(What’s Left of) Our Economy: Energy Drove the U.S. Trade Deficit Drop in a March Full of Records

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Advanced Technology Products, China, energy, European Union, exports, Germany, goods trade, imports, Made in Washington trade flows, manufacturing, Mexico, Netherlands, non-oil goods trade, oil, petroleum products, services trade, Trade, trade deficit, {What's Left of) Our Economy

The monthly improvement in the U.S. deficit in March revealed in today’s official U.S. trade report was first and foremost an energy story – not that other noteworthy developments couldn’t be found, specifically records in manufacturing and in American trade with several leading partner countries and regions, and big changes in goods trade with China.

The combined goods and services trade gap narrowed sequentially on month by 9.08 percent, from an upwardly revised $70.64 billion to $64.23 billion. The March total was the lowest since November’s $60.65 billion.

Moreover, the deficit shrank in the best possible way. Total exports rose by 2.12 percent, from a downwardly revised $250.84 billion to $256.15 billion, while total imports dipped (and for the second straight month) by 0.34 percent, from an upgraded $321.48 billion to $320.38 billion. And this trade deficit progress took place when the economy was still growing (albeit at a significantly slowing rate).

And of the $5.31 billion sequential increase in total exports, $4.68 billion (88.14 percent) came in the petroleum products category. In fact, these foreign sales grew at the fastest monthly rate (21.26 percent) since March, 2022 (28.22 percent).

Largely as a result, the goods deficit tumbled in March by 6.92 percent, from $93.03 billion to $86.59 billion – their lowest level since last November, too. ($83.02 billion).

Indeed, petroleum products exports accounted for 89.66 percent of the $5.22 billion expansion of goods exports. On a relative basis, these foreign sales climbed by 3.09 percent, from a downwardly revised $169.09 billion to $174.31 billion.

Goods imports, meanwhile, decreased for the second straight month as well, by 0.47 percent, from a downwardly revised $262.12 billion to $260.90 billion.

The longstanding surplus in services trade slipped in March by 0.11 percent, from a downwardly revised $22.39 billion to $22.37 billion – the lowest level since October’s fractionally higher figure.

Services exports improved by 0.11 percent, from a downwardly revised $81.75 billion to a second straight record of $81.84 billion. The new total topped the old $81.32 billion mark from last December by 0.65 percent.

Services imports, meanwhile, advanced by 0.20 percent, from a downwardly revised $59.36 billion to $59.48 billion – the second highest total ever behind last September’s $59.55 billion.

The huge and longstanding U.S. goods trade deficit with China became a good deal less huge in March, sinking for the second straight month – and by 12.59 percent, fom $19.00 billion to $16.61 billion. Further, that total was the lowest since the $15.76 billion hit in February, 2020 – when China’s economy was still grappling with the devastating first wave of the CCP Virus.

U.S. goods exports to the People’s Republic shot up by 22.06 percent sequentially in March – from $11.62 billion to $14.18 billion. The new total is the highest since last November’s $15.58 billion, and the rate of increase the fastest since last October’s 31.33 percent.

For some perspective, though, this big March increase followed a sizable 11.26 percent decrease in February.

U.S. goods imports from China inched up for the second straight month, but by just 0.55 percent, from $30.62 billion to $30.79 billion. And those two totals are the lowest since early in China’s recovery from that first 2020 virus wave.

Most strikingly, on a year-to-date basis, the U.S. goods deficit with China has cratered by a whopping 39.85 percent, from $101.04 billion to $60.77 billion.

These results, moreover, clash loudly with those of the U.S. worldwide non-oil goods trade – which as known by RealityChek regulars is a close proxy for U.S.-China goods trade.

The U.S. non-oil goods deficit (which can also be considered the “Made in Washington” deficit because it tracks trade flows most strongly influenced by U.S. trade deals and other policy decisions) worsened by 0.19 percent between February and March – from $92.19 billion to $92.36 billion. So China goods trade performed better sequentially on this basis.

U.S. goods exports to China were up in March much faster than the 0.25 percent gain in non-oil goods exports (from $145.80 billion to $146.16 billion).

As for non-oil goods imports, they increased by just 0.23 percent in March (from $237.98 billion to $238.52 billion) – not dramatically different from the China goods performance.

But the year-to-date contrast is enormous. Whereas the U.S. goods deficit with China nosedived by nearly 40 percent, for non-oil goods trade, it fell by less than half that – 17.80 percent, from $336.25 billion to $276.40 billion.

That makes it hard to avoid concluding that the Trump (now Trump-Biden) tariffs keep punishing China (along with Beijing’s own-goals ranging from last year’s wildly over-the-top Zero Covid policies to increasing harassment of U.S.- and other foreign-owned companies) but not simply by diverting imports and trade to other countries and regions. Domestic American producers must be getting some of that old China business as well.

The manufacturing trade deficit, however, worsened by 9.08 percent in March, from $100.05 billion to $109.64 billion. True, this increase followed a 14.36 percent drop in February, but it can’t be good news given the sector’s recent weakness.

Interestingly, this deterioration reflected major changes in both monthly exports and imports. The former soared by 18.91 percent, from $98.06 billion to a new record $116.60 billion (which topped the previous mark of $114.78 billion set last June by 1.58 percent).

Industry’s foreign purchases jumped by 14.20 percent, from $198.10 billion to $226.24 billion.

Big monthly changes and a record were also recorded in Advanced Technology Products (ATP) trade in March. The ATP deficit dropped from $16.23 billion to $14.31 billion. The 11.82 percent narrowing brought the gap to its smallest since February, 2022’s $13.42 billion.

