Playing at War Games with China   

Playing at War Games with China   
Remarks to the Washington Institute of Foreign Affairs

Ambassador Chas W. Freeman, Jr. (USFS, Ret.)
Visiting Scholar, Watson Institute for International and Public Affairs, Brown University
By video link, Washington, D.C.  11 February 2021

Fifty years ago, Richard Nixon decided to ignore Napoleon’s advice to “let [China] sleep, for when it wakes it will astonish the world.”[1]  I was there when China opened its eyes.  And I have watched it transform the various orders of the world and become an American obsession.

Every generation of Americans feels obliged to reinvent the China policies it inherits from its predecessor.  We can be sure our country will eventually get its policies right – after we’ve exhausted all the alternatives.  But we have not yet done so.  And, for many reasons, our latest policies toward China are almost certain to prove self-defeating.

We have just exited the most bizarre presidency in our history.  One of its distinguishing characteristics was the substitution in our foreign relations of unrestricted economic warfare for diplomacy.  Bluster and bullying replaced dialogue and reason aimed at convincing the recalcitrant to see that it could be in their interest as well as ours for them to do things our way.

In the last half of the last century, we Americans made the rules.  Others got into the habit of following us.  To some extent, that habit – though fading – has outlasted our adherence to the principles we once stood for.  So military posturing, economic intimidation, diatribe, and attempted regime change are becoming the norm in international relations.  China is a case in point.  Sino-American relations now exemplify Freeman’s third law of strategic dynamics: for every hostile act there is an even more hostile reaction.

Americans have an inbuilt missionary impulse.  We enjoy protecting, tutoring, lecturing, and hectoring other peoples on how to correct their character to approximate our idealized image of ourselves.  We are offended when others insist on independence from us and on preserving their own political culture.  China has never wavered in its determination to do both, wishful thinking by American politicians and pundits notwithstanding.

In America’s pas de deux with China, we have consistently been the initiator of the dance and taken the lead.  We developed some well-founded complaints about Chinese economic behavior, so we launched a trade war with it.  We were alarmed about China’s potential to outcompete us internationally, so we decided to try to cripple it with an escalating campaign of “maximum pressure.”  We saw China as a threat to our continued military primacy, so we sought to contain and encircle it.  Cumulatively, we have:

  • declared China to be an adversary and called for regime change in Beijing;
  • launched an invective-filled global propaganda campaign against China, its ruling Communist Party, and its fumbled initial response to COVID-19;
  • sanctioned allies and partners for failing to curtail their own dealings with China;
  • replaced market-driven trade with China with government management of economic exchanges based on tariffs, quotas, sanctions, and export bans;
  • abandoned or attempted to sabotage international organizations in which we deemed Chinese influence to be greater than ours;
  • kneecapped the WTO, trashing the rule-bound order for international economic relations we had taken seven decades to elaborate;
  • attempted to block Chinese investment and lending in third countries;
  • blacklisted Chinese companies and delisted them on our stock markets;
  • curtailed visas, criminalized scientific exchanges, and banned technology exports to China;
  • closed a Chinese consulate (losing one of our own as a result) and initiated tit-for-tat reductions in reporting by journalists;
  • sought to terminate Chinese sponsorship of language teaching in our country, and discouraged in-country study by potential federal employees;
  • reidentified the United States with Beijing’s civil war adversary in Taipei and violated the Taiwan-related terms of U.S. normalization with Beijing;
  • stepped up provocative air and sea patrols along China’s borders; and
  • begun to reconfigure both our conventional and nuclear forces to fight a war with China in its near seas or on its claimed and established territory.

These actions have gotten China’s attention, much as they got Japan’s when we applied a range of considerably less hostile measures to it in 1941.  Japan reacted by attacking Pearl Harbor.  China has not yet lost its cool.  But it has:

  • reciprocated U.S. tariffs and sanctions;
  • begun to diversify its sources of essential agricultural and industrial products to end dependence on the United States, which it now regards as its supplier of last resort;
  • broadened and accelerated its effort to become scientifically and technologically self-reliant and independently innovative;
  • courted countries and international organizations alienated by U.S. unilateralism;
  • created new international institutions to complement existing bodies, in which it is now increasingly assertive;
  • refocused its foreign policy toward the development of cooperative relationships with Europe, Southeast and West Asia, Africa, and Latin America;
  • joined other countries aggravated by unilateral U.S. sanctions based on dollar hegemony in seeking a new world monetary order in which the dollar is no longer the dominant medium of trade settlement;
  • adopted an obnoxiously uncivilized demeanor in its foreign relations while remaining risk averse on issues like Taiwan and U.S. naval harassment of its presence in the South China Sea; and
  • continued to modernize its military to fend off and defeat an American attack on its homeland or near seas.

