What the Huawei battle tells us about US-China relations

The US insists that its opposition to Huawei technology being used in key information systems stems entirely from security concerns: the fear of "back-doors" in the software or the relationship between the Chinese State and its major high-tech companies.

Of course, there may be a good dose of old-fashioned commercial rivalry as well. These are the technologies after all that will shape the world's economic future.

But is there something more? Are we witnessing the first significant engagement in something that is much more than simply a conventional trade war?

For years commentators have been talking about China's rise: a shift of economic power to the East and the relative decline of the US. None of this was likely to happen without friction - but now though, the US is fighting back.

Spokesmen talk about preparing for a new era of global competition. In the first instance the discussion is military - re-orientating the US armed forces away from fighting insurgencies and regional wars to prepare for state-on-state conflict, with Russia and China as the peer competitors.

But in the struggle with China, the economic dimension is fundamental. At one level the Trump administration appears determined to use its economic muscle not just to constrain a company like Huawei, but also to force Beijing to open up its markets and change aspects of its economic behaviour that have long-concerned western companies seeking to do business there.

Beijing, of course, sees something different going on - a developing campaign to contain China's rise. And it may be right.

This battle is about much more than just business practices and commercial markets, it is a struggle over the most basic underpinnings of national power with huge strategic implications. To put it another way, the West is slowly re-learning the simple fact - one that Beijing has assimilated all too well - that economic muscle is the foundation of global power and that economic strength is the precursor of military might.

It is a truism that the West has taken for granted for more than two centuries, but the development of market capitalism and the military revolutions of the 17th Century were inter-linked. It was commercial and economic power that enabled the technology for military innovation, and this, in turn, facilitated the sea-borne empires of the 17th and 18th centuries and the steam-driven empires of the 19th.

When the US fully supplanted Great Britain as the dominant power in the West at the end of World War Two, for a brief moment the world had a single nuclear-armed global superpower. Of course the Soviet Union sought to rival the US in terms of its political and economic model, but it could not sustain the trappings of a military superpower over time. And with the collapse of Soviet communism, the US once again emerged as the sole global player with real military reach. This was the "unipolar" moment which now, in retrospect, seems all so brief.

The rivalry between Washington and Moscow during the Cold War years is instructive. Not because it is a parallel for today's growing tensions between the US and China, but rather because of how different it was. There was simply no equivalent to the current economic rivalry.

The Soviet Union's economy was largely cut off from the West - its technical development circumscribed and comparatively backward except in a few key areas. Western trade restrictions prevented the export of all kinds of technologies to the communist bloc.

China is an entirely different matter. Its huge economy and manufacturing base are hard-wired into the international economic system. It is probably a bit late to try to shut Beijing out of key sectors of economic activity. The pace of China's rise is almost unique. Some ten years ago the US economy was still three times the size of that of China. No longer.

In modern times the US has never faced an economic competitor of equal size let alone one that will out-pace it. This is entirely new. And it is, belatedly perhaps, prompting a fundamental rethink of the terms of economic competition: a rethink that puts economic power explicitly back where it always should have been, as the central foundation of national strategy and national power.

This of course is something the Chinese have understood all along. Nineteenth century China was the victim of western expansionism and buccaneering trade practices. It is a history that is well-remembered there, whereas in the West, the Opium Wars or France's Tonkin campaigns - its early forays into Indo-China - are largely forgotten.

China's "Belt and Road" initiative - its expansive plans for close economic ties with a chain of countries - was not solely about markets and access to raw materials, but reflected a fundamental strategic effort. This has been bolstered by a long-standing programme of buying up and developing essential port facilities around the globe.

It was a conscious policy to secure China's economic future as the key determinant of national power.

The "Belt and Road" initiative was undertaken with the understanding that the US and Japan would not necessarily be China's main trading partners in the long-term. China has tapped into huge markets throughout the developing world - literally billions of people. The Chinese economy may be faltering right now (at least in relative terms) but as one well-informed US China-watcher told me, "they have engineering talent, a focused leadership, a market orientation and long-term horizons".

President Trump has seemingly decided to draw a line against Chinese competition. A variety of regulatory changes in the US seek to curtail China's access to US knowhow and critical sectors of the US economy.

But will it work? Will Mr Trump himself stay the course or enact one of his customary U-turns? His recent comments on concessions regarding Huawei seem to underscore his transactional rather than strategic approach to foreign policy. But this is an issue way bigger than Mr Trump and will challenge multiple US administrations to come.

That though is a short-term concern. The fundamentals of the strategic competition between the US and China are clear and are not going to go away. Efforts to decouple their two economies will cause pain in the short-term for both (and probably in the long term too). But the concern is that the worsening economic tensions are carrying over into the security realm, raising real fears of conflict, either by accident or design.

Many of Mr Trump's domestic political opponents, while accepting that there is "a China problem", nonetheless disagree with the way he is setting about resolving it. International economic institutions need to be refreshed, they argue. Trade and security legislation need to encompass the challenges posed by new technologies like artificial intelligence. And they fear that Mr Trump is pursuing an altogether too-narrow and nationalist approach.

Above all, they say, allies need to be kept on side. If this resolves down to separate economic battles between China and Japan, between China and the EU, or between China and the US, Beijing will have the upper hand.

There was a time when the essential approach of the US to China's rise was to seek to make it a "responsible stakeholder" in the international system. It was essentially saying that China would be accepted if it played by the prevailing economic rules.

But now China has risen and it is a process that will not stop. Not surprisingly it has some ideas of its own. Now much of the talk is about containing China. But this simply raises the question, is China simply too big to be contained?