The UK’s decision has been made for it. Since the results of the referendum a core question has been, will the UK face towards Europe, or to the US? With the latest sanctions imposed by the US on the Chinese tech giant, Huawei, the choice is becoming self-evident. The UK will inevitably move away from its reliance on Huawei in its development of 5G. This is not because there is necessarily any new or material security threat, but because of the risk of secondary sanctions on UK businesses – in Sir John Sawers’ words – “technicalities.”
The UK’s new strategic aproach to trade is embodied in the “Project Defend”: its deliberately militaristic sounding name captures the new, foreign policy leaning of trade in a post Covid-19 and post-Brexit era. At face value, it aims to reduce our dependency on Chinese imports in the interests of keeping supply chains moving during any future pandemic. In reality, it is the Realism of a more strategic approach to trade relations increasingly with national security interests at its centre. The prospective announcement that the UK will move away from Huawei in 5G is just the beginning of a more aggressive, indeed weaponised, trade strategy.
This is an approach that the US has taken since its national security strategy was first published in December 2017: China is regarded as a revisionist power that presents a material threat to its security and prosperity. Trade is the weapon of choice in limiting China’s power: it is no longer a benign mechanism for generating economic growth globally. The conflict is nominally motivated by the trade surplus that China has with the US because it challenges US economic supremacy; the means of conflict are tariffs and sanctions. This is a simple zero sum game: “I export more, you export less. I win, you lose.” It is a struggle for power and influence and the rules of war-gaming, indeed spheres of influence will determine the outcome.
Why has this happened? Because trade is something that everyone understands. It is easy to create an enemy using the rhetoric of trade – a country behaves “unfairly” so there has to be a “defence” – a populist government can explain to its voters why it is taking a zero sum approach because the argument is black and white: “they are imposing constraints on our freedom to set our own tariffs or support our companies – this is unfair so we need to fight back.”
Trade is only the tip of the iceberg, a strategic misdirection, in what is a new type of conflict. This conflict is one that is unconventional – it is being fought in the ether through technology and innovation and through the new forms of digital finance. The weapons will not obviously kill people because they are economic ones, but this is to understate their power to coerce. China has substantial influence over the development of 5G and with it the power to drive consumer behaviours – a perceived threat to national security amongst allies of the US. Similarly more than 70% of global trade is priced in US dollars meaning that the US has actual hegemony over financial markets. Perceived asymmetric technological power on one side hits financial hegemony on the other – the two systems are different but equally coercive, and banks, because of their role in digitalising finance and trade are caught in the slip-stream of this emerging crisis.
Unlike the Cold War, the US and China do not playing the same game and they are not using the same tools. America plays chess – it seeks to win, for example by removing China’s Huawei from 5G networks, or by restricting access to its financial markets. China, in contrast, has historically played “Go” – war and peace can co-exist because the game is about gaining influence, not about winning. It extends its influence through its economic power represented by the Belt and Road: the genuinely held belief is that Chinese economic growth and development can be exported to bring peace and prosperity to all nations involved in the project. Yet alongside this, China can tighten its grip on Hong Kong by unpicking the “one country, two systems” approach, it can build its military sphere of influence, and it can build its capacity in the South China Sea.
The EU is caught, not in a strategic game, but in a game of Happy Families trying to build consensus and hold as many like-minded cards together as possible. Unlike the US, it does not see China as a security threat, although it has taken a more pragmatic view of industrial policy in the last 12 months as its export credit agencies have struggled to compete against the sheer scale of financial support offered by their Chinese equivalents in export markets.
The UK will align with the US rather than the EU. Its approach to trade is increasingly strategic and zero-sum and uses similar rhetoric to “bring jobs back home” or “reduce dependency” on China. The EU will ultimately have to make a similar choices if it is to conclude trade negotiations with the US post-Covid, or hold NATO together. The situation has been worsened by Covid-19: President Trump views China as the aggressor that should be held to account for its lack of transparency on the virus’s origins and has threatened more tariffs and sanctions as a result.
However, the UK is not like the US. It accounts for just 2.5% of world trade, and it is not aligned with any trading bloc after the 31st December. It is a military power, and contributes 2.5% of GDP to NATO, but its position within this world of shifting spheres of influence will be driven as much by its capacity to bring economic weight to the table as it will to bring military weight.
Strategy is all about understanding the game that your opponent is playing. Here, the danger of miscalculation is clear: China is is prepared to behave more aggressively in order to demonstrate commitment to the new era’s “Xi doctrine” of growth and influence but it should not be classed as an adversary as it does not see itself as such. If the UK treats it as an enemy, its capacity to behave like one is greater than our capacity to retaliate, especially by ourselves. As the UK aligns ever more closely with the US and its “Five Eyes” allies it must consider that its own sphere of influence outside of the structures of multilateral organisations such at the WTO, the EU and NATO is limited.
Dr. Rebecca Harding is the co-author of The Weaponisation of Trade – The Great Unbalancing of Politics and Economics (2017) and Gaming Trade – Win-Win Strategies in the Digital Era (2019)