The second cold war

The China strategy America needs

President Joe Biden should aim to strike a grand bargain with America’s democratic allies

The achievement of the Trump administration was to recognise the authoritarian threat from China. The task of the Biden administration will be to work out what to do about it.

Donald Trump’s instinct was for America to run this fight single-handed. Old allies were henchmen, not partners. As Joe Biden prepares his China strategy, he should choose a different path. America needs to strike a grand bargain with like-minded countries to pool their efforts. The obstacles to such a new alliance are great, but the benefits would be greater.

To see why, consider how the cold war against China is different from the first one. The rivalry with the Soviet Union was focused on ideology and nuclear weapons. The new battlefield today is information technology: semiconductors, data, 5G mobile networks, internet standards, artificial intelligence (AI) and quantum computing. 

All those things will help determine whether America or China has not just the military edge, but also the more dynamic economy. They could even give one of the rivals an advantage in scientific research.

The first cold war created separate looking-glass worlds. The protagonists in the second are interconnected. That is partly a result of China’s integration into the global economy, especially after it joined the World Trade Organisation (WTO) in 2001. But it also stems from the network efficiencies of many tech businesses, which reward size and spread. 

And it reflects how hard it is for any one country to master the full range of specialisms in the tech economy. In chips, say, American or British designs may be made in Taiwanese plants, using Japanese and Dutch equipment with German lenses before being assembled in Chinese factories. It is no accident that autarkic North Korea can build nukes but not advanced computers.

The Chinese Communist Party has understood that tech is the path to power. China is blessed with a vast market, ambition and plenty of hard-working talent. The party is supercharging the efforts of Chinese firms with subsidies and industrial espionage. 

Aware of how scale matters, China is touting its technologies by securing export contracts, promoting itself as a digital power using the Belt and Road Initiative and waging a campaign of pro-China standards-setting in global bodies.

Mr Trump’s abrasive solo response has had some successes. He has browbeaten some allies to stop buying gear for 5G networks from Huawei, a Chinese firm. And by threatening sanctions on chipmakers who supply Huawei, he has damaged it.

But in the long run this approach favours China. It has already accelerated China’s efforts to create its own world-class chip industry—though that could easily take a decade or more. More important, if a bullying America always focuses solely on its own narrow interests, it will drive away the very allies that can help it stay ahead in tech. 

Europe is increasingly unwilling to leave itself open to American pressure. The European Union’s highest court has twice restricted the transfer of data to America, where they may be picked over by the intelligence agencies. 

And European policymakers have announced plans to impose rules on the cloud, to impose digital taxes on American tech giants and to limit foreign takeovers—including, potentially, American ones.

A grand bargain would turn that conflict with Europe into collaboration. Rather than be consumed by squabbles, the allies could share an approach to issues like taxation, takeover rules and supply chains. For example, Europe’s General Data Protection Regulation (GDPR) is on the way to becoming a de facto standard outside Europe. 

With closer collaboration in intelligence, the alliance could be more alert to security threats from Chinese hackers and tech firms. By co-ordinating their efforts on critical technologies, they could specialise rather than duplicate research. 

By diversifying supply chains and vetting each link they can protect themselves from accidental or malevolent disruptions. By working together on technical standards such as Openran, which uses mostly off-the-shelf hardware for 5G networks, they can create a favourable environment for their own companies. Crucially, by collaborating on ethical norms over, say, facial recognition, they can protect their societies.

Instead of leaving America isolated, a grand bargain would help it keep ahead in the race for tech dominance by bringing it the gains of closer co-operation with like-minded countries. The whole alliance would be boosted by the tech industry’s formidable network effects. 

A bargain would also leave America more open to cross-border scientific collaboration and immigration, vital for a place that thrives on the contributions of foreign students, many of whom stay on to carry out research or work in tech. Such openness is a strength that China lacks.

Some people argue that co-operation of this sort needs a treaty, an institution like nato or the wto. But that would take a long time to set up. What it would possess in gravitas it would lack in flexibility. A grouping like an enlarged G7 would be more adaptable and less clumsy.

Either way, striking a grand bargain will be hard. For one thing, America would need to acknowledge that it is not as dominant as it was when it set up global governance after the second world war. 

It would have to be willing to make concessions to its allies right now—over privacy, taxation and some details of industrial policy, say—in order to protect its system of government in the long term. For the strategy to be credible abroad, there would need to be bipartisan consensus in Washington.

America’s allies would have to make concessions, too. They would have to trust a country which, under Mr Trump, has sometimes looked on the transatlantic alliance with contempt. Some Europeans would have to temper their dream of becoming a superpower that stands apart from both China and America.

