Our So-Called Foreign Policy: The Deaf Leading the Blind on U.S. China Policy

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China, Our So-Called Foreign Policy, technology, national security, Mainstream Media, Barack Obama, Washington Post, Fareed Zakaria, George W. Bush, Biden, South China Sea, Taiwan, Donald Trump, globalism, Blob, privacy

Is “beyond clueless” or “beyond intellectually dishonest” the best way to describe Fareed Zakaria’s latest column for the Washington Post? It’s tough to tell. And you could ask the same of the editors at the Post‘s opinion pages, who clearly saw nothing wrong with letting this apologia for the United States’ thoroughly discredited (at least for those blessed with working and/or uncorrupted brains) pre-Trump China policies see the light of day.

Zakaria’s missive, from this past Thursday, suffers two glaringly obvious flaws. First, like America’s most influential leaders from both parties for decades before 2017 the author insists on the importance of Washington building and maintaining “a serious working relationship” with a regime that has developed (with oceans of reckless American assistance) into one of the world’s “two most powerful actors.”

And former President Donald Trump’s greatest sin (which Zakaria accuses President Biden of following)? Adopting a policy toward Beijing of “open hostility and criticism” that has caused the “collapse” of “communications channels for managing tensions,” and especially during crises or near crises such as that which appears to be developing over Taiwan.

But nothing could be clearer by now than the delusional nature of these procedure-obsessed and substance-free views (which of course despite Zakaria’s claim have continually been parroted by the Biden administration.) For by now it should go without saying that China’s top priority isn’t avoiding conflict with the United States. In particular, it lacks any interest in the President’s oft-stated  objective of creating clear “guard rails” and other rules of the road that result in a safe and orderly “competition” for goals like “winning the twenty-first century” whose definition seems just as vapid, utopian – and distracting – as his administration’s “liberal global order” references.

Instead, China’s top priority is specific and concrete: increasing its power (in all dimensions) and reducing America’s in every way possible. The reason? Eliminate the greatest obstacle to its plans to ensure its decisive control over every major trend shaping the globe’s future – whether the field is military prowess or technological advance or wealth creation or the evolution of society and culture (especially through privacy-threatening progress in cyber-hacking and facial recognition technology).

Not that the Chinese are eager for conflict or even any kind of frontal challenge or showdown – especially when prevailing is still anything but guaranteed. But the ultimate objective is prevailing, and the means entail building the domestic, regional, and global conditions needed to prevail, either without firing a shot or when clashes do break out.

And not that American leaders shouldn’t make sure to maintain those communication lines with Beijing. With both countries possessing vast nuclear arsenals, lowering the odds of accidental conflict is clearly imperative.

But communication, much less broader engagement, mustn’t become an end in and of itself. History too often has shown that they encourage the (1) U.S. acceptance of empty promises; (2) rationalization of failure to achieve or preserve particular valued objectives in the here and now for the sake of payoffs stemming from a sense of mutual obligation that could be entirely unilateral and imaginary, over a time frame that tends to keep lengthening; and (3) the substitution of wishful thinking about attainable goals for gaining and maintaining the ability to deter or successfully counter specific, dangerous Chinese initiatives.

The second glaringly obvious flaw in Zakaria’s column is its exclusive reliance on former Obama administration officials to support his analysis – which makes as much as sense as citing former Carter administration officials as inflation-fighting experts.

After all, it was under Trump’s immediate predecessor that the Chinese began running wild throughout the South China Sea, pushing aggressive territorial claims and literally building islands with military facilities capable of controlling those commercially vital waters – and according to one senior U.S. admiral at the time, precisely because Beijing concluded that Obama would keep sitting on his hands.

It was also Obama who continued enabling China to pursue the predatory economic policies that badly damaged numerous manufacturing industries vital to American national security, and who turned a blind eye to the massive transfer by U.S. and foreign companies of advanced, defense-related techology to the People’s Republic.

But at least Obama “upgraded” the George W. Bush-era “Senior Dialogue” and “Strategic Economic Dialogue” in order to merge “the economic and security tracks” to “break down the barriers inside both the U.S. and Chinese governments to more effectively tackle cross-cutting issues such as climate change, development, and energy security.” Which accomplished exactly what to advance and defend American interests?

And this is where Zakaria’s editors at the Post come in. Evidently none of them thought to say something like, “Hey, Fareed. Maybe quote someone on China policy whose advice isn’t widely seen as a proven failure?”

Maybe they’re just supposed to look for stray commas and dangling participles?  I suspect that the real reason is that they’re part of the same group-thinking, self-perpetuating globalist Blob that keeps working overtime to ensure that the American public is never exposed to any genuinely fresh ideas about promoting the United States’ security, prosperity, and optimal place in the world – and whose  decades-long record of squandering the nation’s blood and treasure on behalf of one grandiose goal after another is its only claim to success.

