Kissinger's monumental blunder

His suggested policies benefited China hugely

The visit to China by Henry Kissinger and Richard Nixon from February 21 to 28, 1972, gradually led to US support for China’s economic revival. The US granted the most-favoured nation status to China bilaterally and this privilege was renewed annually. By 1984, the US was China’s largest trading partner. Almost two decades later, the US did not block China’s entry into the World Trade Organisation in December 2001. Surprisingly, the US was content with obtaining circumscribed entry to the Chinese economy for its banking, insurance and telecommunications firms. Over the next two decades, US exports to China have incrementally included electrical and optical equipment, vehicles, aircraft and soybeans but invariably China has had a significant surplus in its goods trade with the US.  

Of course, Kissinger’s strategy was to marginalise the USSR and later Russia, and the spin-off economic benefits for China were not a serious enough consideration till recently. Cut to the latest heads of government G7 meeting in the UK from June 11 to 13. Paragraph 49 of this G7 summit’s communique mentions that with “regard to China, and competition in the global economy, we will continue to consult on collective approaches to challenging non-market policies and practices which undermine the fair and transparent operation of the global economy.” China was also criticised over the human rights situation in its Xinjiang region and a fuller investigation was sought on the origins of the coronavirus in China. India joined implicitly in pointing a finger at China as Prime Minister Narendra Modi’s intervention on June 13 delivered virtually at this summit mentioned that India is a “natural ally of the Group” to defend “shared values from threats stemming from authoritarianism.”  

A day later on June 14, US President Joe Biden attended a NATO summit meeting in Brussels. Paragraph 3 of this summit’s communique targeted China and said “China’s growing influence and international policies can present challenges that we need to address as an Alliance. We will engage China with a view to defending the security interests of the Alliance. We are increasingly confronted by cyber, hybrid, and other asymmetric threats, including disinformation campaigns, and by the malicious use of ever-more sophisticated emerging and disruptive technologies.”

At the EU-US Summit on June 15, again in Brussels, it was apparent that Germany was particularly wary of naming China explicitly. Despite Germany’s reservations and to an extent those of the UK, the summit statement mentioned that the EU and US would “closely consult and cooperate on the full range of issues in the framework of our respective similar multi-faceted approaches to China”. China immediately “rejected and deplored” even this mild reference to it in this EU-US joint statement.

Immediately thereafter, on June 16, President Biden met with the Russian President Vladimir Putin in Geneva and the two sides tacitly acknowledged that they needed each other despite differences. After the meeting Biden remarked publicly that “the last thing he (Putin) wants now is a cold war” and that “we (US) have significant cyber-capabilities and he knows it.” This Biden comment exemplifies US suspicions about Russia, and the latter’s economy is increasingly dependent on exports of fossil fuels to China.  

With these recent summit meetings as the backdrop, the collective size of G7 plus South Korean and Australian economies, land areas, populations and trade volumes are contrasted with those of Russia and China in the table.

The GDP and population numbers make it abundantly clear that Russia is no economic competitor at all for the G7+ grouping. However, the Chinese economy alone is now not all that far behind the G7+ economies put together. Further, 9.7 per cent of G7+ total exports and 16.31 per cent of this grouping’s imports go to and come from China. In 2021, China’s economic strength stems from perhaps about 500 million domestic consumers at mid-European income levels. It is evident from the huge market capitalisations of, for example, Amazon e-commerce equivalent Alibaba, Uber-type ride hailing firm Didi Chuxing, and Baidu, which provides services similar to those of Google that China has developed its own finance, marketing and information technology giants. Didi Chuxing is to file for an IPO in the US in July 2021 with a valuation of around $70 billion.

Kissinger’s outreach to China fostered higher global economic growth, including trade, and many countries benefited economically from China’s rise. That was a positive outcome but the fond expectation that China would turn into a multi-party open democracy should have evaporated by 1989 when China put down the Tiananmen square agitation with an iron hand. The US has finally woken up from its foreign policy slumber since Kissinger induced US governments into thinking that Russia was the sole dangerous foe and China would contribute indefinitely to containing Russia. Bill Clinton had remarked in the context of the 1992 US presidential elections that “it is the economy, stupid!” but this maxim was ignored with regard to China.

The negative strategic consequences for the US and some other democracies of Kissinger’s outreach to China have turned out to be more momentous than the global economic benefits. Curiously even now Kissinger is held up as a doyen among foreign policy experts. He and those who followed him in the US government have created a belligerent economic and military behemoth in totalitarian China. In India, we can expect a long grind to keep China at bay even if we get our economic and defence spending policies right. 

j.bhagwati@gmail.com. The author is a former Indian ambassador and World Bank Treasury professional