Ethics & the U.S.-China Trade War, with Nikolas Gvosdev

ALEX WOODSON: Welcome to Global Ethics Weekly. I'm Alex Woodson from Carnegie Council in New York City.

This week we have a two-part podcast with Carnegie Council Senior Fellow Nikolas Gvosdev, director of the U.S. Global Engagement program. Nick is also a professor of national security affairs at the U.S. Naval War College.

For part one, we spoke about ethics and the U.S.-China trade war. Nick wrote a blog post about this for the website of our Ethics & International Affairs journal and we expanded on a few of the issues he brought up. We touched on the Uyghur detention and the Hong Kong protests, differing views on how and why the U.S.-China economic relationship has developed, and what it would mean to "lose" this trade war.

Also later this week, we'll be posting part two of my conversation with Nick, where we focus on foreign policy and the 2020 election, looking at the Democratic candidates and the view from overseas about Trump's reelection chances and American politics.

But for now, here's my talk with Nikolas Gvosdev on ethics and the U.S-China trade war:

Great to see you again, Nick. We're going to talk about your two recent Ethics & International Affairs journal blog posts.

We'll start with China. What are the ethical considerations that need to be factored in as part of assessing the merits of a trade war with China?

NIKOLAS GVOSDEV First, it requires you to decide which ethical framework you're going to use, because I think one of the issues that we have is people assume that there is one ethical approach, and everything else by default must be unethical or amoral. In fact, there are a multitude of different ethical considerations, some of which are contradictory.

To start with, the bipartisan consensus position on China really from the mid-1980s through 2016 was this—it was based upon democratic peace thesis, it was based upon the great capitalist peace thesis: The rise of China could be accommodated, you would integrate China into the global economy. This would decrease the possibility for conflict, and that was seen as an ethical good. If you have a rising power, you want to avoid a World War I/Thucydides's trap, where the rising power—in this case, Germany—feels it needs to challenge Britain and does so militarily.

So, you want to incentivize China. You want to make available not only to China and to America but to the rest of the world a broader swath of goods and services at cheaper prices, so you integrate the two economies.

Until a few years ago it was very common to hear people praise China's economic reforms as the "largest anti-poverty program in history" and to point to the ethics of bringing 300 million-plus people out of subsistence level poverty into a lower middle-class existence, and this was celebrated. China's economic engine was celebrated for pulling other parts of the world out of poverty, or at least helping to alleviate some of the manifestations of poverty.

These were all seen as good things, and therefore an initial reaction to the start of a trade war between China and the United States is to point to all the negatives: that this increases the possibility for conflict, it imposes real economic burdens on Americans, on Chinese, and on others, that this lays the foundation for future conflict. All of this is seen as part of the ethical challenge.

But the interesting thing has been to see the emergence of a counter-narrative on China which draws support from both the right and the left in America and also has different ethical considerations. This includes things like: the number of American workers displaced by trade practices that China has engaged in, that the China integration with the American economy has not necessarily helped at least some segments of the American economy, that concerns that the integration of China with the U.S. economy—particularly the technology transfer—has given China more capabilities to repress dissidents, to repress ethnic groups like the Uyghurs, not to democratize, and that in fact from a realist ethical position it has been unethical for the United States to assist the rise of a challenger which may at some point in the near future take all the benefits of that economic growth and turn it against the United States.

So, you have this counter-narrative that says that a trade war with China, even if it may bring short-term disruption and costs, is ethical in the longer term if it arrests these negative trends that we've seen in China—certainly on the domestic side but also on the international side—and if it benefits Americans. This depends on whether or not you view America by itself or in concert with other democratic countries—going back to Ash Jain's concept of the "the democratic community," that democratic states should trade with each other and strengthen each other's economies rather than strengthening the economies of authoritarian states who have an inimical view of world order that's opposed to the preferences that the United States and its European and Asian allies have.