ATP exports shot up from $29.12 billion to a new all-time high $38.33 billion. And the 31.65 percent increase was the most dramatic since March, 2002’s 31.94 percent.

Imports surged, too – by 16.09 percent, from $45.35 billion to $52.65 billion. And that upswing was he fastest since the 33.64 percent burst of last March.

On the regional and bilateral fronts, many of the most dramatic developments came in U.S. goods trade with Europe.

America racked up its biggest exports total ever to the European Union ($34.96 billion – 12.04 percent greater than the $31.20 billion level hit last March) and bought its second greatest total of imports ($50.82 billion, a number trailing only last October’s $53.07 billion).

The volatile U.S. surplus with the Netherlands skyrocketed by 116.40 percent on month, from $1.84 billion to $3.98 billion, keyed by record exports of $7.76 billion. That smashed the previous mark of $6.96 billion by 11.50 percent.

U.S. goods exports to Germany achieved an all-time high, too, with the $7.50 billion figure exceeding the old record of $6.62 billion, set last March, by 13.20 percent.

The U.S. goods deficit with Mexico reached its highest ever, too, in March, with the $13.55 billion total coming in 8.25 percent higher than the old record of $12.57 billion from August, 2020. American goods sales to Mexico totaled $29.27 billion – their second best performance ever after last August’s $29.98 billion. But imports reached a new record of $42.82 billion – 5.87 percent greater than last March’s $40.45 billion mark.

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Our So-Called Foreign Policy: A Call to Return to Failed U.S. China Strategies

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alliances, allies, Barack Obama, Biden, China, Donald Trump, engagement, FOREIGNPOLICY.com, George W. Bush, Indo-Pacific, intellectual property theft, Michael J. Green, national security, Our So-Called Foreign Policy, Paul Haenle, tech transfer, TPP, Trans-Pacific Partnership, World Trade Organization, WTO

When it comes to China-related issues in particular, supposed American experts who have long completely missed the mark have developed a head-exploding habit of assuming that they have anything useful to say on the matter going forward. Here’s a recent example.

Now these failed economic and foreign policy establishmentarians have hit new heights (or is is “depths”?) of chutzpah. As laid out in this article last week on FOREIGN POLICY magazine’s website, two typical figures are now attacking President Biden’s approach to the People’s Republic for taking too Trump-ian a turn, and blaming his alleged mistakes on learning the wrong lessons from the records of pre-Trump Presidents.

Whereas both the Biden and Trump teams, they write, have accused their predecessors of naively assuming that “engagement would lead to a democratic and cooperative China,” in fact, since the initial Nixon Era opening to Beijing, American leaders have fully understood that China’s democratization could never be a foregone conclusion, and have always “combined engagement with strategies to counterbalance China through alliances, trade agreements, and military power.” In other words, far from being disastrously pathetic failures, America’s pre-Trump China policies were actually as successful as was humanly possible,  And current leaders should emulate some of their principal choices. 

Even the administrations of George W. Bush and Barack Obama, they continue, which faced a China whose wealth and power had begun growing stunningly, had foreseen the possibility of Beijing turning more aggressive, and responded to warning signs exactly as events prescribed. Further, their decisions to stay on an engagement track as well were entirely shrewd and responsible. After all, major potential benefits could still plausibly be expected – because during those years, “the question of how China would use its growing power was open to shaping.”

Indeed, say authors Michael Green (a former Bush-ie) and Paul Haenle (previously both a Bush-ie and Obama-naut), a harder line at that time would have amounted to a policy of “strangling China” that also would have been opposed by major allies and the American people, “both of whom mainly saw China as a partner [and] would not have supported containment and decoupling.“

All that went wrong was that that darned current Chinese dictator Xi Jinping assumed power and, well, just ruined everything with his belligerently expansionist aims and actions, and his reversal of much Chinese economic liberalization. The 2008-09 financial crisis didn’t help, either, according to Geen and Haenle, because it convinced Beijing that “the West was declining and the East is rising.”

All the same, say Green and Haenle, the Biden administration should

>recognize that the two immediate pre-Trump presidents had the security side of China policy fundamentally right with their strategy of maintaining and strengthening U.S. alliances with major Asian countries (an odd recommendation since that’s what Mr. Biden is already trying to do); and

>on the economic side, “reconstruct some of the economic statecraft that underpinned U.S. strategies toward China in the past” – principally reviving the World Trade Organization (WTO) as “an important tool to hold China to account” for its predatory practices and joining the current version of the Trans-Pacific Partnership (TPP), which can “bring the weight of almost two-thirds of the world economy to the table in demanding reciprocal agreements from China” and “force Beijing to play by the rules or lose hundreds of billions of dollars in trade as tariffs and market barriers among the rule-abiding economies went down.”

But these arguments only strengthen the case that Green, Haenle and their ilk should be kept as far away as possible from U.S. policymaking toward China.

Regarding security issues, their contention that Bush-Obama hedging was responsible and understandable ignores all the ways in which China had been undercutting U.S. national security interests long before the Age of Xi began in 2012. For example, it played a key role in creating Iran’s nuclear weapons program starting in the mid-1980s. It’s been a major supporter of North Korea’s economy – and therefore an enabler of Pyongyang’s nuclear weapons development for decades. And it’s beefed up its military presence in the South China Sea – including island grabs that violate international law – for nearly as long.

And Green and Haenle seem to need some improved calendar-reading skills, as financial crisis-borne hubris to which they attribute much of Beijing’s recent bellicosity dates from 2008-09 – three to four years before Xi became China’s top leader. Against this backdrop, it’s glaringly obvious that, judged by actual results, the various hedging statements and even counter-measures mentioned by Green and Haenle counted for exactly squadoosh.

