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America's Fatal Flaw in its Competition With China Is Thinking Militarily, Not Economically

ICE Graveyard 18/04/2016 Jennifer M. Harris

Last week, Washington attempted two important policy feats aimed squarely in Beijing's direction. U.S. Defense Secretary Ash Carter grabbed headlines by visiting the South China Sea, after earlier announcing he would scrap a visit to Beijing amid rising tension over territorial disputes in the region. And on Apr. 11, in a less noticed and more important speech, U.S. Treasury Secretary Jack Lew called on the International Monetary Fund to more aggressively police predatory exchange rate policies and rebuke members for failing to do their part to boost anemic global demand.
The two scenes made for a study in contrast. When it comes to military solutions to manage China's rise, the Pentagon -- swift, clear and measured -- affirms just how honed the U.S. military reflexes are. No doubt, the Pentagon's handling of territorial disputes in the South and East China Seas has had its shortcomings, but U.S. military leaders have in relatively short order managed to settle on, communicate and execute a concrete set of responses to Chinese provocations.

The contest for leadership in Asia is being waged in primarily economic terms.

By contrast, America and its Pacific allies enjoy no such economic counterpart to what the U.S. military alliance structure represents on the security side. There is no comparable framework or vision for jointly exercising economic muscle. Though Secretary Lew's call to revive the Bretton Woods institutions may be ambitious and worthwhile, this isolated effort will not provide an answer to what the U.S. really needs: an economic strategy to deal with China's rise. No practicable IMF, World Bank or World Trade Organization reform will, for instance, give Washington or its allies in Asia a means of raising the costs to Beijing of rising bellicosity, of reducing asymmetrical economic dependence on China or of building adequate defenses against Chinese economic bullying.
The military buildup in Asia is real. But it risks obscuring an inconvenient fact for U.S. foreign policy: the contest for leadership in Asia is being waged in primarily economic terms. And this contrast so vividly rendered last week in Washington -- the world's second most sophisticated military alliance system on the one hand (behind only NATO), and no meaningful counterpart when it comes to advancing the economic aspects of our common foreign policy objectives -- is precisely why Beijing has taken to economic tactics as a first resort. Of course China's military tactics are in full evidence, too. But Beijing's largest victories in its maritime disputes have been silent triumphs -- mostly in the form of self-censoring on the part of countries in Southeast Asia.
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Carter (L) accompanied by Lieutenant General Glorioso Miranda (R), at Camp Aguinaldo in the Philippines on April 15. (TED ALJIBE/AFP/Getty Images)

Welcome to the era of geoeconomic statecraft; more and more often, states are waging geopolitics and state power struggles through economic means. China allows banana exports from the Philippines to rot on the docks as a means of venting its displeasure with Manila's claims in the South China Sea. It rewards Taiwanese companies that march to Beijing's cadence and penalizes those that do not. It promises trade and business with South Korea in exchange for Seoul rejecting a U.S. bid to deploy a missile defense system. It curtails trade with European governments that host the Dalai Lama.
Nor is China alone. India under Prime Minister Narendra Modi refurbishes its "Act East" initiative with a decidedly geoeconomic feel, extending new credit lines to Nepal and Mauritius, new high speed data links to Myanmar, new rail links to Sri Lanka -- all in clear response to China's own encirclement strategy around India's periphery. Russia threatens Ukraine with sovereign default as a means of keeping Kiev within Moscow's sphere of influence, and Putin resorts to pipeline politics as a way of curtailing Europe and Central Asia.

Washington still reaches too quickly for its gun over its purse to solve its problems abroad.

Not so in the U.S., however, where Washington still reaches too quickly for its gun over its purse to solve its problems abroad. With the notable exception of sanctions, the U.S. still debates its largest geostrategic challenges in overwhelmingly politico-military terms: should Washington send lethal weapons to Ukraine? Should NATO reestablish a permanent presence in Eastern Europe? Should the U.S. directly arm the Iraqi Kurds in the fight against the so-called Islamic State? Should it intervene militarily in the Syrian civil war? How should the U.S. respond to China's provocations in the South and East China Seas?

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Carter (C) and his Filipino counterpart, Voltair Gazmin (L), in Palawan on April 15. (Anadolu Agency/Getty)

There is no comparable discussion in Washington of returning Ukraine to economic viability as a way to rein in the Kremlin's plans for a Novorossiya (or "New Russia"), or of steeling U.S. allies in Asia against Chinese economic bullying. Only recently has the U.S. begun truly prioritizing economic and financial denial strategies in the fight against ISIS. Had the U.S. not allowed ISIS to lay legitimate claim to the title of "the best-funded terrorist group on earth" -- a title it had already earned as far back as June 2014 -- perhaps the military battle against ISIS, now in its second year, would've turned out differently.
What is clear, however, is the contrast on display this week in Washington speaks to a broader discomfort with flexing economic muscle to advance its interests. Unless this is corrected, America can expect to pay the price -- in influence, blood and treasure.

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