Treating China as an adversary is not in America’s interest

This blog first appeared in Asia Times

A recent Gallup Poll reveals that favorable American public opinion on China has finally climbed over 50%, albeit just barely. This is a remarkable development in light of the continued barrage of negative sentiments from American politicians and pundits.

Politicians with national ambitions seem to need to attack China as part of their résumé. US Senator Elizabeth Warren is the latest example. It’s almost as if she took a trip to China just to criticize its human-rights record – and to earn a merit ribbon for her foreign-affairs credential.

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Since she is supposed to be a progressive candidate for the American people, she could have spent her visit learning how China has taken hundreds of millions out of poverty and see if any of its techniques could be copied to help take Americans out of poverty – a d

Since she is supposed to be a progressive candidate of the people, she could have spent her visit learning how China has taken hundreds of million out of poverty and see if any of their techniques could be copied to help take Americans out of poverty—a domestic challenge in serious need of solutions.

A common failing among political leaders in Washington is their being quick to criticize China while oblivious to gross human-rights violations at home.

Then there are those pundits who make a living by demonizing China. A glaring case in point is Gordon Chang, author of The Coming Collapse of China, published in 2001. In the US, he continues to get invited to pontificate in public. Outside of the country, his prediction of the collapse of China is seen itself to have collapsed.

Peter Navarro has run wild using Chang’s playbook and has produced books and documentaries that distort China and its trade policies based on exaggerations and outright fabrications.

Navarro’s colleagues at the University of California at Irvine can attest that he has no background or expertise on China. Professionally trained economists around the world look on his amateurish China-related writings with disdain. Even so, Navarro has ridden his China-bashing rhetoric to the inner circle of the White House.

Now that we are faced with threats of mutual economic disruption via a trade war, it’s time to weigh the costs and benefits of treating China as an adversary based on factual information instead of rants and exaggerated tweets.

Why China joined the WTO

China entered the World Trade Organization in 2001, having begun the application process some 15 years earlier. At the time, the size of China’s economy was less than 5% of that of the US. As a developing country, China was entitled under WTO rules to certain measures to protect its manufacturing industries.

The motivation for China to enter the WTO was to force its domestic industries to improve their manufacturing practices so as to compete in the global market. Contrary to implications from President Donald Trump’s announcements, being a member of the WTO did not give China any license to game the system.

Not without irony, it is the White House that is violating the US membership in WTO by arbitrarily and unilaterally threatening to raise tariffs against China.

In those early days, China insisted that in certain industries, for foreign companies to enter the country, the foreign company had to form a joint venture of which it owned no more than 50% and had to share the technology necessary for the JV to succeed.

That was China’s strategy to catch up by learning from the West. US companies did not have to enter the China market if they found those conditions unacceptable.

General Motors for one was very glad that it did. GM made more money on Buicks sold in China through its 50:50 JV than its total sales in the US, and this delayed having to declare bankruptcy. The import duty on foreign-made cars also helped GM in China. Even today, it continues to enjoy a higher margin on cars made and sold in China than in the US.

Lest anyone get the impression that China’s economic success depended on transfer of American technology, the total US investment in China has been far less than factories set up there by Hong Kong and Taiwanese businesses. These ethnic-Chinese businesspeople entered mainland China at least a decade before US companies, and they were the ones that introduced good manufacturing practices to China.

A trade war puts the US at a disadvantage

If the Trump team insists on launching a tariff war, it needs to understand that America will be at a disadvantage, simply because China does not have to buy commodities such as soybeans, pork and wine from the US. Other countries are eager to sell to China. You can think of China as a buyer’s market.

In contrast, if the US were to stop buying daily-use consumer goods from China, the American household would have to pay a lot more for imports from elsewhere. You can think of the US as a seller’s market.

There is no question that membership in the WTO has greatly helped China’s rise economically, because if a factory can’t compete, it goes out of business. Consequently China is a much stronger country than it was two or three decades ago.

Reliance on stolen intellectual property might have been important in the past, but China is now generating significant IP of its own. In some areas, such as fifth-generation mobile communications, robotics in manufacturing and artificial intelligence, China is already among the world leaders.