In addition, there’s compelling evidence that the Chinese thought so, too. As I reported in 2018, a former U.S. Chief of Naval Operations (the Navy’s senior-most officer) has stated that his Chinese counterpart told him that “he thought the United States would have a more forceful reaction when China began” one of its key island-building phases during the former’s tenure – during the Obama years.

P.S. – this behavior doesn’t exactly jibe with the notion that Beijing was blown away by Bush-Obama alliance-rallying, either.    

If anything, the Bush and Obama China economic policies were worse, at least in terms of long-run security impact. Both presided virtually passively as

>China’s economic predation helped produce trade surpluses that put literally trillions of dollars at Beijing’s disposal to devote to its military buildup and prevent any guns versus butter tensions from emerging;

>China stole intellectual property seemingly at will, which supercharged weapons development, too; and

>U.S. multinational companies felt perfectly free to transfer cutting-edge defense-relevant technology to Chinese partners that were first and foremost agents of the Chinese state, and to teach perhaps hundreds of thousands of Chinese employees and students how to use this knowhow – and ultimately how to develop more on their own.

As for the authors’ economic recommendations, they’re simply laughable. The TPP, after all, contained a wide-open back door through which goods with lots of Chinese content could enter the proposed free trade – largely because none of the other TPP signatories wanted to disrupt production chains in which China plays a key role.

Meanwhile, that robust China-Asia/Pacific trade and investment, plus the difficulty that Mr. Biden has run into in mobilizing support outside Europe against Russia’s invasion of Ukraine is telling all but the willfully deaf that the United States will suddenly become able to increase the WTO’s effectiveness against China’s mercantilism. 

As Green and Haenle suggest, being able to learn from both mistakes and successes is one of life’s most valuable skills.  Sadly, all that their article demontrates is either that they can’t tell the difference, or that they stubbornly refuse to.

Following Up: Why the U.S.-South Korea Summit Was Incredibly Weird I

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Alan Beattie, alliances, allies, Biden, China, deterrence, extended deterrence, Financial Times, Following Up, Indo-Pacific, North Korea, nuclear weapons, realism, reciprocity, sanctions, semiconductors, South Korea, technology, Yoon Suk Yeol

Consistent with cutting-edge astro-physicis – and the last few decades of Marvel comics story-telling – I’m sure that among all the infinite number of universes in a “multi-verse” comprising creation, there’s one in which South Korea somehow genuinely has no reason to believe it has any obligation to comply with U.S. wishes in exchange for protection against complete destruction or enslavement by fanatically totalitarian North Korea.

I’m also sure that that universe isn’t the one we inhabit. Which is why it’s so whacko that Financial Times columnist Alan Beattie begs to differ, and that his editors evidently had absolutely no problem with this argument. And that’s only the lesser of two jaw-dropping new developments related to last week’s summit between President Biden and his South Korean counterpart Yoon Suk Yeol, which I analyzed in this post. Nonetheless, that’s the focus of today’s post. Tomorrow’s will deal with the second.

To be clear, I’m not contending that the South Koreans should be grateful to Washington for anything.

As a self-styled foreign policy realist, I’ve long held that countries can be counted on to act first and foremost in their own self-interest, and indeed should – in fact, unapologetically. I’ve taken many of my cues here from the Founding Fathers, who also considered the world to be far too dangerous to ground strategy in considerations of sentiment. So that puts me in pretty good company IMO. 

Moreover, South Korea is emphatically no exception, first because it lives in an exceptionally dangerous neighborhood; and second, because as I explained last week, its semiconductor manufacturing prowess gives it some clout vis-a-vis the United States.

Nor am I arguing that the U.S. commitment to defend the South has ever stemmed from anything other than a regard for its own security or independence or prosperity – even though I’ve disagreed until very recently (because of semiconductor manufacturing-related national security issues) with this characteristically globalist definition of national interest.

Instead, I’m arguing that, given the decision by Washington to protect the South even though its strategy of extended deterrence has recently exposed the United States to the risk of nuclear attack on the American homeland, it’s entirely reasonable for America to seek some South Korean help in meeting a different challenge. In this case, it’s helping Washington limit the technological progress that could enable China to attain military parity – and at some point even superiority – over the United States, and thereby undercut declared vital U.S. national interests throughout the Indo-Pacific region and even beyond.

But Alan Beattie? He writes that it’s “galling when Washington expects you to take economic hits for geopolitical gains when it’s not always willing to do the same itself.”

One fatal flaw in Beattie’s argument is the claim that the United States is asking South Korea to sacrifice some earnings (resulting from the major revenues it earns by supplying semiconductors and other high-value inputs to China’s huge electronics industry) without offering to pay any price for containing China itself.

What he ignores is how the Biden administration tough’s curbs on the investment and operations of America’s own semiconductor and chip-making equipment companies are costing them economically, too. Instead, he focuses on the electric vehicle manufacturing provisions of the Inflation Reduction Act, which require South Korean auto companies to produce key components in the United States in order to qualify for subsidies.

Yet these provisions apply not only to all foreign auto-makers, but to America’s as well.  And even if they were being applied in a blatantly discriminatory manner, however, it’s not as if South Korea wouldn’t still be getting a heckuva deal from its alliance with the United States. Beattie blandly describes the benefits to the South as “maintaining relations with the US….” Of course, as I stated above, it’s really about its national freedom and very survival.

