Thursday, April 13, 2017

Sorry, we gave you the short straw and we’re throwing you off the plane--United

Recently on a United Airlines flight from Chicago O’Hare to Louisville, a young looking 69 year old Asian man was forcefully pulled out of his seat and ejected from the plane.

Videos taken from other appalled passengers showed airport security force dragging an unconscious man along the aisle to the front door. Blood was streaming from his face.

According to eyewitnesses on the plane, the passenger refused to give up his seat because he, being a physician, has patients to see when he gets home.

United explained that the airline overbooked and had asked for volunteers to give up their seats. Apparently not enough found the inducements sufficiently attractive to do so.

The airline then alleged that the unfortunate passenger was randomly drawn by computer program to “voluntarily” give up his seat. When confronted by the bad luck of the draw, the Asian man explained that he has patients at risk waiting for him, and furthermore he wanted to consult with his lawyer.

The airline then called in the Chicago’s finest to bodily eject the man from the plane without so much as a gentle “please.” The official explanation from the airline made the matter even worse.

United CEO Oscar Munoz apologized for the airline for having to overbook (greed made me do it) and then having to force passengers to give up their seats. Munoz really riled public opinion against the airline when he then sent an internal memo praising the crew involved in the incident for “following company procedure.”

Mind you, Mr. Munoz was recently honored as “communicator of the year,” by PR Week. “An excellent leader who understands the value of PR,” the trade publication said.

PR professionals are now probably smacking their lips over the prospects of the vast amount of work in store for them to help United restored the airline’s image and reputation. Thorough review and revision of industry practice and company procedure will likely be part of their workload.

The airlines have profited hugely from this era of big data.  Based on their accumulated experience, they can anticipate and calculate to sell out every flight. (How often have you as a passenger flown on a partly loaded plane nowadays?)

Thus when the airline computer makes the right call, the company makes scads of money. Every once in a while, when more passengers come on board than anticipated, you would expect the airline to take the ownership of the consequences rather than ask the hapless passengers to walk off the plank.

Apparently, the UAL stock price took a hit immediately after the incident went viral on social media. One commonly expressed concern was that the outraged Chinese customers would stop flying on the airline. The lucrative China to US routes represents an important source of revenue for the airline.

Over the long term, whether the company market cap will continue to do well will depend on whether passengers decide to fly on United or not. I am a million miler on United, but if the airline can force me off the plane at random, I am not sure I will want to fly on this airline any more.

To reassure me as a passenger, United needs to tell me that the airline does not as a matter of policy pick on Asians for arbitrary brutality. And, from now on, the airline will have revised their standard procedure so that I will not run the risk of being taken off any flight without my consent.

A companion piece in the Asia Times observed that what happened on the United flight pales in comparison with the way passengers are treated by airlines in China. I am nonplused by the point of the beggar thy neighbor discussion.

Wednesday, April 5, 2017

Donald Trump is right to go direct with North Korea

Edited version first appeared in Asia Times.

As if to set the table for the forthcoming summit in Florida with China’s President Xi Jinping, President Donald Trump declared that if China won’t help resolve the North Korea crisis, the U.S. can and will take direct and unilateral action, implying the military route.

In a sense, Trump is correct. North Korea has always been an American problem not a Chinese one. Pyongyang regime from Kim I, II and III has always worried about what action Uncle Sam might take against them, never about China or even Japan and South Korea.

While direct military strike against targets inside North Korea might be one option, there is a much easier and non-violent approach available to Trump. All he has to do is to bend a little from the customary posture of a hegemon and offer to meet and talk.

The emissary Trump can send to Pyongyang could begin the process by delivering a message along the following lines: We are willing to meet with you to discuss and negotiate mutually acceptable terms and conditions that would lead to a nuclear free Korea Peninsula.

During this period of exchange of visits and meetings, the U.S. would make no further aggressive actions against North Korea and you would agree to do the same and take no action that would intimidate your neighboring countries.

This would not be the first time for the two protagonists to follow this path. In 1994, the Clinton Administration launched a bilateral negotiation that led to an “Agreed Framework.”