Following Up: Sense and Nonsense in the Abortion Debate

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abortion, abortion rights, birth control, Clarence Thomas, Constitution, contraception, Dobbs v. Jackson Women's Health Organization, Following Up, gay marriage, Ninth Amendmen, Planned Parenthood of Southeastern Pennsylvania v. Casey, privacy, Roe v. Wade, same-sex marriage, Samuel Alito, Supreme Court

Even by the standards of the shameful misinformation- and sheer ignorance-dominated era in which we live, the national abortion debate is noteworthy for the shameful misinformation and sheer ignorance it’s generated, So I thought it would be useful to provide some crucial correctives.

First, the 1973 Supreme Court Roe v. Wade ruling just overturned by six of today’s Justices did not create an absolute Constitutional right to an abortion. That majority opinion specifically stated that

“appellant [Jane Roe, the pseudonym of the pregnant woman who brought the case] and some amici [individuals and organizations that provided supportive “friends of the court” briefs] argue that the woman’s right is absolute and that she is entitled to terminate her pregnancy at whatever time, in whatever way, and for whatever reason she alone chooses. With this we do not agree. Appellant’s arguments that Texas either has no valid interest at all in regulating the abortion decision, or no interest strong enough to support any limitation upon the woman’s sole determination, are unpersuasive. The Court’s decisions recognizing a right of privacy also acknowledge that some state regulation in areas protected by that right is appropriate. As noted above, a State may properly assert important interests in safeguarding health, in maintaining medical standards, and in protecting potential life. At some point in pregnancy, these respective interests become sufficiently compelling to sustain regulation of the factors that govern the abortion decision.”

The Roe majority added its agreement with prior federal and state court decisions that, although the right of privacy “is broad enough to cover the abortion decision; that the right, nonetheless, is not absolute and is subject to some limitations; and that at some point the state interests as to protection of health, medical standards, and prenatal life, become dominant.” .

Second, as a result, “codifying Roe” through Congressional legislation, as sought by many critics of the Court’s Dobbs v. Jackson [Mississippi] Women’s Health Organization ruling overturning Roe, would not create an absolute Constitutional right to an abortion, either. In fact, the specific legislation offered in the House and Senate would clash violently with both the Roe and the follow-on 1992 Planned Parenthood of Southeastern Pennsylvania v. Casey decision by preventing the state or federal governments from imposing any limits on abortions “after fetal viability.” as long as “in the good-faith medical judgment of the treating health care provider, continuation of the pregnancy would pose a risk to the pregnant patient’s life or health.”

Third, whatever was contained in legislation establishing national abortion rights, an act of Congress could well wind up providing only the most short-lived of guarantees. For that law would be likely targeted for abolition as soon as anti-abortion politicians gained sufficient control of both Houses of Congress and/or the Presidency (depending of course on whether a majority achieving this goal was veto-proof). And if the Senate filibuster is ended – another goal of many abortion rights backers – scrapping an abortion rights law would be even easier.

Fourth, I wrote on Friday that a Constitutional right to privacy is essential for any political system like America’s that claims to value individual liberties, whether it’s explicitly mentioned in the U.S. Constitution or not. As with all legitimate rights, it can’t be absolute – because in principle and in real life, too many of these can come into conflict. But without an underlying right to privacy, no limits on government’s authority to control individual behavior would exist save those that are explicitly mentioned in the Constitution.

These are numerous and important (like freedom of expression and religion, the right to keep and bear arms, to be protected against unreasonable searches and seizures). And although it’s often overlooked, the Ninth Amendment holds that “certain rights” not enumerated in the Constitution must be “retained by the people.”

But the text of the Ninth Amendment offers no examples or guidance of any kind. And without an underlying right to privacy, it’s not the slightest bit difficult to understand that despite the assurance offered by the Dobbs majority, many other current individual liberties could be endangered. Nor is the evidence limited to Justice Clarence Thomas’ opinion concurring with the Dobbs ruling, which argued that with the right to privacy out of the way, Supreme Court rulings legalizing contraception, same sex marriages, and same sex relationships should be overturned with the same logic.

Even now, politicians in some states are moving to outlaw certain kinds of birth control devices. And it’s surely pertinent to note that Dobbs opinion author Justice Samuel Alito – who insisted that “It is hard to see where we could be clearer” in stating that the majority opposed equating the legalit of abortion and the legality the other forms of intimate behavior mentioned above – himself opposed the 2015 pro same-sex marriage decision using the exact same kinds of arguments he made in Dobbs. So I certainly think he could have been clearer.

But there’s another important reason to prize a right to privacy.  It has to do with the nature of constitutions themselves. Their whole point (unless they’re the phony kind concocted by dictatorships) is establishing limits on government. Why else bother with such exercises? And what set of limits on government is more crucial than those determining how it can and cannot treat private individuals’ behavior? 