Threatening a trade war and other combative posturing will not deter China’s goal to become the strongest economy in the world. At the same time, China does not interfere with American elections or join in Middle East conflicts.

China goes out of its way not to pose a security threat to the US. A quick comparison should amply illustrate this point: The US Navy holds “freedom of navigation” exercises in the South China Sea. China has declined to reciprocate by conducting such exercises in the Caribbean.

To treat China as an adversary is a misuse of the US federal budget, takes attention away from genuinely urgent issues in other parts of the world and gives up any opportunity to collaborate with China in ways that could spell real benefits for the American people.

Navarro's snake oil will sicken the world

Edited version first posted on Asia Times.

Why would a Harvard PhD economist and tenured college professor make a public ass of himself with ridiculous assertions about China that no self-respecting economist would claim ownership?

I posed the question to Professor John Graham, Peter Navarro’s colleague at University of California at Irvine Merage School of Business. He joined the faculty in 1989, the same year as Navarro. Now that Navarro has left to join the Trump Administration, Graham has taken over the course Navarro started on China.

“I am not sure I know why,” Graham said, “In sum, the three books he’s written about China are xenophobic trash. They contain some truths, but Navarro cherry picks the data to prove his points.  Ultimately it’s nothing but yellow journalism.”

He goes on to say, “Navarro has no first hand familiarity of China, doesn’t show any understanding of China and doesn’t speak Chinese. When asked how many times he’s been to China, he evades and doesn’t answer.”

A former UCI professor and colleague confirmed saying, “He generally avoided people who actually knew something about the country.”

Needed help to teach a course on China

After publishing several China-related books, Navarro decided to create his own China relations course, named "China and the Global Order." When Benjamin Leffel, a China specialist and Sociology Ph.D. student at UC Irvine, became aware of Navarro's writings, he reached out to Navarro and questioned his views.

The meeting led to Navarro asking Leffel to act as the counterweight in his China class. Leffel created most of the syllabus using respected academic material in China studies, Navarro's contribution being his own book and documentary.

Leffel wanted to throw out Navarro's materials, but Navarro did not agree. (After Navarro joined the Trump Administration, Leffel and Graham discarded his material from the syllabus.) Despite such a frontal disagreement, Navarro kept Leffel as his instructor and teaching assistant, who in fact did most of the teaching--and who exhaustively corrected the falsehoods and exaggerations found in Navarro's material.  

How would he summarize his experience working with Navarro, I asked Leffel. He said, "it was a tense but successful exercise in working with someone with radically different views, something we need now more than ever.”

Graham speculated that perhaps Navarro was motivated by TV exposure; his books and video documentary were calculated to get him media attention. That was an insightful observation.

Navarro, a Gordon Chang wannabe?

Indeed, Navarro may have taken a page from Gordon Chang’s playbook. Chang published the “Coming Collapse of China” in 2001. In view of China quadrupling the size of its economy since that publication, Chang should have eggs all over his face.

Instead Navarro can see that his friend became a media darling and is frequently interviewed about his views on China. The so called fake news people, those we would otherwise consider as mainstream media, know that they can always count on Chang to give a colorful and negative point of view about China.

Navarro has taken China bashing as the road to success to another level. He writes better than Chang, is more telegenic and has resources to tap that are not available to Chang. Nucor Foundation gave him a $1 million to turn his book into a documentary, which he then premiered from coast to coast.

Chang attended those premiers and celebrated with selfies taken with Navarro. Sometime between Chang’s book in 2001 and Navarro’s “Death by China” in 2011, they have become fast friends.

To celebrate their friendship, Navarro even wrote an article in defense of Chang called, “Revenge of Gordon Chang and the Coming Collapse of China.” The piece also appeared in National Interest on May 7, 2016.

When it comes to China, Navarro is not driven by facts and has no desire to write with authenticity and scholarship. To my knowledge, none of his papers on China have been published in peer reviewed, prestigious academic or professional journals.

He coauthored with Wilbur Ross an economic plan for the incoming Trump Administration. A public letter from 370 economists, including 19 Nobel laureates, labeled the plan “as immediate and unmitigated disaster.”