How the framework came about was discussed in William Perry’s memoir, “My Journey at the Nuclear Brink.” He led the negotiations with Pyongyang while he was Clinton’s Secretary of Defense and continued after he stepped down.

The basic elements of the framework included: (1) North Korea would stop construction of larger reactors and suspend producing plutonium from a smaller already operating reactor. (2) South Korea and Japan would build two light water reactors for generating electricity (so that North Korea would not need the reactors.) (3) The U.S. would supply fuel oil until the light water reactors become operational.

“I considered this a good deal for the US: war was averted, plutonium production suspended, and North Korea gave up their program for building larger reactors that were under construction,” said Dr. Perry.

As he related in his book, after a long tortuous series of talks and meetings, his team was on the verge of reaching a deal with North Korea that would convert the cease-fire agreement in place since 1953 into a permanent peace treaty and normal relations with the US.

From the North Korean’s point of view, getting a binding commitment from America eased their sense of insecurity and the need for blackmail in the form of nuclear weapons to counter threats from the US.

By then George W. Bush entered the White House. He decided not to continue the dialogue with North Korea for next two years (probably because he did not want anything to do with a member of axis of evil.)

When Bush resumed contact with Pyongyang in year three of his administration, he in effect moved the goal post by adding more conditions and demands on North Korea.

By then Pyongyang was well on its way to developing the atomic bomb and was in the position to reply with the middle finger salute.

I asked Dr. Perry if having the bomb changed the dynamics of the bilateral negotiations. He said of course the restarted negotiations were made more complicated and difficult.

Trying to be helpful, Beijing organized the six party talks that added Japan, South Korea and Russia as well as China to the mix. Nothing positive emerged because the basic conditions remain unchanged. Namely, North Korea wanted to be treated as a nation with normal relations with the US.

What did changed was that China was now the responsible party for the North Korea debacle. From the US point of view, China keeps North Korea’s economy alive, from its collapse, has most influence on the Pyongyang regime, etc., etc.

Washington, whether oblivious to history or unwilling to face inconvenient reality, has for the last sixteen years been waiting for Beijing to bail America out of the mess.

All President Trump has to do is to ignore the legacy of his two predecessors and ask Secretary Tillerson to make a fresh approach with Pyongyang. I am sure President Xi would be happy to assist.

Tuesday, April 4, 2017

What should Xi and Trump talk about?

This first appeared in Asia Times.

Later this week, China’s President Xi will meet U.S. President Trump in Florida at the unofficial White House. In view of Trump’s predilection for unpredictability and brash outbursts, some pundits thought Xi might be taking a risk if the impromptu summit does not turn out well.

I believe the probability of the outcome turning out badly is low. Secretary Tillerson’s visit to Beijing and advanced preparation by officials from both sides must have provided some reassurance before Xi would agree to the visit.

Another reason that the meeting should go well is because having experienced a series of setbacks, Trump will not want to jeopardize the chance for some welcomed good news for a change.

So what could Xi offer in his meeting with Trump that will make Trump look good? A nice opening would be if Xi were to say, “President Trump I am here to offer you a solution to rebuilding America’s infrastructure while creating more American jobs.” These are two sweet spots closely identified with Trump’s presidential campaign.

As a matter of fact, Chinese companies are already winning bids on infrastructure projects in America using American labor. The New Jersey based US affiliate of China Construction, a state-owned company, won the competitive bid to rehabilitate the Alexander Hamilton Bridge over the East River in upper Manhattan. They completed the work ahead of schedule and won a bunch of awards and recognition for a job well done. Since the completion of that project, the company has gone on to win other bridge rehab in metropolitan New York area.

China Railway Rolling Stock Corporation (CRRC), another State-owned enterprise, has signed a number of contracts to build railcars for the metro systems of major cities such as Boston, Chicago, Los Angeles and Philadelphia.