What you are now seeing is a tug of war between these two positions: a trade war disrupting what is seen as largely a benign liberal world order which has brought benefits and is now imperiled versus a viewpoint that says this gamble with China has not panned out and in fact has real dangers—dangers to the United States in the security sphere but also in the sense that China today is in a much greater position. It has not democratized in the way that certainly I think the Clinton administration assumed it would when it pushed for China to come into the World Trade Organization and was willing to expand that economic relationship.

Then, in fact, today ranging from—whether it's Google and other American tech firms helping the Chinese government keep its people under great surveillance or China being able to use dual-use technologies to make its military more effective and thus be able to do things in the South and East China Seas—a sense that perhaps we have to bear the short-term disruptions of a trade war for a longer-term gain.

I think this is how the debate is unfolding. It's certainly unfolding within the Democratic primaries to some extent—muted, but it's there—and certainly it's part of the discussions in assessing President Trump's position.

ALEX WOODSON: I want to talk a little bit more about some of these ethical considerations. Specifically, you mentioned the Uyghurs, the tension in Western China. We don't really know how bad that is. It looks very bad.

Then you have the protests in Hong Kong. As of right now, the police have been a little rougher than some people would want them to be, but there hasn't been a huge crackdown by the Chinese security forces yet.

Vice President Pence said something yesterday about this, about Hong Kong, and I think Mike Pompeo has said something about that, too, you see Trump even moving toward that a little bit. Is there a line that we just have to cut them off—by "we" I mean the United States—because of these two things that are just really antithetical to America?

NIKOLAS GVOSDEV I think this is part of an issue that has been brewing for a while in U.S. foreign and certainly U.S. foreign economic policy, which is at what point does trade with authoritarian countries not lead those countries to move in what we would see as a positive direction and in fact reinforces their ability to move in what we would see as a negative direction? And at what point—does China today have more capabilities to repress precisely because it was able to access a wide variety of Western goods and services that frankly were not available to the Soviet Union during the Cold War? We had a very clear understanding that there was a whole range of goods and services that we did not want to see in Soviet hands precisely because we felt that it would enhance Soviet military capability or would make the Soviet Union a more effective repressive society.

In the Chinese case, I think we allowed for this economic integration to occur under this assumption that it would lead to these positive benefits. We didn't necessarily create the political brakes that say, "Well, if you trip these lines, then the economic relationship must of necessity contract."

It's interesting because this debate with China is coming at a time when for the first time in decades the U.S. Congress has been willing to take a much more critical eye at the U.S. relationship with Saudi Arabia. Because for many years that was seen as a relationship that could not be questioned precisely because we may not like how the Saudis govern themselves but because they were a key supplier of a vital commodity for the economies of the United States and really of the entire globe—the Saudis had to be given a wide pass on how they govern themselves internally.

Now there's a sense—partially because the United States is more energy self-sufficient to be willing to question that, and then the question is whether with China we've reached a point where people are willing to do that. The question then is—the tradeoff for the U.S. domestic system is going to be how much short-term pain of disruption with China versus ensuring that we can see these long-term shifts happening.

This then brings us back to the perennial question of U.S. engagement in the world, which is winners and losers. Because right now you have a very clear lobbying effort on the part of U.S. farmers, who have been negatively impacted by the trade war with China, claiming relief on the grounds that having suffered these losses from the trade war they are entitled to compensation, which the society as a whole should be prepared to give via benefit transfer from the federal government to America's agricultural producers.

At what point again—if we are thinking about a long-term reorientation of the U.S.-China relationship because we feel that this is an antagonistic relationship and that trade is not going to ameliorate it—what's going to happen to those segments of the U.S. economy which can't pivot to other markets or which are dependent on Chinese inputs, and also what are U.S. consumers are prepared to do in terms of paying higher prices for goods and services?

It's very interesting to see in polling data that when you talk about these issues in the abstract you get one set of responses, and when you start laying out concrete costs to people then it changes their perspective. I think we are too early in the first salvos of this trade war to be able to say with any certainty what the domestic mood is.