These four aspects of the abortion rights debate certainly don’t exhaust the list of  falsehoods and plain old hare-brained ideas warping a controversy that’s otherwise entirely legitimate and necessary. But the sooner they’re recognized and cashiered, the likelier the nation will be to craft (or re-craft, as I’d put it, given my belief that Roe and Casey got the basics right) an abortion consensus behind which Americans can unify.  

Im-Politic: The Court’s New Abortion Decision is Egregiously Wrong Itself

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abortion, abortion rights, Constitution, Dobbs v. Jackson Women's Health Organization, gun control, Im-Politic, Planned Parenthood of Southeastern Pennsylvania v. Casey, privacy, Roe v. Wade, Supreme Court

The Supreme Court has finally decided to overturn the 1973 Roe v. Wade ruling supporting a Constitutional right to an abortion based on the majority’s vigorously argued position that “Roe was…egregiously wrong and on a collision course with the Constitution from the day it was decided” and that the follow-on 1992 Casey decision “perpetuated its errors.”

Maybe so, but at least based largely on the official summary (the Syllabus) of today’s ruling released by the Court, the six Justices who backed the Dobbs v. Jackson (Mississippi) Women’s Health Organization decision expressed some views themselves about what government can and can’t regulate that look pretty internally contradictory at first glance and that seem – eggregiously – at variance with ideas about Americans’ liberties that – to quote a legal standard they cite – are “deeply rooted in [our] history and tradition” and “essential to this Nation’s ‘scheme of ordered liberty.’”

Perhaps first and foremost, the Dobbs ruling states that “the authority to regulate abortion is returned to the people and their elected representatives.” And at least since a draft of the decision making this point was leaked in May, any number of pro-life supporters have argued that rescinding the right to an abortion by no means amounts to a nation-wide ban on the practice, and that states will remain perfectly free to keep or enact permissive abortion policies.

But in Dobbs, the Court has also called abortion a “critical moral question” because it “destroys what Roe termed ‘potential life’ and what the law challenged in this case calls an ‘unborn human being.’” Today’s Dobbs decision emphasizes this point in order to insist that their judgement poses no intrinsic challenge to other rights concerning highly personal behaviors, like the availability of birth control or gay marriage – which presumably don’t rise to abortion’s level.

All of which raises the question: If abortion is in a morality class by itself because of its devastating effects on the unborn, why do the six Justices supporting the Dobbs decision believe that states should have the any authority to regulate it? What satisfactory definition of morality could permit such a uniquely heinous practice to be permitted anywhere in the United States? Why, indeed, should it not be banned nationally – with or without whatever exceptions this or future Courts happen to allow.

In fact, contrary to the majority’s views, today’s Dobbs decision leaves in place many of the gravest threats to Americans’ freedom from government’s reach that appeared to receive support in the leaked draft version. Principally, the Court has now affirmed that not only does the Constitution grant no right to an abortion. It also holds that there’s no right to privacy having to do with the freedom to make “intimate and personal choices” that are “central to personal dignity and autonomy.”

To be sure, the six Justices in the majority correctly contend that no Constitutionally granted rights are absolute, observing that this founding document creates a system of “ordered liberty” that “sets limits and defines the boundary between competing interests” – and also, by extension, between competing rights, since many regularly clash with each other in real life.

But if the American system of government and law aren’t distinguished fundamentally by the assumption that a substantial burden of proof lies with government for infringing on the freedom to make “intimate and personal choices” related to “personal dignity and autonomy,” then it’s difficult to imagine fundamentally what it is distinguished by. In other words, if you can’t find something like a “right to privacy” in the Constitution, you’re not looking very hard.

And ironically, just yesterday, the Court supported this kind of argument when it struck down New York State’s “concealed carry” gun control law. That majority argued that this statute unconstitutionally “required law-abiding, responsible citizens to ‘demonstrate a special need for self-protection distinguishable from that of the general community’ to carry arms in public.” That is, an excessive burden of proof was placed on ordinary Americans, when it should belong to government. Why shouldn’t this kind of reasoning apply to abortion?

Finally, how can anyone believe that “a State’s regulation of abortion is not a sex-based classification” that “violates the Constitution’s Equal Protection Clause?” What men does the Dobbs majority believe will be affected by its decision? And how can these Justices reject the – inevitably gender-based — logic of the Casey decision’s statement that

“The Roe rule’s limitation on state power could not be repudiated without serious inequity to people who, for two decades of economic and social developments, have organized intimate relationships and made choices that define their views of themselves and their places in society, in reliance on the availability of abortion in the event that contraception should fail. The ability of women to participate equally in the economic and social life of the Nation has been facilitated by their ability to control their reproductive lives”?

One claim made by many Dobbs supporters is true — the practical, on-the-ground effects of the decision will be limited for the time being , mainly because the total numbers of legal U.S. abortions have been falling significantly in the last three decades, and because practically all of these have taken place during a pregnancy’s first trimester. (See here for the data.) Interestingly, that’s after Mississippi’s proposed abortion near-ban would go into effect.

