The New Cold War
America, China, and the Echoes of History
The past few years have seen a heated debate among U.S. politicians and analysts about whether the United States should “decouple” from China by severing the supply chains, trade relationships, and financial links that bind together the world’s two largest economies, transforming a one-world economy into two separate spheres of influence. Among American officials and scholars, the debate mostly centers on whether the security benefits of decoupling would offset its economic costs. That framing, however, ignores what should be a major factor in determining the best course of action—a factor that tips the balance against decoupling and in favor of continuing to foster engagement between Washington and Beijing. That factor is climate change.
Without taking into account the risks posed by catastrophic, irreversible environmental damage, it might be possible to conclude that, on balance, decoupling from China would be in the best interests of the United States. But the most promising way to tackle climate change—the formation of a “climate club” of major economies that would use tariffs and other border adjustments to protect countries that meet emission targets and punish ones that do not—will require Washington to retain a degree of leverage over Beijing that can come only from continued engagement. Decoupling would make it almost impossible for the United States and its partners to create strong incentives for China to participate in a climate club and would thus scotch the best hope for preventing the worst-case scenarios of environmental devastation.
In the twentieth century, U.S. strategists could afford to downplay environmental risk; climate change was a problem for other countries and other generations. Not anymore: even if one considers only the direct damage that climate change will likely inflict on the United States in just the next 30 years, the cost in terms of lost lives and property will be massive. During that time, according to a 2018 report by the Union of Concerned Scientists, more than 300,000 coastal homes in the United States will be at risk of chronic flooding, meaning a flood event at least 26 times a year—or every two weeks, on average. In recent years, wildfires of unprecedented scale and ferocity in California have led insurers to pull away from some 800,000 homes, with some questioning the future of the state’s entire $4.4 trillion real estate market. The picture is even more alarming for China. Scientists expect that the North China Plain, home to 400 million people, will be virtually uninhabitable within 80 years because of recurring extreme heat waves. There is no avoiding some climate damage, but for both players, the costs of inaction far outweigh the costs of mitigating additional climate change.
From the standpoint of U.S. national security, climate change also represents a threat multiplier, according to numerous studies by the U.S. Department of Defense. Rising temperatures will aggravate existing problems in various countries—such as poverty, crop failure, and social tensions—that lead to civil wars or migrant waves, which in turn cause other problems. For example, in 2006–11, a severe drought in Syria led to massive agriculture failures, which contributed to the country’s subsequent civil war. Likewise, in the next 30 years the effects of climate change could induce up to 30 million Central American migrants to head for the United States. Decoupling from China would help mitigate some real security risks. But those risks pale in comparison with the ones posed by climate change.
From the standpoint of U.S. national security, climate change represents a threat multiplier.
Of course, the question of whether to decouple is not entirely up to the United States. Beijing’s increasingly aggressive and provocative moves, such as its expanding military presence in the South China Sea, its brutal repression of ethnic Uighurs, and its crackdown on dissent in Hong Kong, have made it difficult to imagine much warmth in U.S.-Chinese relations in the near future. Still, U.S. policymakers have choices about how to react to Chinese actions. They do not have to start trade wars, for example, as the Trump administration has done. By contrast, despite China’s provocations, Chinese President Xi Jinping made clear his commitment to economic integration with the United States in 2017—and has mostly stuck to that position. That leaves a large part of the choice about decoupling in U.S. hands.
The notion of decoupling tempts American policymakers for three main reasons. First, it would limit U.S. exposure to Chinese espionage and intellectual theft, which are easier to carry out when Chinese companies enjoy full access to the U.S. market. Second, decoupling would likely hurt China more than it would hurt the United States and thus slow China’s relative gains. Third, if the United States became less dependent on China for certain natural resources (such as refined lithium) and essential commodities (such as pharmaceutical products), it would limit U.S. vulnerability to embargoes, price gouging, or tariffs that China might apply to such goods in the future.