Yet that European dream has always looked far-fetched. And if anything can overcome divisions in Washington, China can. Moreover, the sacrifices would be worth it. A grand bargain would help focus competition with China on tech, potentially enabling detente in areas where collaboration is essential, such as curbing global warming, health and, as with the Soviet Union, arms control. 

A grand bargain could make the world safer by making it more predictable. When superpowers are set on a collision course, that is something profoundly to be wished for.

Will it float?

Hong Kong and Singapore test the world’s most comprehensive travel bubble

Other countries are watching, but most will have to wait

THE PANDEMIC, as its name indicates, has been a border-hopping global catastrophe. But for many people it has made the world feel more local. First, countries closed their borders. 

Then, locked-down families were forced to shut their own front doors to all but themselves.

Of the many industries ravaged by covid-19, tourism has a claim to be the hardest hit. According to the World Travel and Tourism Council, an industry association, as many as 174m tourism-related jobs could be lost around the globe in 2020. 

It calculates that the decline in travel could cost the world economy $4.7trn this year (last year it reckons the sector contributed $8.9trn to global GDP, or 10.3% of the total). With new vaccines unlikely to be widely available until well into 2021, it is little wonder that countries are looking for safe ways to open their borders.

On November 22nd Hong Kong and Singapore will begin to test the world’s most comprehensive air-travel bubble. From that date, travellers will be able to fly between the two cities without need for quarantine, and without any restrictions on what they can do when they arrive—whether it is taking in the sights, visiting family or conducting business. 

Flights will be at first limited to one per day, carrying 200 passengers. If all goes well, capacity will be increased incrementally. (For comparison, in 2019 people made 2.9m flights between the two.)

There are of course precautions in place. Foremost among them is the idea of “double protection”, says Edward Yau, Hong Kong’s secretary for commerce. That means flyers will have to secure a negative test result not more than 72 hours before travelling, and face another test in the airport when they arrive at their destination. 

Hong Kong will have a dedicated facility at its airport, so that travellers will spend around four hours waiting for a result, down from around eight earlier this year. Other safeguards include ensuring that travellers have not been outside either Hong Kong or Singapore for 14 days prior to flying.

Though there have been other attempts to get cross-border travel going again, none has gone this far, says Brian King of Polytechnic University in Hong Kong. Australia and New Zealand allow some travel, but it is restricted by region and some quarantine is also required. 

Plans to implement a fully fledged version by Christmas are all but dead, following a recent re-emergence of the virus in South Australia. Other countries, such as Japan, have special arrangements for certain business travellers. The Baltic states ended their travel bubble earlier this year when covid overran their borders.

The rest of the world will therefore be watching keenly to see how this latest attempt goes. They may be long-standing rivals, each making a claim to being Asia’s pre-eminent financial hub, but Hong Kong and Singapore have intrinsic advantages in pairing up, thinks Mr King. Both are small, with a single point of entry, making any outbreaks of the disease easier to trace. 

Most important, they currently have the coronavirus under control. Over the past week Hong Kong averaged around three local cases a day, Singapore less than one. 

What is more, they trust each other’s testing programmes. That will be the minimum requirement for other countries looking to follow suit, reckons Moritz Kraemer, an epidemiologist at the University of Oxford.

An attempt to open up Europe over the summer, with travel permitted within “green zones” with lower levels of covid-19, foundered. It was attempted while the prevalence of the disease was still too high. Europe’s second wave of infections was the inevitable consequence, says Mr Kraemer. 

Confounding matters was a lack of rigorous testing at borders, and ineffective tracking schemes within countries. Not only did this mean that infectious travellers were allowed in, but it also made it more difficult to discern whether clusters were linked to recently imported cases or homegrown ones. 

Neither concern has yet been adequately addressed. Even if the virus were not running rampant around the continent, that would need to be sorted out before the experiment is tried there again.

Much of Asia is freer of such concerns. Mr Yau says Hong Kong is discussing possible bubbles with 11 other governments, mainly within the region. Another scheme, called Return2HK, will shortly be launched for locals wishing to travel from the southern Chinese province of Guangdong. 

Australia, too, is considering opening its borders to certain low-risk Asian countries, such as Japan, South Korea, Singapore, Taiwan and parts of China—although the extent to which quarantine might be relaxed or movement within the country curtailed has not been revealed.

Such agreements are likely to be fragile. Notwithstanding the economic benefits, any sense that a country has needlessly imported another wave of infections from abroad will put governments in hot water. 