Moreover, some other so-called “trigger laws” will allow abortions early in pregnancies, too. But others (see, e.g., here) will significantly narrow this window (even outlawing the procedure before most women even know they’re carrying), and in some of these and others, the lack of exceptions for instances of rape and incest, for example, are truly abhorrent. And now with Dobbs the law of the land, who knows what other outrages may lie in store?      

At one point the Dobbs ruling, the majority wrote that “In interpreting what is meant by ‘liberty,’ the Court must guard against the natural human tendency to confuse what the Fourteenth Amendment protects with the Court’s own ardent
views about the liberty that Americans should enjoy.”  As far as I’m concerned, that advice about leaving personal beliefs out of judicial decisions is a vitally important rule of thumb across the legal board, and as indicated by the above examples of tortured reasoning in today’s abortion rights decision, it’s one the Dobbs majority just threw under the bus.    

(What’s Left of) Our Economy: Are Apple Products “Designed in California…& Extorted by China?”

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Apple Inc., Breitbart.com, China, Donald Trump, economics, forced technology transfer, free trade, globalization, infotech, John Carney, national security, privacy, surveillance, tech, TheInformation.com, Tim Cook, Trade, {What's Left of) Our Economy

You have to give Tim Cook credit for sheer gall, at least if a recent report is true (as it appears to be, since it he hasn’t yet denied it). There was the Apple, Inc. CEO in 2018, at a forum in Beijing no less, in effect warning former President Donald Trump to ditch his plans to impose America’s first ever serious tariffs on Chinese goods, largely because “What I’ve seen over my lifetime is that countries that embrace openness, that embrace trade, that embrace diversity are the countries that do exceptional — and the countries that don’t, don’t.”

And not two years before, according to this account, Cook had promised China that over the next five years, the infotech giant would make a $275 billion effort to strengthen the People’s Republic’s technology and manufacturing base if China’s thug regime would back off a major crackdown it had launched on the company’s massive Chinese operations.

Moreover, as made clear in the December 7 article in TheInformation.com, Cook’s commitments not only have inevitably and massively affected U.S. and China trade and broader economic flows, and will continue to do so going forward. They’re likely to endanger America’s national security. After all, Cook, for reasons having squadoosh to do with free trade or free markets or economic fundamentals, evidently pledged to

>invest “many billions of dollars more” than what the company was already spending annually in China: in part on building new research and development centers”;

>help Chinese manufacturers develop “the most advanced manufacturing technologies” and “support the training of high-quality Chinese talents”;

>collaborate on technology with Chinese universities and directly invest in Chinese tech companies”; and

>collaborate on technology with Chinese universities and directly invest in Chinese tech companies”;

>use more components from Chinese suppliers in its devices”; and 

>give business to Chinese software firms”.

Since every economic and academic entity in China is ultimately under the thumb of the Chinese government, Cook’s submission to Beijng’s pressure has made enormous amounts of resources and knowhow available to a Chinese regime that has challenged American security interests in East Asia and around the world, and that powerfully threatens Washington’s ability to protect Americans’ privacy and political freedoms through its increasingly impressive hacking and other surveillance capabilities (including via the wildly popular TikTok video-sharing app).

In the worst (but ever more plausible) case, in a future conflict with Beijing, Chinese weapons that kill U.S servicemen could be partly and/or indirectly financed and developed by Apple – and, as I’ve made clear, e.g., here and here, by the numerous other U.S. companies that have fueled China’s tech and therefore military prowess.

But also crucial to point out – the deal signed by Cook (far from the only target of China’s successful campaigns of forced tech and manufacturing production transfer over a period stretching back decades), also challenges a core idea of free trade theory in a way first pointed out by friend John Carney of Breitbart.com.

As Carney wrote more than two years ago, economists and others who were crticizing Trump’s tariffs were making an especially important mistake. They were assuming “that all of the goods that are imported from China are made there because China is the lowest cost manufacturer of those goods. If that were true, moving production out of China would necessarily increase costs of production and reduce efficiency.”

But as he proceeded to remind, China couldn’t be such a paragon of manufacturing value. If it were, why would Beijing have been relying for so long on such a wide variety of “mercantilist tactics to attract and retain manufacturing business from global businesses, including requiring companies to manufacture goods in China in order to access its domestic markets and imposing steep tariffs on imports for foreign-made goods”?

In fact, Carney continued, “China’s policies…impose what economists call ‘deadweight losses’ on the global economy by preventing companies from moving their supply chains to cheaper sources.” And tariffs can serve as an essential counter-weight. 

Apple is nothing if not public relations-obsessed, and several years ago responded to public concern about all its production in the People’s Republic with an ad campaign stressing that its products are “designed in California.”  At least for accuracy’s sake, the company should now add “and extorted by China.”  And the news should greatly energize Washington’s efforts to stop U.S. companies from strengthening and enriching this burgoning menace.               

(What’s Left of) Our Economy: U.S.-China Decoupling Help…From China!

