Our So-Called Foreign Policy: Trusting Asian Allies to Help Contain China is Risky Business

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alliances, allies, Asia-Pacific, Aspen Institute, Cato Institute, China, East Asia-Pacific, Hong Kong, India, Japan, Jim Risch, Our So-Called Foreign Policy, Republicans, South Korea, Taiwan, Ted Galen Carpenter, Trade, Trump

Some leading Republican Senators are slated to introduce legislation today intending to fill what they see as a big and dangerous gap in U.S. globalization and national security policy: the alleged lack of a comprehensive strategy to push China to conform with international norms on trade and related business policies and practices, and to make sure that the People’s Republic doesn’t replace the United States as the kingpin of the East Asia-Pacific region.

I haven’t seen the bill yet, but this Financial Times report gives what looks like a pretty complete summary – which comes from the horse’s mouth (Idaho Republican Senator Jim Risch, the lead sponsor and the Chairman of the Senate Foreign Relations Committee). Some of the economic proposals seem promising – although their focus seems to be China’s appalling human rights violations (about which the United States sadly can do little) as opposed to China’s economic predation (which Washington has considerable power to fight effectively).

As for the national security stuff – I really wish that Risch and his colleagues had consulted with Ted Galen Carpenter of the Cato Institute, one of America’s most trenchant foreign policy critics (and, full disclosure, a valued friend).

For in a new survey just posted by the Aspen Institute, Carpenter has made depressingly clear that one of the conditions most vitally needed nowadays for containing China’s growing military power and political influence in its back yard – reliable allies – simply doesn’t exist and isn’t likely to anytime soon.

Risch and Carpenter certainly agree on the importance of reliable allies, and apparently on their absence – although the former evidently and bizarrely believes that President Trump deserves at least part of the blame for the current unsatisfactory state of America’s regional security relationships. That take on the U.S. approach is bizarre because America (a) keeps running a growing risk of nuclear attack on the American homeland by stationing “tripwire” forces in South Korea largely because that wealthy country continues to skimp on its own defense; and (b) last I checked, America’s immense (and expensive) naval, air, and land deployments in the region were still fully intact.

And don’t just take my word for it: Carpenter lays out in painstaking detail how under President Trump the United States has actually clarified its rhetorical opposition to China’s territorial ambitions, stepped up its military operations in the Asia-Pacific region, and boosted military aid to Taiwan – which of course China views as nothing but a renegade province that it has every right to take back by force.

Regardless of what the United States is or isn’t doing, though, if U.S. alliances are going to be strengthened and oriented more explicitly against China, the allies themselves need to be at least as concerned about Beijing’s aims as Americans. That’s mainly, as Risch and his Senate colleagues note (along with yours truly over the years, as in the above linked 2014 RealityChek post), because China’s military buildup and modernization drive have eroded U.S. military superiority, and because if there’s anything worse than going to war without needed allies, it’s going to war with allies unlikely to help out once the shooting starts. And Carpenter revealed exactly how real that latter danger is by detailing just the latest instance of allied timidity:

“Washington is seeking backing from both its European and East Asian allies for a more hardline policy regarding China. The Trump administration exerted pressure for a strong, united response to Beijing’s imposition of a new national security law on Hong Kong. US officials wanted a joint statement condemning that measure and an agreement from the allies to impose some economic sanctions. However, the European Union collectively, and its leading members individually, flatly refused Washington’s request. With the exception of Australia, the reaction of the East Asian allies was no better. Japan declined to join the United States, Britain, Australia, and Canada in issuing a statement condemning the PRC’s [People’s Republic of China’s] actions in Hong Kong. South Korea seemed even more determined than Japan to avoid taking sides on the Hong Kong issue.”

And as the author rightly emphasizes, “Given the dearth of even diplomatic support from the allies for Washington’s Hong Kong proposal, there is even less chance that those countries will back a military containment policy against the PRC.”

A principal reason is money. Since the 1990s, America’s Asian allies (in particular, Japan, South Korea, and Taiwan) have profited hugely from setting up electronics assembly operations in China and selling the final products (made largely of their own parts, components, and materials, and put together with their production equipment) to the United States. Why on earth would they want to break up this highly lucrative marriage of their technology on the one hand, and China’s low labor costs and lavish subsidies on the other?

To be sure, as noted repeatedly on RealityChek, China has been moving up the technology ladder, and replacing Made-Elsewhere-in-Asia inputs with its own manufactures. But it’s a long way from totally supplanting its neighbors’ products.

It’s true that American multinational companies also are guilty of feeding and profiting handsomely from the Chinese beast. And it’s equally true that pre-Trump U.S. Presidents have helped create the problem by coddling allied fence-sitting. But at least the Trump administration’s trade policies are striving to disrupt these U.S. corporate supply chains, and its tariffs are threatening the profitability of foreign-owned multinationals’ export-focused China operations.  Japan has followed suit on decoupling to a limited extent, and India – which has moved closer to the United States lately for fear of China – is increasingly wary of its own, much less profitable, entanglement with the People’s Republic. But even Taiwan keeps eagerly investing in China and thereby increasing both its wealth and its military power.

Neither Carpenter nor I support the goal of beefing up U.S. military China containment efforts in the Asia-Pacific region (though not for the exactly the same reasons). In fact, we both favor major pullbacks. But we both agree that if containment is to be pursued, Washington needs to do a much better job of lining up its local ducks. Otherwise, it could find itself either losing another war in Asia, or winning a victory that’s pyrrhic at best.