All the deals are structured along similar lines. The exterior of the cars would be manufactured in China and shipped to the U.S. for final assembly. Major components such as propulsion, heating, ventilation and air conditioning, and lighting would be made in the U.S. by CRRC or sourced in the U.S. CRRC would invest and build factories in each metropolitan area to do the necessary manufacturing, employing local American labor.

These deals provide the best outcome for both countries. Through more than a decade of experience, China has become the preeminent experts in knowing how to manage infrastructure projects as well as having the expertise to make necessary components at competitive prices. As they perform projects around the world, Chinese companies have gained valuable experience in managing disparate local work forces.

Thus, Chinese companies can offer to rebuild America’s infrastructure at prices not available from any other source while providing valuable training and employment for American labor.

Trump has been complaining of “unfair” bilateral trade giving China unfair advantage and overwhelming trade imbalance. One effective approach that would bring some of the trade surplus in China back to America is to encourage more Chinese companies to invest and build plants in the U.S.

As I reported in Asia Times earlier, Fuyao, an auto glass windshield company, has made a $450 million investment in Ohio, resulting in employment for 3000 and monthly contribution of $30 million to the local economy. There are others similarly interested in coming to America. Instead of using the threat of CFIUS review to frighten them away, the US needs to overcome xenophobic inclinations and open the door for investments from China.

There is another way to take advantage of the trade surplus China enjoys. Namely, it would be to require China to include financing in the infrastructure project bids that Chinese companies wish to compete. China should be quite willing to do so as China has been actively financing various projects along the Silk Road.

Finally, if Trump were to raise the prospect of having China provide financing for infrastructure projects, I believe Xi would be most receptive because such financing would require government guarantees and therefore closer bilateral cooperation. Xi loves to talk about win-win arrangements and this would most certainly qualify. And Trump would have some real news to tweet about.

Monday, April 3, 2017

Review of Task Force Report on US Policy towards China, Part II

In Part I of my review of the Task Force report on “US Policy Toward China,” I noted that the tone was surprisingly hostile sounding toward China. This was the report published under the joint leadership of Orville Schell of Asia Society and Susan Shirk of UCSD.

Upon further reflection, I decided that the authors probably thought an unfriendly posture toward China was necessary in order to gain the acceptance of the incoming administration. During the campaign both candidates had been attacking China as if that was the way to winning the votes of the electorate.

Thus, the authors probably felt, or at least subconsciously felt, obliged to be critical of China so that their report wouldn’t appear discordant to pre-existing notions and get trashed without being read.

Part I of my review was to examine the six priority issues on my premise that the Trump Administration has no choice but to collaborate with China. This Part II is my review of the ten longer-term issues identified by the Task Force, again from the perspective that the US needs to work with China and not treat China as an adversary.

Cyber Issues

The discussion of this section by the Task Force was relatively free of the kind of rancor that would singled out China as the only party guilty of cyber infractions and intrusion.  Quite sensibly, the Task Force sought different venues where the US and China could discuss and seek solutions in issues that represent common interest.

Cyber security and cyber attacks are beyond the comprehension of the ordinary citizens. To deal with these issues require technologists with special expertise and knowledge. Instead of international cooperation, if governments allow cyber security to become an issue for finger pointing, the winners would be the cyber criminals.

Energy and Climate Change

By the end of Obama’s term, China had already emerged as the world’s leading user of wind and solar energy. Xi Jinping pledged to work alongside the U.S. to reduce emission of green house gases. Because of China’s rapid economic rise based on “pollute now and remediate later,” China has been suffering from foul air, toxic water and unbridled solid waste. Now that Chinese leaders recognize time has come to pay the price needed for remediation, they are making the commitment without external pressure from any outside party.

However unlike Obama, President Trump seems to continue to insist that climate change is some kind of ruse to steal jobs from America. As the same time, the Republican Congress has rescinded Obama’s order to limit the burning of coal and forbid use of fresh water to wash coal. So long as Trump and Congress are unwilling to accept the science surrounding climate change, China will have to go it alone.

Global Governance

In this section, the Task Force begins with the recognition that “today many global problems are nearly impossible to solve without Chinese involvement and support.” The report, however, failed to point out and perhaps did not understand that China goes about international governance very differently from the US.