Despite such condemnation, Navarro now stands as the key economic whisperer to President Trump.

A five times loser in politics

In his earlier life, Navarro ran unsuccessfully for political office. He came within a whisker of becoming the mayor of San Diego, the second largest city of California. That was his first attempt running for public office and led the primary field with 38.2% of the votes.

In the general election runoff, it was his election to lose, and lose he did. He was nasty and vicious in attacking his opponent, Susan Golding, reducing her to tears in the last televised debate. The voters turned against Navarro.

He was to run for various offices in San Diego four more times. Each time his campaign tactic was nastier than the previous. Mudslinging was his standard procedure. Even his campaign manager called him a scoundrel.

When Navarro was first announced as joining the Trump Administration, San Diego Union Tribune, the local newspaper published a pointedly hostile review of his past association with the city (12/21/16). The headline read, “How many elections did Navarro lose?”

Charlie Cook, a nationally recognized political analyst, met Navarro once and vividly remembers that Navarro is one of the most obnoxious political candidates he has ever met. (Politico, 3/11/17)

In one election post mortem, Navarro admitted, “I don’t have any concerns at all about making stuff up about my opponent that isn’t exactly true.”

When asked why he began to pay attention to China. His reply was that it was when he noticed some of his students were losing jobs to China. Factory workers might lose jobs when plants shut down but MBA students don’t lose jobs to China. Nice try, Peter.

The public media is in part responsible for enabling a 5 time political loser to join the inner sanctum of Trump’s White House. When Navarro spouts nonsense, it’s the responsibility of the media to challenge his assertions and not give him a pass.

Now Navarro will be part of the team steering the US economic policy. It’s too early to tell whether he will be a mere transitory blip in history or an unmitigated disaster feared by many. If Trump really listens to him, only the Almighty can save us. Trump has just announced $60 billion worth of tariff duty on goods from China. That’s not an encouraging development.

Kudos to Donald Trump

By talking to North Korea, is Trump ready to make history? First posted on Asia Times.

Well deserved kudos should be given to President Donald Trump. By agreeing to meet with North Korea leader Kim Jung-un, he has made a clean break from the impasse that outlasted two US presidents.

Trump will be doing what his two predecessors were unwilling to do. Both George W. Bush and Barack Obama dismissed the notion that any meeting with the North Korea leader can take place in lieu of North Korea abiding by certain preconditions.

Without an agenda loaded with excess baggage, Trump and Kim can begin a conversation that could break the ice and make history together.

American leaders frequently forget that confrontation and upfront in your face demands rarely impress Asians favorably. It will behoove Trump to remember that in giving face, good things happen.

Given the suddenness of the development and unpredictable nature of Kim and Trump, it will be hard to predict the eventual outcome. However, Kim through the South Korean intermediaries has already indicated that the topic of denuclearization is on the table—certainly a concessionary gesture.

If Trump is a fraction of the master negotiator he has said he is, he has a real opportunity to resolve the Korean debacle that has bedeviled American presidents since the end of the Korean War in 1953.

If so, he would deservedly be honored around the world as the statesman that made a major contribution toward world peace. He could look forward to ticker tape parades not only in New York and Washington but Beijing, Seoul, Pyongyang, even Moscow and Tokyo, too.

Back to making America great again

Then, after a suitable breather, Trump can go back to making America great again.

Ironically, Trump’s “America first” strategy will depend on not only getting along with China, but figuring out various ways of enlisting China’s assistance and cooperation.

Indeed, as a professor from University of Texas pointed out in Fortune, Trump could not begin to meet his own goal of rebuilding the nation’s infrastructure relying just on public and private capital from within the US.

Obviously America needs capital from China, virtually the only source with the wherewithal to help. Furthermore, China has the proven skillset to plan and manage infrastructure projects that would complete on time and within budget. Therefore, that means the US needs China’s goodwill.

Firestein of University of Texas suggests that to avoid geopolitical controversy, the US invite only China’s private capital to participate. That distinction won’t work, because American policy makers have trouble distinguishing the difference between China’s private and state own entities in any case.