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China, decoupling, Didi, Didi Chuxing, finance, investing, IPOs, national security, privacy, stock markets, tech, Wall Street, Xi JInPing, {What's Left of) Our Economy

Here’s an absolutely stunning and potentially crucial development that I sure didn’t anticipate: The Chinese government is emerging as one of the most powerful forces working to decouple the American and Chinese economies.

In fact, Beijing’s recent crackdown on Chinese entities (remember: since China has no free market economic or financial system, these organizations shouldn’t be called “companies” or “businesses”) could rival the tariffs and the technology curbs imposed by the Trump administration and continued by President Biden as a means of (1) reducing America’s dangerous economic reliance on this increasingly hostile rival, and (2) cutting the long-time outflow of valuable U.S. capital and knowhow that inevitable enriches and strengthen the People’s Republic.

This turn of events is so unexpected, because, as I’ve written, finance looms as the one policy front on which decoupling had made the least progress.  Worse, despite the obvious and more subtle threats posed by this trend to individual investors (described insightfully here by investment analyst and friend Steven A. Schoenfeld), not to mention to American security, prosperity, and privacy, the flow of U.S. capital to the People’s Republic kept swelling. So far this year alone, a record $12.5 billion has been raised for Chinese entities on U.S. stock markets in 34 listings – way up from $1.9 billion worth of new listings in 14 deals during the same period last year. And many more seemed on the way.

But don’t think that these numbers come anywhere close to revealing China’s presence in U.S. finance. The kinds of initial public offerings (IPOs) mentioned just above have been appealing to Chinese entities and to the regime because with the U.S. exchanges the world’s biggest by far, passing muster with them is like a Good Housekeeping Seal of Approval. Therefore, it’s inevitably encouraged investors the nation and world over to pile in. As a result, the total market capitalization of these entities stood at no less than $2.1 trillion as of two months ago.

In recent days, however, China has made clear that some national security concerns of its own, along with dictator Xi Jinping’s determination to bring these gigantic, highly advanced organizations closer to heel, were now outweighing the prospect of continuing to attract more oceans of U.S. and other global investment. Just two days after ride-sharing giant Didi Chuxing raised a record $4.4 billion in a June 30 Wall Street debut, Beijing’s internet regulators ordered it to stop signing up users. This past Monday, China ordered that its app be removed from Chinese app stores (as recounted here).  The announced justifications: the need both to protect national security, and users’ personal data. 

But since China’s leaders are not exactly known as champions of personal privacy, the former was surely the real reason, along with the desire to reassert control. Last weekend, in messages presumably endorsed and even placed by Chinese authorities on the Twitter-like platform Weibo, Didi was actually accused of transferring the data it collected overseas.

Since then, moreover, the crackdown has gone beyond Didi. On Monday, China also announced a cyber-security review of two entities also listed in U.S. markets, and The Wall Street Journal reported that Chinese regulators had suggested that Didi postpone its IPO. The following day, Beijing “issued a sweeping warning to its biggest companies, vowing to tighten oversight of data security and overseas listings just days after Didi Global Inc.’s contentious decision to go public in the U.S.”

This news, along with the beatings taken by the share prices of these U.S. listed companies and major counterparts in trading worldwide, have prompted widespread speculation that the Chinese IPO wave in American finance is over, a least for the time being. And almost right on cue, reportedly today a Chinese entity decided to drop its own U.S. IPO plans because of Beijing’s new stance. 

Wall Street of course isn’t happy – huge underwriting and trading fees stand to be lost. But China’s evident change of priorities represents a golden opportunity for U.S. leaders to jump in and lend a helping hand. They should make the regulatory moves needed to keep Chinese entities out of U.S. markets for good going forward, and speed up efforts to kick out those remaining. And as is not the case with other decoupling policies, American officials seemingly can be certain that China’s powerful flunkies in the Washington, D.C. swamp won’t be trying to gum up the works.

Making News: Podcast Now On-Line of National Radio Interview on TikTok, China Strategy, Biden, & the Stimulus Negotiations

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China, Congress, decoupling, election 2020, Joe Biden, Making News, Mark Meadows, Market Wrap with Moe Ansari, national security, privacy, stimulus package, tech, TikTok, Trump

I’m pleased to announce that a podcast is now on-line of an interview I did yesterday on Moe Ansari’s nationally syndicated radio show.

Click here and then scroll down a bit to the segment with my name on it to listen to a timely, informative session on three major headline issues: what President Trump is trying to accomplish with his decision to ban from U.S. markets the popular Chinese social media app TikTok; how a President Joe Biden is likely to handle China issues; and what to expect from the current White House-Congress talks on the economic stimulus package. The segment comes on at about the 23:50 mark.