P.S. One of Risch’s co-sponsors, Utah Republican Mitt Romney, has just revealed that he’s especially clueless on the potential of rallying the allies. 

(What’s Left of) Our Economy: More Ridiculous Myths About Trump’s China Trade Policies

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CCP Virus, China, coronavirus, COVID 19, election 2020, enforcement, exports, Hong Kong, imports, Phase One, Trade, trade war, Trump, Wuhan virus, {What's Left of) Our Economy

Time to scotch two myths that have come up recently about U.S.-China relations that are close to a class in themselves in terms of weirdness.

Myth Number One: President Trump is clinging to the “Phase One” trade deal he signed in January because he thinks its continuation is crucial to his reelection.

No less than every single reason cited is wrong. First is the suggestion that it’s a lousy deal but that Trump needs it because it’s one of the only results of his China or overall trade record that can be called an “accomplishment” to any extent.

Actually, even leaving aside Mr. Trump’s record of significant success in disentangling the U.S. economy from China’s (which admittedly isn’t universally viewed as a plus), the trade deal is undoubtedly a major success on terms every American except agents of the multinational Offshoring Lobby should cheer. As I’ve explained, it not only committed China to buying an enormous amount of U.S. goods way above and beyond what its import patterns suggested. It also contained an ingenious enforcement system likely to hold China’s feet to the fire by leaving Beijing only the option of pulling out of the entire deal if it’s dissatisfied with any U.S.actions – including new American tariffs to punish China for treaty violations.

In sharp contrast to their predecessors under pre-Trump administrations, the President’s negotiators acted like they understood that China’s heavy dependence on exporting to the U.S. market would prevent Beijing from walking away – for fear of losing any remaining access. But because the United States needs China’s market much less, a U.S. withdrawal would be a supremely credible threat.

It’s true, as so many critics have charged, that China’s promises in the Phase One deal to cease or cut back on its wide-ranging predatory trade and related practices are pretty general. But the lopsided nature of the enforcement mechanism provides a great way to solve this problem. If Washington decides that Beijing isn’t living up to even vague promises, it can retaliate however harshly it wishes. The only legal option open to China is ending the entire agreement. None of the kinds of tit-for-tat retaliations that Beijing used so skillfully to spark domestic U.S. complaints about the President’s earlier tariffs are authorized. If China tries going down this road, it would likely face even stiffer U.S. tariffs.

Slightly more reasonable – but only slightly – have been observations that Mr. Trump urgently needs the extra Chinese purchases to sustain his claim of guiding the American economy to impressive levels of prosperity. Make no mistake: The export promises specified in Phase One represent valuable, production-based growth opportunities – the more so since 40 percent of those exports were specified to be manufactures, which add so much value to the American economy, as well as create so many family wage jobs.

But the economy – including the trade-sensitive manufacturing sector – was climbing out of a soft patch by the end of last year. Now that the CCP Virus has induced a prolonged national economic shutdown, any growth boost would of course be welcome, including from exports to China. But the downturn has been so gargantuan, and so heavily concentrated in the personal services sectors, that China trade has receded far into the background for the time being. Nor will it matter much to any substantial recovery – which will mainly require a rebound in those same personal services.

But couldn’t a collapse of the Phase One deal – for whatever reason – still threaten the President’s cherished goal of a strongly rising stock market? No, and because investors also appear aware of the trade deal’s marginality to the real economy for time being – and, it seems, especially keenly. In fact, their behavior as Sino-American tensions have risen recently for all sorts of reasons (the virus, China’s apparently impending further crackdown on Hong Kong) contrasts strikingly with their reactions to the trade war’s previous ups and downs. Then, they traded – often frantically – on the resulting headlines. Since the March bottom, though, it’s been a decidedly seller’s market.

Which leads to the second myth that should be headed for the circular file – that the Chinese know they have the upper hand on the President at least during this election year, and that they’re about to use an obscure clause in the deal to get them off the import hook. I’ve always doubted that anyone outside top Chinese leadership circles has any handle on what’s going on and being thought in Chinese leadership circles.

Luckily, howeve, there’s no need for entrails-reading. What matters most of all are Chinese actions. And the record shows that Beijing has never brought up the so-called force majeure clause (see Article 7.6 at the very end of the treaty text), which could enable China to suspend promised increases of imports due to extraordinary circumstances like the virus – which continues to take a heavy toll on its own economy. Indeed, at the recent meeting of China’s rubberstamp legislature, Premier Li Keqiang, second in command to China’s supremo Xi Jinping, explicitly affirmed China’s commitment to meet its Phase One obligations. 

Because that legislature has now passed the newly proposed Hong Kong crackdown law, Mr. Trump will face the challenge of developing a response. His options are wide-ranging, and predicting them seems a thankless task. What does seem certain is that his choices will be accompanied by a new round of bizarre China policy myths.   