For example, Huawei is dominating the global markets with their telecommunication products because of their cost effective advantages. By alleging a shadowy connection of the founder with his previous PLA affiliation, Huawei has been shut out of the US, its privately held status notwithstanding. This is foolish xenophobia at its worst.

By continuing to treat China as an adversary justifies the defense budget and does nothing for the US as a whole—and won’t make America first.

Consistent with Trump willing to break the mold on dealing with North Korea, he should consider undertaking a brand new, history making, approach with China.

To do so, it’s probably necessary to first dispel the many myths and misinformation about China that circulate inside the Washington Beltway.

Many in the US expect China to become a democracy as it becomes an economic power, and are deeply disappointed when China goes their own way. Such expectation is in fact not founded by China’s past tradition and history, and can be attributed to a delusional mindset of the critics that every country must eventually be like the US.

The current government in Beijing believes in single party rule in the name of ensuring internal order and stability. If anything, the PRC government is most like the city-state of Singapore. Unlike the US, China does not attempt to export their way of governance to other parts of the world.  

Thus, nothing China has done could be considered provocative or hostile toward America. They do not try to interfere with the US elections. They do not engage in an arms race with the US.

They will not initiate a trade war because they understand very well that there will be no winners in a war of tit for tat rounds of retaliatory tariffs.

It’s true that China has become enormously successful in global trade. Their success comes from making products at a low cost and competitively priced. Their comparative advantage benefits consumers that buy their goods around the world.

Made in China industrial goods benefit the US economy and create jobs. For example, low cost solar panels increase demand to convert to solar power. The demand creates an industry of panel assemblers and installers.

In a trade war, tariff protection for one sector of the economy will damage other sectors that depend on reasonably priced imports to build a business. Also hurt would be sectors that export because their competitive advantages would be erased by retaliatory counter tariffs. The net effect will be mutually assured damage or even destrruction of their own economy.

There is nothing to be gained by insisting on casting China as America’s adversary and everything to the good by treating China as a friend.

As I commented previously, Chinese companies operating in the US, have already demonstrated their ability to rebuild America’s infrastructure cost effectively, such as China Construction rebuilding the bridge over the East River in Manhattan and China Railway Rolling Stock replacing old subway cars in major U.S. cities.

Both Chinese entities—yes, they are state owned—delivered quality results relying on American labor. These projects resulted in local US investments and created local jobs. A long array of win-win outcomes awaits US China cooperation, if America can get over their xenophobic bias and treat China as peer and partner.

Given President Trump’s bold move toward North Korea, he is just unorthodox enough to pull this off, namely change the narrative about the most important bilateral relations in the world.

Fear of Chinese nontraditional collectors strikes again

This blog is slightly modified from the original that appeared in Asia Times.

At a recent US Senate hearing, Christopher Wray, director of the Federal Bureau of Investigation, was asked how China conducts spying in the United States. “With non-traditional collectors,” he said.

Lest anyone think Wray had discovered something new and novel, he hadn’t.

He was merely perpetuating the institutional racial bias the FBI held against Chinese-Americans since the inception of the agency founded by J Edgar Hoover.

During the hysteria in the late 1990s when Dr Wen Ho Lee, a scientist at the Los Alamos National Laboratory, was accused of spying for China, so-called FBI sinologists – meaning they were supposed to be experts on China – explained to the American public that China did not spy by traditional means. “They spy by grains of sand.”

At the FBI, “grains of sand” was shorthand for all ethnic Chinese living in the US. The alleged conflicted loyalty between the motherland and adopted homeland leads each grain to collect and send every conceivable tidbit of useful information back to Beijing.

The speculation was that some super-duper computer in the basement of some ministry programmed with powerful artificial intelligence would crunch these random submissions, and out would come the designs for America’s latest top-secret weaponry.

Grains of sand now non-traditional collectors

This is patently ludicrous, of course. But this deeply rooted bias within the FBI gives cover for racial profiling of Chinese-Americans. Wray, with a smirk, wink and a nod, had simply upgraded “grains of sand” as “non-traditional collectors.”

Wray’s testimony came out of the US Senate Intelligence Committee open hearing on global threats and national security. Six heads of agencies in charge of protecting national security were summoned to testify – the most familiar being the Central Intelligence Agency and the FBI.

