APEC can open ‘economic Iron Curtain’

Companies and governments are increasingly forced to make a choice between China and the United States. Photo: Teh Eng Koon/AFP via Getty Images


  • David Capie : Professor David Capie is director of the Centre for Strategic Studies at Te Herenga Waka—Victoria University of Wellington.
  • Natasha Hamilton-Hart : Professor Natasha Hamilton-Hart is director of the New Zealand Asia Institute at the University of Auckland and a senior fellow in the Centre for Strategic Studies at Te Herenga Waka—Victoria University of Wellington.
  • Jason Young: Associate Professor Jason Young is director of the New Zealand Contemporary China Research Centre at Te Herenga Waka—Victoria University of Wellington.

A broader decoupling of the US and China might be prevented by APEC, writes Te Herenga Waka—Victoria University of Wellington

After more than two decades of economic alignment that fostered complex interdependence, tensions between the United States and China have risen. The two countries now have an adversarial relationship and no longer view deep interdependence to be in the national interest.

Both countries seek a degree of decoupling and to diversify their global engagement. This shift is especially significant in the area of technological innovation and information technology, but is also evident in other trade areas, as well as financial, health and education services.

Businesses are responding by seeking to limit their economic exposure or are being forced to exit the market. Companies are attempting to restructure and rationalise global value chains to accommodate the new normal.

This partial decoupling is unlikely to be temporary, thereby presenting a series of challenges for organisations like APEC (Asia-Pacific Economic Cooperation), which New Zealand is hosting in 2021.

Leaders of APEC economies do not wish to choose between a China-led technological sphere and an American-led sphere. Such decoupling of complex interdependence is not only economically costly; it makes a deteriorating security environment even more fragile.

If the complex interdependence crafted by deeply enmeshed supply chains is “incompatible with war” (Geoffrey Garrett, 2019), unwinding this interdependence can only weaken the moderating effect of shared interests.


This is the second of two edited extracts from ‘Decoupling Dilemmas: The Economics-Security Nexus in the US-China Trade Conflict’, an article in the latest issue of Policy Quarterly, published by the Institute for Governance and Policy Studies at Te Herenga Waka—Victoria University of Wellington. The issue focuses on New Zealand and the Asia–Pacific and is guest edited by Alan Bollard, the University’s Professor of Pacific Region Business.


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