Our So-Called Foreign Policy: Closer U.S. Taiwan Ties Must Become a Two-Way Street

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alliances, allies, CCP Virus, China, coronavirus, COVID 19, decoupling, East Asia-Pacific, foreign investment, Hong Kong, Huawei, national security, Our So-Called Foreign Policy, South Korea, Taiwan, tech, Trade, Trump, TSMC, Wuhan virus

As if its CCP Virus coverup and planned crackdown on what’s left of Hong Kong’s freedoms weren’t bad enough, China has been escalating its aggressive words and deeds throughout its East Asia/Pacific neighborhood, and one major sign has been new pressure exerted on Taiwan – which Beijing views as a breakaway province that needs to end its rebellion immediately and join the Communist People’s Republic.

This more worrisome Chinese posture understandably has sparked calls for the United States to retaliate by demonstrating stronger support for Taiwan in various ways. This impulse also seems reasonable to me. But if the Trump administration speeds up its march down this road, it handles a closer relationship with Taiwan a lot better than its predecessors for decades had handled security alliance relationships with Japan and South Korea. Specifically, it’s crucial that Taiwan share much more of the burden of resisting China’s ambitions than has long been the case.

The latest alarm bells about China’s Taiwan policies have been set off by China’s words – or, more accurately, a missing word. Although the PRC (People’s Republic of China) has never renounced using force to achieve its longstanding aim “reunifying” China (as it defines the issue), its rhetorical positions toward the island have long fluctuated between the conciliatory and the blustery. But for 40 years, when Beijing mentioned of reunification, the word “peaceful” has always preceded it.

Last Friday, though, China’s second most important leader dropped the “peaceful” – and did it at a major forum: the annual meeting of the country’s rubberstamp parliament.

So it seems clear that the China cloud over Taiwan has darkened. But U.S. steps to bolster Taiwan’s security will greatly underperform – and may actually increase the dangers posed to America by China itself – unless Washington starts demanding in return that Taiwan stop its longstanding practice of investing massively in manufacturing in China, including in high tech sectors.

Indeed, as of 2018, according to this report, the total value of Taiwanese investment in China hit $180 billion – ten times the value of Taiwan’s investment in the United States. The annual amounts have been going down, but mainly because of the Trump administration’s tariffs on China, which have made it much more difficult for any factories in China – Chinese or foreign-owned – to earn fat profits by exporting major shares of their output to the United States. Even so, such investment had reached massive proportions. Indeed, in 2017. China still attracted nearly 45 percent of all Taiwan’s outbound foreign direct investment. Moreover, so much of this investment has come in technology sectors that fears have emerged of the island hollowing out its own innovation sector – which has been so vital to Taiwan’s spectacular economic development. And of course, Taiwanese companies like contract semiconductor manufacturing giant TSMC have been major suppliers of microchips and other high tech products to Chinese tech companies like Huawei, the global leader in advanced telecommunications.

It’s important to recognize that Taiwan is hardly the only U.S. ally that’s promoted China’s economic – and therefore technological and military – development. It’s not even the biggest. (That dubious honor goes to Hong Kong, but most of this Chinese “Special Administrative Region’s” direct investment flows to China seem to be concentrated in lower-tech, labor-intensive sectors without significant national security implications.) Moreover, the United States remains complicit itself.

But even though his administration doesn’t use the word, decoupling from China does appear to be a major goal of President Trump’s. There’s certainly been a lot of it. I’m not big at all on the United States embarking on a full-fledged campaign to mobilize East Asia/Pacific countries to out-compete China for influence in the  region. Indeed, I’ve argued that disentangling the United States from China economically is vital to ensure American security and prosperity on its own merits. But if President Trump does want to go the full-court anti-China press route, what’s the point if supposed American allies aren’t all-in on decoupling asd  as well?

Im-Politic: In Case You Still Doubt It’s a China Virus

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China, China virus, coronavirus, COVID 19, decoupling, elites, globlalism, Hong Kong, Im-Politic, Iran, Italy, pandemics, Taiwan, The Epoch Times, Trump

Yesterday’s RealityChek post explained why Americans looking for current domestic scapegoats for the sluggish China Virus outbreak response are barking up the wrong tree. But despite the predictable criticisms from globalism- and political correctness-happy elites and the Mainstream Media journalists who follow their cues, the search for foreign scapegoats is absolutely legitimate – primarily because one country above all has unmistakably earned the title: China.

Skeptical? Then check out this editorial from The Epoch Times. As it compellingly demonstrates, “Where Ties With Communist China Are Close, the Coronavirus Follows.”

More specifically, although the editorial writers note that numerous drivers lie behind COVID19’s spread, “the heaviest-hit regions outside China all share a common thread: close or lucrative relations with the communist regime in Beijing.”

One reason I found the editorial especially important was its explanation for the virus’ concentration in Italy. Some convincing explanations for high levels of Italian mortality rates have come out, but I’ve yet to run across any material on why China Virus became so common in Italy to begin with. The Epoch Times spotlights some major reasons:

“Italy, the most heavily affected country outside China as of March 10, was the first (and only) G-7 [“Group of 7” – an official organization of the world’s seven biggest economies] nation to sign onto the PRC’s Belt and Road Initiative (BRI, also known as One Belt, One Road). In an attempt to prop up its weakening economy, Italy has also sought to capture the Chinese market for selling its luxury goods….

“Italy also has signed scores of sister-city agreements with China, with the cities of Milan, Venice, and Bergamo included among them. These are the areas hardest-hit by the virus.”

China ties also seem largely responsible for the coronavirus’ outsize impact on Iran:

“The Iranian regime has had a comprehensive strategic partnership with China since 2016, and its ties with Beijing began years before that. In violation of international sanctions, Iran has imported embargoed materials from China, while continuing to sell oil to the PRC. The Islamic Republic allowed flights in and out of four major Chinese cities until the end of February.”

