Editor’s note: In his book, Every Nation for Itself: Winners and Losers in a G-Zero World, Ian Bremmer argues that the world has entered a period of transition. The United States, Japan, and Europe no longer have the desire or ability to lead the world through transnational problems, such as stabilizing the global economy, reversing the effects of climate change, and tackling cybersecurity issues. Emerging economies like China still face too many domestic issues to deal with global problems. Bremmer, president of the Eurasia Group, a political risk research and consulting firm, says with the G20 and other multilateral organizations unable to lead because of the diverse interests of their members, the world has entered the G-Zero. In an excerpt from his book, Bremmer discusses what this leadership vacuum may mean for US-China relations.

Governments don’t accept costs and risks until they believe they have to—and until they become convinced that other governments won’t do it for them. But to protect their domestic political positions, leaders of established powers will act to try to ensure that transnational challenges don’t threaten their countries’ security, wealth, and privileges. Political elites in emerging states will try to make certain that crises don’t prevent their countries from emerging. As the G-Zero generates turmoil, decision makers in both sets of countries will have to build new systems, alliances, and global institutions. They will work together or act separately. They will adapt existing international institutions or build new ones. Either way, the G-Zero is not the new world order. It’s a period of transition that will give way to something else.

To predict what the new international order will look like, we must answer two questions in particular. First, will the United States and China act as partners or enemies? No political and commercial relationship is more important for 21st century peace and prosperity. Second, will other countries have the strength to play an important, independent role in the international order?

Some of the problems and opportunities that will shape the future of US-Chinese relations depend on developments inside each country. Confrontation becomes more likely if one or both of them suffer serious economic setbacks that send leaders scrambling for foreign scapegoats. In China, policymakers face the profoundly complicated task of implementing the reforms needed to keep the country’s economy humming while managing the threats that all these changes pose to the country’s domestic tranquility. In Washington, if partisan rivalries continue to poison American politics and prevent lawmakers from restoring the country to fiscal health, US frustration with the US-Chinese trade imbalance could reach a boiling point. In 2012, the transition to the next generation of Chinese leaders begins with a new president and a new Politburo in Beijing. In November, US voters go to the polls for both presidential and congressional elections. For better or for worse, all these new legislators and decision makers will change the relationship.

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Then there are the factors determined by direct interaction between the two countries. If US companies continue to earn large profits inside China, they will have a stake in China’s success and in stable US-Chinese relations. That would give them good reasons to lobby the White House and US lawmakers to avoid unnecessary confrontations. If, on the other hand, Chinese companies use their growing leverage within China’s bureaucracy to craft new rules and regulations that tip the competitive playing field in their direction, US companies are likely to drive the two governments toward a more aggressive commercial competition. If China continues to allow its currency to appreciate against the dollar, we could see a healthy rebalancing of US-Chinese trade relations— and less demand in Washington for punitive legislative action. But a major cyberattack launched by someone on one side against someone on the other—or even the appearance of one—might spark a politically reckless response. A shock that sends oil prices sharply higher will give US and Chinese officials a powerful common interest in easing the resulting pain, but a coup in North Korea, depending on how it develops, or a fight over Iran, would likely put US and Chinese officials on opposite sides of a security crisis.

Posted by US-China

The China Business Review (CBR), published since 1974 by the US-China Business Council, and online since 1997, is the leading voice on commercial relations with China.