whom. The cool war, too, will involve a struggle to gain and keep allies. The meaning of alliance, however, will differ from earlier wars, in which trade between the different camps was severely constricted. In the cool war, the protagonists are each other's largest trading partners. Each side can try to offer security and economic partnership, but cannot easily demand an exclusive relationship with potential client states of the kind that obtained in the Cold War. Instead the goal will be to deepen connections over time so that the targeted ally comes to see its interests as more closely aligned with one side rather than the other. Much more than during the Cold War, key players may try to have it both ways.
The Pacific region is the first and most obvious place where the game of alliances has begun to be played - and it challenges the post-World War II "hub and spokes" arrangement of bilateral treaties between the United States and Japan, South Korea, Tai wan, and Australia that guaranteed security without joining them into a single regional alliance on the model of NATO.
Over the course of the last decade, China has replaced the United States as the largest trading partner with each of these Pacific countries. The United States, in other words, now increasingly guarantees the capacity of the countries in the region to engage in a free economic relationship with China.
In November 2012, China joined Japan, South Korea, India, Australia, New Zealand, and the ten members of ASEAN to announce negotiations for what the group calls a Regional Comprehensive Economic Partnership. Taken as a whole, the proposed free-trade group would include a population of some three billion people with as much as $20 trillion in GDP and approximately 40 percent of the world's trade. It represents an alternative to an American-favored pro posed Trans-Pacific Partnership that includes the United States but excludes China.
China's long term interest is to supplant and eventually replace the United States as the most important regional actor. It has benefited from U.S. security guarantees, and now sees no reason why it should be hemmed in by U.S. proxies. At the same time, it must be careful not to frighten Japan and South Korea so much that they cling to the American embrace. Creating a regional trade alliance that includes traditional U.S. regional allies but not the United States would serve these complicated and slightly contradictory goals. It would provide countries like Japan and South Korea with the incentive to draw closer to China while framing that movement in terms of economic advantage rather than security.
Emblematic of the contradictory new reality is that China is negotiating for free trade with Japan at precisely the moment when geopolitical tensions between them are at the highest point in decades. The conflict over the Diaoyou/Senkaku Islands went from civilian to military in a matter of months, as both sides scrambled jet fighters. This conflict is itself logical: the product of uncertainty over the changing balance of power. Yet the economic partnership is strengthening simultaneously.
The U.S. response to the changing geostrategic situation has been to signal increasing willingness to empower its regional allies, particularly Japan. The incorporation of a Japanese admiral as the second in command at last summer's RIMPAC exercises was a signal that the United States viewed with favor a potential Japanese shift away from pacifism and toward a more active regional security role.
But this regional response will not be enough. The United States also will have to broaden its base of allies using the tools of ideology. The strongest argument that can be made to countries who trade freely with china is that Chinese hegemony would threaten their democratic freedoms. Senator John McCain's proposed league of democracies is therefore likely to be revived eventually, though probably under another name.
India is the leading candidate for membership. The inventor of non-alignment is not in the same position as it was during the Cold War. Now nonalignment risks letting China rise to regionally dominant status. India's interest is to balance China in the realm of geopolitics while urging it to respect international law, especially the laws of intellectual property and trade. India must, of course, be careful not to push the Chinese too far. China could use border troubles with India to feed domestic nationalism. But India should be increasingly open to joining a democratic league that might have the long-term effect of pressuring China toward human rights and democracy. The natural ground for the alliance is democracy and human rights-the features that the United States and India share but China lacks.
China's great advantage in the race to find allies is its pragmatism. Unlike the United States , China typically makes no demands that its allies comply with international norms of human rights or other responsible behavior. China's natural allies are, as a result, often bad international actors, as the examples of Iran and Syria make clear. China has an independent interest in opposing any form of humanitarian intervention or regime-change based on a human-rights justification. So it is natural - and so far, low-cost - for China to provide cover for such allies. Russia shares the same interests, and the once-chilly Chinese-Russian relationship has been considerably warmed by overlapping interests in the trying to limit Western regime change. Indeed, Russia may emerge as China's most important geostrategic ally - a development signaled recently by Xi Jinping making Russia his first stop on assuming the presidency. If the United States reached out to China in the cold War to weaken the Soviet union, China may try to use Russia similarly in the cool war.