And reinforcing the case for a vital Iran-China connection is this Wall Street Journal piece. It reports that the Iranian city of Qom, which Iran’s government calls the country’s COVID19 starting point, has been the site of numerous infrastructure projects built by Chinese engineers and technicians as part of that Belt and Road program.

As the Times notes, even South Korea’s government – whose comprehensive and seemingly testing program has garnered widespread global praise – seems to have set itself up for China Virus troubles “for refusing to ban Chinese tourists at large and instead only barring entry for those who recently traveled to Hubei Province, the epicenter of the epidemic in China.”

Don’t forget, moreover, that one big reason surely has concerned South Korea’s long surging economic relations with China – which assembles lots of high-value manufactured goods containing numerous South Korean parts and components. The same goes for Japan, another coronavirus hotspot.

The Epoch Times‘ conclusion is also borne out by the experiences of two other places with extensive economic relations with China that seem to have the disease contained: Hong Kong and Taiwan. (And I don’t mean to suggest that the latter isn’t a “country.”)

The city, located right next to another China Virus epicenter, Guangdong Province, has basically shut its border with the People’s Republic. Taiwan “began to board planes and assess passengers on Dec. 31, 2019, after Wuhan authorities first confirmed the outbreak. In early February, Taiwan banned entry to foreign nationals who have traveled to the PRC.”

Of course, now that the virus has spread far beyond China, government authorities need to focus on more domestically focused strategies – although plugging remaining foreign travel gaps, as President Trump approved in his otherwise unsuccessful Wednesday night Oval Office address, can certainly be justified in many circumstances.

Moreover, China’s primo role in not only the coronavirus outbreak but the previous Bird Flu and ongoing Asian Swine Flu episodes indicates that there’s something about China that makes it particularly (if not uniquely) plague-prone. As a result, further curbs on commerce with the PRC seem imperative even leaving aside (as no one should) Beijing’s recent threat to cut off shipments of vital medicines and their chemical ingredients to the United States. In other words, keeping the focus on China’s responsibility will help American leaders keep and intensify their focus on desirable, broader economic decoupling.

And China’s disgraceful effort to place blame for the virus on the United States amounts to a major additional reason to spotlight the above transnational coronavirus links.

“Blame games” in politics and policy are often condemned, and surely they’re often wrongheaded or overdone. But they also serve the valuable purpose of clarifying thought, accurately identifying problems, and – as suggested above – speeding the discovery of effective solutions. That’s why The Epoch Times editorial gives me more reason than ever to keep calling the coronavirus the China Virus – and why the same should go for all Americans.    

Following Up: More Reasons for the NBA to Get Woke on China

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basketball, China, Following Up, Hong Kong, human rights, India, Japan, LawfareBlog.com, National Basketball Association, NBA, Nikkei Asian Review, sports, Uighurs, Victor Cha

Earlier this month, I published a piece on The American Conservative website scolding the National Basketball Association (NBA) and some of its star players and coaches for too often knuckling under to Chinese human rights-related pressure for fear of getting shut out of the People’s Republic’s vast and rapidly growing market. I justified my call for a more outspoken China stance by this normally politically outspoken league by noting that China wasn’t the only big foreign market capable of adding to the league’s already healthy profits and thus to the players’ and coaches’ already titanic salaries. And I observed that in fact, U.S. pro basketball has enough leverage with China to lead a global sports world push for better behavior from Beijing, especially when it comes to Hong Kong and the country’s Uighur Muslim minority.

That’s largely why it’s been great to see these arguments being reinforced lately both by some new NBA-related business developments and by a leading authority on Asian affairs.

On the business front, a recent report from Japan’s Nikkei Asian Review (NAR) observes that the league is indeed continuing full steam ahead with its efforts to win fans and rake in bucks in Japan and India. The former, not so incidentally, is the world’s third largest single national economy (after the United States and China). The latter has a population so huge and still growing so fast that it’s soon expected to surpass China as the world’s biggest.

According to NAR, this fall the NBA played its first games in Japan (exhibitions) in 16 years and the stands were packed. Moreover, the publication cites one estimate claiming explosive recent growth in subscriptions for the streaming service authorized to carry league games.

Further, the NBA’s popularity in Japan looks set to keep surging for the foreseeable future. For next year’s summer Olympics will be held in Tokyo, and the U.S. and other foreign teams slated to compete will contains dozens of NBA stars. And in 2023, Japan will be one of the co-hosts (along with other big Asian countries the Philippines and Indonesia) of the basketball World Cup.

But perhaps the biggest boost to the NBA’s popularity has been Washington Wizards rookie Rui Hachimura. Hachimura isn’t the first Japan-born player to appear in an NBA game. But so far he looks to be the best by far, and could boost the league’s Japanese fan base in ways reminiscent of Yao Ming’s impact in China.

As for India, the league opened its first office in that population giant in 2017, and although its athletes don’t seem NBA- (or major college-) ready yet, but its fans could identify with Vivek Ranadive, Indian-born owner of the Sacramento Kings. And the Kings played the Indiana Pacers in Mumbai this fall shortly before the Japan exhibition games.