The Hong Kong-Singapore bubble will be suspended should either city report an average, over a seven-day period, of more than five untraceable cases of covid-19 a day (ie, neither known to be imported from abroad, nor linked to a recognised cluster).

What of the travellers themselves? 

Business trips may rebound fastest, although firms will need to be convinced that the measures are close to watertight before they dispatch their road warriors abroad, says Benson Tang of the Corporate Travel Community, another industry group. And many will want contingency plans should one of their employees succumb to covid-19 abroad. 

But there is little doubt that they are keen to send their staff packing. Activities such as sales, training and closing deals are all better done face-to-face, reckons Mr Tang. And those running lucrative corporate events are itching to get delegates back into conference halls and away from Zoom. 

When China ended internal travel restrictions in April, business travel was soon back up to 80% of its 2019 level, according to a report by McKinsey, a consultancy, and Skift, a research firm. That suggests a lot of pent-up demand when the rest of the world reopens.

Leisure travellers will be slower to respond, according to the McKinsey-Skift survey. Tourists are likely to continue to opt for more local trips, at least for a while. They may be wary of being stranded abroad, or suddenly being subject to new quarantine rules on their return, as happened to many in Europe over the summer.

So in the longer term, perhaps the best hope of carefree travel for Europeans and Americans will be vaccination. Some less-affected countries could insist upon covid-19 inoculation as a condition of travel, much as, for example, many Africans need a yellow-fever jab to visit Australia. 

Until that time, the world must inflate its travel bubbles cautiously. 

Better that they float limply and hopefully than pop.

The Siren Song of Austerity

Among the many lessons of the 2008 financial crisis and its aftermath in the United States is that there is no good reason to start worrying about debt when unemployment remains high and interest rates low. The hasty embrace of austerity derailed the last recovery, and it must not be allowed to do so again.

J. Bradford DeLong

BERKELEY – Ten years and ten months ago, US President Barack Obama announced in his 2010 State of the Union address that it was time for austerity. “Families across the country are tightening their belts and making tough decisions,” he explained. “The federal government should do the same.” 

Signaling his willingness to freeze government spending for three years, Obama argued that, “Like any cash-strapped family, we will work within a budget to invest in what we need and sacrifice what we don’t.” 

So great was the perceived need for austerity that he even vowed to “enforce this discipline by veto,” just in case congressional Democrats had something else in mind.

Immediately following these remarks, which appeared to fly in the face of economic common sense, some in the Obama administration tried to convince me that the president was merely engaging in Dingbat Kabuki Theater. 

The implication was that the administration would, of course, continue to use fiscal policy to reduce unemployment through tax cuts and spending on items that were exempt from the freeze: “national security, Medicare, Medicaid, and Social Security.”

But political theater can have a powerful effect on policy debates, determining which arguments can and cannot command broad assent in the public sphere. After the 2008 financial crisis, I and others had argued that in an environment of still-high unemployment and extremely low interest rates, the cost of continued government borrowing and spending would be trivial compared to the benefits. Yet Obama’s rhetoric lent austerity the bipartisan gloss that it needed to prevail.

Never mind that the US prime-age employment rate was still a dismal 75.1%, having fallen from 80% in early 2007 (and from almost 82% in mid-2000). Owing to the embrace of austerity, the employment rate was still only 75.6% when Obama gave his Second Inaugural Address in January 2013. 

Almost three years later, it remained at 77.4% – making up less than half the loss since 2007, and just one-third of the loss since 2000. Nonetheless, then-Federal Reserve Chair Janet Yellen announced in December 2015 that the economy would soon be running “too hot” unless interest rates were raised.

In the event, the Fed started raising its benchmark rate for the first time in a decade. 

The US prime-age employment rate did not return to its 2007 level until August 2019, and even then, US national income was still 8.3% below its 2000-07 growth trend, meaning that none of the lost real income and production output since Obama’s January 2010 speech had been recouped.

In 2012, Lawrence H. Summers, the director of Obama’s National Economic Council until January 2011, and I warned that without a renewal of aggressive fiscal stimulus, prime-age employment, productivity, and real incomes would never recover to their pre-2007 trends. 

We were right about the latter two, while the prime-age employment rate eventually recovered only after 12 years (three times longer than in previous post-World War II business cycles).

Summers and I considered it a matter of elementary arithmetic. 

The rates at which savers around the world were lending to the US government, we noted, implied a willingness to pay the government to keep their wealth safe. Not only was there no cost to government borrowing; there also was no need to divert resources to service the debt.

Under those conditions, borrowing to fund additional stimulus would have been wholly beneficial. Although there might well come a time when savers would lose their taste for holding US government debt, and when policies to curtail the debt would be appropriate, 2012 certainly wasn’t it.