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

 

Our So-Called Foreign Policy: Why Microsoft Can’t Be Trusted to Run TikTok

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censorship, China, Microsoft, national security, Our So-Called Foreign Policy, privacy, social media, tech, TikTok

When I read that President Trump’s recent decision to ban TikTok from the U.S. market gave the popular Chinese social media app’s services one chance to survive intact – a purchase of its U.S. business by an American-owned company (most likely, it seems, Microsoft) – my “Uh oh” antennae started buzzing. I knew that there’s no reason for confidence that a U.S.-owned tech multinational would adequately safeguard American national security and individual privacy interests versus the kinds of threats that have already been posed by TikTok’s obligations to an increasingly hostile Chinese government, much less uphold values in the freedom of expression family.

I knew this because research for a 2013 article I published on Bloomberg.com revealed that Microsoft was one of the many big U.S. tech companies whose drive for access to China’s potentially huge customer base involved extensive activities aimed at strengthening the technological prowess that has helped make the People’s Republic such a danger to America as well as the world at large.

As I wrote – based on the companies’ own financial reports – these efforts have included the establishment of state-of-the-art factories and laboratories, along with training programs that have taught literally hundreds of thousands of Chinese students state-of-the-art tech skills not only at facilities run by these businesses, but through partnerships with Chinese universities.

Worse, as made clear by a Financial Times report last week Microsoft, whose operations in China “have included collaborations with researchers at China’s military-controlled National University of Defense Technology,” has done nothing important since this piece came out to scale back such cooperation with China’s dictatorial regime.

For example, in 2015, Chinese leader Xi Jinping “visited Microsoft’s headquarters in Redmond, Washington, where he praised the company for “driving forward the development of China’s ICT [information and communications technology] industry”. Moreover, last month, “Microsoft was the sole US company invited to a televised entrepreneurs’ summit with Mr Xi.”

Perhaps most troubling, the Financial Times reported that “The company’s management of its research staff is very light.” According to a former executive at Microsoft China, limiting research collaborations is “a really tough question — research is a very liberal environment in itself. People might question [research collaborations] but from the point of view of our researchers, they want to work with the best partners they can find in their field.”

And what did Microsoft get for itself and its shareholders for all this assistance? Almost nothing. Even though its Windows operating system enjoys an estimated 90 percent market share, piracy of its products is so widespread that China accounts for less than two percent of its global revenues, according to its president. So I’m glad I don’t have to make the case that Microsoft can be relied on vigilantly to resist Beijing’s pressures to remain privy to important U.S. data – by hook or by crook.

Indeed, another recent Financial Times article claimed that Microsoft is mulling a takeover agreement that would give it “one year to separate TikTok from its Chinese parent and address US government concerns over the security of the data generated by the app.” Yet even if Microsoft’s U.S.-based executives do their darnest to shut the Chinese government out, that could leave plenty of time for TikTok’s Chinese employees to work with the regime to create new or keep open existing backdoors to Beijing.  Alternatively, once the deal is done, Microsoft might simply manage ongoing cybersecurity issues as “lightly” as the U.S. parent has managed its research team-ups with China’s regime.

Moreover, requiring Microsoft to conclude the separation much sooner would still leave the company – which would still be anxious for more China business – free to  wind up emulating TikTok’s practice of taking down content deemed offensive by China. Such subjects include praise for the Tiananmen Square protests of 1990, or the Tibetan independence movement. And Microsoft certainly wouldn’t be the first U.S. tech company to regulate speech with political aims in mind.

For all I know, effective safeguards against all these contingencies might be developed. But at very best, preventing China from continuing to exploit TikTok – and other tech products and services it’s currently offering to U.S. customers or could offer – will be a never-ending struggle. Best to remove as many uncertainties as possible, and make defense as easy as possible, by simply kicking TikTok and other Chinese products like it out, and keeping them out.   

Making News: On CNBC Today on the U.S.-China Tech War

Tags

China, CNBC, Making News, national security, privacy, social media, technology, TikTok, Trump, WeChat

I’m pleased to announce that I’m scheduled to appear on CNBC this afternoon EST to talk about the intensifying technology conflict between the United States and China.  The segment, slated to start at 2 PM EST, will key off President Trump’s announcement last night that the Chinese social media apps TikTok and WeChat will be banned from the American market.

You can watch the segment live on the network, and if you can’t catch it, I’ll post a link to the video recording as soon as it’s available.

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

Our So-Called Foreign Policy: Long Overdue Curbs on U.S. Financial Investment in China Seem at Hand

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CCP Virus, China, coronavirus, COVID 19, cybersecurity, government workers, human rights, investing, investors, MSCI, national security, Our So-Called Foreign Policy, pensions, privacy, rogue regimes, sanctions, Steven A. Schoenfeld, surveillance, Thrift Savings Plan, Trump, Wuhan virus

A major debate has just broken into the open over some crucial questions surrounding the future of U.S.-China relations. Chances are you haven’t read about it much, but it essentially involves whether Americans will keep – largely unwittingly – sending immense amounts of money to a foreign regime that was long posing major and growing threats to America’s security and prosperity even before the current CCP Virus crisis. The details, moreover, represent a case in point as to how stunningly incoherent America’s China policy has been for far too long.

