Address to Glasgow University

‘The Impact of US-China Relations on Global Geo-politics, Geo-economics and Climate Change: The Continued Need for Managed Strategic Competition’ 

Hon. Dr. Kevin Rudd AC
26th Prime Minister of Australia

An Address to the University of Glasgow on the Conferring of an Honorary Degree of Doctor of Letters

Bute Hall
University of Glasgow
28 May 2024

Prepared for delivery

I thank this ancient university, founded in the 15th century, and now among the oldest in the world, for awarding me this honorary degree.

I thank the Vice Chancellor, Professor Anton Muscatelli, for his leadership of this storied institution and the great kindness he has extended to me personally.

And I thank my former parliamentary and prime ministerial colleague, Gordon Brown, for his friendship over many years and his friendship with this university.

You proudly boast the great moral philosopher and modern economist Adam Smith as one of your own, whose writings in Moral Sentiments and The Wealth of Nations have shaped my own worldview over many years.

In the engineering sciences, you also nurtured James Watt, Adam Smith’s great friend and contemporary, who became the inventor of the steam engine, giving rise to what we came to call the Industrial Revolution, which transformed the world.

You have also produced three former British prime ministers, including Queen Victoria’s great Whig favourite, Lord Melbourne.

And it is here we find another connection with Australia.

Not only in giving his great name to what is now one of our greatest cities.

But also, less gloriously, his decision as Home Secretary to despatch a second wave of convicts to our already fatal shores – this time political refugees who had been among the Swing Riots of 1830-31 and the Tolpuddle Martyrs of 1834.

While I cannot claim direct lineage from this great gaggle of political radicals, their influence over the next half-century helped shape the embryonic Australian labour movement and through it the Australian Labor Party of which I would one day become a member, an MP, and later as its parliamentary leader, Australian prime minster.

History bends a long and large arc indeed.

I should add that while I’m not a descendent of the Tolpuddle Martyrs who were transported to the infant convict colony, when I did become prime minister, the researchers went to work and found that I too had convict forbears.

Not just one convict forbear – Thomas Rudd, from the Second Fleet in 1790 – but in fact five convict forbears in my direct family line.

All of which is to prove that, while a record of criminality is not necessarily mandatory for a career in Australian politics, it can nonetheless be decidedly helpful.

For which we all owe Lord Melbourne, a graduate of this great university, some debt of gratitude for his contribution to the diversity of our Antipodean convict gene pool.

The Rise of China

I am grateful for the opportunity today, at this great gathering of the university, to be invited to provide some personal reflections on the state of our world. 

I do so, however, in my individual scholarly capacity as a lifelong student of the workings of the Chinese Communist Party, as a former political practitioner, and a continuing global citizen. But not as Australian Ambassador to the United States, nor as a representative of the Australian government.

The world today is a much smaller place than it was in Lord Melbourne’s day.

In the 19th century, there was a clear delineation between the foreign and the domestic.

Less so in the 20th century when we were ravaged by two world wars, a Great Depression and the complex legacy of colonialism.

And now in the 21st century we are witnessing the collapse of what political scientists once described as “the great divide” that separated clinically that which was once neatly described as the “national” from the “international”.

We now see the globalisation of everything: from security, politics, economics, technology, communications, society, culture, people movements, climate change and, most recently, pandemics.

It is one of the reasons why national governments across the democratic world face growing challenges on longer-term policy efficacy and therefore political legitimacy – because often the powers of national governments to deal effectively with national problems are increasingly limited by international factors over which they have at best marginal control.

And at the same time, the institutions of global governance have seemingly ground to a halt.

The impact of the rise of China offers the starkest illustration of this today – its impact now reaching across geo-politics, geo-economics, the global environment, the future of the international system and a growing global ideological divide.

China under Xi Jinping has the world’s second most powerful conventional military, and against most measures, now the single largest military force.

China has now become the second-largest economy in the world and, according to purchasing power parity measures, already the largest.

It has been the world’s largest trading power since 2015, the third-largest source of foreign direct investment for the world since 2020 and is now locked in a struggle with the United States to secure the commanding heights across all critical domains of technology, most crucially artificial intelligence.

On climate, the carbon intensity of China’s economic modernization over the last four decades has, since 2015, made it the largest single contributor to global greenhouse gases.

Based on current trajectories, by 2030, China will account for a quarter of annual global emissions (with the United States coming a distant second at just under 10%).