Meanwhile, my claim that the NBA possesses ample clout to confront China successfully on human rights issues was seconded recently by Victor Cha, a Georgetown University political scientist and former National Security Council Asia specialist under George W. Bush’s administration. In a December 8 post for the Lawfare blog, Cha wrote:

“China may continue to ban broadcasts of [certain NBA] games, but how long before Chinese people express frustration? It’s not like there is an alternative to NBA stars like Lebron James or Steph Curry for youth on a Chinese basketball team to worship. China’s punishment may be costly in the short term, but in the long run, the demand signal from Chinese consumers will remain strong. And if the Beijing authorities are seen to be standing in the way, the Chinese Communist Party may be doing more harm than good to its own domestic standing. Moreover, the attention brought to the Chinese over the NBA ban could make the Chinese people aware of alternative narratives of the events in Hong Kong beyond the official media’s framing of the protests as criminal, thuggish and unjustified behavior.”

And I would strongly second Cha’s broader conclusion that “China’s predatory liberalism is an affront to the liberal international order, and the NBA, whether intended or not, is now a part of this struggle. Its actions going forward will set precedents, hopefully positive, for governments, companies, and individuals both inside and outside of China.”

Making News: A New China (and Basketball!) Op-Ed, and Back on CNBC Today!

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China, CNBC, European Union, Hong Kong, human rights, Making News, National Basketball Association, NBA, The American Conservative, Trade, Trump

I’m pleased to announce that a new op-ed article of mine was posted last night.  Appearing on the website of The American Conservative, it explains why the National Basketball Association and its often politically outspoken players and coaches can easily afford to lead a global campaign to press China to clean up at least some of its human right act in Hong Kong and elsewhere.  Click here to read.

Also, I’m scheduled to return to CNBC this afternoon to discuss all the fast-breaking developments in U.S. trade policy across the board – including with China and the European Union.  The segment is slated to begin at 2 PM EST and, as usual, if you can’t tune in (or if you’re dying to see it again), I’ll be posting a link to the streaming video as soon as one’s available.

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

 

 

Our So-Called Foreign Policy: Signing the Hong Kong Democracy Bill Should be a No-Brainer for Trump

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China, Congress, democracy, Hong Kong, Hong Kong protests, human rights, Our So-Called Foreign Policy, sanctions, trade deal, trade talks, Xi JInPing

Full disclosure: I don’t believe that promoting human rights and democracy abroad should be a high priority for U.S. foreign policymakers. (My most detailed explanation comes in this late-1994 article in FOREIGN POLICY magazine, which is available on-line here and here.) All the same, there’s no doubt in my mind that President Trump would be making a big political and substantive mistake if he, as he’s (very obliquely, to be sure) hinted that he might veto the Hong Kong Human Rights and Democracy Act of 2019 just passed overwhelmingly by both the House and Senate.

Don’t get me wrong: I’m under no illusion that the legislation will do anything in the foreseeable future to promote human rights and democracy in Hong Kong – and you shouldn’t be, either. In fact, there’s every reason to believe that it’s a classic example of political virtue-signaling. For example, even the sponsors of the bill don’t seem to believe that any plausible official American words or deeds can affect the fate either of Hong Kong generally or of the huge numbers of protesters who have been challenging China’s determination to keep eating away at the special freedoms enjoyed by its residents since its hand over by the United Kingdom to Beijing in 1997.

If they did, you’d think that they’d have included in the bill some economic sanctions against the Chinese economy. But not only are such provisions entirely missing. The only measures resembling economic sanctions or potential sanctions are directed against the economy of Hong Kong – in the form of requirements that the various ways in which U.S. policies and other laws that treat Hong Kong differently from China (based on the assumption that this “Special Autonomous Region,” as Beijing calls it) really still is autonomous – remain justified by the facts on the ground in Hong Kong.

The bill does contain some sanctions instructions directed at China – but not at any sectors of its economy. Instead, they’re to be applied against “foreign persons” determined to be “knowingly responsible” for any “gross violations of internationally recognized human rights in Hong Kong.”

To which the only serious response is “So what?” The Hong Kong officials who give the specific orders to the police to fire tear gas or crack some heads or shoot rubber bullets into crowds are nothing more than tools of the dictators in Beijing. Concentrating punishment on them amounts – knowingly – to punishing the little fish and letting the prize catches get away. And P.S. – they’re as easily replaceable and interchangeable as any ordinary functionary.

Unless you can think of many U.S. politicians in either party who would back imposing sanctions on Chinese kingpin Xi Jinping or any of his senior cronies? Fat chance – assuming you could even locate any of their assets vulnerable to America’s reach. After all, how many American elected officials genuinely doubt that China’s top leaders are ultimately responsible for the harsh repression of the Hong Kong protests – or for the extradition law that triggered this uprising?

Nonetheless, the politics alone argue compellingly for presidential signing of the Hong Kong measure. It attracted nearly unanimous support on Capitol Hill, so a veto override is likely. And although the President won’t win much praise for enacting the bill into law, he’ll generate a hail of brickbats for any opposition.

And for what? As I argued in the article cited at the beginning, human rights interests generally should take a back seat in U.S. foreign policy for any number of reasons, but chiefly because other interests are usually more important for America’s security or prosperity (since foreign governments’ human rights practices as are almost completely incapable of undermining these objectives). Moreover, American actions can sometimes backfire, and it’s far from far-fetched to worry that a Trump approval of the Hong Kong bill and more frequent and stronger expressions of official outrage will only further convince China’s dictators (and much of the nationalistic Chinese public) that the unrest in Hong Kong stems from foreign meddling, not legitimate concerns.