The controversy attained critical mass this week when the Trump administration on Monday “directed” the board overseeing the main pension plan for U.S. government employees and retirees (including the military) to junk a plan that would have channeled these retirement savings into entities from the People’s Republic. The President can’t legally force the managers of the Thrift Savings Plan (TSP) to avoid China-related investments. But he does have the authority – in conjunction Congressional leaders – to appoint members to the board, and has just announced nominations to fill three of the five seats. 

This afternoon, the board announced that its recent China decision would be deferred. But because it’s still breathing, all Americans need to ask why on earth the U.S. government has ever allowed any investment in shares issued by entities from China (as known by RealityChek regulars, I refuse to call them “companies” or “businesses,” because unlike their supposed counterparts in mostly free market economies, they’re all ultimately agents of and most are massively subsidized by the Chinese government in one way or another). And why doesn’t the board just kill off the idea for good?    

After all, at the very least, Chinese entities often engage in the most fraudulent accounting practices imaginable, thereby preventing outsiders from knowing their real financial strengths and weaknesses. As just pointed out by Trump administration officials, many also play crucial roles in China’s human rights violations and engage in other practices (e.g., hacking U.S. targets, sending defense-related products and technologies to rogue regimes) that could subject them to national or global sanctions. Worst of all, the thick and secretive web of ties between many of these entities and the Chinese military mean that in a future conflict, U.S. servicemen and women could well get killed by weapons made by Chinese actors partly using their own savings.

Further, government workers’ savings aren’t their only potential or even actual source of U.S. financing. Any American individual or investment company or private sector pension plan is currently allowed to direct money not only toward any Chinese entity listed on American stock exchanges (even though regulators keep complaining about these entities’ lack of transparency – while generally continuing to permit their shares to trade). Such investment in Chinese entities listed on Chinese exchanges is perfectly fine, too. In addition, as documented on RealityChek, U.S.-owned corporations have long been remarkably free to buy stakes in Chinese entities whose products and activities clearly benefit the Chinese military.

Still, the idea of the federal government itself significantly bolstering the resources of China’s regimes belongs in wholly different categories of “stupid” and “reckless.” And don’t doubt that major bucks are involved. The total assets under management in the TSP amount to some $557 billion. And about $40 billion of these are currently allotted to international investments. (See the CNBC.com article linked above for these numbers.)

Could there be any legitimate arguments for permitting these monies – most of which are provided by U.S. taxpayers – to finance an increasingly dangerous Chinese rival? Defenders of the TSP China decision (prominent among whom are officials of public employee unions, who seem just fine with underwriting a Chinese government whose predatory trade practices have destroyed the jobs and ruined the lives and jobs of many of their private sector counterparts) maintain that the prime responsibility of the managers is maximizing shareholder value. And since the TSP had decided that the optimal mix of international holdings are essential for achieving this aim, it quite naturally and legitimately decided to move its overseas investments into the MSCI All Country World ex-US Investable Market index.

This tracking tool and the fund it spawned are widely considered the gold standard for good investment choices lying outside the United States, and in early 2019 decided to speed up a previous decision to triple the weighting it allots to China companies. The share is only about three percent, but who’s to say it stops there?

The TSP board unmistakably should be mindful of its fiduciary responsibilities to current and former federal workers. But as noted by the Trump administration, how can it adequately promote them when it’s transferring their savings into Chinese entities that are simply too secretive to trust and that may be crippled by U.S. sanctions?

More important, as managers of a government workers’ pension fund, TSP board members can’t expect to be treated like private sector fund managers. They clearly have responsibilities other than maximizing shareholder value, and undermining U.S. policies toward China (or on any other front) can’t possibly be part of their mandate.

Bringing the TSP in line with the broader emerging U.S. government approach to China wouldn’t solve the entire problem of huge flows of American resources perversely adding to Beijing’s coffers. This article by investment analyst Steven A. Schoenfeld (full disclosure: a close personal friend) details the alarming degree to which MSCI along with other major indexers have increased the China weightings in their emerging markets indices in particular to alarming levels – levels that aren’t easy to reconcile with the imperative of investment diversity, and that haven’t exactly been broadcast to the large numbers of individual investors who rely on them.

Even immediate, permanent new restrictions on TSP would do nothing to address this issue. Nor would they affect continuing private sector investment in Chinese entities that supply that country’s armed forces, and that strengthen its privacy-threatening hacking and surveillance capabilities.

But TSP curbs would be a start. And any TSP managers that don’t like them can quit and go to work on Wall Street.