Needless to say, our arguments had little if any impact. But I am reminded of this now-ancient history because it increasingly looks like we are about to repeat it.

Owing to the COVID-19 pandemic, US prime-age employment is back down to 76%, just a little higher than it was in 2010. Remember, in normal times (before 2007-08), one-fifth of prime-age Americans were neither employed nor looking for a job; but now, an extra 5% of the population has been added to this cohort. 

That is millions of people who could be performing any number of useful paid tasks that are currently being left undone.

Under a sane national policy, the federal government would spend as much money as it takes to generate the demand necessary to make it worthwhile for employers to re-hire this one-twentieth of the working-age population. 

Worries about what we can afford would be set aside until the day the world’s savers no longer regard US government debt as a special, singularly valuable asset. That day may never come.

As John Maynard Keynes famously observed during World War II, “What we can do, we can afford.” 

Today, the point is even more obvious. We do not even have to figure out how to finance the response to the current crisis; that part of the equation has already worked itself out.

J. Bradford DeLong is Professor of Economics at the University of California at Berkeley and a research associate at the National Bureau of Economic Research. He was Deputy Assistant US Treasury Secretary during the Clinton Administration, where he was heavily involved in budget and trade negotiations. His role in designing the bailout of Mexico during the 1994 peso crisis placed him at the forefront of Latin America’s transformation into a region of open economies, and cemented his stature as a leading voice in economic-policy debates. 

The Limits of Syrian Kurdish Self-Determination

In Syria, the Kurdish question isn’t only about statehood.

By Hilal Khashan 

The creation of the Kurdish Regional Government in northern Iraq in 1992 had a tremendous impact on Kurds throughout the Middle East. In Syria, the Kurdish minority saw it as an example of what could be achieved in their own country, especially after the military clampdown following the 2004 Qamishli riots, which began after a soccer match between Kurdish and Arab teams turned violent. 

The Syrian uprising in 2011 and the withdrawal of government forces in the northeast gave Kurds hope that their time had finally arrived. But the subsequent turn of events demonstrated that achieving the same status that Kurds enjoy in Iraq is unattainable in Syria.

Stalled Project

In March 2016, the Kurdish Democratic Union Party, or PYD, established the autonomous region of Rojava, literally meaning west Kurdistan, in northern Syria. The new entity included Afrin and Kobani, cities along the Turkish border, and Jazira, a region east of the Euphrates River. Before the year’s end, the PYD renamed Rojava the Democratic Federation of Northern Syria. 

It had a demographically diverse population that included Kurds, Arabs, Syriacs, Assyrians, Turkmen and Armenians. As an offshoot of the Kurdish Workers’ Party, or PKK, which advocated Kurdish statehood, the PYD seemed keen on presenting itself as a moderate and multiethnic political project that encompassed more than one-fourth of Syria’s territory. 

But there were concerns, due at least in part to the PYD’s utopian slogans, that the federation was a stepping stone toward building a Kurdish state. 

The federation’s military establishment is the multiethnic Syrian Defense Forces whose backbone is the PYD’s military wing, the People’s Protection Units, or YPG, and the Kurdish Asayish police force.

Following the Islamic State’s rout by the U.S.-backed YPG in 2016, Turkey launched three decisive military operations in northern Syria. They resulted in the Kurds’ loss of Afrin, a strategic border town for pro-Turkey Syrian rebels, and their pathway to the Mediterranean. 

Just after U.S. President Donald Trump ordered the withdrawal of U.S. troops from northern Syria in October 2019, Turkey launched another assault, Operation Peace Spring, which led to additional territorial losses for the YPG and Turkey’s seizure of a 115-kilometer stretch of land between Tell Abyad and Ras al-Ayn. 

The Kurds felt betrayed by the U.S. as well as by Russia, which had told them that it would not oppose their advance to the sea.

Territorial Control in Syria | November 2020

For the Kurds, the loss of their self-declared autonomous region’s geographic contiguity to the Turks and Manbij and Kobani to Syrian government forces was painful. They know that Damascus is hostile to their cause but believe it’s possible to reach a negotiated settlement with Damascus, unlike Ankara. 

Indeed, Turkish President Recep Tayyip Erdogan made it abundantly clear, after the YPG removed IS from Kobani in 2015, that he would not tolerate a Kurdish regional government in Syria similar to the KRG in Iraq. Thus, despite Turkey’s strong ties to the KRG, Syrian Kurds view Turkey as the biggest adversary of the Kurdish people.

Victims of Geopolitics

Kurds throughout the Middle East have repeatedly suffered at the hands of other parties that have either overtly expressed opposition to their cause or claimed to be allies then turned their backs on the Kurds’ plight.

