Will the China-U.S. geopolitical and technological competition come to an end in 2024, after an extended period of containment by the United States since the Donald Trump administration? While a turning point might be anticipated, the answer might not be obvious.
Stephan Ezell, a geotech expert and vice president of the Information Technology and Innovation Foundation (ITIF), conveys concerns over the trade disputes and geopolitical confrontation between China and the U.S. He encourages supply chain friendshoring and advanced technologies export controls to avoid the loss of millions of U.S. manufacturing jobs, which had aided Donald Trump's 2016 presidential campaign.
However, we disagree with the accusations and suggest it would be better to seek a concrete and practical solution of addressing trade deficits instead of focusing on the endless trade or political disputes that erode mutual trust.
First, U.S. supply chains, infrastructure and skilled labor are all inadequate to the task of reshoring, making it impractical to transfer production from China to the United States. If decoupling is the only option, Mexico or Vietnam would stand to benefit, rather than the U.S. Trade deficits between Mexico, Vietnam and the U.S. increased to $130.5 billion and $116.1 billion, respectively, in 2022 — from $54.3 billion and $19.6 billion in 2013, according to data from the U.S. International Trade Commission. These deficits rank second and third in the U.S. balance, behind China, which came in at $382.9 billion. But the combined sum of Mexico and Vietnam — $246.6 billion— is higher than that of the EU's $203.9 billion.
Second, to reduce the overall trade deficit we recommend expanding services trade between bilateral parties. The World Trade Organization reports that the U.S. and the rest of the world have a $228.6 billion services trade surplus, of which $76.9 billion is received from European Union and only $14.5 billion from China (92.56 percent, or $13.4 billion, of which is traveling). If the U.S. opens its services trade market to China, encompassing travel, intellectual property, financial or professional services, and assumes that the scale is the same as the EU's, an additional $60 billion surplus might flow to the U.S. from China.
A third recommendation we propose involves the agricultural sector. According to the WTO, there is a $16.9 billion agricultural product trade deficit between the U.S. and the rest of the world, while it has a $32.4 billion surplus with China, which is expected to continuously rise in the years to come.
Further, it cannot be ignored that an alternative market in China will emerge that will weaken America's ability to innovate and increase profits if the industrial linkage established based on comparative advantage is blocked. China's massive market will likely help defray and mitigate the high costs of R&D in the United States.
Silver lining in the clouds
While there is a silver lining to the cloud of collaboration between the two most powerful forces in the world, it is evident that disagreements and containment mindsets cannot be eliminated in the near future. The exacerbating geotech competition also increases the concerns of many developing countries because they need to survive in a business environment, even one with fractured technology innovation or regulation.
Regardless of disagreements, however, top experts from China, the U.S. and the world should be encouraged to candidly and freely discuss geotech competition concerns, whether in regard to academic theory, national strategy or governmental policy. The endeavors of academics, intellectuals, professionals and representatives of the parties will ultimately reach consensus and create a positive-sum rather than a zero-sum game between the major powers.
Moreover, this will support the establishment of a global governance platform and settlement mechanism and will increase academic exchanges to address differences or common challenges to improve mutual understanding and trust between China and the United States.
Managing geotechnological competition will also benefit third parties. For instance, China and the U.S. both provide various supports for Hungary's rapid and innovative development, which relies on free trade, fair competition and widespread cooperation with global partners, according to Szabolcs Szolnoki, deputy state secretary for Technology in Hungary's Ministry for Economic Development.
Challenges abound
These good intentions are insufficient. There is still a long way to go in easing tensions between China and the U.S., despite some progress under the Biden administration. This is especially true given the significant challenges that China, the U.S. and the rest of the world already face.
China will continue to restructure its economy in 2024. Following a rapid expansion spanning more than 20 years, China's economy is now slowing down. However, investors in New York, London and Singapore are discovering that China remains attractive because of its massive market, combined with global industrialization in its far-flung regions and digitalization in its coastal regions.
Nevertheless, China must immediately address its own challenges, such as determining the next catalyst for economic expansion — development of smart cities or the electric vehicle sector, for example — and how to quickly rectify imbalances in the market and pay off the accumulated debts in the financial and real estate sectors. It is always possible to find the answers to questions surrounding economic development through administrative reform and market openness. In an attempt to find the solution, China is developing regional markets, both locally and globally — for example, through the integration of the Yangtze River Delta and the Guangdong-Hong Kong-Macao Greater Bay Area and through the Belt and Road Initiative.
In 2024, America's domestic agenda will center on the presidential election. On one hand, the Democratic Party candidate, Joe Biden, typically supports globalization, particularly by embracing pro-engagement tactics in international politics and economics and giving greater consideration to issues of social equality and global governance.
At the same time, the majority of people in the world, including those in the U.S., will not profit from super globalization. As a consequence, more non-traditional leaders will take over the leadership of their countries. Argentina will not be the last. From this vantage point, the Republican Party candidate, Donald Trump, garners a lot of attention both domestically and internationally — for instance, unifying nationalism and conservatism at home.
We all acknowledge that the purpose of this essay is to be objective and nonpartisan and not to condemn, accuse or judge any leaders of any country. However, we also agree that the U.S. presidential election in 2024 will have a significant impact on global political stability for the remainder of this decade.
China's economy and U.S. politics in 2024 will both be vital to the international community. In a pessimistic scenario, for example, society will be volatile and divided, and there might be fewer groundbreaking inventions in the scientific or industrial areas. That is, there is no clear indication that the global threat of political unrest and economic stagnation will go away anytime soon.
Outlook
Geotech competition is a hot topic around the world, and not just concerning China and the United States. Yet these two nations are the world's most important stabilizers, particularly in times of crisis or other unfavorable circumstances. Perhaps the world needs guts and a practical action-map from the bottom up.
To revitalize the innovation and confidence of the private sector, we suggest that China collaborate with the U.S. in some unconventional collaborative economic corridors from the Middle East to Africa. This would not only provide new business scenarios for new technologies and infrastructure for businesses from all over the world but would also offer an integrated solution for concerted action in global governance. We suggest creating an expert group for this platform or solution, which might facilitate co-consulting or jointly funded initiatives.
Although scholars and policymakers engage in contentious discussions about China-U.S. relations, the world still has a chance to be revitalized, provided that people are willing to collaborate and advance their shared interests instead of throwing out endless accusations while pursuing their own parochial interests.