At their present course, by 2040, China’s combined current and historical emissions will produce a cumulative carbon footprint larger than that of the United States, which took two centuries of industrial development to produce the same effect.

China’s national power against all measures had been rising rapidly under Xi Jinping’s three predecessors – Deng Xiaoping, Jiang Zemin and Hu Jintao.

What has changed under Xi Jinping, however, has been China’s predisposition to use its accumulated national power through a more assertive foreign policy, military posture, and global economic strategy.

This was made plain in 2014 when Xi formally abandoned Deng’s decades-long strategy of “hiding your strength, biding your time, never taking the lead”.

Xi, by contrast, over the last decade set about actively changing the international status quo through a more assertive and at times more aggressive international policy – both in a direction and with a destination more compatible with the Chinese Communist Party’s nationalist interests, as well as its Marxist-Leninist ideological values.

In part, these changes have been driven by an active decision by Xi to deploy China’s newfound national power to change the international status quo to its advantage.

In part, they have also been driven by Xi’s deliberate changes in the party’s underlying ideological worldview – and what my own recent doctoral dissertation concludes as his determination to build a more Leninist party and politics, a more Marxist economy and a more nationalist foreign policy.

It’s for these reasons, and in response to these changes in Xi Jinping’s ideological and strategic posture, that most foreign governments have over the last decade been in the process of changing their own strategy for dealing with China’s rise.

The Future of Geo-Politics

In the Middle East, the central focus of geo-politics remains Israel, Gaza and the Occupied Palestinian Territories.

In Europe, it’s the Russian invasion of Ukraine which, if allowed to prevail, violates the most fundamental principle of the post-war order on the absolute illegality of states invading other sovereign states.

In Asia, it is the need to deter China from undertaking unilateral military action against Taiwan as this would fundamentally redefine the strategic future of the Indo-Pacific with Beijing then at the absolute centre of a new regional order.

The world therefore is awash, once again, with geo-politics, in a way that we have not seen since the height of the Cold War against the Soviet Union.

These geo-strategic challenges are also linked with China having become an essential strategic, economic and foreign policy partner of Putin’s Russia, within what both leaders now describe as a “strategic partnership without limits”.

Indeed, there are now assessments that without Chinese economic support and its supply of dual-use technology, Putin could not sustain Russian forces in the battlefield.

Notwithstanding their own significant historical – and some continuing – disagreements, the world has not witnessed the combined Eurasian might of this new combination of Russian and Chinese political, military, economic, cyber and space capabilities since the 1950s.

The United States political system, both Republicans and Democrats, have responded to this changing China challenge with a new doctrine of “strategic competition”, replacing its earlier, bi-partisan approach of open-ended “strategic engagement”.

This earlier approach was anchored in an underlying analysis that China would, in time, become what the Americans described as a “responsible global stakeholder” in the rules-based international order that the US and its allies had crafted together since WWII.

This reasoning was anchored in the view, over decades of political and economic engagement with Beijing, that it was as much in China’s interests as the rest of the world’s for China to continue to grow its economy within open international markets and within a geo-strategic environment of continuing stability.

It has been Xi’s changing strategy since 2014 that has changed these deep analytical underpinnings of US and allied strategy toward China over the last decade.

This new US approach can perhaps best be described as “managed strategic competition”, although different terms of art are used within the Washington beltway.

It is anchored in a doctrine of integrated deterrence in order to persuade Xi that the costs and risks of unilateral military or cyber action against Taiwan, or against US treaty allies in the region, would simply be too great for Beijing to consider, let alone initiate.

Put starkly, deterrence is intended to reduce the risk of war by design.

And deterrence should be accompanied by a range of practical “confidence and security building measures” designed to reduce the risk of conflict by accident – including the restoration of basic military-to-military channels of communication to avoid, manage and, if necessary, de-escalate incidents at sea and incidents in the air of what is already a very crowded strategic space.

Furthermore, strategic competition is also anchored in an emerging doctrine of national resilience so that the US and its strategic allies and partners are themselves capable of defending and sustaining their political institutions, economic infrastructure and social cohesion against external, non-kinetic assault – including cyberattack.

In the case of Taiwan, the effectiveness of deterrence also rests on the critical assumption that Taipei will not seek unilaterally to change the status quo concerning its own political status by not declaring its own independence. This would cross a longstanding Chinese red line. Fortunately, this now seems to be the bipartisan position across Taiwanese domestic politics and is supported by three quarters of Taiwanese public opinion.

