An Asia Society Policy Institute Publication The Avoidable War e Case for Managed Strategic Competition BY THE HONORABLE KEVIN RUDD, President, Asia Society Policy Institute The Avoidable War: The Case for Managed Strategic Competition A COLLECTION OF MAJOR SPEECHES DURING 2019 THE HONORABLE KEVIN RUDD PRESIDENT, ASIA SOCIETY POLICY INSTITUTE JANUARY 2020 With a solution-oriented mandate, the Asia Society Policy Institute (ASPI) tackles major policy challenges con- fronting the Asia-Pacific in security, prosperity, sustainability, and the development of common norms and values for the region. The Asia Society Policy Institute is a think- and do-tank designed to bring forth policy ideas that incorporate the best thinking from top experts in Asia and to work with policymakers to integrate these ideas and put them into practice. ABOUT THE AUTHOR The Honorable Kevin Rudd served as Australia’s 26th Prime Minister (2007–2010, 2013) and as Foreign Minister (2010–2012). He led Australia’s response during the global financial crisis—the only major developed economy not to go into recession—and co-founded the G20. Mr. Rudd joined the Asia Society Policy Institute in New York as its inaugural President in January 2015. He serves as Chair of the Board of the International Peace Institute and Chair of Sanitation and Water for All. He is a Senior Fellow at Harvard University’s John F. Kennedy School of Government, a Distinguished Fellow at Chatham House in London, a Distinguished Statesman with the Center for Strategic and International Studies in Washington D.C., and a Distinguished Fellow at the Paul- son Institute in Chicago. Mr. Rudd is a member of the Comprehensive Nuclear Test-Ban Treaty Organization’s Group of Eminent Persons. He serves on the International Advisory Board of the Schwarzman Scholars program at Tsinghua University, and is an Honorary Professor at Peking University. Mr. Rudd is proficient in Mandarin Chinese. He remains actively engaged in indigenous reconciliation. Chapters one through six of this collection include remarks as prepared for delivery. The Asia Society Policy Institute and the Asia Society take no institutional positions on matters of public policy and other issues addressed in the reports and publications they sponsor. All statements of fact and expressions of opinion contained in this report are the sole responsibility of its authors and may not reflect the views of the organization and its board, staff, and supporters. © 2020 The Asia Society. All rights reserved. The Asia Society Policy Institute Web: AsiaSociety.org/Policy-Institute Twitter: @AsiaPolicy Facebook: facebook.com/AsiaPolicy Email: [email protected] New York Washington, D.C. 725 Park Avenue, 6th Floor 1779 Massachusetts Ave, NW, Suite 805 New York, NY 10021 Washington, DC 20036 +1 212 288 6400 +1 202 833 2742 CONTENTS FOREWORD 4 Henry M. Paulson, Jr. INTRODUCTION 7 The United States, China, and the Decade of Living Dangerously 1. China’s Strategic Vision, Strengths, and Vulnerabilities: 10 Regional Responses across the Indo-Pacific An Address to the 55th West Point Senior Conference, United States Military Academy, West Point, New York • April 9, 2019 2. New Directions in Beijing and Washington: Are We 25 Seeing the Beginning of a Chinese Policy Reset? And Will There Be a U.S. Reset Once the Trade Deal Is Done? An Address to the 22nd Annual Harvard China Forum, Harvard Business School, Cambridge, Massachusetts • April 14, 2019 3. The Trade War, Economic Decoupling, and Future 35 Chinese Strategy toward America Remarks at the Lowy Institute, Sydney, Australia • June 13, 2019 4. China’s Political Economy into 2020: Pressures on 51 Growth, Pressures on Reform An Address to the Conference on China’s Economic Future: Emerging Challenges at Home and Abroad, Chatham House, London • July 11, 2019 5. To Deal or Not to Deal: The U.S.-China Trade War 64 Enters the Endgame An Address to the American Chamber of Commerce (AmCham China), Beijing, China September 9, 2019 6. To Decouple or Not to Decouple? That Is the Question 75 for U.S.-China Relations Robert F. Ellsworth Memorial Lecture, 21st Century China Center, University of California, San Diego • November 4, 2019 7. The Avoidable War 98 A Conversation at the John F. Kennedy Jr. School Forum, Harvard Kennedy School, Institute of Politics, Cambridge, Massachusetts • December 5, 2019 4 | ASIA SOCIETY POLICY INSTITUTE THE AVOIDABLE WAR: THE CASE FOR MANAGED STRATEGIC COMPETITION FOREWORD Kevin Rudd served as Prime Minister and Foreign Minister of Australia during a period when four trends— each of them deeply connected to the rise of China—began to thoroughly reshape the international order. First, the global economic order has been irrevocably changed by the emergence of China as the world’s second-largest economy and its transition from a capital importer to a major exporter of capital to emerging and advanced industrial markets. Rudd