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INSIGHTS into the WORLD / What we can expect in the ‘new Cold War’

By Takashi Shiraishi / Special to The Yomiuri ShimbunRecently, there has been much talk of a “new Cold War.”

The new Cold War differs from the old — the post-World War II confrontation that developed between the United States and the now-defunct Soviet Union. During the earlier Cold War, the world was gripped by the real fear of a possible nuclear war, as seen in the case of the Cuban crisis of 1962. Over the course of the four-decade conflict, the Eastern and Western blocs rarely depended on each other economically.

The absence of economic interdependence between the two blocs enabled the U.S. and its allies to build a liberal international order in the “free world” and to pursue a policy of containment of the Soviet bloc. In contrast, no matter how dangerously conflicts between the United States and China may intensify, the possibility of Washington and Beijing resorting to nuclear strikes against each other is very low. Nor is containment viable as a strategic option in the new Cold War, because China has already integrated itself into the world economic system, even while sticking to Communist Party rule and a socialist market economy.

Why, then, has the U.S.-China rivalry spiked so rapidly? Because China is seen as seeking to be hegemonic in its vicinity, in pursuit of what its leadership calls the “China Dream,” and the United States is determined to thwart Beijing’s ambition.

Addressing the 19th National Congress of the Communist Party of China in October 2017 and the National People’s Congress in March 2018, Chinese President Xi Jinping declared that China, under the leadership of the Communist Party, would step up its domestic and international ambitions. He specifically referred to Beijing’s determination to “build China into a great modern socialist country,” “put into place a system of world-class armed forces with Chinese characteristics,” “continue to actively push forward the Belt and Road Initiative” and “actively participate in the evolution and construction of the global governance system.”

In response, the United States announced its “National Security Strategy” in December 2017, pointing out that “China seeks to displace the United States in the Indo-Pacific region, expand the reaches of its state-driven economic model and reorder the region in its favor.”

In October 2018, U.S. Vice President Mike Pence gave a comprehensive speech, spelling out the Trump administration’s policy toward China. He said: “America had hoped that economic liberalization would bring China into a greater partnership with us and with the world. Instead, China has chosen economic aggression, which has in turn emboldened its growing military.”

Pence sharply criticized China for building its manufacturing base by using “an arsenal of policies inconsistent with free and fair trade, including tariffs, quotas, currency manipulation, forced technology transfer, intellectual property theft …” He also accused China of attempting on the military front to unilaterally change the territorial status quo around Japan’s Senkaku Islands and in the South China Sea and of interfering in the democratic politics of the United States.

Where are U.S.-China relations headed?

The trade war between the United States and China is part of the new Cold War. In early December, Xi and U.S. President Donald Trump agreed to a 90-day tariff truce to allow for further talks. But even if China makes huge concessions to U.S. demands, the U.S.-China rivalry is unlikely to come to an end. In the United States, there is a broad bipartisan consensus that it should continue to be the world’s most economically and militarily powerful country and that, as the key to ensuring such status, it must hold on to technological supremacy in those fields.

There is a good chance, it seems, that the United States will play hardball with China in the areas of trade, investment, technology and security, and China will respond in like fashion in each of those areas. Japan and other countries will also react to the new geopolitical and geo-economic dynamics in various ways and, as an outcome, international relations will change fast in ways no one really predicts.

I would like to mention three areas we need to watch carefully as this new Cold War unfolds.

First, let us look at the trade system.

In August 2018, President Trump signed the National Defense Authorization Act (NDAA) for 2019, strengthening the Committee on Foreign Investment in the United States (CFIUS), which reviews foreign firms’ bids to merge with or acquire U.S. companies. The move also aims to restrict foreign parties’ access to classified U.S. information. The enhancement of the committee’s authority is seen as targeting China. Further, the NDAA bans equipment and services of Chinese telecommunication giants, including Huawei Technologies, from U.S. government contracts and systems.