Beyond these basic principles of deterrence, guardrails, resilience and the preservation of the political status quo on Taiwan itself, the doctrine of managed strategic competition also embraces two other concepts as well.

The first is that in the domains of foreign policy, economic capacity, technology and ideology, there will now be an era of no-holds-barred, but non-violent, competition between the US and China.

The second is that, with certain agreed global public goods, the US and China can continue to cooperate, for example: in maintaining global financial stability given the near death experience for us all in the Global Financial Crisis of 2008-09; in reducing the risk of another pandemic given how much we all failed to deal effectively with the last one; as well as the enduring great challenge of avoiding catastrophic climate change.

This framework of managed strategic competition is therefore multidimensional in its content.

It has not, however, formally been accepted by China, which offers its own framework for managing its strategic relationship with the US through what Xi Jinping interestingly describes as “no conflict, no confrontation, mutual respect and win-win cooperation”.

Since October last year at least, after the meeting between Xi Jinping and President Biden at the San Fransisco APEC summit, there has been a tacit de facto, if not de jure, recognition that both sides are, for the time being at least, engaged in the practical business of managed competition between them.

This has involved certain tactical adjustments on China’s part – for example, in the resumption of both high-level political as well as military-to-military dialogue with the US after many years of suspension.

What remains unclear, however, is how long these tactical adjustments will remain in place, particularly given the clarity of Xi’s domestic ideological discourse that China is not about to change its long-term strategy.

The Future of Geo-Economics

If the world is awash with geo-politics today, it is equally important to understand how much this is also shaping the future trajectory of global geo-economics.

This would be particularly clear here at Adam Smith’s great university given the impact of classical and later neo-classical economics, and its anchoring principles of the role of markets, efficient price and Smith’s “invisible hand”, on global economic orthodoxy in recent times.

Xi Jinping’s new economic nationalism, mercantilism, and doctrine of self-reliance – and now America’s response to it – is instead driving much of the deep change we are seeing unfold in global economic policy today.

While the American and wider international critique of China’s economic framework in the pre-Xi Jinping era was significant (focussing on Chinese industrial policy, tariff and non-tariff barriers, and intellectual property theft), the US response to Xi Jinping’s new economic model became systemic after 2015.

This was when Xi released his famous – now infamous – Made in China 2025 strategy which detailed for the first time China’s plan to dominate global manufacturing in general, and all major high technology domains in particular, by 2025.

This plan represented a direct assault on the fundamental principles of open markets, both at home and abroad, and the reality of mutual economic interdependence on which these principles were based.

This change in economic policy settings became clearer after the 19th Party Congress in 2017 under Xi’s new mantras of the “new development concept”, the “security in development” and the so-called “dual circulation economy” strategy.

Under the latter, China, through what he describes as “the great internal circulation” (for which read Chinese domestic demand) would increasingly generate the bulk of its own future national economic growth, while allowing the rest of the global economy to become increasingly dependent on China’s “lesser external circulation” (for which read international trade and investment).

Put simply, for future economic growth, at least from the perspective of Beijing’s new ideological orthodoxy, China was to become less dependent on the world economy, while the world would become more dependent on the Chinese economy.

It took some time for the United States and others to absorb fully the significance of China’s changing economic policy direction.

After 35 years under Deng, Jiang and Hu, China’s economic order was suddenly turning on its head, as the world confronted an increasingly all-powerful Leninist party which was now asserting itself in economic policy after decades of technocratic-driven, basically pro-market, pragmatic economic management.

Furthermore, Xi had not only empowered this more assertive Leninist party, he also had begun to lay out a different Marxist ideological framework for the future of the Chinese economy.  

Its domestic organising principles were: 

• the assertion of industrial policy over the market allocation of economic resources;

• the reassertion of the state-owned enterprise sector over the private sector; and

• a radical new emphasis on income distribution under the ideological rubric of “common prosperity”.

Its new international economic policy principles were:

• national economic, energy, mineral resources and, most critically, technological self-sufficiency;

• a related premium on national security across the board; and

• a new assertive economic diplomacy around the world, both to coerce noncooperative states where necessary, and to change the rules, norms, technical standards, currency exchange and, where necessary, the institutions of global economic governance. 

What tipped the balance, both in the United States and in much of the rest of the West, was the global pandemic, its origins and the acute new sense of economic vulnerability that followed as many countries discovered that they had become dependent on China across the supply chain: from protective personal equipment, to pharmaceutical precursors, through to a full range of basic manufactures that were suddenly in urgent demand.  

