The View

Decouple US-China competition in trade, tech and geostrategy to ease tensions

Weaponising trade policy to address national security concerns has only reduced mutual benefits from the economic relationship

The two countries should instead seek to establish new agreements on arms control and industrial policies, which will require rebuilding trust

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Economic interdependence does not undermine security; if anything, decoupling is far riskier. Photo: AP

Wing Thye Woo, vice-president for Asia at the UN Sustainable Development Solutions Network, is Distinguished Professor Emeritus of Economics at the University of California, Davis and a research professor at Sunway University in Kuala Lumpur and Fudan University in Shanghai.

Published: 11:30pm, 20 Jun 2023

Tensions between the United States and China have reached such a high level that the Group of 7 (G7) recently changed its objective in its relations with China from “decoupling” to “de-risking”. But the reality is that de-risking, like decoupling, requires the participation of both sides and a common agenda. And while the objective of de-risking might be clear, its substance is not, besides keeping communication channels open.

The first step towards a productive dialogue is to recognise that the interaction among three types of competition – trade, technology and geostrategy – is driving the spike in US-China tensions. To stop this vicious cycle, these must be decoupled and, to the extent possible, the policy instruments applied to each segment must be kept distinct.

Weaponising trade policy to address matters of national security, for example, has only reduced mutual benefits from the economic relationship without easing geostrategic tensions. China banned rare earth exports to Japan in 2010 over a territorial dispute and restricted a range of imports from Australia in 2020 after the country called for an independent investigation into the origins of Covid-19, yet such retaliation was ultimately ineffective.

Likewise, the US ban on exporting advanced microchips to China – a similar form of economic coercion – is unlikely to guarantee US technological dominance in the long term unless all advanced economies commit to containing China permanently.