Yet U.S.-China relations these days are so bad that it’s difficult to imagine a Trump signature on the Hong Kong legislation significantly worsening them. It’s possible that Beijing could retaliate with still higher tariffs or other curbs on American exports, especially farm products, but China remains much more vulnerable to U.S. economic pressure than vice versa. Nor is the President likely to suffer much politically from such measures during the upcoming election year, since nearly all of his political opponents have spoken out much more emphatically against China’s record in Hong Kong than he has. As for “outside agitator” claims – the Chinese are already making them, including against the United States.

Which leaves us with the one stated presidential reason for considering a veto of the Hong Kong bill – that an obstacle could be created to reaching a trade deal. The problem here is that a trade deal that serves U.S. interests (as opposed to a cosmetic deal that, e.g., results in increased American exports to China in exchange for American tariff reductions with no commitments from Beijing to end its most important predatory trade practices) simply isn’t possible. As I’ve written repeatedly, even a complete Chinese cave-in on paper to every demand the administration has ever made can’t possibly be verified adequately – because the Chinese government is so big and so secretive.

In fact, if there’s any relationship between trade policy and Hong Kong policy, it surely works the other way: More human rights pressure from Mr. Trump would be added to the economic pressure that’s already making Xi’s life hard enough. And whatever throws the Chinese off balance by definition helps the United States. For it would force Beijing to spend more time putting out fires and playing defense generally across the board, and leaves less time for pursuing offensive economic and geopolitical goals that undermine American interests.

As I’ve always seen it, claims that these interests (properly defined, of course) and ideals are always ultimately compatible are among the most fatuous made by practitioners, scholars, and historians of American foreign policy. But especially for a country with America’s range of geopolitical and economic choice (by dint of its high degree of built-in security and economic self-sufficiency, and potential for even more), there’s also no question that the United States can afford to promote its admirable values on a regular basis.

Hong Kongers’ struggle for more freedom and democracy represents one such case, meaning that a Trump-ian failure to sign the Hong Kong bill would call into question not only his support for these ideals, but his pragmatic instincts as well.

(What’s Left of) Our Economy: Now What in the U.S.-China Trade War?

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agriculture, allies, China, decoupling, Democrats, election 2020, forced technology transfer, Hong Kong, Huawei, impeachment, intellectual property theft, National Basketball Association, Phase One, Steven Mnuchin, subsidies, supply chains, Taiwan, tariffs, Trade, trade talks, Uighurs, verification, {What's Left of) Our Economy

This is the second working day since the United States and China reached what the Trump administration is calling a “Phase One” trade deal with Beijing last Friday, and the questions surrounding the agreement still far outweigh what’s known. That alone should tell you that towering obstacles continue blocking any confident assessment of where the President’s so-called trade war stands, much less where the conflict is likely to go. Even so, here are some observations I hope are useful.  (Teaser:  One major point concerns tonight’s Democratic presidential candidates debate.)

First, the absence of any written statements or documents from the U.S. side describing or even summarizing what’s actually in the agreement justifies big doubts that anything deserving the term “deal” has been reached at all. Further reinforcing legitimate skepticism is China’s long record of broken promises on trade.

Second, especially strong skepticism is warranted about U.S. claims that any meaningful progress has been made on the so-called structural issues focused on from the very beginning by the Trump administration. For it as I’ve long argued, China’s government is so vast and secretive, and leaves such scanty written records of key decisions, that it will simply be impossible for the United States to monitor and enforce even the most promising Chinese commitments on intellectual property theft, technology extortion, discriminatory Chinese government procurement, and Beijing subsidies that shaft U.S.-owned and other foreign businesses vis-a-vis their Chinese rivals.

Third, even if China currently means to keep its alleged promises to binge buy American agricultural products, any number of external events could upset the apple cart. They include the Hong Kong picture becoming uglier (its becoming prettier can’t be totally ruled out, but seems highly unlikely); new Chinese crackdowns on other protests that may emerge (especially among the Uighur Muslim population) or revelations of new Chinese atrocities against the Uighurs or other minorities or other protesters; more attempted Chinese bullying of high-profile U.S. businesses like the National Basketball Association; a major flare-up of tensions over Taiwan or China’s aggressive moves in the South China Sea; a step forward in the Huawei case that increases the chances that the CFO daughter of the founder of this Chinese telecommunications giant will be extradited to the United States from Canada for sanctions-busting; and Chinese moves that persuade Washington that Beijing has no intention of keeping its perceived agriculture or other promises.

Moreover, the longer China takes to ramp up its buys from American farmers, the greater the potential for these kinds of shocks to bring this “Phase One” agreement crashing down.

Fourth, the less impressive the “mini-deal” keeps looking, the more convincing my view that its apparent modesty reflects President Trump’s belief that his domestic political position has weakened significantly – both because of the new impeachment threat and signs of an economic slowdown.

It’s true that Treasury Secretary Steven Mnuchin has suggested that if the deal hasn’t been finalized by December 15, the Trump administration will go ahead with a previously vowed 15 percent increase on $156 billion worth of levies on Chinese imports. But that’s anything but a concrete threat. In addition, it’s important to note this report suggesting (the specifics are really sloppily described) that China wants the sequencing to work in the opposite way:  First, tariffs get rolled back (or frozen in place?), then the agriculture buys begin. 