(What’s Left of) Our Economy: How a U.S.-China Huawei Tech Disaster Unfolded

Tags

5G, antitrust, AT&T, Bell Labs, China, espionage, Huawei, Lucent, national security, networking, offshoring, privacy, semiconductors, surveillance, tech transfer, technology, telecommunications, {What's Left of) Our Economy

It’s hard to think of a worse mess that Washington has gotten the country into than the loss of global leadership in advanced telecommunications knowhow to China. With the world on the cusp of a transition into the so-called 5G standard, the United States boasts exactly zero companies capable of creating complete networks based on this technology, which will increase by orders of magnitude the speed with which individuals, organizations of all kinds, and governments can send and receive digital information, and thereby bring much closer all kinds of game-changing breakthroughs. In particular, 5G can enable the creation of truly “smart” electronic networks that will greatly boost the efficiency of public transportation and energy infrastructure, healthcare, manufacturing, and so much more. (Here’s a good primer.)

Even worse, the world’s pace-setter in terms of both quality and price is Huawei, and Chinese entity with unusually close ties with China’s dictatorial and belligerent government.  Moreover, its lead over its other two 5G competitors (Finland’s Nokia and Sweden’s Ericsson) is enormous. Huawei’s dominance matters a lot because the advent of an effectively networked world also means the advent of a world in which hacking becomes much more dangerous – and the power to hack will translate into decisive strategic and economic leverage. Just think of the possibilities of national security and economic spying alone, let alone the implications for everyone’s privacy. And because of Huawei’s 5G leadership, Beijing holds entirely too many of these cards.

All is by no means lost yet. In particular, Huawei and other Chinese technology entities still rely heavily on U.S.-based companies for state-of-the-art parts and components – especially semiconductors – along with software. But thanks to 5G’s vast potential alone, Americans can’t assume that, before too long, China won’t be able to use it to cut into their lead in these information technology manufacturing and services sectors.

So how did this dangerous U.S. failure come about? When I first briefly answered this question posed by a Twitter follower, I emphasized the U.S.’ reckless pre-Trump administration China policies. These both greatly incentivized Americans businesses to offshore production and jobs to the People’s Republic even in the advanced manufacturing sectors in the public was assured the United States would always maintain matchless superiority, and turned a blind eye to China’s practice of extorting cutting edge knowhow from these U.S.-based firms in exchange for access to China’s huge and potentially huge-er market.

But as the author of an article last year focusing on the weird – and arguably perverse – relationship between recent American trade policies like these, and recent American antitrust policies, I was especially grateful to this Financial Times article for reminding me that the latter helped create this disaster as well.

Here are the key passages explaining the lack of a US telecom equipment manufacturer capable of producing the full-range of 5G kit:

“To understand how this came about, it is necessary to go back to the mid-1990s when the US passed a Telecommunications Act that weakened US champions such as Lucent Technologies by enticing a flurry of new entrants into the market. With its profit margins under pressure at home, Lucent targeted sales in a fast-growing Chinese market to prop up a flagging share price.

“But Chinese authorities insisted that all foreign equipment makers would — as the price of admission — be obliged to hand over technology and knowhow to state research labs and business partners. One by one, the chief executives of the largest telecoms equipment companies trooped through Beijing in the early 2000s pledging to localise their technologies and production bases.”

Neither American Presidents nor Congresses displayed any serious interest in the consequences. Yet submitting to China’s blackmail failed even to save Lucent. In 2006, it found itself in desperate straits, “and was sold to a French rival, leaving North America without a heavyweight telecoms equipment player. The company that was once the technology champion behind Bell Labs is now part of Finland’s Nokia.”

My trade/antitrust article focused on the bizarre situation that had prevailed in the pre-Trump decades, during which the U.S. leaders from both major parties seemed hell-bent on maximizing the competition faced by U.S.-based businesses from foreign economies (via offshoring-friendly and similar one-way trade deals and policies) even as they seemed equally determined to reduce the domestic competition faced by U.S.-based businesses by greatly weakening antitrust enforcement.

The Financial Times article shows that exceptions periodically appeared to this indulgent antitrust policy. But more troubling, it indicates that no national security or even global economic competitiveness considerations (and of course the two are closely related) ever significantly affected antitrust policy. That’s an indictment just as serious as simple neglect or actual encouragement of ever greater levels of corporate concentration.

It’s important to point out, moreover, that this telecommunications disaster’s roots run much deeper. Specifically, the federal government began back in 1949 to pressure AT&T’s ancestor Bell Telephone, which had dominated American telecommunications from its 19th century beginnings, to divest it manufacturing and research and development activities on the one hand from its services activities. And this even though that research arm, Bell Labs, invented the world’s first semiconductor device – the transistor.

First AT&T and then Lucent made plenty of their own mistakes, too. It’s a really complicated story, though, and two good short accounts can be found here and here. Nonetheless, clearly the voices in Washington during these decades that might have been encouraging a more comprehensive strategy to preserve U.S. dominance – or even competitiveness – in this crucial technology were way too weak. And now, for the near-term future in any event, the nation is dependent for this knowhow on a distant regime whose benign intentions can by no means be assumed.