swept to oce in 2007 at the head of a Labor government focused on sustaining Australia’s economic momentum while broadening its opportunities in the world. But within just one year, the global nancial crisis had altered the context for the pursuit of those policies. As America’s 74th Treasury Secretary, I worked closely with Rudd and other world leaders not just to stave o the worst economic crisis since the Great Depression of the 1930s but also to reduce the likelihood and severity of future nancial crises. At the time, China was playing a critical role. Its USD $1 trillion economy when it entered the World Trade Organization had multiplied severalfold. Its cooperation was important in containing the crisis and driving global growth in the immediate aftermath of the crisis. Today, China is a USD $14 trillion behemoth and the world’s second-largest economy, giving Beijing new weight as a source of global growth. Even more than in 2008, Beijing’s choices and preferences, for good or ill, will now aect every element of the international economic order—how and where capital moves; the sources and drivers of growth; the roles of tari and nontari barriers and counter-barriers; and whether openness or protectionism will prevail. In this collection of speeches, Rudd digs deeply into the implications of these economic changes, not just for the global economy but for how the world’s major nations can and should relate to one another. Second—and as a direct result of this economic reordering—the architecture of international institutions has changed. By 2008, we believed that no global response to any truly global economic challenge could fail to include the world’s fastest-growing economies, especially China and India. Here, Rudd worked closely with President George W. Bush, me, and other world leaders and nance ministers to pioneer a new Group of 20 (G20) Leaders Group to serve as the world’s principal multilateral forum to coordinate and then rebuild from the crisis. e G20 has since come to supplant the G7, reecting both the importance of a more representative grouping and China’s emergence as a force in world aairs. Indeed, it was both a practical response to the realities of a world that had changed since the 1970s and integral to an aspirational eort to encourage the world’s emerging economies to be responsible partners in global governance. Rudd rightly recognized that China’s goals were not the same as those of the leading liberal democracies, including Australia and the United States. But he also understood that with countries like China about ASIA SOCIETY POLICY INSTITUTE THE AVOIDABLE WAR: THE CASE FOR MANAGED STRATEGIC COMPETITION | 5 to gure so large in world aairs, our democracies would need both to fortify our preferred rules and standards and nd ways to preempt China’s desire to export its own preferred rules and standards. Xi Jinping’s rise to power has only intensied this challenge. Rudd’s speeches in this collection address directly the nature and extent of Xi’s eort to tout China’s experiences as a “model” that can be exported and potentially assimilated by other countries. And to the extent that this represents a direct challenge to the democracies’ preferred rules, standards, and institutions, that challenge is now at the core of debates about the future of the international order. Rudd lived this—and tried to shape it—as the prime minister of a leading Westminster democracy. And he has thought deeply about the implications of China’s present challenge to it. is collection of speeches enlivens this second set of debates too. It also proposes ways to adapt to China’s challenge and a few ideas to try steering Beijing’s emerging energies. ird, the future of the world’s natural environment—its climate, its energy future, and the fate of its delicate ecosystems—became an urgent global challenge in the years when Rudd led Australia. And the importance of attacking climate change has only intensied in the years since he left oce. In 2009, Rudd was a presence at the Copenhagen climate conference, leveraging Australia’s role to try to shape a positive outcome. Yet, ultimately, the central story at Copenhagen became, once again, the growing role of China. Premier Wen Jiabao represented Beijing in contentious talks that, at various points, pitted China and certain like-minded countries against the advanced industrial economies, including Australia and the United States. Today, climate change and energy adaptation remain singular challenges, not just to the natural environment but as perhaps the biggest risk to the future of the global economy. e leading economies cannot aord a one-dimensional approach to China that turns solely on climate change while subjugating other priorities. Still, as climate impacts intensify, from the Australian bush to the American ocean coasts, Beijing’s choices and approaches will be essential to the future of global collective action.