US-China rivalry in South Asia

Dawn, Encounter
May 8, 2005
It’s a tight-rope walk for Islamabad: US-China rivalry in South Asia
By M. Abul Fazl



ACRUCIAL point in Chinese Prime Minister Wen Jiabao’s speech in New Delhi, during his recent visit to that country, was that the two countries should “refuse to let questions left over from history disrupt and impede the development of bilateral relations.”

Both the US and China are urging Pakistan and India to develop better bilateral relations, but from different perspectives. Washington wants India to be active in a sort of “containment” of China. Therefore, it does not want Pakistan to bind one of India’s hands. Instead, it favours a rapprochement between the two neighbours to enable India to play its role in the American scheme. China seeks detente in South Asia only to dissuade India from participating in any such containment scheme.

Premier Wen stated China’s position on South Asia in Islamabad before going to India so as to make it clear that a Sino-Indian rapprochement would not come at the expense of China’s relations with Pakistan. This position was: Kashmir was a bilateral dispute to be settled through negotiations between Pakistan and India. China would not enter into any alliance or treaty which infringed upon Pakistan’s sovereignty, territorial integrity or security. It would continue military cooperation with Islamabad and give it economic assistance, including the promotion of Chinese investments in the country. It continues to have an interest in Gwadar and the Arabian Sea.

It follows that China does not accept India’s demand — never officially formulated but the constant premise of all its moves vis-a-vis China being that Beijing treat South Asia as India’s sphere of influence, if not “Chasse gardee” — and deal with Islamabad, Dhaka, etc., through New Delhi.

China has supported India’s claim to a permanent seat in the UN Security Council. Presumably, it would also be prepared to accept India’s annexation of Sikkim, its suzerainty over Bhutan and its primacy in Nepal. That would enable India feel free to directly crush the revolutionary movement in Nepal if the Nepalese are unable to do so. However, India would abide by its 1954 recognition of China’s sovereignty in Tibet.

The Sino-Indian border question is not a complicated one in itself. China basically stands by Chou Enlai’s offer of 1960 to Nehru under which it would accept the McMahon Line in the east and India would accept the existing positions obtaining in the west, including Aksai Chin. But it is hard to see how can there be a transfer of territory there, as Aksai Chin’s whole territorial boundary is a watershed. Anyway, India’s claim to it is predicated upon a hunting trip that an British official working in India, made to it in the late 19 century.

If China and India agree to a frontier delineated as proposed by China, it will automatically invalidate India’s objection to Pakistan-China border agreement. With the frontier problem and India’s claim to supremacy in South Asia out of the way, China and India can move to economic cooperation on a large scale. However, trade will now have a different composition from the one envisaged in their first trade agreement signed in early 1950s. At that time, China had offered typical Third World products, while India had agreed to sell many advanced industrial goods that it did not produce. It was thus prepared to become a conduit for many European exports to China. The two countries have now gone far ahead in the second stage of industrialization and can trade in goods related to even the third stage, such as electronics, etc.

However, the two Asian giants may have to face a new problem in the near future. The Chinese currency is undervalued. That may bring Beijing a lot of foreign exchange but it also means unequal exchange in all of its foreign trade i.e. China gives more value in exchange for less value. This is possible because the wages of the Chinese industrial workers are not only low but continue to be kept low.

But since the productivity of the Chinese workers producing relatively simpler modern industrial goods is not far below than that of the European workers and since many of these production processes are often in the nature of assembly, requiring more labour than what is needed in complex production, the rate of surplus value in industry is high. Some of this surplus is surrendered in foreign trade and the rest goes into equalizing the rate of profit in the general modern industrial sector.

However, when wages grow faster than productivity which is bound to happen because their level is artificially low now, the rate of profit will decline, making export of the simpler Chinese industrial goods less competitive. Then China’s export of capital is bound to rise. This may bring clash of interests between China and India in South-East Asia and Africa. China plans to cope with this eventuality by proposing Sino-Indian cooperation in establishing export processing zones.

We, on our part, are going merrily into what may be described as de-industrialization by reducing import duties and levying higher excise taxes on our existing industrial production. Our prize export is textiles, which, in industrial terms of today’s world market, puts us lower than when we were exporting only cotton (and jute). And we seem to be content with staying at that primitive level, proclaiming proudly that we use the advanced Swiss textile machinery, unlike the Indians, who, the poor mortals, make their own textile machines.

Our economic managers must be the only believers today in the neo-liberal theories, apart from the importers of luxury goods in the rentier states. If neo-liberalism had had any truth, the Third World would, today, have the same per capita income as the advanced countries. I do not know the reason for this ideological orientation. But if we continue to stick to the path of primary industrialization we will soon be dominated by the countries like China and India, which have gone into the second stage and are entering the third now.

We should consider entering into agreement with China to set up export-processing zones in Pakistan and, more importantly, join with it in setting up such zones in the third countries. This may transfer some technology to our industry, enabling it to transcend the textile stage. And, of course, it will contribute to the political aspect of our relationship.

Meanwhile, the US Defence Secretary, Donald Rumsfeld, was in Pakistan soon after Wen’s visit but with a different perspective. In the past, we were recruited into western anti-Soviet alliances primarily to guard the West’s interests, like oil, in West Asia. This association, now over 50 years old, has both positive and negative aspects. Over this period, there have developed individual contacts at different levels between the two countries. These have been of help to us, even during the periods when the US, behaving with the ruthlessness of a great power, has acted in ways which harmed us.

However, the principal weakness of this relationship has been its predominant military content. This has, no doubt, permitted the development of a good rapport between our military leaderships. But it has also helped inflate the size of our armed forces beyond our needs and far beyond our capacity to bear their expenses.

Today, the US has assumed the historically difficult task of re-making the state system in Central and Western Asia, following the collapse of the Soviet Union. The task is likely to be prolonged. The US needs Pakistan, its territory and, perhaps, its armed forces for it but Islamabad would find itself unable to intervene militarily in most cases in the two regions. But there are many ways, short of intervention, in which it can render effective help to the US. However, the unilateral US military interventions will not last for long. Both their frequency and force are likely to diminish once the other economic powers find a way to check the US’s ability to finance its imports with its unsupported national currency.

Secondly, while the US and India are groping their way to a “strategic alliance”, neither is certain what shape it will take. The US would need a strong and stable Pakistan during this period, and later to act as a sort of stick to wave at India in case the latter becomes too assertive.

Our interest is to maintain a good relationship with the US but we should also endeavour to reduce the military content of this relationship, so that Washington helps us in accelerating the pace of industrialization instead of forcing us to lower our guard against the destructive currents of the world capitalist market.

America and China are both making moves to shape up the post-Soviet Asia. We are friends of both and would like to remain so. However, it is a fact that China is more sensitive to our vital concerns than the US. We can only hope, and perhaps try to see, that their competition does not take an ugly turn.

As to the Muslim world to our west, our interests and those of the US do not coincide beyond a certain point. The US is the greatest power in history, the “sole super-power” as the media puts it. But the relative strength of all powers is also historic. It has a beginning and an end in time. The US is far away and may, one day, withdraw from our vicinity. Our territorial neighbours will always be there. We have to ensure that our relatively short-term cooperation with the US is not to the detriment of our long-term interests.