Moreover, no one in the administration has said anything about reversing its Phase One-related decision to suspend a big tariff increase (to up to a formidable 30 percent on some products) previously announced to begin on October 15. So even though U.S. duties on some $360 billion worth of Chinese goods would still remain in place if China blows Mr. Trump off, there’s a real chance that Beijing won’t incur any further punishment – doubtless because the President believes that tariffs above and beyond current levels and coverage could panic investors again and further soften economic growth.

Some kind of blow-up in Hong Kong or elsewhere could yet change Mr. Trump’s calculations. But the more important point so far is that events, not the President, are now in charge of the trade talks track of his China policy.

Fifth, at the same time, none of the above means that the United States is devoid of leverage versus China and in particular the kind of clout that can keep advancing its economic as well as closely related technology and national security interests, and this is where a second, arguably more important, track of the Trump China policies needs to be remembered. As I’ve written, the President has sought not only to end the threat of China’s economic predation by forcing Chinese policy changes through tariff pressure. Although he rarely speaks of it, he’s also been trying to repel Chinese threats to U.S. security and prosperity through a series of unilateral measures aimed at decoupling the United States from China economically.

By crimping trade, investment, and technology flows, these decoupling steps are reducing America’s vulnerability to China by significantly reducing the access to the U.S. market so crucial to the success of China’s advanced industries; by shrinking the footprint of China’s state-controlled economy in America’s largely free market system; and by cutting off a Chinese tech sector that could be become highly dangerous from critical supplies of U.S. components.

Decoupling has also been advanced by those tariffs so far imposed on $360 billion worth of Chinese products (amounting to nearly 86 percent of all goods imports from China last year). They haven’t done much to achieve their stated aim of improving China’s behavior, but they have decreased China’s importance to the U.S. economy by prompting an exodus of global manufacturing supply chains out of the People’s Republic.

Further, the Trump decoupling campaign has also helped awaken many foreign governments to the China tech and broader economic threat – though because so many other countries (including major American treaty allies), were profiting so handsomely from the pre-Trump globalization status quo, progress on this front has been uneven and disappointing. (See here for why Germany, for example is so conflicted.) 

Sixth and finally, one major set of actors in this drama, though, hasn’t been very woke on China issues:  most of the Democratic presidential candidates. Sure, many have supported a policy of “doing something” on China (though rarely involving tariffs – or any other concrete measures). But so far, none seems to view China’s multi-dimensional challenge to America as a major concern – and all the top-tier contenders and most others now support impeaching the President. 

Consequently, they could greatly strengthen not only Mr. Trump’s position, but the American position, with firm declarations in tonight’s debate that China will stay squarely in Washington’s cross-hairs if they win the White House, and that therefore there’s no point in stonewalling in hopes of easier post-2020 U.S. policies. Not that any confidence looks well founded that any of them will.        

(What’s Left of) Our Economy: What the Mini-Deal Says About Trump’s China Policy

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agriculture, business investment, censorship, China, decoupling, democracy, Democrats, election 2020, Elizabeth Warren, Hong Kong, Hong Kong protests, human rights, impeachment, Populism, Republicans, tariffs, Trade, trade talks, trade war, Trump, Uighurs, Ukraine, Ukraine Scandal, {What's Left of) Our Economy

The “Phase One” min-deal reached by the United States and China tamping down bilateral trade tensions for the moment, speaks volumes about the three major forces that are now driving President Trump’s China policy, and that will keep shaping it through the next U.S. election – though not always in consistent ways. They are:

>the President’s evident belief that his reelection hopes are being threatened mainly by revived impeachment threats but also by an economic slowdown that has unmistakably been influenced by the so-called trade war with China;

>his consequently increased need for political support from the establishment Republicans so numerous in Congress who have never boarded the Trump Tariff Train and who are worried about their own reelection chances next year; and

>Mr. Trump’s consistent (though generally unstated) belief that no matter how the formal trade talks proceed, America’s national security as well as economic interests require the U.S. economy to continue steadily decoupling from China’s.

The strength of the impeachment drive faced by the president is now indisputable. Some polls are even showing growing Republican support for not only impeachment by the House but removal by the Senate. Moreover, this political challenge comes at a time when the President’s strongest suit by far (at least according to polls) – his economic policy record – is looking somewhat weaker.

Few signs point to a recession breaking out by Election Day, much less during the preceding weeks or months. But growth has been slowing to levels that Mr. Trump himself has deemed unacceptable – in no small measure because they were the rates that prevailed for most of the Obama administration.

The tariff-heavy Trump trade policies hardly deserve all the blame. (See, e.g., this recent post.) But the failure of business investment to stay elevated following passage of major tax cuts for business is especially telling. It buttresses claims that both the President’s various sets of tariffs and the inconsistency with which they’ve been both threatened and applied have inhibited companies from approving big new expenditures on new factories and other facilities.

As a result, nothing that can reasonably be expected from Washington (in other words, ruling out a big infrastructure spending bill) is likelier to boost the economy more than a nerve-calming trade truce with China mainly featuring some Chinese market opening or re-opening (especially for agricultural products) in return for some U.S. tariff cuts, promises to refrain from new levies, or some some combination of such moves. At the least, such an agreement would in theory help growth maintain the momentum it has remaining.