As the only hegemon in the world, the US is accustomed to setting the rules and then expects all others to abide by them. Not so with China. Since joining the UN, China has become an increasingly active participant of various international bodies, always within the confines and rules set forth by the bodies. More recently, China has also taken the initiative to lead in the formation of international bodies such as the Asia Infrastructure Investment Bank. In the case of AIIB, China did not set the rules unilaterally but through the participation of all the founding nations.

The Task Force also mentioned that even though China is a signatory of UN Convention on the Law of the Sea, China failed to accept the ruling of UNCLOS on the South China Sea dispute with Philippines. That was an accusation levied at China so often in the American media that it became accepted as true. Unfortunately, it was untrue.

China rejected the arbitration by the Permanent Court of Arbitration (PCA), which was not affiliated with UNCLOS in any way whatsoever, because China never agreed to participate in the arbitration hearings. Just like clapping with one hand, the arbitration can have no validity if only one party participated at the hearing. Furthermore, the US never got around to ratifying UNCLOS and thus had no dog in the fight and must rely on Philippines to act as the Labrador pointer.

Asia-Pacific Regional Security

The Task Force position was typical of the mainstream American view, namely the US has an obligation to guarantee the security of Asia Pacific, specifically pertaining to the waters off the coast of China. To carry out their role as a guarantor of security, it has been necessary for the US Navy fleet to patrol the South China Sea and the East China Sea in the name of freedom of navigation. It has also been necessary to fly surveillance planes around the coast of China.

Whether the constant intrusion of American planes and ships is supposed to make Asian countries feel more secure is a matter of debate. One thing is certain; China does not feel more secure, just more angry and resentful. China has always derived their sense of security not by exercising freedom of navigation elsewhere but by owning a credibly menacing second strike.

North Korean Nuclear Threat

As I pointed out in Part I of my piece, while both countries are in agreement that the Korean peninsula must be nuclear free, the national interest of China and that of the US are not aligned. To expect them to cooperate effectively is not realistic.

Bill Perry’s memoir clearly described the origin of the problem as one between North Korea and the US. North Korea felt threatened by American troops in the south and developing the bomb was their way of swapping a deterrent for some sense of security. To resolve the stalemate now, it will continue to depend on Washington to swallow some pride, take the initiative and offer to resume two party talks, i.e. just representatives from the US and the North Koreans in the room.

Maritime Disputes

The US has been dealt a weak hand and should simply face reality.  Washington has not ratified UNCLOS and does not claim any real estate in the waters of dispute. The American naval fleet has to sail a long ways to flex their muscles—a tiring and expensive proposition. America’s role is that of a busybody kibitzer lacking a legitimate stake in the game.

The Report did admit, “Since China has pledged publicly and repeatedly to resolve the disputes in the South China Sea—especially those over the Spratly Islands and associated maritime claims—through peaceful negotiations,” the claimants should be allowed to do just that. The cruising American navy is merely muddying the waters and interfering with negotiations.

Taiwan and Hong Kong

The Task Force noted that the US has “maintained a principled hands-off position” on Taiwan and Hong Kong.  If true—there are always rumors of CIA hanky panky to stir up local unrest—minding one’s own business is a laudable approach.

The Umbrella Movement, contrary to media reports, represented a minor fraction of the Hong Kong population. There were indications that the movement had outside support such as the Mormon Church and who knows what else. The fortunes of the younger generation are tied to the mainland. Those that recognize this fact will have productive careers. Those that don’t will likely become homeless, career protesters.

Tsai Ing-wen of Taiwan has already found out that she can’t have her cake, i.e., enjoyed close economic ties with the mainland, and not give what Beijing wants, i.e., recognition that Taiwan is part of one China. Her economic policies without the mainland are not working, tourists from across the straits are plummeting, and the economy is in negative growth.

