Friday, June 4, 2021

Biden’s China obsession could be the undoing of America - Collaboration with China has been good for the US and its people in the past, and should be again

First posted in Asia Times. Abbreviated version in Putonghua can be found on YouTube and here. It’s hard to tell if US President Joe Biden’s position on China is his true conviction or he’s just going along with the heavy anti-China sentiment in Washington, but his China team has made it official now: no more engagement with China, just competition from here on. The nature of competition the Biden team has in mind, mind you, is not your gentlemanly sort of sporting contest where my one-upping you will incentivize your one-upping me, and we both in the end are better for competing. No, all indications point to all-out, below-the-belt, eye-gouging, anything-goes tactics to attack the other party, namely China. Two ongoing developments point to this conclusion. Winding its way through the US Congress is the so-called Strategic Competition Act of 2021. It has not been enacted as yet, so we don’t quite know all the provisions. My understanding is that as much as $300 million has been allocated to blacken China’s image around the world. In this era of fake news, assassination of one’s character (or a country’s reputation) via innuendo, exaggeration and even outright lies is easy to do. August members of the US mainstream media, such as The New York Times or The Washington Post, are not above purveying or contributing misinformation, sometimes with malice of aforethought and sometimes simply being too lazy to authenticate questionable sources. Consistent with all this is Biden’s recent call to reopen an investigation into whether the virus that causes Covid-19 could have originated in a research lab in Wuhan, China. The task force was given 90 days to report its findings. Biden to revisit origin of Covid A definitive investigation leading to conclusive understanding of the origin of Covid-19 is a good thing, important to protecting the future health of the world. Provided, of course, that the work is above-board, science-based and conducted by a scientifically qualified team of people of impeccable honesty and integrity. A team of investigators that includes the likes of a Peter Navarro or Mike Pompeo would not pass the smell test. Furthermore, to be completely comprehensive, some of the other speculations besides the Wuhan lab theory deserve to be included in the investigation. For instance, the biological laboratories at Fort Detrick in Maryland were shut down by the US Centers for Disease Control and Prevention for violations of safe practices more than six months before the outbreak in Wuhan. Around that time there were unexplained deaths caused by respiratory failures. A full account was never made public, but the issue was swept under the carpet by blaming the fatalities on excessive vaping, that is, inhalation of fruit-flavored smoke. There were also reports in cyberspace that there was evidence of the coronavirus being found in European sewage systems, again months before the Wuhan outbreak. What happened to all those rumors? If the Biden task force is not just for the purpose of pinning the blame on China, but to perform a thorough and credible investigation, 90 days may not be enough. Secretary of State Tony Blinken’s approach to competing with China is to recruit and reorganize former allies to band together against China. These former allies were offended and turned off by former president Donald Trump and his go-it-alone approach. But what does Blinken have to offer to entice the allies to join the fray? A recent tally indicates that 165 countries now consider China their No 1 trading partner, as compared with 13 countries that regard the US as their No 1 trading partner. More than 100 countries are participants of China’s Belt and Road Initiative in more than 2,600 projects with a total value of US$3.7 trillion. As his only counter, Blinken goes around the world warning the countries to beware of debt traps. Obviously, the US does not have the ability to compete with China when it comes to doing business via trade or provide assistance in erecting infrastructure. Countries are asked to choose sides with no clear idea of the benefits of aligning with the US. The only alternative is to slander China and turn world opinion against Beijing. The US as ‘model of democracy’ Thus Blinken has to trot out the usual tropes, that China is not democratic, has no human rights etc, ad nauseam. All of the prospective allies are urged to be freedom-loving democracies like America. So how does the US stack up as a “model” democracy? Let’s count the ways. The losing candidate of the last presidential election, Donald Trump, still claims to have won. Members of his political party, the Republicans, have gone to great lengths to shield him from going to jail, even for violating the statutes of the US constitution. As part of the debacle, the Republican Party at the state level is busy devising ways to deny certain citizens the right to vote. In its view, democracy is not for everybody in America and winning by hook or crook is everything. Mass shootings in America have become a nearly daily occurrence. In America, the right to carry an assault weapon is an human right more important than a human life. The US with just 4.4% of the world’s population has 22% of world’s prison population, far and away the most of any country. China with about 4.5 times the US population has fewer people incarcerated, and yet we Americans accuse China of abusing human rights. Furthermore, the US prisons house a disproportionate share of black and brown people. Young children torn away from their refugee parents at the southern border, and still unaccounted for, is yet another blot on our human-rights record. Because of concerted efforts by the central and local governments, China has lifted all of its people out of poverty. In America, conditions in the ghettos have not changed much and they are still mostly populated by black and brown people. One out of eight Americans lives below the poverty line. Government officials in China are given rotating assignments and graded on their performance. They get promoted if they show they are capable of taking on increasing responsibility. In the US, the most important requirement for those aspiring to public office is to be able to raise a lot of money, or be already wealthy. By any