The United States and China have had a complex relationship since the establishment of diplomatic relations in 1979. The relationship has been characterized by cooperation and competition, with both sides trying to maintain a balance between the two. However, in recent years, the relationship has become more contentious, with both sides engaging in a trade war and a tech war, as well as increasing tensions over issues such as human rights, Taiwan, and the South China Sea.
One possible outcome of these tensions is decoupling, a process by which the US and China disentangle their economies and technological systems. Decoupling is a controversial concept, with some arguing that it is necessary to protect US national security and economic interests, while others argue that it is counterproductive and will lead to a less stable and less prosperous world. In this essay, we will explore the concept of US-China decoupling, its potential benefits and drawbacks, and its implications for the global economy.
What is decoupling?
Decoupling refers to the process by which two countries reduce their economic and technological interdependence. In the context of the US and China, decoupling would involve reducing trade and investment flows, restricting the transfer of sensitive technologies, and creating separate technological ecosystems.
The idea of decoupling has gained traction in recent years as a result of the growing tensions between the US and China. The US has accused China of engaging in unfair trade practices, stealing US intellectual property, and threatening US national security through the use of technology such as Huawei’s 5G network. China, in turn, has accused the US of trying to contain its rise and of interfering in its internal affairs.
The US-China trade war, which began in 2018, has been one of the main drivers of the decoupling debate. The US has imposed tariffs on Chinese goods in an attempt to reduce the US trade deficit with China and to force China to change its trade practices. China has responded with its tariffs on US goods, leading to a sharp decline in bilateral trade. The trade war has also had spillover effects on other countries, as global supply chains have been disrupted and businesses have been forced to rethink their strategies.
The tech war between the US and China has also contributed to the decoupling debate. The US has taken steps to restrict the export of sensitive technologies to China, including semiconductors, artificial intelligence, and robotics. These restrictions have been justified on national security grounds, with the US arguing that China could use these technologies for military purposes or to undermine US interests. China, for its part, has responded by investing heavily in its domestic technology industry, to become self-sufficient in key areas.
Potential benefits of decoupling
Supporters of decoupling argue that it is necessary to protect US national security and economic interests. They argue that China’s rise represents a threat to the US-led international order and that decoupling is necessary to prevent China from gaining access to sensitive US technologies and undermining US security.
From an economic perspective, supporters of decoupling argue that the US needs to reduce its dependence on China as a source of cheap labour and a market for US goods. They point to China’s state-led economic model and its use of subsidies and other trade practices as evidence that China is engaging in unfair competition with the US. Decoupling would enable the US to reduce its reliance on China and diversify its supply chains, reducing the risk of disruptions such as those caused by the COVID-19 pandemic.
Supporters of decoupling also argue that it would create opportunities for other countries, such as India and Vietnam, to become more important players in the global economy.
Supporters of US-China decoupling argue that there are several potential benefits of reducing economic and technological interdependence between the two countries.
- Protecting US national security: One of the main arguments in favour of decoupling is that it would help protect US national security interests. Supporters of decoupling argue that China’s rise represents a threat to the US-led international order and that China is engaging in activities that threaten US security, such as cyber espionage and the theft of US intellectual property. By reducing economic and technological interdependence with China, the US could reduce the risk of China gaining access to sensitive US technologies and undermining US security.
- Creating opportunities for domestic industries: Decoupling could create opportunities for domestic industries in the US. Supporters argue that by reducing US reliance on Chinese goods and services, the US could create new markets for domestic industries to grow and expand. This could help create jobs and drive economic growth in the US.
- Reducing the risk of supply chain disruptions: The COVID-19 pandemic has highlighted the risks of relying on a single country, such as China, for critical goods and services. Supporters of decoupling argue that by diversifying supply chains and reducing reliance on China, the US could reduce the risk of supply chain disruptions and ensure greater resilience in the face of future crises.
- Reducing trade deficits: The US has long had a trade deficit with China, meaning that the US imports more goods and services from China than it exports to China. Supporters of decoupling argue that by reducing economic interdependence with China, the US could reduce the trade deficit and improve the overall balance of trade.
- Strengthening US technological leadership: Decoupling could help the US maintain its technological leadership in key areas such as semiconductors, artificial intelligence, and robotics. Supporters argue that by reducing the transfer of sensitive technologies to China, the US could maintain its competitive advantage in these areas and ensure that it remains the global leader in technological innovation.
- Protecting human rights: Finally, some supporters of decoupling argue that reducing economic interdependence with China could help protect human rights. They argue that China’s human rights record is poor and that by reducing economic ties with China, the US could send a message that it does not support China’s actions in areas such as Hong Kong, Xinjiang, and Tibet.
US-China decoupling argues that reducing economic and technological interdependence with China is necessary to protect US national security interests, create opportunities for domestic industries, reduce the risk of supply chain disruptions, and strengthen US technological leadership. They also argue that it could help send a message that the US does not support China’s human rights violations.