In October 2018, the United States, Mexico and Canada signed the U.S.-Mexico-Canada Agreement (USMCA), replacing the three-way North American Free Trade Agreement (NAFTA). The new pact states that if one of the signatories enters into a free trade deal with a “non-market country,” the other two are entitled to withdraw from the USMCA with six months’ notice and supersede it with a bilateral free trade accord. The phrase “non-market country” is a clear reference to China.

There is also a good possibility of Washington proposing in the future that the transfer of “emerging and generic technologies” the United States considers vital for its national interests be restricted under an international export control regime.

In light of these U.S. approaches, the Japanese government has already adopted guidelines for procurement of information technology equipment. The government has reportedly decided to ask companies and organizations providing key infrastructure equipment to 14 sectors, including electric power, banking and IT, to refrain from procuring telecommunications equipment that is vulnerable to leaks of information and system shutdowns. Moreover, considering the swift pace of technological innovation, it is time for Japan, too, to think of placing exports of “emerging and generic technologies” under stricter control.

Since the 1980s, trade liberalization has been spearheaded by the United States, but the situation is now at a major turning point. It is likely that the world may have 21st-century versions of the Cold War-era Coordinating Committee for Multilateral Export Controls (COCOM), which regulated exports to communist countries, and the China Committee, better known as CHINCOM, which controlled exports to China. If new export control regimes are negotiated and eventually installed, Japanese companies’ operations will be greatly affected in terms of trade with China and cross-border regional supply chains.

Second, let us examine the latest developments in the area of security.

The National Defense Program Guidelines, approved by the Cabinet in December 2018, envisage the development of a “multi-domain defense force” with defense capabilities combined across all domains: not only land, sea, and air but also the new domains of space, cyberspace and the electromagnetic spectrum. To that end, Japan ought to work out a mechanism that will facilitate deeper collaboration with the United States and its allies in the area of military technology development.

Japan is said to be strengthening relations with the Five Eyes, the world’s most comprehensive intelligence alliance, involving the United States, Britain, Australia, New Zealand and Canada. To promote its cooperation with the anglophone coalition, Japan will have to consolidate its own intelligence management system.

While Europe was the primary theater of the original Cold War, it is Asia that is the front line of the new Cold War. Japan has been bolstering its relations with the United States and its allies in the area of security cooperation. Though it is not discussed much here in Japan, this development will have an important bearing on the U.S.-led hub-and-spoke security system in this region.

The third and last point we will look at is digital data circulation.

We now live in an age in which people and things are all connected with each other thanks to Internet of Things (IoT) technology. The data-driven economy has already become a reality, creating new values through data collection and analysis of all kinds of electronic data covering medical services and financial transactions, among others.

But there is no global consensus about the data circulation regime. China insists on sovereign control over the data circulation, while countries with democratic political systems and market economies have different ideas and systems regarding the flows of data between and among people and businesses.

For democratic and market-economy countries, a big challenge is to promote cross-border data flows while giving due consideration to the protection of privacy and adequately regulating ever-growing mega platform service providers.

In his keynote speech at the World Economic Forum Annual Meeting at Davos, Switzerland, on Jan. 23, Prime Minister Shinzo Abe called for the formulation of a new track for multilateral negotiations, under the roof of the World Trade Organization, to set international rules for worldwide data governance. His proposal has the potential to lead to the inauguration of a new international regime that will govern a greater international zone for safe and free flows of data.

In the new Cold War era, different from the old one in which containment was the strategy of the “West,” recalibrating new international regimes in such areas as trade, security and data circulation is likely to be deeply contested. This means that if Japan wants to play an active role in the evolution of the new regimes, it has to realign and change its domestic systems.

Special to The Yomiuri Shimbun

Shiraishi is chancellor of the Prefectural University of Kumamoto. From 2011 to March 2017, he served as president of the National Graduate Institute for Policy Studies, and from 2007 to 2018 was president of the Institute of Developing Economies-Japan External Trade Organization.Speech

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