If this were a game of chess, we’d be easy to spot.  We’re the player with no plan beyond an aggressive opening move.  That is not just not a winning strategy.  It’s no strategy at all.  The failure to think several moves ahead matters.  The protracted struggle we have launched with China is not a board game, but something vastly more serious.  It is not in any respect a repeat of our victorious competition with the sclerotic USSR.  And the days when we could act internationally without incurring consequences are past.

So far in the contest with China, not so good.

Our farmers have lost most of their $24 billion market in China, perhaps permanently.  Our companies have had “to accept lower profit margins, cut wages and jobs for U.S. workers, defer potential wage hikes or expansions, and raise prices for American consumers or companies.”[2]  Our tariff increases and turn to government-managed trade have cost an estimated 245,000 American jobs,[3] while shaving something like $320 billion off our GDP.[4]   On average, American families are paying as much as $1,277 more each year for everything from apparel and shoes to toys, electronic goods, and household appliances.[5]

In 2017, when we launched the first of our wave of economic attacks on China, our trade deficit with it was $375 billion.  Last year, it appears to have fallen to about $295 billion.  Over the same period, however, our global trade deficit rose from $566 billion to an estimated $916 billion. This reflects a shift of Chinese production to Taiwan, the EU, Southeast Asia, Mexico, and elsewhere.  There has been almost no “reshoring” of the industrial jobs American companies originally outsourced to China.  According to an Oxford Economics study, if the Biden administration leaves current policies in place, the United States can expect cumulative job losses of 320,000 by 2025, and our GDP will be $1.6 trillion less than it would otherwise be.[6]

As is normal in wars, whether economic or military, the other side has also taken some casualties, but they appear to have been considerably lighter than ours.  China’s overall trade surplus last year rose to a new high of $535 billion.  Beijing improved its international position by lowering tariff barriers to imports from sources other than the United States, striking free trade deals with other Asian countries and the EU, and helping to sponsor a trade dispute-settlement mechanism to replace the US-sabotaged WTO.  China is expected to contribute one-third of global growth this year.  It is becoming an innovation powerhouse.  Forty percent of global venture capital investments are now Chinese – on a par with our own.

The U.S. focus has been on tripping up China rather than improving our own international competitiveness.  This is an expression of complacent hubris rather than a plan.  It is a sure way to lose ground, not gain it.  The United States continues to disinvest in education, infrastructure, and science.  We are making no effort to curtail the anti-competitive impact of domestic oligopolies or reform the corporate culture that drives companies to offshore work instead of retaining and retraining American workers to use more efficient technologies.  Our country is more closed to foreign talent and ideas than ever before.  The United States is still among the most innovative societies on the planet, but others are overtaking us.  It does not help that we have come to value financial engineering more than the real thing.

Recent polling shows that most of the world now sees our political system as broken, our governance as incompetent, our economic and racial inequalities as perniciously debilitating, our policies as domineering, and our word as unreliable.  Ranting and raving about China’s initial mishandling of the outbreak in Wuhan a bit over a year ago of a previously unknown coronavirus has not made the world less impressed by Beijing’s amazing ability to recover from a bungled start and counter and control the pandemic on its territory.[7]  Nor has it obscured the contrast between China’s performance and the catastrophically incompetent U.S. response to the virus.  Even our closest allies, partners, and friends now expect China to surpass us in wealth and power within the decade.  Last year, in the culmination of a trend that preceded the pandemic, China passed the United States to become the world’s largest recipient of foreign companies’ investments.   If we do not fix our domestic embarrassments, other countries may come to see us as a problem to be avoided rather than a partner to be courted.

Meanwhile, China has not broken stride.  Its students’ performance in science, technology, engineering, and mathematics (STEM) is already among the best in the world.  It is investing 8 percent more each year in education.  China already accounts for one-fourth of the world’s STEM workforce and is widening its lead.  Measured in purchasing power, its investment in science is now almost on a par with our own and rising at an annual rate of 10 percent, as ours continues to fall.  China’s infrastructure is universally envied.  It already accounts for 30 percent of the world’s manufactures, versus our 16 percent, and the gap is growing.  Last year it became the world’s largest consumer market.  Its economy is, for the most part, not dominated by monopolies or oligopolies, but fragmented and ferociously competitive.

In short, China has many problems, but it has its act together and appears, by and large, to be on top of them.

