In a striking historical parallel, a leading academic has posed a critical question for our era: has China effectively become the United States' new Japan? The comparison draws a direct line from the intense economic and technological rivalry of the 1980s between the US and Japan to the current, all-encompassing strategic competition with China.
Echoes of the Plaza Accord in Modern Trade Wars
The analysis, presented by Professor Raymond da Silva Rosa from the University of Western Australia, centres on a pivotal moment in late 20th-century economics. In September 1985, finance ministers from the world's leading economies convened at New York's Plaza Hotel. The outcome, known as the Plaza Accord, was a coordinated plan to devalue the US dollar, particularly against the Japanese yen and German Deutsche Mark.
The primary goal was to reduce the massive US trade deficit, which stood at a staggering 3% of GDP at the time, by making American exports cheaper and imports more expensive. The strategy worked with dramatic effect on currency markets. However, Professor da Silva Rosa argues the long-term consequences for Japan were severe, contributing to an asset bubble, a "lost decade" of economic stagnation, and a lasting dampening of its global economic challenge to US primacy.
From Semiconductors to Strategic Containment
The parallels to today's US-China conflict are profound. The 1980s friction was heavily centred on specific industries, most notably semiconductors and automotive manufacturing. The US responded with tariffs, import restrictions, and accusations of intellectual property theft—a playbook that seems remarkably familiar today.
Fast forward to the present, and the theatre of conflict has expanded exponentially. The current US approach towards China is not limited to trade imbalances or specific sectors. It encompasses a broad-based strategy of technological containment, targeting China's ascent in foundational technologies like artificial intelligence, 5G networks, and quantum computing. Measures like sweeping export controls on advanced chips and sanctions on flagship Chinese tech firms like Huawei represent a more comprehensive and strategic effort to curb a rival's rise.
The scale and scope are fundamentally different, notes the analysis. While the US-Japan rivalry was largely economic, the US-China contest is fused with deep-seated geopolitical and ideological competition, touching on everything from military dominance in the Indo-Pacific to competing models of governance.
Implications for Australia and the Global Order
For Australia, a nation deeply economically integrated with China yet strategically allied with the US, this historical comparison offers crucial insights. The Plaza Accord era demonstrated how great power economic adjustments can have unintended and far-reaching consequences for smaller, trade-dependent nations.
The key question for Australian policymakers and businesses is whether the current tensions will lead to a similar negotiated recalibration or a more permanent, fractious decoupling. The risks are significant. A fragmented global technology ecosystem and bifurcated supply chains could force costly choices and reduce economic efficiency worldwide.
Professor da Silva Rosa's examination suggests that while history does not repeat itself exactly, it often rhymes. The US's response to Japan's rise provides a template, but the confrontation with China is unfolding on a grander, more complex stage. The outcome will likely define the global economic and security landscape for decades to come, with Australia navigating the precarious space between its largest trading partner and its foremost strategic ally.
Understanding this historical context is vital. It moves the discussion beyond the headlines of daily trade spats and reveals the deeper, structural shifts in power occurring. As in the 1980s, the actions taken by the world's major economies today will set the course for prosperity and stability long into the future.
