The Tokyo Foundation for Policy Research


The Tokyo Foundation for Policy Research

Can America’s Hedging Strategy Last?

November 16, 2015

Washington is pursuing a hedging strategy toward Beijing in the hopes of accruing the benefits of cooperation while avoiding the costs of competition. The core problem, Paul Saunders notes, is whether the United States and China can develop a sufficiently trusting relationship for engagement to succeed even as Washington conveys mistrust . The current state of the US-Russia relationship may be a cautionary tale .

*     *     *

America’s recent “freedom of navigation” operations in the South China Sea—and the possibility of a direct conflict between the United States and China—have again focused attention on the highly complex US-China relationship and the broader security environment in the Asia-Pacific region. While Washington attempted to demonstrate that the operations were not directed solely at China by sending the same destroyer that sailed near Beijing’s new artificial islands through areas claimed by the Philippines and Vietnam, the message was a clear one. Less clear is the course of the growing US-China rivalry in East Asia.

US policy toward China in the post–Cold War era has incorporated elements of both cooperation and competition. Analysts generally describe US strategy as one of “hedging” or, in other words, pursuing engagement with China while simultaneously taking prudent steps to defend important US national interests, which includes upholding commitments to US allies. Most consider this a sensible approach that minimizes the risks of a policy oriented exclusively toward engagement or confrontation.

Indeed, there are strong reasons to take this approach. The United States has enormous economic interests in the US-China relationship, which (among other things) helps to finance US government borrowing, earns substantial returns for US investors and exporters, and provides inexpensive goods to American consumers. Sharply reducing or cutting off the US-China relationship would be extremely costly. Conversely, of course, the United States has enormous security interests in East Asia. Any nation that dominated the region could pose a direct threat to the United States and challenge US international leadership, an invaluable asset in protecting American global interests.

America’s China Policy Dilemma

While the US has many other security and economic interests in East Asia—including some in each area that are countervailing—this simplistic collision between economic and security interests is America’s fundamental dilemma. Of course, there could also be security benefits to engagement, such as joint efforts to deal with problems like Syria, or economic benefits to confrontation, such as expanded trade and investment relations with US allies and others in the region. The hedging strategy is so attractive because it appears to allow Washington to do all of this at the same time and thereby to avoid making very difficult and consequential choices. But does it?

Hedging rests on the assumption that in simultaneously pursuing cooperative and competitive policies, the United States will achieve the best of both worlds, accruing many of the benefits of cooperation while avoiding most of the costs of competition. However, it seems at least equally possible that this strategy could actually produce the worst of both worlds—by contributing to a situation in which America gains few of the benefits of cooperation (and accepts many of its costs) while shouldering many of the costs of competition (yet winning few of its benefits). The core problem is one of trust: can the United States and China develop a sufficiently trusting relationship for engagement to succeed even as Washington conveys its mistrust by hedging?

How Hedging Can Fail

From this perspective, the US-Russia relationship may be a cautionary tale. Washington has pursued a broadly similar policy toward Russia—“cooperate when we can, confront when we must”—for much of the last two decades. That relationship has virtually collapsed due to deep mutual mistrust. Moscow sees US military interventions and support for regime change as evidence of opposition to Russia’s status as a great power that will ultimately culminate in an effort to oust Russia’s leaders and replace them with a friendly democratic government that would not uphold Russia’s national interests. Washington sees Russia as seeking to reestablish dominance across the former Soviet region and central Europe through force, intimidation, and political meddling. This is not about who is right or wrong, but about a set of current outcomes that look predictable in retrospect (and that some predicted in advance). In many respects, the United States and China now seem to be on a similar path.

Unfortunately, America’s hedging strategy thus far looks inadequate to the task ahead. If China is also hedging, the cooperative side of the bilateral relationship looks too weak to prevent serious conflict. US-China trade and investment are vastly greater than US-Russia economic ties—and therefore create influential constituencies favoring a stable relationship—but can carry only so much political weight, particularly when Americans are again questioning trade deals and when China’s political system is under stress. To put it most directly, economic interdependence did not prevent England and Germany from going to war in 1914. Unfortunately, when the psychology of an interdependent relationship tips into confrontation, mutual dependencies can rapidly evolve from points of cooperation to sources of leverage. When that happens, larger dependencies produce greater leverage and higher stakes. Consider European Union economic sanctions against Russia or, for that matter, US oil sales to Imperial Japan.

At the same time, if China is instead pursuing the strategy perhaps most feared by the United States and its allies—gradually escalating confrontation camouflaged by limited cooperation in certain areas—the US rebalance to Asia seems unlikely to deter increasingly self-confident Chinese leaders with expanding anti-access/area-denial capabilities and a sense that America is past its prime. The fact that the United States would eventually prove them wrong would not reduce the potential costs of this situation.

From a policy perspective, these realities suggest two key conclusions. First, hedging is probably not sustainable indefinitely. Secondly, however, because hedging is currently far preferable to taking considerable risks by making a clear choice between engagement and confrontation, the United States should pursue hedging in a way that can work as long as possible. That means simultaneously trying much harder both to cooperate with China and to compete with it without provoking a conflict. It won’t be easy.

    • Senior Fellow in US Foreign Policy at the Center for the National Interest / President, Energy Innovation Reform Project
    • Paul J. Saunders
    • Paul J. Saunders

Featured Content




Click on the link below to contact an expert or submit a question.