China’s principal challenge to us is not military but economic and technological.   But our country is geared up to deal only with military threats.  So, China has become both the antidote to our post-Cold War enemy deprivation syndrome and a gratifying driver of U.S. defense spending.  If you think you’re St. George, everything looks like a dragon.  We have been unable to tame China, so we now dream of slaying it.  The dragon is alert to this.  We are in China’s face.  It is not in ours.  Not yet anyway.  But if you go abroad in search of dragons to arouse, they may eventually follow you home.

There are American aircraft and ships aggressively patrolling China’s borders, but no Chinese aircraft and ships off ours.  American bases ring China.  There are no Chinese bases near us.  Still, we are upping our defense budget to make our ability to overwhelm China’s defenses more credible.  We do so in the name of deterring Chinese aggression against China’s Asian neighbors.  But military assault is not the threat from China that agitates its neighbors.

The countries of the Indo-Pacific are universally apprehensive about China’s increasingly bullying demands for deference, but none fears Chinese conquest.  We are distraught that we can no longer breeze through China’s increasingly effective defenses to strike it.  We have counted on being able to do so if the unfinished civil war with the newly democratized descendant of Chiang Kai-shek’s regime in Taiwan resumes.  We seem to think that a war with China over Taiwan could be limited like Korea and Vietnam.  But such a war would begin on Chinese territory and be fought directly with Chinese forces, not in third countries or by allies or proxies of either China or the United States.

It’s comforting to assume that we are so powerful that, if we strike another people’s homeland, they will refrain from retaliating against ours.  We prefer not to think about China’s capacity to reach out and hurt us, including with nuclear weapons, if we hurt it.  But this is delusional and it misses the point.  We cannot hope to deal with China’s politico-economic, diplomatic, and technological challenge by engaging it in armed combat or threatening to do so. We cannot outspend it militarily.  And we can no longer hope to beat it on its home ground.

Rivalry, in which each side competes to outdo another, can raise the competence of those engaged in it.  So, it is potentially beneficial.  But adversarial antagonism, in which competitors seek to win by hamstringing each other, is not.  It entrenches hostility, justifies hatred, injures, and threatens to weaken both sides.

If we are to compete effectively with China and other rising and resurgent powers, we must upgrade many aspects of our performance.  This will require a serious effort at domestic reform and self-strengthening.  And it will take time.  Trying to bring down foreign countries to prevent them from surpassing us is more likely to backfire than to succeed.  We need to take a hard look at where we are falling behind and make the changes necessary to power ahead.

The United States is endowed with unexampled geopolitical, human, ideological, and physical advantages.  With the right policies, we can outcompete any challenger, however formidable.  But, if we seek to hamstring our competitors, we should expect them to respond in kind.  If we treat China as our Nemesis, China has the capacity to become Her.

In the third decade of the 21st century, Americans can no longer reliably command international support for our preferred approaches to international issues.  Others have come to doubt the wisdom, propriety, and constancy of our policies and suspect they are formulated without taking their interests into account.

Many countries are apprehensive about the growth of China’s wealth and power.  But – without exception — they want multilateral or plurilateral backing to balance and cope with this challenge, not unilateral, confrontational American activism.  They seek to expand trade with China, not contract it.  They want to accommodate China on terms that maximize their own independent sovereignties, not make China an enemy or reinstate America as their overlord.

If the United States persists in defining our contest with China in confrontational bilateral terms, we will find ourselves increasingly isolated.  Given the unconvincing state of our democracy at present, if we misdefine our China policy as an effort to combat authoritarianism, we will alienate, not attract most other nations.  Only if we are willing to be a team player and can credibly claim to be serving the interests of partner powers as well as our own will they stand behind us in support of perceived common interests.

China is an increasingly formidable world power with interests that range from some that parallel ours to others that are antithetical, and still others that are of no consequence to us.  We should treat China as the disparate bundle of challenges it is.  There are many issues of concern to us that cannot be effectively addressed without Chinese participation.  We need to leverage Chinese capacities that serve our interests and counter or immobilize those that don’t.  Specifically, we should:

  • stop pushing China and Russia together in opposition to us;
  • let market forces – rather than paranoid plutocrats, xenophobic politicians, and ideological crackpots – play the major part in governing trade and investment;
  • create a predictable framework for trade with China in strategically sensitive sectors, like semiconductors, that safeguards U.S. defense interests while taking advantage of China’s contributions to global supply chains;
  • compete with China and other countries for influence in international organizations, rather than withdrawing from them because we can no longer dominate them;
  • seek to cooperate with China to address planetwide problems of common concern like:
  • the mitigation of climate and environmental degradation;
  • the reinforcement of global capacity to respond to pandemics and other public health challenges;
  • the inhibition and, if possible, reversal of nuclear proliferation;
  • the reconstruction of a globally agreed framework to manage the international transfer of goods, services, and capital;
  • the maintenance of global economic growth amid financial stability;
  • the healthy development of the world’s poorer countries;
  • the setting of standards for new technologies and competition in new strategic domains; and
  • the reform of global governance.

