James A. Baker, III, Partner, Baker Botts LLP and Former US Secretary of State
Joint AmCham/HKGCC Luncheon
March 23, 2006

Ladies and gentlemen,
It is a great honor to be standing before this distinguished group of business leaders. Your hard work and dedication to free markets and international trade provide a strong argument for the advance of globalization.
My subject today – America and China in Asia – is admittedly a complex one. While I cannot claim the specialized expertise of many in this audience, I hope that my remarks – focusing on the broad trends shaping Sino-American relations – can shed light on what, to my mind, is rapidly becoming the most important bilateral relationship in the international arena.
Let me begin by a brief discussion of two truly historic phenomena that are shaping Asia and indeed the world today.
The first may be called – in the words of Charles Krauthammer – America’s “unipolar moment.” I use the term with some hesitation because it can suggest that American power is unlimited – an assertion, as I will point out later, that is both dangerous and untrue. But Krauthammer’s formulation does capture a critical element of the contemporary international environment. With the collapse of the Soviet Union, the United States faces no global rival. The days when the world was divided into two armed camps are long since gone. In a number of areas -- military might chief among them, but including economic power, technological innovation, and cultural influence -- America possesses advantages over any would-be rival that make it unique in modern history.
But we must be careful not to exaggerate. The United States may be the preeminent power in the world today. But preeminent is very different from omnipotent. This is true even in the area where America’s edge is most obvious: the projection of decisive military force across immense distances. The relative ease with which the United States overthrew the Taliban in Afghanistan and Saddam Hussein’s regime is striking testimony to our military strength. But the continued insurgency in Iraq suggests that our military edge is less pronounced when it comes to irregular warfare. I say this as someone who both remains cautiously optimistic about the eventual outcome in Iraq and admires the extraordinary performance of American military personal engaged there. But the fact remains that our overwhelming military advantage is much diminished when dealing with an insurgency. Moreover, Washington’s ability to deploy military power is constrained by domestic opinion. While the American public is prepared to support military action in defense of our national interests, it clearly has no taste for the United States becoming the world’s policeman. Talk of an American “Empire” is just that: talk.
The second phenomenon shaping the current international environment is the rise of China. China’s economic revolution – one that has seen growth average nearly ten percent for three decades and hundreds of millions of its citizens lifted from poverty – is arguably the most dramatic economic transformation in world history. From a closed, inward-looking and impoverished nation, China has moved rapidly to the first rank of world economies. Unsurprisingly, this transformation has been matched by an increasingly activist foreign policy not just in Asia but around the world. China seeks a voice in international affairs commensurate with its economic status. And, to judge from its defense build-up, Beijing views military power as one of the prerequisites to attaining that voice.
Again, however, we should not overdraw the case. Despite increases in military expenditures, China still falls far short of a capability to project force at great distances. Even in the economic realm, China confronts huge challenges if it is to sustain robust growth rates. These range from the imperative of continued economic reforms – most notable perhaps in the financial sector – to the growing economic gap between urban and rural populations. In addition, we can fully expect Chinese growth rates to decline in future decades as its population ages and economy matures.
Despite these provisos, both China’s rise and America’s preeminence are by any standard historic. Taken together, they have prompted observers on both sides of the Pacific to predict an inevitable conflict as Beijing’s ambitions collide with American dominance in Asia and around the world. I believe we should reject any such analysis.
We should do so on three grounds. First, predictions of inevitable conflict can become self-fulfilling prophecies. There is no better way to find an enemy than to go looking for one. To view any expansion of China’s role in world affairs as somehow “sinister” will only increase the misunderstanding and mistrust that already complicate the Sino-American relationship. Second, such an analysis seriously underestimates the broad areas – economic and strategic – where Chinese and American interests converge. Thirdly, predictions of conflict give short shrift to the ability of Washington and Beijing to manage differences when they arise.
Shared Sino-American interests are most obvious in the economic arena. Not only are the two countries major trading partners, but both possess a vital interest in the health of the broader world economic system. Each is a major beneficiary of more open trade and investment. Each is an important stakeholder in the ongoing process of globalization. These common interests are likely to expand and deepen with time, as China’s economy matures. Views on intellectual property rights and foreign investment, for instance, will surely converge as China turns more to technological innovation and herself becomes a major global investor.