Again, as a realist, I respect South Korea’s right to define its own interests however it wishes, and to act accordingly. But should I – or anyone – agree with Beattie that Washington’s desire for some South Korean reciprocity is “galling,” or excessively steep? It sounds like Beattie’s actual position is that any U.S. effort to leverage its commitment to defend South Korea is unreasonable – especially if it might interfere with the decades of hyper-globalization that the author tends to lionize uncritically, even though they’ve unmistakably fueled the dangerous rise of Chinese power. Can that be a serious basis for conducting diplomacy?

But from Beattie’s scathing tone, it’s also apparent that he’s condemning this kind of transactional approach to foreign policy for deeply personal reasons as well – likely the transparently childish view that the United States, or maybe just the Anglo-phone countries, should be above this sort of crassness, and that even if international relations aren’t comparable to a sporting event, where the real world stakes are modest, they should act as if they are – whatever the risks.

Thankfully, the Biden administration is steadily (though not fast enough for my tastes) thinking in more adult terms and recognizing – like the Trump administration before it – that one-way-street alliances no longer make sense from America’s standpoint (if they ever did). In this instance, moreover, South Korea could easily conclude that containing the tech prowess of a gigantic totalitarian and increasingly aggressive neighbor serves its own interests quite handily, too.

Tomorrow’s post will describe that aforementioned even more befuddling – and possibly more worrisome – consequence of the Biden-Yoon summit.

P.S. Full disclosure:  Beattie has blocked me on Twitter because he believed that my stances on immigration policy partly reflected anti-Muslim prejudices. So clearly he’s not my favorite journalist.  

Our So-Called Foreign Policy: U.S. Microchip Failures Have Now Worsened its Korea Nuclear Dilemmas

Tags

allies, Biden, China, deterrence, extended deterrence, North Korea, nuclear weapons, Our So-Called Foreign Policy, semiconductors, South Korea, Taiwan, tripwire

As needs to become clear to U.S. leaders as South Korea’s president visits the United States, America’s loss of global leadership in the knowhow needed to make the world’s most advanced semiconductors now could expose the United States to nuclear attack from not one but two adversaries in East Asia.

The first threat of course comes from China, and stems from the possibility that it invades Taiwan. Because the island is the undisputed champ in manufacturing the most powerful chips, a Beijing victory could give it access to technology that’s crucial for making state-of-the-art weapons today, and for generations to come. And because that prospect, rightly in my view, is seen in Washington as an unacceptable threat to U.S. security, independence, and prosperity, the Biden administration has apparently decided to defend the island if the Chinese military moves.

The huge problem with this policy – which hasn’t been announced formally but has been mentioned in various seemingly off-the-cuff statements by Mr. Biden – is that success may require U.S. nuclear weapons use, and the Chinese have the forces to retaliate by attacking the American homeland with their own nukes. Maybe the possibility of a U.S. counter-strike on China would deter Beijing from pressing its nuclear buttons. But maybe it wouldn’t.

The threat that’s come into focus in recent days comes from North Korea and the target is South Korea – which unlike Taiwan is a full-fledged U.S. treaty ally that enjoys a longstanding and clearly stated American nuclear guarantee. Moreover, as is also not the case with Taiwan, the United States will find it exceedingly difficult to avoid nuclear weapons use if the North invaded the South. Worse, that’s so even if America ultimately concludes that South Korea’s security isn’t worth risking nuclear attack from a Pyongyang arsenal that’s smallish but could be able right now to reach American soil.

That’s because, as I’ve described repeatedly, American leaders have decided to bolster the credibility of the U.S. deterrent by stationing tens of thousands of American ground troops right in the way of any North Korean attack. The idea is to convince the North that to prevent its superior conventional forces from overwhelming the Americans, a U.S. President would launch his own nukes to destroy the invaders and likely the whole of North Korea.

This aim of intimidating the North with nuclear threats made sense when the United States had an enormous nuclear arsenal and Pyongyang was nuke-less. It even made sense when North Korea’s stockpile was even smaller than at present, and much less impressive. But due to the North’s recent progress and consequent current or imminent ability to vaporize an American city – or two or three – the U.S. nuclear guarantee, and the continuing presence of U.S. forces in the South whose vulnerability could force Washington into a damaging nuclear exchange, looks positively masochistic.

As a result, I’d argued for many years at least for withdrawing the tripwire and thereby increasing the odds that an American President would initiate a nuclear conflict with the North. Yes, South Korea could well be lost. But the United States itself would be saved from catastrophe. And of course South Korea could eventually respond by building up its own conventional military and going nuclear itself. Am I eager to see the roster of foreign nuclear weapons states expand? Of course not. But would this be better than the annihilation of Los Angeles or San Francisco or Seattle? That’s even a question?

It’s possible, however, that semiconductor-wise, South Korea might be as valuable as Taiwan. And if it’s still behind, it’s semiconductor manufacturing capabilities certainly aren’t far behind. (See this post for a sense of how complicated it is to determine who’s ahead.) Much more certain – the South is considerably ahead of American industry.

I’m not so much concerned that if the South felt abandoned, its microchip prowess would fall into the hands of the North Koreans. I’m much more concerned that a South Korea that’s decoupled from the United States security-wise would keep helping China develop its own semiconductor industry by building more and more advanced chip factories in the People’s Republic. It’s not just a distinct possibility, it’s a virtual certainty because China’s immense electronics industry is an immensely important customer for these South Korean chip manufacturers – just as it is for the U.S. semiconductor companies and chip equipment manufacturers that are equally guilty of strengthening China.