The rest, of course, is history.

The US, just prior to the pandemic, had already taken punitive tariff measures against China across multiple tariff lines as retaliation against China’s own trade barriers and its large-scale industrial subsidies.

A truce of sorts had been signed in February 2020, before the public polemics over the origins of Covid and the adequacy of China’s domestic responses to it, erupted into the mainstream of US and global politics during 2020, 2021 and 2022.

But since the pandemic, consistent with geo-politics, the economic relationship between China and the US has continued to deteriorate across the board.

The US has maintained and now expanded its tariff measures against the PRC.

The US has also now banned a range of high technology exports to China, both by the US and by its allies, particularly in semiconductors.

And, on top of the above, the US has implemented at scale its own industrial policy responses (including the Chips and Science Act and the Inflation Reduction Act) to build its own industries back.

That brings us to the present when we see a global battle royale now raging between the US, China (and, at times, the EU) on the future of industrial policy.

China’s protectionism remains formidable. As does its eye-watering supply of industrial subsidies. As are the great debates today over the degree of Chinese dumping on global markets – in critical minerals, batteries, renewable energy technologies, electric vehicles and middle range semi-conductors.

I doubt that Adam Smith, in his observation of the actions, behaviours and pricing signals of the Glasgow merchant class in the 1770s, and their always-controversial trans-Atlantic trade, envisaged an economic Leviathan 250 years later in the form of the Chinese party-state – increasingly positioning as a single, integrated actor in world markets, both as near-monopoly supplier and a near-monopsony purchaser.

Indeed, the world has not seen a national and global economic actor like it in modern history.

The challenge for policy makers and private firms for the future is how to navigate a global economic order that is becoming more bifurcated, more driven by re-risking on both sides, and the even deeper dangers of decoupling.

The United States defines this as managing a “small yard with high fences”.

Meanwhile, China objects to any yard at all, while at the same time building its own national and global economic ecosystem that is increasingly divorced from market principles and increasingly driven by its own sense of national security imperatives.

Global geo-economics is therefore likely to become increasingly binary, rather than economic engagement constraining, as it once did, the deepest atavistic tendencies of global geo-politics.

Or at least as long as the new ideological, strategic and economic orthodoxies of the Xi Jinping era last.

And on this, all eyes are now trained on the Third Plenum of the 20th Central Committee, due in July 2024.

Already 15 months later than usual, the analytical world will be trained on whether China’s significantly slowing domestic growth numbers may begin to result in a deep change in economic strategy that might match China’s interests in geo-political stabilisation as reflected at the Xi-Biden Summit last November.

Strategic Cooperation, Climate Change and the Future

All this may make for bleak news in an already very bleak world.

It’s important, however, particularly in these halls of higher learning, to be deeply aware of the great trends that are unfolding before us in our time.

And for sharp minds to focus on practical policy ways through. For Washington. For Beijing. For Brussels. For Whitehall. And for those of us in the region itself.

History, despite what the Marxists may tell us, is never determined for us.

It is there for all of us to write. We all have political agency.

We are not the mere puppets of some mystical structure of deep-set international relations theory.

And the advantage of strategic concepts such as “managed strategic competition” is that it combines both strategic realism about the hard business of defence, deterrence and resilience; the sharp challenges of economic, foreign policy and ideological competition; while still building the space for strategic cooperation in critical domains such as climate change.

As this academy knows well, the biosphere, the climate that sustains it, and the actions necessary to preserve it, are intolerant of geo-political and geo-economic rationales for inertia. The times are already too late to procrastinate.

This is now more acute than when Gordon Brown, Barack Obama and I struggled as hard as we knew how to realise a binding global treaty on climate in 2009. And, in part at least, we failed.

But we must never abandon hope.

There is indeed a rational basis for this hope.

And that lies in intelligently advancing this precious space for climate action in the midst of the great contests over geo-politics and geo-economics that surround us all.

The uncomfortable truth is that climate change, if left uncorrected, will prove equally destructive to both the United States and China.

There is therefore a deep mutual interest at stake for both to deal with this global challenge, quite apart from the rest of the planet. 

That is why doubling down around the principles of managed strategic competition between China, the United States and its allies, are now more important than ever – to sustain geo-political stability, to manage geo-economic competition and to continue to create sufficient political space for effective climate change action.