We should:

  • work with China and others to ease the now inevitable transition from dollar hegemony to a multilateral monetary order in ways that preserve maximum American influence and independence;
  • leverage, not boycott, China’s “Belt and Road Initiative,” to ensure that we benefit from the business opportunities and connectivities it creates;
  • promote cross-Strait negotiations and mutual accommodation rather than military confrontation between Beijing and Taipei;
  • expand consular relations, restore journalistic exchanges, and promote Chinese language and area studies to enhance both our presence and our understanding of China.

China and the United States began 2021 in different moods.  This year, China will celebrate the 100th anniversary of its ruling Communist Party.  Chinese associate the Party with the astonishingly rapid transformation of their country from a poor and beleaguered nation to a relatively well off and strong one.  Most Chinese have set aside their traditional pessimism and are optimistic that the enormous progress they have experienced in their lifetimes will continue.  China’s decisive handling of the pandemic has bolstered its citizens faith in its system.  Morale is high.  China is focused on the future.

By contrast, the United States entered this year in an unprecedented state of domestic disarray and demoralization.  A plurality of Americans disputes the legitimacy of the newly installed Biden administration, which faces an uphill battle with a Congress well-practiced at gridlock and evading its constitutional responsibilities.  Despite a booming stock market supported by cheap money and chronic deficit spending, we are in an economic depression.  So far, our answer to this has been limited to subsidizing consumption rather than investing in the rejuvenation of our political economy through attention to infrastructure, education, and reindustrialization.  We have our eyes fixed firmly on the immediate, rather than the long term.  But, without serious repairs to restore a sound American political economy, our future is in jeopardy, and we will be in no condition to compete with the world’s rising and resurgent great powers, especially China.

Doubling down on military competition with Beijing just gives its military-industrial complex a reason to up the ante and call our bluff.  An arms race with China leads not to victory but to mutual impoverishment.  As President Eisenhower reminded us sixty years ago, “every gun that is made, every warship launched, every rocket fired signifies in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed.”  And stoking China’s neighbors’ dependency on us rather than helping them become more self-reliant implicates them in our conflicts of interest with China without addressing their own.  They need our diplomatic support even more than our military backing to work out a stable modus vivendi with China, which is not going away.

Our China policy should be part of a new and broader Asia strategy, not the main determinant of our relations with other Asian nations or the sole driver of our policies in the region.  And to be able to hold our own with China, we must renew our competitive capacity and build a society that is demonstrably better governed, better educated, more egalitarian, more open, more innovative, and healthier as well as freer than all others.

To paraphrase Napoleon, let China take its own path while we take our own.  We need to fix our own problems before we try to fix China’s.  If we Americans get our priorities right, we can once again be the nation to rise and astonish the world

.

[1]Looking at a map of the world and, pointing at China, the newly crown Emperor Napoleon said “Ici repose un géant endormi, laissez le dormir, car quand il s’éveillera, il étonnera le monde.”   He repeated the thought during his exile on St. Helena: “Laissez donc la Chine dormir, car lorsque la Chine s’éveillera le monde entier tremblera.”

[2] More pain than gain: How the US-China trade war hurt America, https://www.brookings.edu/blog/order-from-chaos/2020/08/07/more-pain-than-gain-how-the-us-china-trade-war-hurt-america/

[3] https://www.reuters.com/article/us-usa-trade-china-jobs/u-s-china-trade-war-has-cost-up-to-245000-u-s-jobs-business-group-study-idUSKBN29J2O9

[4] “Trump’s China Buying Spree Unlikely to Cover Trade War’s Costs,” Bloomberg Economics, December 18, 2019, https://www.bloomberg.com/news/articles/2019-12-18/trump-s-china-buying-spree-unlikely-to-cover-trade-war-s-costs

[5] https://www.cbo.gov/publication/56073

[6] https://www.icis.com/explore/resources/news/2021/01/15/10595900/us-to-face-heavy-economic-losses-if-trade-war-with-china-continues

[7] https://www.thelancet.com/journals/laninf/article/PIIS1473-3099(20)30800-8/fulltext

Comments are closed.