objective measure, would any potential allies find the US a worthy model of democracy to follow? Blinken has a tough sell ahead of him. The Biden administration is also planning to compete with China by investing in and subsidizing the development of new technologies. The Endless Frontier Act, surprisingly enough, has bipartisan support for dedicating $120 billion to focus on artificial intelligence, superconductors and robotics. Biden bets $52 billion on semiconductors Supposedly, Biden will throw $52 billion at the American semiconductor industry to build new manufacturing facilities in the US, known as fabs. I am doubtful that this will work. The US used to be the world’s leading maker of semiconductor chips. But as the design of the chips became more complex, the cost of the fabs increased geometrically, and soon Silicon Valley companies gave up manufacturing and just concentrated on designing proprietary chips, relying largely on Taiwan Semiconductor Manufacturing Corporation to make them. Today, Intel is the only US company that still owns fabs, and it has publicly admitted that they are two to three generations behind TSMC’s. Morris Chang, founding chairman of TSMC, has openly questioned whether US companies would still have engineers with the experience and skills needed to run a state-of-the-art fab. China also does not own state-of-the-art fabs because the US will not allow the sale of advanced manufacturing equipment to China. Therefore, regardless of whether the $52 billion will be well spent, China will not catch up for some time. But if Beijing needs skilled engineers to run an advanced fab, it can always recruit from Taiwan to supplement its own staff. Many are already working in China. To attain the most advanced fab, China will need to buy lithographic machines from ASML, based in Netherlands. Already, Peter Wennink, chief executive of ASML, is fretting that the US export control measures will prevent his company from selling the most advanced machines to China, each with a $1 billion+ price tag. The loss of the China market would mean the loss of more than one-third of ASML’s revenue, and therefore funds for further research and development, necessary in order to maintain the company’s technological lead. Wennink is worried that the export restriction will force China to develop its own technology and soon not only ASML will lose a major customer but will face a new competitor. You’d have to wonder how long the European company will go along with the Washington ban on exports to China. Another aspect of disengaging China is to discourage the enrollment of STEM (science, technology, engineering and mathematics) graduates from that country in US universities. US Senator Tom Cotton, for one, thinks Chinese students are here just to steal American knowhow. But without the infusion of the best and brightest international students – and students from China make up more than one-third of them – elite schools such as the Massachusetts Institute of Technology (MIT) would wither and shrivel if they had only America’s own graduates, trained by a faltering K-12 system, to draw from. One anecdotal story will illustrate my point. At a recent international math competition among high-school students, the US team beat the team from China for first place. But the “upset” win can be attributed to the fact that every member of the US team was ethnic Chinese, students whose parents had immigrated to the US from China. The quality of China’s universities is improving; many are already among the world’s top 50 schools. China’s elite schools may not yet on par with their US counterparts but Beijing believes in investing in human capital. If its graduate students can’t come to the US, they can go elsewhere, or simply stay home and learn from the best professors recruited from around the world. The loser in the long run would be the US. Engagement has been good for America All along, we Americans have been acting like the 40+ years of engagement has been a one-way boon for China at our expense. That’s hardly the case. Collaboration enabled Apple to “design in California and assemble in China,” a strategy so successful that the company is now worth more than $2 trillion. Had Apple designed and assembled in the US, the high costs would have limited its sales and stunted the profitability and growth of the company. With much fanfare, Trump announced that Foxconn, which had been the principal assembler of Apple products, would build a big plant in Wisconsin. He chalked that win up to his “persuasive” personality. Yet the plant has not materialized because the labor rates of China are just too far apart from those of the US. Even Trump can’t wring water out of a rock. And that was at the high end. On the low end of the economy, low-cost imports filled the shelves of Walmart and American consumers continued to enjoy their standard of living and not face rising prices. As much as 60% of China’s trade surplus with the US was due to goods made by American companies in China. Because China’s economy grew at a remarkable rate, doubling every eight to 10 years, American companies that initially went there to source their products began to expand their investments in order to participate in the Asian country’s growing middle class as the size of China’s market became comparable to their home market. America’s leading technology companies soon saw the wisdom of designing in China for the world. They set up R&D centers to take advantage of the technical talents in China, which produces eight times the number of STEM university graduates as the US. Sadly, our leaders in Washington only know that might makes right and we have the strongest military in the world. They are banking on the premise that we can outcompete with China on the basis that we can wreak more death and destruction. Otherwise, disengaging and competing with China will be at best a mutually diminishing outcome. It won’t help Washington solve our deteriorating infrastructure, failing school system, deaths by random shootings, and widening gap in income between the super-rich and the have-nots. We need leaders with the vision and political courage to see and tell the American people what’s good for America and that competing with China is not the way. In fact, as we continue on the Biden trajectory, we could be on a downward spiral that spells the end of the American empire.

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