It also comes back to another question—the trade war, immigration, a whole variety of issues: What is the ethical duty of a democratically elected government? Who does it owe primary obligations to: its own citizens or to people in general? With all of these questions what you have is a sense that there are those who say—and it is the reality of a democratic political system—that elected officials will respond to the needs and concerns of their constituents over an abstract humanity.

So, when it comes to things about who should come into the United States, what procedures you should have, or when it comes to the trade war with China and then, say, the human rights question, you're going to have some people who say, "Terrible what's happening in Hong Kong. Terrible what happens to the Uyghurs. But the job of the U.S. government is to ensure the prosperity of American citizens," and if that means continued trade with China, you may see a constituency develop along those lines that says that the human rights concerns are subordinated to the economic concerns of U.S. citizens.

It's an ethical issue we often avoid discussing, but I think it's at the heart of so many of these contentious issues that are roiling our politics today: Who are duties owed to by the government, particularly a democratically elected government? Who are they owed to, and what are the obligations?

ALEX WOODSON: What's your sense of how other nations are viewing these ethical considerations? China, with its Belt and Road Initiative, is trying to expand into different markets. Of course, Africa is a continent that comes up when you're talking about that, but also into Western Europe. We did a podcast recently about China making moves into Italy, into their ports.

Do other nations—I know you can't speak for every other nation, it's not a monolith—also see these ethical considerations in a similar way as Americans do? Just because the United States might cut off trade with China—which probably won't happen, but if something like that were to happen, other nations would fill the void, too.

NIKOLAS GVOSDEV I think what you're seeing is that these questions all have to be answered, but they're going to be answered differently by different countries and then even by different governments within those countries depending on who's in power and who's out of power.

You can see one set—and a lot of this has also been tied up with questions about self-determination, sovereignty, responsibility, where you might have a country that says, "We don't like what China does internally, but that's their business, and our job is to ensure our own peace and prosperity. If China is giving us investment or Chinese markets are important, we may find it distasteful, but we'll overcome that."

You may have others who say, "The ethical considerations of how China governs itself internally should be reflected in whether or not our country chooses to do business or accept investment," questions about rules, transparency, fairness.

One of the interesting things about China's role in Africa and to watch the real shift in attitudes toward China in a number of African countries, which was initially, 10-15 years ago, "China is here to help. China doesn't impose all of these rules and onerous burdens on us. They simply want to do business." Chinese investment was welcomed, especially if countries felt they were getting out of Western-imposed conditionality.

Now you're seeing a backlash against that because the Chinese are very transactional, and it is about business, but "business" as they define it, and China's not investing in Africa for the sake of improving the lots of Africans. They are investing in China—as most investors will invest—to make a profit or to benefit their own industries and to also benefit their own labor force.

So, you may have a project in Africa where the Chinese say, "We need to bring in 10,000 Chinese workers," and "We're not here to give jobs to local people necessarily—we might give some—but we'll invest here, but we have these considerations," and then the questions of fairness, of equity, of transparency—obviously, the whole Sri Lankan experience I think has been sobering for a number of people to realize that paying attention to what you're signing and what rights you're giving away and what assets you're giving up plays a role.

I think you're going to see that these arguments will be mirrored throughout the world, where you'll have some people saying, "China is the best transactional deal" and the ethics of the deal should be driven by benefit analysis, and then you'll have those who say, "The Chinese may offer better terms, but what are we giving up, and what are the compromises we might have to make, and how will that play out?"

In the European context it's also very interesting because the Chinese approach there is to ensure that Europe does not stay connected with the United States on any issues related to Asia or China but essentially agrees to sit out if there were to be a future conflict between the United States and China. Some of these projects are designed to buy European neutrality and to have Europeans say, "These aren't our standards, but we can't impose our standards on any other part of the world, and therefore what happens in Asia is not Europe's concern."

ALEX WOODSON: The last question about this, something that you and Ali Wyne talked about a couple of months ago—and it might be kind of an unfair question—what would it mean to lose this trade war? The term "trade war" implies that there's going to be a winner and a loser, but I'm not exactly sure that's the right way to think about it. What's your take on it?

