Last month, under pressure from the administration of US President Donald Trump, Google terminated its cooperation with Huawei, thereby depriving the Chinese smartphone manufacturer of its license to use Google's Android software and related services. This move also represents a new culmination of the Sino-American conflict and the end of globalization led by the USA
After three decades of moving towards a single global market governed by the rules of the World Trade Organization, the international order has gone through fundamental changes. The United States and China are engaged in a tariff war that initially appeared to be about bilateral trade balance, but turned out to be much more than that. Until recently, hope was raised by the fact that, despite the frequent exchange of threats, these two countries are still negotiating. That is no longer the case.
Last month, under pressure from the administration of US President Donald Trump, Google terminated its cooperation with Huawei, thus depriving the Chinese smartphone manufacturer of its license to use Google's Android software and related services. This move represents an existential threat to Huawei. But more than that - it also marks a new culmination in the conflict between China and America and the end of globalization led by the USA. The message from the United States is clear: exporting technology and software is no longer a matter of business, but of power. Henceforth, the US puts power before markets.
Now that the conflict has taken the form of a hegemonic battle, China may have to use all available means to protect its national champions. This means an immediate withdrawal from all supply chains that rely on American high-tech instruments, especially semiconductors. China will have to start sourcing all necessary components domestically, or from secure partners within its orbit of influence. In the foreseeable future, this adjustment will divide the world into two spheres of economic competition. Sooner or later, all the smaller powers that depend on global markets will have to choose a side, unless they are somehow strong enough to withstand both American and Chinese pressure. With both China and the US demanding to know where they stand, even economic giants like the European Union, India and Japan will be faced with an extremely difficult economic dilemma.
If we assume that an open, single global market will indeed become a thing of the past, then the question is how China will play the cards it has been dealt. As America's largest creditor, will it see the currency war as an ace up its sleeve? If this is the case, the already dangerous struggle for global technological supremacy will turn into a wider and more dangerous conflict. The danger is not only that economic rivalry, protectionism and trade restrictions will threaten global prosperity, but also that this development will increase the risk of serious political conflict. Technological sovereignty would take the place of trade and exchange, and national corporations - even large multinationals - would become only as important as their business model.
However, it would be wrong to conclude that this entire conflict was caused by Trump and his neo-nationalist agenda. Two days after Google announced its decision, the New York Times published an op-ed by Thomas L. Friedman, author of The World Is Flat, in which he criticizes the same unfair trade practices by China that Trump attacks. If this is the position of the former supreme ideological priest of globalization, then China is facing not only Trump's America, but also liberal America. The new move by the Trump administration should signal that the US will not surrender its dominant global position without a fight. However, by causing a break in existing trade relations with China, the US imposes significant costs on itself.
There is no doubt that earthquakes await Europe as well. A crack in the global economy would represent an essential challenge for the European - and especially the German - export model. Although the European Union will remain dependent on US security guarantees and trade with the US, exporters within the bloc are increasingly relying on the Chinese market.
A scenario where they are forced to choose a side leads to a win-win outcome. It is true that in a general technological war, the value of the EU as an ally of the US would increase, and the risks of punitive US tariffs on European exports would decrease. However, European exporters relying on China would be torn. Past experiences have shown us that Europe usually needs a crisis in order to move to the next stage of development. If there is a bright spot in the current situation, it is the fact that Europe may now have no choice but to develop a geopolitical strategy for the 21st century. The European Union was largely spared populist disturbances in the recent elections for the European Parliament. Now she must get down to business to preserve her prosperity and sovereignty in the time of the Sino-American rift.
The author was the German Minister of Foreign Affairs and Vice-Chancellor from 1998-2005; he also played a key role in the founding of the German Green Party
Copyright: Project Syndicate, 2019.
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