Tuesday, March 14, 2017

Blowback is a lesson the Trump Administration should keep in mind

An edited version of this commentary first appeared in Asia Times and later reposted on SupChina.

“What goes around, comes around,” can be a critics comment on the blowback at the perpetrator whose action had misfired. The late Chalmers Johnson devoted an entire book criticizing American foreign policy based on “blowback.”

However, once in a while, what comes around could be a good thing. One example, remarkably enough, involves China and Japan. The story came from a speech by Daisuke Kotegawa given at the international conference organized by the Schiller Institute, held in June 2016 in Berlin. Mr. Kotegawa was a retired career bureaucrat from Japan’s Ministry of Finance.

He noted that after Fukushima in 2011, hotels in Tokyo had vacancy rates of 90%. But in recent years, tourists from China are filling the hotels. When the cherry blossoms are in bloom, Chinese tourists are overfilling the hotels.

In 2015, 5 million visitors came to Japan, double from just two years earlier. With average spending of about $3000 per person, that was a $15 billion injection into Japan’s economy.

“So thanks to those foreign tourists, our economy is now very good,” said Kotegawa. He went on to say that he was part of the team that agreed to provide economic assistance to China in 1989 to the tune of more than $10 billion per year for six years in the form of loans at 0.5% interest.

These loans were made to build airports in Beijing, Shanghai and Guangzhou, along with seven each of ports, railroads, fertilizer factories, dams and power plants. The telephone networks in Shanghai and Beijing were financed by these loans as well as the subway system in Beijing.

Thanks to the infrastructure put in place with Japan’s assistance, the Chinese people got wealthy and as Kotegawa-san observed, “Now we are actually getting the fruits in the form of huge numbers of Chinese tourists.”

This story has a couple of lessons for the Trump Administration. One is that a well-oiled economy needs a first rate infrastructure. The American Society of Civil Engineers just released their quadrennial “Infrastructure Report Card” on sixteen sectors of America’s infrastructure such as roads, rail, dams, drinking water and so on.

Most sectors earned a rating of D, which means the infrastructure is “in poor to fair condition and mostly below standard, with many elements approaching the end of their service life. A large portion of the system exhibits significant deterioration. Condition and capacity are of serious concern with strong risk of failure.”

Even though the category of bridges earned a C+, one of the higher grades from ASCE; nevertheless, 56,000 bridges in America are “structurally deficient”—in other words, potential catastrophes waiting to happen.

President Trump campaigned on fixing the infrastructure and members of Congress have known for years that the nation’s infrastructure is old and worn. But either Congress lack the intelligence to figure out where the funding can come from or lack the courage to propose taxes that would pay for the improvements. Kicking the can down to next election is what they do best.

According to ASCE, it will take a couple of trillion dollars to bring America’s infrastructure up to snuff; mind you, not at grade A state of the art but at least up to grade B enabling the American economy to start humming again. But if Congress can’t come up with the funding, how will Trump deliver on his promise?

This is where China comes in. They have gone from being a recipient of soft loans and foreign assistance to becoming the world’s largest investor, partner and builder of infrastructure projects. They have taken their Silk Road initiative around the world and countries are eager to work with China because China has developed the reputation for producing quality results on schedule and at low cost, and additionally with attractive financing terms.

All Trump Administration needs to do is to be willing to take a different approach to the bilateral relations with China, a new look based on what’s in national interest for America. How will sailing naval fleets on South China Sea benefit our national interest? How will launching a trade war with China benefit America? In other words, how will confrontation benefit America? Not much.

On the other hand, if Trump can invite the Chinese companies to help build and finance the infrastructure projects; that clearly would be in America’s interest. Trump can even stipulate that for every winning bid by a Chinese company, it would have to take on a joint venture partner drawn from the list of local American construction outfits. Since it’s been many years that American companies have undertaken large infrastructure projects, these JV projects will help bring them up to speed again.

By making sure that what comes around will benefit America, the Trump Administration will be well on the way to developing a winning relationship with China. Just keep in mind that the people of America and China have everything to gain by collaboration and nothing by confrontation.



1 comment:

Joe Wong said...

Asking China for help surly will blow a big hole in the American Exceptionalism ego, prestige and hundreds of years of White supremacy myth on the believe that only the White can invent and only the White can success.

For the Americans who are still living in a world with a mindset belonging to the past, stalled in the old days of colonialism, and constrained by the zero-sum Cold War mentality, nothing suggested in the article can be done.