Hello Friends,
And happy Friday!
After last week’s rather abstract issue, this one is anchored into a very concrete reality: the current world order and its hidden reliance on processor chips.
First, some context with The Thucydides Trap 30min applied to the US/China relationship:
Since China became the world’s second largest economy after the United States, the question of how China and the United States should get along has become a matter of concern for politicians and scholars.
Thesis: As the Sino-US trade dispute escalates, many fear that the U.S. and China will fall into a Thucydides trap and begin a new Cold War.
But Chinese leaders and many scholars do not agree with the Thucydides trap theory. Xi Jinping has proposed that China and the United States build a new type of great power relationship based on no conflict, no confrontation, mutual respect and win-win cooperation, arguing that China will not follow the old path of great power hegemony, and that Sino-US relations will naturally not repeat the tragedy of great power relationships in history.
The traditional Western theory of great power relations emphasizes the struggle between great powers for world hegemony, and those who hold this theory tend to view China's rise and development in the light of the West's past experience, thus giving rise to various arguments about the "China threat theory”. The U.S. fears that China will replace the United States as the world's hegemonic power and that China and the US will fall into the Thucydides trap. Graham Allison wrote: "Motives aside, when a rising power threatens to displace an existing incumbent, the resulting structural pressures, without exception, lead to a violent conflict. This happened between Athens and Sparta in the 5th century B.C., between Germany and Britain a century ago, and even more so between the United States and the Soviet Union in the 1950s and 1960s, almost leading to a war between the two."
The theoretical model of Thucydides’ trap has repeatedly been effective in explaining past conflicts in world history. The First World War ended the "century of peace" in European history that followed the Napoleonic Wars. Spilling the blood of millions of young people on the battlefield, Britain and France fought back against the challenge of Germany, an emerging empire that sought to overturn the European balance of power and compete for world domination. With the help of the United States, Britain, France, and their allies won World War I and reestablished the European order.
Antithesis: The Thucydides Trap Does not Apply to China
Past great power relations fell into the Thucydides trap because the rising powers were dissatisfied with the established international order and became challengers, thus causing conflicts between the rising powers and the established powers. Many people are used to seeing China in this way, as a second Soviet Union and a challenger to the current international order. Some people also believe that the end of the process of power transfer between the rising power and the defensive power lies in the success of the rising power in building an international order centered on itself.
From the perspective of foreign policy theory and practice, China does not challenge the existing international order, which is a substantial difference between China and the Soviet Union, as well as between China and other late-developing powers in history. Xi Jinping has stressed: “In modern times, the Chinese people have suffered a century of foreign invasions and internal wars, and are well aware of the value of peace, and the greatest need for nation-building is a peaceful environment to continuously improve people's lives.
Since a stealth rise until the force ratio becomes overwhelmingly favourable to China seems more profitable to China than a premature overt conflict, one is allowed to doubt the truthfulness of the author’s antithesis. Difficult to conclude a priori.
And this doubt is widespread: some “neutral” Swiss voices herald a cold war that would eclipse last century’s between the US and the USSR.
The New Cold War 10min
The Soviet Union was never a serious challenger economically, however, only militarily. It was a bipolar world, with practically no points of economic contact between the two superpowers. Therefore, the world economy outside the communist bloc was only threatened if there had been a military escalation.
One day in the not-too-distant future, even Europe will have to show its colors in this new cold war. It owes its freedom to the United States, but today's generation has forgotten that and often looks across the Atlantic with disdain.
Europe is an economic heavyweight, but weak in new technologies and without a powerful military. The Old Continent cannot defend itself, nor can it protect its interests in the world. In terms of power politics, Europe is a dwarf and is therefore no longer respected in the world.
Europe will try to stay out of the conflict as long as it can. But is that possible? The U.S. and China are the biggest buyers of German, French or Italian exports, and Europe therefore is vulnerable. Europe is largely integrated into NATO, so Washington will insist on loyalty and alignment of interests should the conflict with China intensify. But China is one of the most important customers of the European export industry and will also state its demands.
The European Union will be in hot water. The boomerang of naive European pacifism of the last decades, even if historically justifiable, and of its economies one-sidedly trimmed for exports, will hit it hard.
From this point of view, it is advisable for Switzerland, with its oversized export industry, to remain neutral on all sides. An integration into the EU by means of a proposed framework agreement is therefore dangerous, because Switzerland would get into dependencies, which it could better avoid as a neutral small state. But even our politicians and captains of industry have not yet understood that the time of the serene, peaceful world is over.
But the story does not end there. Similar to wheat fueling the Roman Empire’s Pax Romana and oil fueling the US’s Pax Americana, our modern world is now more and more running on a new commodity: silicon chips.
And since the world runs on it, and the world is still more or less controlled by the US, they control this resource and restrict its access to protect their interests: US Blacklists China’s Phytium for Making Missiles Using Western Tech 5min
Tianjin Phytium Information Technology Co. is one of seven companies that the US put on its Entity List that China used American and Taiwanese chip technology to create the world’s first hypersonic missiles.
Phytium used American EDA tools to design chips that were manufactured by Taiwan Semiconductor Manufacturing Co. (TSMC) for use in a supercomputer which simulated the performance of DF-17 hypersonic missiles that China rolled out at its 2019 October 1 National Day parade, according to the Washington Post report.
The DF-17 appears designed to evade ballistic missile defense systems deployed by the US and its allies in the Pacific. A hypersonic missile strike could help to eliminate ballistic missile defense systems, increasing the lethality of a subsequent missile strike, allowing near complete destruction of infrastructure such as runways and hangars, tipping the scales of a conflict.
China’s new hypersonic glide missile (HGM) may be powerful enough to penetrate US missile shields in the Western Pacific, switching Beijing’s strategy in the Taiwan Strait from defense to offense.
Hypersonic glide vehicles (HGV) are launched on traditional ballistic missiles, but instead of entering outer space, they remain within the atmosphere, using fins to steer and glide at supersonic speeds until reaching their targets. Fins on HGVs allow them to be guided to a selectable range of targets more dynamically than a traditional ballistic missile. This flexibility at low altitude makes HGVs nearly impossible to intercept with a ballistic missile defense system.
If you had never heard the name TSMC, now you have. It will become more and more present in the mainstream media in the following months and years.
China is consuming the global chips output even faster than concrete or copper.
And the world buys all the derived products: phones (including iPhones), computers, etc. … from China.
This article provides a great overview of the situation: The Chip Wars of the 21st Century 10min
As you might also remember, I shared that I believed that China would reunite with Taiwan in the following 2-3 decades.
Well, this fascinating article shares a beautiful game theory analysis as to why it can’t happen right now - and most likely not in the next few years either. You guessed it, it is TSMC-centered:
Why a Chinese invasion of Taiwan would be a catastrophe for China and the world 15min
I can’t do it justice with any kind of summary, so if you have to read only one external article in this issue, it is the one. I strongly recommend it, it is entertaining beyond its instructive value.
My conclusions from all this: China would never be able to get TSMC in any kind of operating state because of the existing US hegemony. And the world economy as we know it would stop. So if China wants Taiwan + TSMC in a decent condition, it will have to wait either for the world to no longer rely that heavily on TSMC, or for its own domestic capabilities overtake TSMC’s which is not realistic yet. Only in one of these two cases will TSMC cease to be such a strategic asset for the US, and China might be able to reunite with Taiwan without it being sabotaged first.
What do you think?
Please don’t forget to share if you think this type of readings can interest others:
Thanks for reading, and have a peaceful weekend,
V