I recently read an article by former U.S. Treasury Secretary Henry Paulson (Bush administration 2006-2009) referring to China and U.S. trade concerns.
I took some exception to Paulson’s portrayal of the problem.
After spending years in the Pentagon examining Chinese security intent and reach, we too in the military (like Paulson in Treasury) did not quite understand what drives China…in other words, their history, traditions, culture, and ideologies. And worse, did not communicate or fuse information with our cabinet partners…one being the U.S. Treasury. For example, I attended a Joint Chiefs of Staff (JCS) meeting during the Obama administration listening to our Pacific Command brief the JCS chairman on Chinese aggression in the south china seas. At one point during the brief, the two-star admiral leading the brief used a keyword describing the Chinese….the word was “threat.” On the outside, this seems like an accurate security depiction of the Chinese, especially since recent aggressions such as building an island in international waters, declaring it a sovereign territory of China, and subsequently forming a military air defense zone around it, seemed to support this conclusion. As far as the JCS was concerned, China was a threat.
Not so fast!
After the brief and during questions, a very smart high ranking assistant secretary of defense brought up the point that not all of our government organizations refer to China as a threat. He mentioned the fact that the Treasury Secretary assesses China as a partner. A partner? Amazing, these two assessments could not be further apart…and within our own government. It is discombobulated assessments like this that create mixed signals and uncoordinated positions. The result being diplomatic and more importantly actionable confusion. So what is it? Is China a threat or a partner? Or both? And more to the point of my blog, how do you determine a U.S. position and its actions if we don’t even have the U.S. government on the same sheet of music?
The bottom line is you don’t! And we didn’t until Trump came into office and got them all on the same sheet….I’ll bet painfully? Is Trump’s position the right one? Time will tell but what Henry Paulson states in his article is what I feel is the problem with our historical approach to China. In other words, old diplomatic rhetoric, ignorance and passive positions. We let China become an embolden beast with few boundaries because we failed to truly understand who they are, what they believe and their past.
The Chinese worry about only a few things; the party, power, and profit…at any cost!
Here’s my take on Paulson’s article
Paulson’s old diplomatic rhetoric, in part, is what got us into this imbalance with China in the first place. The U.S. has always protected its interests but in the case of China, we were more interested in economic opportunity than balancing China’s emergence. We let them grow from a dumpling to a full course stir fry in less than 30 years. U.S. corporate hustlers (and our government who let them) sold off technology for market entry, which I believe still is an entry condition. The economic potential was just too enticing and clouded our trade negotiations, foreign direct investments (FDI), labor disparities, and technology transfers.
They have taken advantage of the U.S. for the last 30 years in so many ways. So much so that we ended up with a $375B trade deficit and Chinese FDI in the U.S. at twice the level of U.S. investment in China ($29 billion vs. $14 billion). In my layman’s view, these trends and other imbalanced issues forced the U.S. to create questionable partnerships like the Trans-Pacific Partnership (TPP)…btw, Paulson was the Treasury Secretary when we first started negotiating TPP…uhmmmmm?
Also, Paulson is a former Goldman Sach’s CEO who during his tenure as the Treasury Secretary missed the ball leading up to the 2008/09 financial crises…not essential in this review but a competency issue…FYI
More on TPP
What was TPP going to do for the U.S. in hedging against China when its very foundation was imbalanced. In fact, TPP just exacerbates our own trade problems. For example, out of the eleven countries that signed TPP, we have trade deficits with seven totaling almost $200B. And to further highlight the absurdity with TPP, the imbalance adds up to almost half of the trade imbalance with China…tough to hedge when you have nothing to hedge with!
So why pursue it? On the surface, TPP touted U.S. market access, tariff reductions and GDP growth. But underneath the hood, it looked a lot like the North American Free Trade Agreement (NAFTA). To put it another way, U.S. manufacturing and corporate wealth were going somewhere else. The U.S. government and corporate America continued its 90s trend of outsourcing cheap labor and production for market advantage and top political elite’s globalist pursuits. In other words, America was not first!
This type of mentality works if you are willing to carry the economic burden it generates. It is this very diplomatic philosophy of America second that got the U.S. into several burdensome economic deals, like NAFTA, TPP, Kyoto Protocol, and the Paris Climate Accords (read my article on The Religion of Climate Change). It is also bad deal’s like this that got Trump elected...STOP the hemorrhaging…America first!!
Here’s where the Chinese boom party started
Once China entered into the WTO, it was all over! They now possessed a formal way to trade in their favor. It provided the confidence China needed to expand and the credibility to officially violate agreements. Yes, violate! As stated by Steven Ezell in his article, Top 9 False Promises That China Made in Joining the World Trade Organization, “These broken promises [trade liberalization] have harmed the global trading system as well as both economic growth and the health of innovative industries across the United States and Europe.” Easy to do in a world where corporations subjugate to cheap Chinese labor and access…but at a cost…more on cost later. All of this could have been checked by the U.S. through slow integration instead of leaping into an expanding and unchecked China.
But, how can this be bad for the U.S.? Cheap labor, opening markets, and apparently great relations.
Here’s the rub.
The Chinese are still commies and it is about power and control first, State interests second and anything else a distant third…you notice I never mentioned building or nurturing foreign relations unless it falls under number two. The Chinese are no one’s friend and never will be in their current form of governance. It is all about paranoia, interests, influence, and money… and I repeat, at any cost. In order to combat this type of philosophy and practice, one has to play hardball with them…if not, it is a sign of weakness! And will be exploited, currently in the tune of a $375B trade deficit and violations, climate control abuses, and unaccountable intellectual theft. If one reads Chinese history, the plan is quite obvious…rearrange the world economic and political order…and they are not yet done.