But the U.S. firms’ China operations and plans are now significantly restricted by the Biden administration’s tough sanctions. Even though it’s a U.S. treaty ally, South Korea has enacted no such curbs, and is still resisting American pressure to join Washington’s containment campaign. If the South feels cut loose by America, it’s not likely to sell China its crown jewel microchip tech. But as noted above, keeping on its current course could be damaging to major U.S. interests, too.

And that’s not even the end of the Biden administration’s current dilemmas. For there’s plenty of evidence that, despite the tripwire U.S. forces on their soil, South Korea’s leaders and its people no longer believe the Americans will ride to their rescue, or ride hard enough to risk nuclear war. So in principle, the United States could be stuck with the worst of all possible worlds – forced to maintain its current, nuclear war-risking approach to defending South Korea in hopes of preserving some semiconductor leverage with the South, but lacking the clout to gain meaningful South Korean support for limiting China’s tech progress. Reportedly, President Biden has decided to handle the situation with more energetic efforts to reassure the South.

Alternatively, South Korea could decide that it still doesn’t trust Washington, build its own nuclear weapons anyway, and feel even freer to go its way on China.

I can envision various scenarios in which all these needles are threaded to America’s advantage for the time being – and perhaps longer. But there are no guarantees. Meaning that the big takeaway is that when it comes to critical technologies, there’s no substitute for a Do It Yourself determination to maintain American leadership to avoid needing to rely on the kindness of strangers (and even allies) – or as is the case now, to restore it.

Our So-Called Foreign Policy: Yes, America’s Europe Allies Really are Lagging in Decoupling from China

Tags

allies, Biden administration, China, decoupling, Emanuel Macron, European Union, foreign direct investment FDI, France, investment, Our So-Called Foreign Policy, Trade

Since French President Emanuel Macron’s boot-licking recent trip to China, something of a debate has broken out this past week over whether America’s European allies are moving fast enough to reduce their dependence on commerce with the People’s Republic – or as fast as the United States is. Here’s a claim that they are. And here’s one that they aren’t.

How to know for sure – or with some confidence? Maybe by looking at some numbers? So I did. And the two most important 30,000-foot measures of trade and investment show that the Europeans are lagging significantly – in absolute term and relative to the United States. In fact, both measures indicate that investment in and especially trade with China recently has become more important to the European Union (EU), not less.

The gauges I use are two-way trade as a share of the total U.S. and European Union economies, and direct investment in China as a share of their respective goss domestic products (GDP – the standard measure of an economy’s size). As is often the case, I use the numbers as percentages of their economies because they provide the context that the numbers themselves lack. And this practice is all the more important when trying to figure out matters like dependence or vulnerability.

Let’s start with the European Union’s two-way trade with China and use 2019 as the first year – since that’s the last full year before the arrival of the CCP Virus pandemic, which focused so much attention on over-reliance on China (or any single supplier) for products deemed unusually important. As can be seen, combined exports to and imports from the People’s Republic has grown much faster since 2019 than has the EU economy:

2019: 4.01

2020: 4.39

2021: 4.83

2022: 5.75

In fact, during this period, this trade relative to the EU economy expanded much faster than in the years before 2019. For example, in 2012, two-way Sino-EU goods trade already stood at 3.36 percent of the Union’s output.

(Both sets of figures are in euros before factoring in inflation. The 2012 and 2019-21 figures come from the reliable Statistia.com website here and here. The 2022 trade data come from Statistia. The 2022 GDP figure comes from taking the 2021 Statistia number and adding the 3.6 percent pre-inflation EU growth estimate provided by the Union’s statistical service Eurostat.)

Here’s how America’s annual bilateral goods trade with China as a share of the U.S. economy has changed from 2019 to 2022:

2019: 2.60

2020: 2.65

2021: 2.81

2022: 2.71

These percentages are up some during this period, but by much less than those for the EU. And in 2022, the share went down. Also of note: These numbers are lower in absolute terms than the EU’s. For comparison’s sake, the U.S. figure for 2012 was 3.30 percent. So the importance of China trade to the U.S. economy had been fading steadily before 2019, and has stabilized since. But may be declining once again. So the EU certainly looks like a laggard here.

(These U.S. pre-inflation trade and GDP data come from the standard Commerce Department sources.)

Turning to direct investment flows to China, here are the annual EU results as a percent of economic output:

2019: 0.05

2020: 0.04

2021: 0.03

2022: unavailable

Here, EU relations with China look to be decreasing. But one source pegs the 2021-22 increase at 92.5 percent – a near doubling! Since EU economic growth last year wasn’t remotely that strong, it’s possible that the Union’s businesses have just executed a major turnabout.

(The EU GDP data for 2019-21- this time in pre-inflation U.S. dollars – come from the World Bank. The 2022 figure comes from the St. Louis branch of the Federal Reserve.  The investment figures, also in in pre-inflation U.S. dollars  – including the claim of the big 2022 jump – come from the China-Briefing.com website.)

Their U.S. counterparts?

2019: 0.03

2020: 0.04

2021: 0.01

2022: 0.04

No clear trend here – but no evidence of a big recent pop. So let’s call this a draw at best. And overall edge to the United States.

(The 2019-21 investment and all the GDP data come from the Commerce Department.  The 2022 investment figure can be found in this New York Times piece.

Not that I’m completely thrilled with the U.S. performance. Except for the curbs on exports of goods and investments related to advanced semiconductors, the Biden administration seems wed to the notion that the United States can trim its China economic sails in a piecemeal fashion. But this approach suffers at least two major flaws.

First, as I’ve repeatedly argued, the threat from China is systemic. Therefore addressing product by product or industry by industry is likely to keep Washington straining to keep up with China’s progress.