A mini-deal along these lines would also please the Senate Republicans who might ultimately judge the President’s fate, and who generally have lagged far behind the GOP base in turning against pre-Trump China and broader trade policies. Moreover, as I’ve written, impeachment politics have greatly magnified their sway over Mr. Trump before. Despite his sky-high popularity with Republican voters, the President was heavily dependent on their political backing until this spring in order to neutralize any impeachment chances while his Russia ties were being investigated. That’s surely why his early policy initiatives were dominated by traditional Republican priorities, like tax cuts and repeal of former President Barack Obama’s healthcare overhaul, rather than by populist priorities like an infrastructure bill and the prompt imposition to tariffs.

Once the Special Counsel and other investigations flopped for various reasons, Mr. Trump had a much freer hand. But because of the emergence of “UkraineGate,” for now, those days are over. Probes growing out of those events are certain to last for months. Therefore, continued, much less higher, tariffs on China that could further drag on the economy and further frustrate the rural constituencies so crucial to the President and many other Republicans seem out of the question.

The President is so hamstrung that he’s been unable to marshal greater public support for staying the tariff course even though China is antagonizing American public opinion with its harsh suppression of the Hong Kong protests and the Muslim Uighur minority, and with its heavy handed efforts to extend its censorship practices to the National Basketball Association and other U.S. businesses. And don’t forget: These developments have placed China in a much weaker position, too.  

One reason that the President hasn’t been able to capitalize could well be his reluctance to declare publicly the functional equivalent of economic war, or his intent to decouple – presumably because any such statements would prompt the Chinese to crack down even further on American companies even doing business in the PRC that have nothing to do with job and production offshoring aimed at serving the U.S. market from super-cheap and highly subsidized Chinese facilities, as opposed to serving Chinese customers. And that reasoning has been entirely understandable.

Much less understandable – the President’s insistence that a trade war with China would be easy to win and inflict no economic harm on Americans, rather than choosing to challenge his compatriots to endure some sacrifices in order to beat back a mortal threat to their national security as well as prosperity. No wonder public support for so-called hard-line policies remotely strong enough to offset the opposition and reservations of the Congressional Republicans and most Democratic politicians is nowhere to be seen.

And don’t doubt that the Chinese fully understand. Whatever problems they initially experienced in figuring Mr. Trump out, they surely have concluded that they’re best advised to play the waiting game on the broader and deeper so-called structural issues dividing the two countries (e.g., intellectual property theft, technology extortion, massive subsidies) until the President is replaced by a Democrat who’s much easier to deal with.

Indeed, the evidence for this conclusion is abundant. China issues have played a small role in the Democratic primary campaign so far – even when it comes to long-time critics of pre-Trump trade policies like Democratic Socialist Vermont Senator Bernie Sanders, and Massachusetts Senator Elizabeth Warren. One likely explanation: In recent years, Democratic voters and leaners have markedly flipped on those pre-Trump approaches, from deep dislike to general approval. This shift in public opinion (matched in part by a trade flip in the other direction among Republicans and leaners) may also warrant some Chinese confidence that even a President Warren might prove a more acceptable interlocutor than Mr. Trump.

Nonetheless, the formal talks are not the only track on which the Trump administration’s China trade policies are running. And the other track – featuring unilateral U.S. moves to restrict Chinese involvement in the American economy, and thereby foster decoupling – is much less controversial than the trade talks and especially the tariffs and tariff threats clearly required to spur any meaningful progress.

Highly revealing on this score (in terms of the importance attached in Washington to decoupling): Even as a high level Chinese delegation was jetting to Washington, the President approved actions against Chinese tech companies and Chinese officials that were justified by human rights concerns, but that in the first case clearly advanced decoupling. Just as revealing (in terms of possible Chinese acceptance of a more skeptical new bipartisan U.S. consensus on China policy): Despite the provocative timing, the Chinese didn’t turn around and head back home once they heard the announcement.

Reinforcing the new American consensus on decoupling has unmistakably been the growing realization by the U.S. corporate sector that its heavy bets on China have dangerously increased its vulnerability not only to the whims of American politics, but to a Chinese regime that’s turned out to be much less hospitable than expected. As a result, “Phase One” is not only a suspiciously convenient-looking term being used by the President to describe his new deal. It also looks suitable for describing where his administration’s overall China policy stands right now.     

Making News: Two China Trade War (& NBA?) National Radio Interviews Coming Up Today

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censorship, China, Hong Kong, Making News, Market Wrap with Moe Ansari, National Basketball Association, NBA, The John Batchelor Show, Trade, trade talks, trade war

I’m pleased to announce that I’m scheduled to be interviewed on two nationally syndicated radio programs today on the current, possibly crucial phase of the U.S.-China trade talks.  I also suspect that both segments will at some point turn to the uproar over China’s efforts to censor a National Basketball Association executive for tweeting his support for the Hong Kong protesters, and Beijing’s follow-on efforts to intimidate the league.

The first, slated to air at 3 PM EST, is with Moe Ansari on his popular “Market Wrap” program.  You can listen on-line here.

The second, which will start at 9:15 PM EST, is on “The John Batchelor Show,” and here’s the listen live on-line link.

As always, if you can’t tune in, I’ll post links to the podcasts as soon as they’re available.

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