China has also been highly effective in creating alliances with resource-rich African states. China became Africa's leading trading partner in 2010. China typically opts to work with existing governments-whether they are autocratic does not matter-to build infrastructure that is sorely lacking. The Chinese tout their own expertise in rapid devel opment; they bring Chinese labor to do the job; and they promise to deliver the benefits of improved roads, rivers, and revenue streams for government.
China's pragmatic approach to Africa is free of the evangelical spirit and appeals frankly to its in terlocutors' naked self-interest-and the Chinese make no bones about the fact that they are pursuing their own self-interest as well. They make no attempt to reform African governance or African ways of life. They may condescend, but they do not lecture. Unlike Western interactions with Africa, the Chinese encounter does not seem plagued by bad conscience. How much this will ultimately matter to Africans remains to be seen. But a policy of pragmatic honesty may confer real advantages when dealing with countries and peoples who are accustomed to being met with self-serving lies. China aims to get the benefits of resource colonization without paying the international price of being hated as a colonizer-and it has a reasonable chance of succeeding.
Extensive cooperation in economics, intense competition in geopolitics: this new situation poses extraordinary risks. China and the United States are bound together in a mutual embrace of economic interdependence. They are also on a course to conflict driven by their divergent interests and ideologies. Escalating hostility might lead not only to violence but to economic disaster.
Yet economic interdependence also poses unique opportunities for the peaceful resolution of conflict. What is more, it creates common interests that mitigate the impulse to domination. Trade is the area where cooperation can have the greatest transformative effects. Today, China is an active participant in the WTO regime, which is the most effective expression of international law-as-law ever created. Nations obey the decisions of WTO tribunals out of straightforward self-interest: the cost of defection is outweighed by the benefits of staying in the international trade regime.
To manage the cool war, we must always keep in mind the tremendous gains that both the United States and China have achieved and will continue to experience as a result of economic cooperation. Both sides should use the leverage of their mu tually beneficial economic relationship to make fighting less attractive. The positive benefits of trade will not render geopolitical conflict obsolete. But focusing on them can help discourage a too-rapid recourse to violence.
The world is going to change under conditions of cool war, and efforts to keep the war from becoming violent must take account of these changes. New networks of international alliances are emerging. International organizations like the Security Council and the WTO will have more power than before, and should be deployed judiciously and creatively. International economic law can increasingly be enforced as a result of the mutual self-interest of the participants. Global corporations will develop new alle giances as part of a cool war world-but they can also provide in centives to discourage violence and associated economic losses. Human rights, long treated as a rhetorical prop in the struggle be tween great powers, will still be used as a tool. But over time, respecting rights may come to be in China's interests-with major consequences for the enforcement of human rights everywhere.
What unifies these conclusions is a willingness to embrace persistent contradiction as a fact of our world. We must be prepared to acknowledge both diverging interests and also areas of profound overlap. We must be forthright about ideological distance, yet re main open to the possibility that it can gradually be bridged. We must pay attention to the role of enduring self-interest while also remembering that what we believe our interest to be can change what it actually is.
The United States and China really are opponents-and they really do need each other to prosper. Accepting all this requires changing some of our assumptions about friends and enemies, al lies and competitors. It means acknowledging that opposed forces and ideas do not always merge into a grand synthesis, and that their struggle also need not issue in an epic battle to the finish.
It would be uplifting to conclude that peace is logical, that rational people on all sides will avert conflict by acting sensibly. But such a conclusion would betray the analysis that I have tried to develop. Instead I offer a more modest claim. Geostrategic conflict is inevitable. But mutual economic interdependence can help manage that conflict and keep it from spiraling out of control.
We cannot project a winner in the cool war. If violence can be avoided, human well-being improved, and human rights expanded, perhaps everybody could emerge as a winner. If, however, confrontation leads to violence, it is also possible that everyone could lose.
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