Second, the piecemeal approach seems to assume that “strategic goods” exist in isolation, even though nearly all manufactured products are only the tip of a (yes, iceberg-like) supply chain.

In other words, if you want to boost America’s health security, you need to make sure that the domestic economy can not only turn out facemasks, but the materials from which they’re made, the machinery needed to manufacture them, and the parts and components of this equipment.

Does this mean that there’s no substitute for aiming to shut down economic relations completely, however gradual this effort may be to proceed? Doubtful, because so many of the goods supplied by China, like apparel and toys, are harmless (although their purchase does increase resources ultimately available to the Chinese regime).

But does it mean that much more energy and thought need to be applied to so-called “decoupling” by both the European Union and the United States? Undoubtedly.

Glad I Didn’t Say That! Did Yellen Just Swing and Miss on China?

Tags

Biden adminstration, China, Glad I Didn't Say That!, Janet Yellen, Xi JInPing

“Yellen Calls for ‘Constructive’ China Relationship. The Treasury secretary struck a more conciliatory note in a speech Thursday.”

– New York Times headline, April 20, 2023

“As Xi Befriends World Leaders, He Hardens His Stance on the U.S.”

– New York Times headline, April 20, 2023

(Sources: “Yellen Calls for ‘Constructive’ China Relationship,” by Ana Swanson, The New York Times, April 20, 2023, https://www.nytimes.com/2023/04/20/business/economy/yellen-us-china-relationship.html and “As Xi Befriends World Leaders, He Hardens His Stance on the U.S.” by David Pierson, Ibid., April 20, 2023)

Following Up: National Radio Podcast of China Decoupling Interview Now On-Line

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allies, CBS Eye on the World with John Batchelor, China, decoupling, Following Up, Gordon G. Chang, investment, national security, resilience, supply chain, Trade

I’m pleased to announce that the podcast of my interview last night on John Batchelor’s nationally syndicated radio show is now on-line.

Click here for a timely discussion – with co-host Gordon G. Chang – on how quickly (or not) the United States and its major allies are moving toward their stated goal of reducing their economic dependency on China.

And keep checking in with RealityChek for news of upcoming media appearances and other developments.

Making News: Back on National Radio Tonight on Decoupling from China…& an Award!

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allies, CBS Eye on the World with John Batchelor, China, decoupling, Feedspot.com, Gordon G. Chang, investment, Making News, resilience, supply chain, Trade

I’m pleased to announce that I’m scheduled to be back tonight on the nationally syndicated “CBS Eye on the World with John Batchelor.” Our subject – just where matters stand with efforts by the United States and other major industrialized countries to reduce their economic relations with China.

The segment will be aired at 11 PM EST and also features co-host Gordon G. Chang. But the entire program, which begins at 10 PM EST, is always compelling, and you can listen live at links like this. As always, moreover, I’ll post a link to the podcast as soon as one’s available.

In addition, it was great to see that RealityChek made the Top 100 on Feedspot.com‘s list of “best political blogs.” At number 66, it was ranked ahead of The Guardian, Think Progress, Talking Points Memo, The Cook Political Report, and The Wall Street Journal Washington Wire, among other well known sites.

All the more reason to keep checking in with RealityChek for news of upcoming media appearances and other developments!

Our So-Called Foreign Policy: Advice From a Genuine China Expert That’s Genuinely Useless

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China, espionage, fentanyl, globalism, Mel Books, national interests, Nicholas Kristof, opioids, Our So-Called Foreign Policy, privacy, spying, Thomas Hobbes, TikTok

New York Times columnist Nicholas Kristof’s column on how the United States can avoid war with China generated two big takeaways that jumped out at me right away:

First, although his knowledge of the People’s Republic is impressive (he and his wife deservedly won a Pulitzer Prize for reporting on China’s democracy movement and its brutal suppression in Tiananmen Square), his foreign policy thinking can be dangerously childish for anyone primarily concerned with defending and promoting critical U.S. interests..

Second, this column is worth focusing on because such childishness has been all too typical of the globalist strategy that dominated U.S. foreign policymaking and thinking in the decades between the end of World War II and the advent of the Trump presidency.

The problems with Kristof’s column begin with the headline “How to Avoid a War with China” – which unlike many headlines, accurately reflects the main theme. This objective is troublesome because except for pacifists or those unconcerned about preserving acceptable levels of American political independence and prosperity, it can’t be the top priority for U.S. China policy or for any other dimension of U.S. foreign policy.

And in fact, it hasn’t been the nation’s top international priority for decades. That’s why Washington has long pledged to defend numerous treaty allies by threatening adversaries with nuclear attack in response to aggression. The domination of these allies by the Soviet Union and/or North Korea and/or China has been deemed an outcome worth endangering America’s physical survival.

It’s perfectly legitimate for Kristof or anyone else to question these priorities. I myself have opposed incurring nuclear war risk in any number of circumstances (most recently, on behalf of Ukraine, which in my view is of no intrinsic importance to U.S. safety, sovereignty, or prosperity).

But if Kristof or anyone else seeks to fold back some or all such American nuclear umbrellas based on cost-risk calculations demonstrating why various national security objectives (including, for example, America’s own independence) aren’t vital after all, or unless these critics are simply doctrinaire pacifists, they need to take one of two steps for the sake of full disclosure to their audiences and intellectual honesty.

They can either explain how the United States can achieve vital objectives without the deterrent effect of nuclear weapons. Or they can acknowledge that achieving such U.S. objectives regardless of risk isn’t their concern. Since Kristof hasn’t argued for any of these points, from this standpoint, it’s difficult to view his column as anything else but a simple expression of fear.