The people of Taiwan will decide their own future. Not everyone has the luxury to move to the mainland or to the US. Those that remain in Taiwan will decide soon enough on whether Tsai is on the right course. For the US to interfere would be a big mistake and counter to maintaining peace and stability across the Taiwan Strait.

Human Rights

Despite significant setbacks such as the Tiananmen Square crackdown in 1989, the Chinese people since the end of the Mao era have experienced expanding gains in a variety of individual freedoms in everyday life. These freedoms include the ability to choose their own jobs, become prosperous, travel abroad, marry whom they choose, have more than one child, worship as they wish, and live where they choose.

In addition to the opening statement by the Task Force above, China has taken 700 million of its people out of poverty. With China’s one belt and one road initiative, Beijing is looking to pull others out of poverty along the Silk Road. China does not go around proselyte on how each country should govern, but recognizes that economic improvement is good for the direct beneficiary and in turn good for the neighboring countries. Economic improvements improve the human condition and automatically allow for more human rights.

Defense and Military Relations

The Task Force recommends adopting “an active denial strategy,” which boils down to deploying more military forces and spread them over more locations and thus capable of threatening China from more directions. More recently, China has been deploying its version of active denial strategy to counter American presence in their backyard. Each move is likely to be met by a countermove. In such a scenario, the cost advantage of maintaining comparable relative strength goes to China.

Last, the Trump administration should bear in mind that over the long term, US military power is dependent upon the vibrancy of the nation’s economy, the effectiveness of its system of democratic governance, the caliber of its human capital, and the scope of its research and development and technological innovation. The global apportionment of US military forces matters in the short term; decisive over the long term is the strength of the country’s political and economic foundation.

I couldn’t summarize this section any better than the above. The question for all Americans to ponder is this: Are we Americans so confident of our political and economic foundation that we can go anywhere around the world and pick fights?

Trade and Investment Relations

Because trade and investments are of vital national interests to both parties of the bilateral relations, the Task Force made detailed and specific recommendations for the Trump Administration. One of these was to ratify the Trans Pacific Partnership as quickly as possible. Given that cancelling TPP was     virtually the first act as soon as Trump was sworn into office, it is unlikely that he will pay any attention to the other recommendations presented in the report.

One exception worth mentioning is Chinese investments coming into America. Because of favorable economics, Chinese companies are now looking to set up manufacturing plants in the US. Hopefully the Trump administration will not cut off one’s own nose and discourage such job creating investments.


The recent Pew survey indicates that Americans’ impression of China has become increasingly negative with time. I attribute this to, probably unintentional, the conspiracy between media, academics and politicians. Negative stories about China from the mainstream media invariably outnumber any warm and fuzzy stories about how well China is doing. It’s almost an industry rule that negative stories about China sell while positive stories do not.

The 2 to 1 split between academicians with unfavorable views of China to those more favorable as represented in the Task Force is probably an accurate measure of the academic circles in the US. I am not sure why this is so. Possibly professors tend to mentor students of like mind and help their academic advancement. Young aspiring professors may find espousing accepted views to help them advance their careers. Thus, bad impressions of China become self-reinforcing.

The politicians of America find bashing China risk free and profitable at the polls. They behave irresponsibly and reinforces the negative feelings of the American people toward China.

I would like to propose a new way of looking at the bilateral relations. Namely, why getting along with China is in America’s national interest. I can think of two major reasons. First, about 1/7 of the earth from Ukraine down through Afghanistan, Iraq and Syria and rest of Middle East to Sub-Sahara, are in turmoil. All kinds of crimes against humanity are taking place daily. Uncle Sam as the world’s guarantor of security has his hands full dealing with this region, about 1/8 of the earth surface. Given the runaway federal budget deficit and military personnel getting weary, why should the US go look for China or anyone else to turn them into adversaries?

Secondly, China has taken a long-term view by going around helping other countries build their infrastructure. Improved infrastructure will stimulate the economy and raise the living standards. These improvements will have a rippling effect for countries along the upgraded highway and rail—and give less reason for acts of terrorism. What China is doing is not what America can do or would like to do, but the two together can be perfect partners for world peace.