Unlike their counterparts in the House of Representatives, this Senate committee and its hearing were class acts. Members of the committee were civil, courteous and respectful to one another and to the witnesses.

But despite a collegial air of non-partisanship, the class act was defiled by the xenophobia of Republican Senator Marco Rubio. When it was his turn to question the panel, he began with a diatribe that China represented the biggest threat to the US.

Marco Rubio’s xenophobia

Then he asked Wray how the FBI monitors the many Chinese students studying in the US. Wray’s verbatim response was as follows.

“The use of non-traditional collectors, especially in the academic setting – whether it’s professors, scientists, students – we see in almost every field office that the FBI has around the country.

“It’s not just in major cities. It’s in small ones as well, it’s across basically every discipline. And I think the level of naiveté on the part of the academic sector about this creates its own issues.”

In Wray’s view, the problem is pervasive, and he suggested that the solution required a societal response, which I interpret to mean that every American has a duty to keep an eye out for the Chinese in the US.

A few years after the Wen Ho Lee fiasco – Dr Lee was put in solitary confinement without charge for 10 months and then released with an apology from the embarrassed presiding judge – the British Broadcasting Corp asked the special agent in charge of the FBI’s Silicon Valley field office about Chinese espionage. He said something to the effect that he had to watch some hundred thousand Chinese professionals running around the valley, and they were all potential spies.

More recently, the FBI broke a door down early one morning and charged into the home of Professor Xi Xiaoxing and arrested him for spying for China. Much to the embarrassment of the FBI, the head of the physics department at Temple University in Philadelphia, Pennsylvania, who is a US citizen, had been “caught” exercising normal international academic exchanges of information belonging in the public domain.

The FBI simply did not have the knowhow to judge the technical content of the e-mails they were spying on. But if their suspect was Chinese – US citizen or not – then presumption of guilt without due process was justified.

So long as the FBI is soaked in racial bias against the Chinese, its director is a perfect foil for the likes of Rubio or any politician with an ax to grind against China. They can confidently make baseless accusations and won’t be challenged.

Fortunately, Rubio seemed to be the exception among his fellow members of the Senate Intelligence Committee. Other members in their questions expressed serious concerns on more concrete issues such as opioid overdoses, cybersecurity and Russian interference in the US election process.

National debt seen as top security threat

Dan Coats, director of national intelligence, made the opening remarks on behalf of the entire panel of witnesses. He declared that the actual and greatest threat to US security was the national debt, now exceeding US$20 trillion. In other words, if the dollar collapses, everything else will not be worth worrying about.

Democratic Senator Jack Reed asserted that technologically China is way ahead of the US in quantum computing and artificial intelligence. Senator Mark Warner, another Democrat, pointed out that the total Chinese investment in those fields was less than the cost of one advanced fighter plane,

Indeed, Senator Warner observed that while the US is investing heavily in the best weapons of the 20th century, America’s rivals are investing for the 21st century.

Perhaps Warner had in mind the 2019 fiscal budget President Donald Trump has proposed to Congress. The largest increment of the budget increase was allocated to defense, in part to render the world’s deadliest weapons even more powerful.

The New York Times has projected that Trump’s budget would add another $7 trillion to the national debt over a 10-year period. Given the sentiment at the hearing, increasing the national debt and thus endangering national security seemed wrong headed.

It’s time for cooler heads to re-evaluate the madness of Americans competing with themselves for more advanced weapons. If the US instead stops considering China as an adversary, it can spend less on defense and thus strengthen its financial balance sheet and step away from the debt precipice.

It’s important to be reminded that after World War II, many students from Hong Kong and Taiwan and later from mainland China came to the US and elected to remain. Their contribution to US technology and the nation’s economy far exceeded the expectation based on their numbers.

To convey the xenophobic bias that students from China are not to be trusted and welcomed is to hurt US national interest through stupidity of Americans’ own making.

In conclusion, it makes no sense to raise the military budget and increase the national debt so as to put national security at far greater risk than perceived threats based on xenophobia. If we Americans find ways to get along with China, we will find common ground and actually be more secure.