Except two points that Kristof has made exemplify one example of what I’ve long called a deepseated American failure – especially by generations of globalists in and out of government – to think of U.S. foreign policy as an exercise in promoting or defending specific interests at all. My first comprehensive stab at this argument came here.

And further research revealed to additional ways in which “interest-based” thinking was avoided, including that which Kristof demonstrates – which I called (not too catchily) a search for abstract standards for judging U.S. foreign policy decisions that are incapable in and of themselves of helping America cope with important challenges or capitalize on important opportunities

These standards can take many forms – i.e., advancing human rights or strengthening international institutions or promoting the economic development of low-income countries. The one that Kristof is pushing in his column seems to reflect the idea that it’s not legitimate (or doesn’t pass some more elemental smell test) for the United States to defend itself against or even object to any Chinese threats in spheres in which America’s record isn’t simon pure or outstandingly effective itself.

Yes, this sounds positively ditzy. But what other interpretation can be put on the following two passages?

>“I’m among those wary of TikTok because of the risk that it might be used for spying. But I also know that the United States has similarly used private businesses to spy on China. When China purchased a new Boeing 767 in 2000 to be the Chinese equivalent of Air Force One, American officials planted at least 27 bugs in it” and

>”I think the United States should press China harder on some issues, such as the reckless way Chinese companies export chemicals to Mexico that are turned into fentanyl. That Chinese-origin fentanyl kills many thousands of Americans each year, and it’s hard to see why the deaths of so many aren’t higher on the bilateral agenda.

“But we also need humility. America’s politicians, pharma companies and regulators themselves catastrophically bungled the opioid crisis. Why should we expect Chinese leaders to care more about young American lives than our own leaders do?”

Regarding the TikTok and spying point, sure Kristof professes concern about the Chinese app. But if his paramount aim is helping to prevent Beijing from jeopardizing the privacy of individual Americans, why mention America’s own espionage operations other than to foster the impression that they somehow excuse China’s? What else can this suggestion of moral equivalence accomplish?

I suppose that, in principle, Kristof (or someone else) could think that abstaining from some (or all?) U.S. spying on China might help the United States. Maybe by encouraging Beijing to reciprocate? But again, he never mentions how or why.

Someone prioritizing U.S. interests would recognize that the fact that Washington is “guilty” of the taking same kinds of actions that China carries out (along with every other country with such capabilities) is completely irrelevant to the imperative of defending Americans from its probes. That’s the only objective – or even subject of interest – that should matter to anyone concerned with this nation’s well-being.

Kristof makes a similar disclaimer about understanding the need to respond to the Chinese fentanyl ingredients threat. But then he introduces more distractions – namely (a) a call for humility because Washington has performed so miserably in dealing with opioid use; and (b) the suggestion that if U.S. leaders had cared more about their own people, China’s leaders would care about Americans more as well.

Let’s say, however, that President Biden publicly criticizes America’s opioid record. I’m a fan of humility. But exactly what purpose would such a statement serve? Awakening Americans to the dangers of opioids and/or to their own leaders’ incompetence and/or indifference? Spurring them to demand more effective domestic countermeasures? As if many Americans aren’t already angry about the crisis’ domestic roots and haven’t clamored for action?

Or perhaps Kristof believes that Beijing would be satisfied enough with the resultant propaganda victory to conclude that actively helping to kill so many Americans was no longer necessary? I can’t think of any other value that would be added to a public U.S. eating of humble pie. But again, he leaves this discussion hanging, too.

Or maybe Kristof is worried that if the Chinese sign some agreement, then U.S. leaders will believe that the fentanyl pressure is off them? He sort of indicates this at the end, with his contention that the United States can best fend off various Chinese threats by strengthening its own society and economy. And he’s certainly right about the need for better U.S. domestic policies. But would Washington really be let off the fentanyl hook until deaths fall dramatically? That’s doubtful, and in any event, the author’s analysis here is awfully skimpy.

But it’s distraction Number Two that’s more revealing, because, as with Kristof’s seeming views on spying, it raises the possibility that as long as Washington’s own anti-fentanyl measures haven’t reached some level of acceptability (in whose eyes? China’s?), it can’t reasonably expect Beijing to lend a helping hand…and perhaps shouldn’t even try changing Chinese policies?

I can’t say for sure that’s Kristof’s view. But even if current Chinese leaders ever would consider such a beneficial course of action under any foreseeable circumstance, it’s anything but clear here, either, why in Kristof’s view even mentioning the American fentanyl record matters. However lousy it’s been, shutting off the flow of precursors from China would indisputably help save American lives So this outcome should be pursued vigorously, period. Why muck up the issue with any other considerations?

It may seem that I’m calling emphatically for a foreign policy of double standards and of hypocrisy. But that would be missing the point. I’m arguing instead for anchoring America’s approach to the world first and foremost to the defense and advancement of specific, concrete national interests – that is, to no standards whatever except for whatever contributes to those goals.

As for the hypocrisy charge, I plead (as a Mel Brooks movie once memorably put it) “Incredibly guilty. Because in the kind of fundamentally Hobbesian world that I’m of course assuming, I’m perfectly fine with the United States resorting to methods whose use by others it opposes because I’m completely uninterested in creating or upholding norms to which all should adhere. I’m simply interesting in doing whatever’s necessary, whenever it’s necessary, for the United States to create advantage – of course subject to the approval at some point of the American people – and to ensuring that the nation retains the power to enable this approach to succeed.

