Chinese Chess

An Interview with Kevin Rudd

The overriding effect is a level of strategic uncertainty around the world as to what a future America may do. How predictable will American strategic behavior be in the future? Our traditional view, as friends and allies of the United States, is that if you're going to be the world's remaining superpower, one of the things that goes along with it is being predictable in your behavior. Others then tend to organize themselves around that principle. If the superpower becomes unpredictable and vacuums emerge, others seek to either occupy those vacuums or hedge or both. This is why we are starting to see what I would describe as breakouts of instability in various places.

OR: Do you see China becoming, then, the dominant power in the Pacific?

Rudd: China is the largest trading partner of every country in East Asia, without exception, from Tokyo through to almost Delhi. That's a big figure. America, the largest economy in the world, is often not among the top-five trading partners of those countries. Capital markets will always be different. America will remain dominant, for the simple reason that the yuan is not tradable and the Chinese capital account remains closed.

But the relativities are also changing in China's favor over time. The economic geography of East Asia is changing. America is now not the central player. TPP was an effort to turn that around, and uniquely you had Japanese leadership follow — historically not the world's leading free trading country, reflecting its own strategic paranoia in relation to the United States.

So the overall posture within East Asia is one of understanding the unfolding economic realities and at the same time being uncertain about where America lies strategically in the future. Trump said he's reinvesting hugely in the American military and its capacity, but we don't know — given the "Trump Doctrine" — the predictability with which that military will be deployed. So the emerging posture across most of East Asia is one of hedging about the future, strategically hedging. Part of that hedge is not knowing through Trump's uncertainty as to where all that leads. If Trump is reelected, the hedging will become even more acute. Even if Trump is not reelected, then what is the lasting impact of this current “America First” movement?  Does it infect more broadly the American body politic?

These are open questions in most of the foreign ministries of Asia.

OR: On climate change, are we creating a problem we won't ultimately be able to fix if we don't address it now?

Rudd: On climate, I just follow the science. As prime minister of Australia I had a responsibility to respond to the findings of Australia's chief scientists and the Commonwealth Science and Industrial Research Organization, which has been in existence nearly a hundred years. It’s a massive institution which analyzes these questions in a clinical and detached scientific fashion. And their advice to us, from when I first became prime minster in 2007, was: A) It's real. B) It's accelerating. C) The manifestation of it is not just temperatures rising, but more extreme weather events, more droughts, more fires, more extreme storms, more extreme winters.

And if you don't believe any of that from the scientists, if you only believe in good old capitalist principles, then look at how every single major insurance firm is now costing climate-associated risk in the world. The biggest capitalist firms in America put huge premiums on extreme weather events associated with climate change. I haven't met a single global insurer that doesn't believe in climate change.

So not only do we have these massive geopolitical shifts between the United States and China, we have a second global challenge in the acceleration of climate change. And a third is massive technological disruption. We haven't even spoken about AI and its impact on business, on work, on the competitiveness of nations. Yet we have this technology revolution and its disruptions massively disrupting politics as well. You have climate disruption, you have geopolitical disruption between China and the United States. So if everyone's feeling a bit stressed at the moment, they've got reason to be.