The advantages to closer economic cooperation are two-fold. Importantly and obviously, it promises greater economic well-being for the citizens of both countries. But economic cooperation also tends to dampen the chances of conflict. Let me stress that I do not believe economic ties alone are a guarantor of peace. The experience of World War I – preceded by its own “golden age” of economic interdependence – is cautionary in this regard. But close economic links clearly do reduce the possibility of conflict by increasing the price of any confrontation and providing incentives to peaceful resolution.
“Issues where Chinese and American interests converge extend well beyond trade and investment. One such area, for instance, is energy. China’s emergence as a major importer of oil has created news realms of cooperation between Washington and Beijing. These can range from coordinated stockpiling to a common approach to stability in major oil-producing regions. One clear threat to stability in the Persian Gulf is Iran’s nuclear program, which could allow Tehran to blackmail its neighbors and set off a regional arms race. Both Washington and Beijing have a direct interest in avoiding such outcomes. How well the international community deals with Iran’s dangerous quest for nuclear weapons will represent an early and important test of Sino-American cooperation.
Another obvious common interest is combating terrorism. What happened to New York and Washington on September 11th, 2001 can happen in London, Cairo, New Delhi – or Hong Kong. While differences clearly exist between China and the United States on the wisdom of American intervention in Iraq, there remains broad scope for intelligence sharing and joint law enforcement in the broader international effort against terrorism. Beijing’s steps to tighten its export control regime – to pick just one example – represent an important contribution to this effort.
A last – and truly vital – area of shared interest is stability in North East Asia. Here the major threat is North Korea’s nuclear program. Should Pyongyang deploy nuclear weapons, it could place immense pressure on Seoul and Tokyo to do the same – a strategic development that Beijing should, and I am convinced would, view with alarm. An actual nuclear exchange – even aside from its terrible human cost – would plunge all of North East Asia into instability. China, as a participant in six-party talks to resolve the crisis, has clearly signaled its commitment to a comprehensive regional approach to North Korea’s nuclear program. This is a first – but crucial – step in what I hope will be broader security cooperation between Beijing, Washington, and regional capitals in the years and decades ahead.
Despite these broad areas of shared interest, Chinese and American policymakers cannot be content with identifying issues for common action. We also must manage differences. For make no mistake about it, such differences do exist. More are likely to arise as the United States and China pursue their various interests across an increasing range of issues and regions. One potential flashpoint – Taiwan – remains an area of perennial concern. So does trade policy, as witness the furor in the United States last year over the American trade deficit with China. Human rights and proliferation are also areas of contention.
A first and – to my mind – important step in managing differences is broadening the range of Sino-American consultation across the board. The recently completed second round of the US-PRC dialogue provides a model in this regard. The dialogue not only addresses specific issues of concern to both countries but includes broader exchanges of views. Initiatives to increase military coordination as a confidence building measure are similarly welcome. So are official and private exchanges of scholars, scientists, and students. Such initiatives both ease mistrust and foster open dialogue. As such, they are a critical supplement to traditional diplomacy.
But managing the Sino-American relationship will also demand firm and courageous political leadership on both sides of the Pacific. Leaders in Washington and Beijing must be prepared to confront powerful domestic constituencies as they seek to keep bilateral relations on an even keel. And they must be willing, in crises, to mute their rhetoric, sustain a dialogue, and seek compromise. On a personal note, let me say that one of the signal diplomatic accomplishments of the George H.W. Bush Administration was maintaining Sino-American engagement in the wake of Tiananmen Square. It was the right thing to do. But it was highly unpopular at the time.
Similar political courage may well be required at some point in the future. I am confident that leaders in China and the United States can in fact summon it – but only if they keep their eyes on the broader issues at stake. For let there be no doubt: Should Washington and Beijing slip into confrontation, everybody will lose – and not just the people of China and the United States. The consequences in terms of instability would be felt throughout Asia and on a truly global level. It would be nothing less than tragic were the world, after emerging from one Cold War, to plunge into another.
I firmly believe that such an outcome can be avoided. But it will require leaders in Beijing and Washington who understand those twin phenomena that I discussed at the beginning of my remarks. China can no more displace the United States than the United States can contain China. Washington and Beijing, working together, can do much to ensure that the people of Asia and the world enjoy a more secure and abundant future.
But it will take persistence, imagination, political courage – and vision.
Thank you.