In the early 20th century, a spate of Kurdish uprisings threatened to destabilize Iraq and the newly formed Turkish republic. These outbursts of violence alarmed Turkey, Iran and Iraq, which, along with Afghanistan, signed the 1937 Treaty of Saadabad, a non-aggression pact that emphasized their commitment to preventing the Kurds from destabilizing the new regional order – that is, preventing them from establishing a state in the Zagros Mountains. 

The Soviet Union supported Iranian Kurds in declaring the Republic of Mahabad in 1946 but soon after pulled out of northeastern Iran and failed to respond when the Iranian army crushed the republic and hanged its leaders. 

Iran, for its part, has consistently encouraged Iraqi Kurds to rebel against Baghdad, though its connection to the Patriotic Union of Kurdistan in Iraq has been one reason for the party’s decline.

The West has repeatedly encouraged Kurdish nationalists to rebel against the state and then left them to face defeat. In 1880, the British let Kurdish nationalist leader Sheikh Ubeydullah’s revolt collapse after the Persian Qajars and Ottomans closed in on his tribal forces. 

The Kurdish National Council, an umbrella movement in Syria that owes its formation in 2011 in Erbil to the KDP, repeatedly warned the PYD against trusting the U.S. and Russia, believing they would abandon it after IS was defeated.

Kurdish Identity

In Syria, the Kurdish question is unlikely to be answered by the formation of a federation in itself. Indeed, a long-term solution requires a negotiated national pact that recognizes their separate ethnic identity – an issue Syrian leaders failed to address when the country gained independence in 1943. 

Urban Kurds in Syria have deep roots in the country and were well-integrated into society until the surge of Arab nationalism in the mid-1950s. 

Ibrahim Hananu, a Kurd from Aleppo, emerged as a staunch defender of Syrian independence during the French mandate and was recognized as a national symbol. Khalid Bakdash, a Kurd from Damascus, led the Syrian Communist Party from 1936 until his death in 1995. Syria also had three presidents of Kurdish origin between 1949 and 1954: Husni al-Zaim, Fawzi Selou and Adib Shishakly.

But the emergence of Egyptian President Gamal Abdel Nasser as a charismatic pan-Arab leader galvanized many Syrians into demanding a merger with Egypt under his leadership. Kurds opposed the union, and in 1957, the newly formed Kurdish Democratic Party in Syria demanded recognition of Kurdish national identity. 

After the formation of the United Arab Republic between Egypt and Syria in 1958, Nasser outlawed the party. The UAR dissolved in 1961, but that didn’t allay Kurdish apprehension about Arab nationalism. 

The new leaders in Damascus adopted the Syrian Arab Republic as the country’s official name, and the following year, the government held an emergency census in the predominantly Kurdish Hasakah governorate that revoked the citizenship of 120,000 Kurds in Syria, claiming that they entered the country illegally from Iraq and Turkey.

Kurdish rural areas in Syria belong to Upper Mesopotamia, originally part of northwestern Iraq and southeastern Turkey. Following the signing of the 1916 Sykes-Picot Agreement, the Anglo-French architects of the new regional order included them in Syria. Their inhabitants identify more with their compatriots in Turkey and Iraq than with those in Syria. 

The 1963 coup in Damascus that ushered in Baathist rule exacerbated Syrian Kurds’ dilemma, especially after the discovery that same year of oil in the country’s northeast. 

The new Syrian rulers dispatched troops to assist the Iraqi army in crushing the Kurdish rebellion in northern Iraq and prevent its spread into the Jazira region. In 1980, former Syrian President Hafez Assad decided to establish a 375-kilometer security belt along Syria’s borders with Iraq and Turkey in Jazira. 

He used the agrarian reform law to displace 140,000 Kurds from the border area and resettle Arab tribespeople in their place.

Looking Ahead

Mainstream Kurdish movements in Iraq and Syria, such as the KDP and KNC, have come to terms with their limitations, realizing that they have to work with the national government to agree on a modus vivendi. 

Turkey remains a major obstacle to Syrian Kurds’ establishment of a federalist system, but resolution of the Kurdish question in Syria hinges also on the establishment of a new political arrangement that recognizes the country’s sectarian and ethnic cleavages and redefines the meaning of citizenship and national identification. 

Syrian Kurds want to be recognized as citizens but also want to have their cultural and linguistic origins acknowledged. The only lesson learned from a bloody and protracted conflict like Syria’s is that those who survive it construct a better system that avoids the pitfalls of the past. Syrians are still struggling to get there