NIKOLAS GVOSDEV Again, we're back to the ethical question of how do you deal with winners and losers within a society, about any policy choice that you make—trade with China, cutting off trade with China, there are those who benefit, there are those who don't. The question is, how do those who have benefited from a policy, what are their obligations to pass on some of those benefits to those who have had to pay the cost? For those who are paying the costs, what claims can they make on those who are benefiting?

A trade war with China—again when we look at this—is defining, what are the conditions of winning and losing? Because on the one hand the United States involved in a trade war with China is not going to be extinguished as a country. Going back to Hans Morgenthau, this is not an existential-level threat to the United States. It's not as if the United States would cease to exist as a country. But there would be choices made.

Let me give you one example. We benefit from China's willingness to degrade its own environment for rare earths. We choose not to do so because we don't want to ravage the land to get some of these rare earths. We don't want to pay for the environmental mitigation, the costs associated with that, so for a number of years we've been content to let China pay those costs and for us to benefit. In a situation where China and the United States have a ruptured trade relationship, to what extent are we willing to compromise our own environmental standards? Now you'll have some who say, "That's the price you pay."

It's the same debate we had in the last decade about opening up the Arctic to oil exploration, environmental concerns versus energy and economic ones, the same debates we've had for years about the Keystone access pipeline, and again there whose rights prevail? Is it better to do something that benefits the country? That also brought in the whole question of indigenous land rights and so on.

Trade war with China means then we'd have to reopen some of these debates, and we'd have to reopen some of these questions. What are we willing, in terms of accepting which would be a reality, higher prices for a smaller selection of goods?

We've had periods in American history, certainly during—anyone who has talked to grandparents or great-grandparents who remember the Second World War, no one was buying new cars, they weren't available, there was rationing. Again, the country wasn't imperiled. I'm not saying that a trade war with China would lead to rationing of goods or anything of that sort, but it might mean that there's a smaller selection for which you're paying a higher price.

We've seen that appeals to patriotism were not enough in the last decade to get Americans to say, "I'm going to pay $40 more for a pair of shoes that were made in the United States by American workers if I can buy"—not just from China or from some other country where if you said, "Well, but what about your fellow citizens who are shoemakers and the like?"

Trade war with China? Possibly then we would have some of these inputs no longer coming in. Are Americans willing to pay a higher price and say that that's the price that they're willing to pay?

We've seen this debate about the Walmart effect. Walmart puts small shopkeepers out of business and potentially puts American companies out of business because they can't source per Walmart's price requirements. On the other hand, people have said, "Walmart has brought a wide array of goods to lower-income Americans who otherwise would not have had access to them." Again, there's that tension in how that would be resolved.

Again, the question also I think that people are concerned with, this question of losing a trade war is the impact on third countries. Are we going to provoke trade wars not only with China but also with other countries, friends, allies, and then how long can you do this?

Ultimately the question is, is this something that'll make America stronger and is the rest of the world weaker as a result? Are we going back to the 1930s beggar-thy-neighbor policies, and if you believe that that was one of the precipitating causes for military conflict, then you would have concerns about that.

On the other hand—this also, by the way, ties to climate change. I have no way of confirming any of this, but there has been some work done that says a trade war with China plus things like America pulling out of Paris climate accords and other things that China is more susceptible to climate disruption than the United States. If you see this, for lack of a better analogy, as a demolition derby—trade wars, climate, and other things—the idea is that the United States will get damaged but will come out, and China will be more significantly damaged.

So, if you believe that a U.S.–China conflict is inevitable, then you may again say that in a trade war, "Yeah, America will take losses," but if you think it knocks China off its perch as a rising power and forces them to be more inward-looking, then you might say that's a worthwhile strategy to pursue. I actually think that at least some within the current administration believe that this is a "race to the bottom" that America can win and China cannot.

ALEX WOODSON: That's a frightening thought.