This doesn’t rule out cooperation with other countries at various times on various subjects. And if the American people endorse such a course, it doesn’t even rule out U.S. efforts to conform with those non-interest-based, abstract standards of behavior. What it does rule out is making any of the above the alpha and omega of foreign policy. And if you believe that any other test should rule instead, let me know.

Im-Politic: More Support for the Lab Leak Theory – From China

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Anthony S. Fauci, CCP Virus, China, coronavirus, COVID 19, gain-of-function research, George Fu Gao, Im-Politic, Kristian Andersen, lab leak, National Institute of Allergy and Infectious Diseases, National Institutes of Health, natural origin, wet markets, Wuhan Institute of Virology

Imagine if a close friend of Dr. Anthony S. Fauci, the recently retired U.S. medical official who spearheaded the nation’s fight against the CCP Virus pandemic, just made public comments undercutting a pandemic proposition pushed long and hard by Fauci – along with many American apologists for Beijing (Or were they simply Trump-ly deranged scolds determined to beat what they saw as the former’s xenophobic penchant for blaming foreign countries for…anything? Or both?)?

This belief, of course, is that this this devastating disease originated in a wild animal and not from a virology lab in China with a terrifyingly casual – but evidently typical Chinese attitude – toward preventing accidental pathogen release.

Imagine further that this friend of Fauci – whose initial response to the “lab leak theory” was to use his power in the American research community to slime as “conspiracy thinking” any suggestion that the Chinese regime’s recklessness loosed the virus on humanity – was an eminent virologist himself.

And finally, imagine that this Fauci friend had until last year been not only a leading medical authority, but essentially Fauci’s Chinese counterpart.

That would be a development you’d think would supercharge U.S. government and other international pressure on China to come clean on the virus’ origin, and thereby help identify crucial steps needed to reduce the odds of another possibly preventable medical disaster engulfing the globe.

And that’s exactly what happened Friday in London at an international conference. Dr. George Fu Gao, former head of Beijing’s Center for Disease Control and Prevention, told attendees that there was still “no evidence” showing which animal the virus supposedly came from.

Gao’s full statement: “Even now, people think some animals are the host or reservoir. Cut a long story short, there is no evidence which animals (were) where the virus comes (from).”

As known by those who have followed the virus origins debate closely, Gao’s remark is nothing unusual per se. Finding conclusive evidence along these lines is difficult because it typically requires finding the pathogen in specimens caught in the wild – which are carrying the disease before they’ve had any contact with possible human sources. In fact, despite searching for decades, scientists still haven’t identified the natural “reservoir host” of the ebola virus.

But Gao’s view matters a lot because just a month ago, a report was published that many “natural origins” proponents claimed all but clinched the case that the CCP Virus first jumped to humans from raccoon dogs that were sold at a “wet market” in the city of Wuhan. That is, no Chinese lab was involved.

Interestingly, one of the report’s lead authors was Dr. Kristian Anderson of the reknowned Scripps Research Institute, who in early 2020 worked closely with Fauci and other specialists to (in his words) “disprove any type of lab theory” (italics in original), and who had been the recipient of big grants from Fauci’s agency.

A close reading of the findings (good summaries can be found in the above-linked Atlantic and New York Times articles) makes clear that they don’t clinch the case at all. For example, although the Chinese-collected samples from the Wuhan market did contain mostly genetic material testing positive for the virus that matched the raccoon dog genome – the evidence that so excited the natural origins supporters. But infected human samples were found as well. Moreover, the Chinese researchers who collected the samples used at least some test kits designed to filter out human material (which sure sounds consistent with a lab leak cover-up campaign), though it’s not certain how effectively they did achieved this goal.

To be clear, Gao has not endorsed the lab leak theory. In fact, in principle, his remarks could dovetail with the Chinese regime’s claim that the virus came to the People’s Republic from abroad. (Beijing, ironically, doesn’t endorse the natural origins theory because it’s embarrassed by the minimal-at-best hygienic conditions at the wet markets.)

But Gao’s comments are important because he undoubtedly recognizes that, since no one outside China (except some apologists?) takes seriously the foreign-origin claims, any development that undercuts the natural origins theory ipso facto strengthens the only remaining alternative – the lab leak theory. And therefore it would strengthen the case not only for Chinese responsibility, but for Chinese government responsibility.

In turn, if Chinese government responsibility is so distinctly possible, it raises the question of why Fauci worked so hard to discredit it. And one answer is supported by abundant evidence: that very soon after the virus’ severity became clear, Fauci realized that his own agency had funded the kind of research (known as “gain of function”) dangerous enough to create novel and indeed unprecedently deadly pathogens at the Chinese government-operated lab in Wuhan that had already come under scrutiny as the virus’ possible origin point. (See, e.g., my post here.)

This doesn’t mean that Fauci’s American and Chinese grantees at the Wuhan Institute of Virology accidentally created the bug that became SARS-Cov-2 (the scientific name for the CCP Virus). That charge seems implausible. (At least, that’s what been stated by the U.S. National Institutes of Health, and even though it’s the parent agency of Fauci’s National Institute of Allergy and Infectious Diseases, and therefore was responsible for funding Wuhan research, too, I haven’t yet seen a convincing refutation.)

But at that early stage, neither Fauci nor anyone else could know that for sure. And clearly even once that allegation was disposed of, any solid reason to think that Fauci had funded dangerous work in China – especially given that country’s slipshod lab safety record – would have indicated judgement appalling enough to justify his firing.

Before long, Fauci will be appearing before Congressional committees investigating these and other controversial aspects of his record in the fight against the virus. Here’s hoping some lawmaker asks him if he thinks his friend George Gao is a lab leak conspiracy-monger, too.