Beijing’s increasingly aggressive moves have made it difficult to imagine much warmth in U.S.-Chinese relations in the near future.
These arguments face two standard objections. First, decoupling would be enormously costly. It would disrupt supply chains, reduce the sales figures of U.S. companies in the Chinese markets, and cost American universities hundreds of thousands of Chinese students. Second, any reduction in interdependence would create security risks of its own: most scholars of international relations believe that strong, mutual economic links reduce the probability of conflict between states, even if they do not eliminate it completely.
Still, many politicians and officials from both major U.S. political parties view the security benefits of decoupling as outweighing these large economic costs. There is no way to tally up these costs and benefits; grand strategy is not an accounting exercise. Even so, it would be foolish to dismiss the economic costs of decoupling—and even more foolish to ignore the ways in which decoupling would make climate change harder, if not impossible, to address.
Unfortunately, effective climate policy has fallen victim to a political dilemma in the United States. Opponents of unilateral U.S. policies that would reduce emissions—such as a carbon tax, a federal cap-and-trade system, and stricter regulations and enforcement—argue that taking such steps would allow China and others to free-ride. If policymakers condition domestic steps on the existence of an enforceable global climate deal, it will take far too long, given the glacial pace of international negotiations. But if they don’t make such steps conditional, a global deal is unlikely to ever happen, because unilateral U.S. action would give away much of Washington’s bargaining leverage and make it unlikely Beijing would follow suit.
A wise foreign policy should tackle this dilemma head-on. The United States should take the first step by working with European countries to create an international climate club of major economies, as the economist William Nordhaus and others have proposed. Membership would obligate countries to enforce certain pro-climate policies, and the club would apply border adjustments, such as tariffs, on all countries outside of the club. Border adjustments would be necessary because without them, climate policies strong enough to meet UN goals would put industries inside the club at a competitive disadvantage. Border adjustments erase that disadvantage inside the club and give outsiders an incentive to become members: they can avoid the tariffs only by joining the club and adopting pro-climate policies. Those tariffs solve a problem that undermined the 1997 Kyoto Protocol and other climate efforts, including the 2016 Paris agreement—namely, the lack of a punishment on those that refused to participate.
Effective climate policy has fallen victim to a political dilemma in the United States.
This success of this strategy would depend on the size of the economies inside the club. Only a large group would make sufficient decarbonization possible—and that means that any successful climate club must include China. But inducing China to join instead of just free-riding would mean imposing high costs on nonparticipation by Beijing. The U.S. Congress should pass a law authorizing a conditional policy: if China joined the club, it would join the United States and European countries in adopting a tax on carbon emissions above an agreed threshold (or an equivalent policy). No club member would face any climate-related tariffs from any other member. If China declined to join, the United States and its European partners would adopt a more modest carbon tax (with fewer climate benefits for all) and also impose tariffs on Chinese products. Those tariffs would be designed to hurt China’s exporters at least as much as they would be hurt if China adopted the club’s carbon tax or equivalent, giving Beijing an incentive to join. A refusal to join on Beijing’s part would allow Washington and its European allies to shift the political narrative and cast China as the chief villain on climate change.
This approach would work, however, only if the United States did not decouple its economy from that of China. If the two countries were to walk away from the trade and investment that have so thoroughly linked them for the past three decades, Washington would have no easy way to persuade Beijing to join the climate club and no easy way to punish the Chinese for not doing so.
The need for climate cooperation with China is thus somewhat like the need for nuclear arms control with the Soviet Union during the Cold War: in both cases, realpolitik means setting aside certain differences in order to cooperate on a dilemma that neither side can solve alone. Wise political leaders should see that the gains from careful, guarded, partial cooperation far outweigh the costs. Continuing to engage with China, with limited exceptions for national security reasons, represents the only clear path to addressing the climate crisis. Decoupling, in contrast, would mean pursuing a small victory in the short term and courting disaster in the long term.