11.11.2017
The well-known American economist M. Goodman, who deals with the problems of Asian development at the authoritative Center for Strategic and International Studies (CSIS) in Washington, reflecting on the specifics of modern US-Chinese relations, brings up for discussion serious concerns about the challenge that the rising China poses to the American – centric world.
Goodman draws attention to the phrase in the speech of US Secretary of State Rex Tillerson regarding US-Indian relations, which he delivered at CSIS on October 18, 2017: “We need to cooperate with India to ensure that the Indo-Pacific region…it will not become a region of unrest, conflicts and predatory economies of individual countries.” According to the author of the note, this statement reflects the essence of not only the resonant speech of the US Secretary of State about the priorities of American policy in Asia, but also reflects the perception of the PRC in the American political establishment.
So, Goodman highlights the last words in the above sentence (about the “predatory economy of individual countries”), which cause him surprise as actually a direct allusion to the”mercantilist economic policy of China”. Of course, there is some truth in this, but, most likely, Goodman believes, this phrase cuts the ears of many in Asia and could have the opposite effect if the United States does not offer its own, more positive concept of economic integration of this important region.
According to the American expert, Tillerson was generally right that in many respects Chinese trade and investment activities are problematic – especially when the country is undergoing changes under President Xi Jinping. In his opinion, a blatant example is “Beijing’s use of economic coercion to achieve its diplomatic goals.”
In particular, Goodman cites real-life examples when China blocked tourist and retail trade with South Korea in early 2017 after the THAAD missile defense system was installed in Seoul. When the previous Philippine government ignored China’s maritime claims in the South China Sea, Beijing effectively imposed an embargo on Philippine bananas. The author also cites an example when ” the export of Norwegian salmon fell victim to Beijing’s discontent for awarding the Nobel Prize to the Chinese dissident Liu Xiaobo in Oslo in 2010.”
According to the American expert community, China’s trading partners have a growing account of detailed information about Beijing’s mercantilist methods. These include widespread restrictions on market access, from the stock limit on investments to regulatory harassment; extensive subsidies to large state-controlled companies that change the conditions of competition against foreign firms in China and in third-country markets; as well as widespread forced technology transfer, and theft of intellectual property.
Moreover, American businessmen and experts in the field of national security are afraid that this practice will continue: the Chinese plan “Made in China 2025” openly speaks about Beijing’s ambitions to dominate key industries of the future, such as robotics, aerospace and advanced biotechnology (where the United States dominates today – the Center for the Study of China).
During his speech at CSIS, US Secretary of State Tillerson highlighted another problem, answering a question from CSIS President John Hamry, about the meaning of the”predatory economy”. Tillerson referred to financing schemes for large infrastructure projects that burden recipient countries with unbearable debt and may even jeopardize their sovereignty. He said that the US is having a peaceful conversation with other countries about alternative financing mechanisms.
The author notes that US President Donald Trump repeated these points in his speech earlier this month in Da Nang, Vietnam, calling on the World Bank and the Asian Development Bank to focus on high-quality investments in Asian infrastructure and suggesting that American development institutions such as the Overseas Private Investment Corporation (OPIC) could offer new financing alternatives.
American experts believe that although such efforts may be constructive, the Trump administration should be careful not to brand all of China’s economic activities as “predatory”.
Asian countries want access to a large Chinese market, and increasingly they want Chinese technologies and capital, including to support infrastructure development. The signing of Xi Jinping’s “One Belt, One Road” initiative is generally widely welcomed in the region, and Washington should not give the impression that it opposes Beijing’s efforts. Goodman recalls that the Obama administration made a mistake in 2015 when it tried to enlist the support of US Asian partners in countering the Asian Infrastructure Investment Bank (AIIB).
At the same time, Goodman believes that the United States should push China back when this country violates the letter or spirit of the rules-based economic order. He believes that the US should criticize Beijing when it uses economic coercion to impose its will on small states.
Using US trade laws and World Trade Organization (WTO) procedures to combat illegal Chinese subsidies or forced technology transfer policies is essential to protect American economic interests and protect an order that serves both countries well. Goodman believes that the US should do all this in such a way as not to cause more harm to the order, since the unilateral and protectionist language of the Trump administration indicates that this is possible. Also, America should ask what role can US private sector participants play in protecting a system based on established norms.
China’s systematic efforts to acquire strategic technologies from the United States and its allies have also been presented as a form of “predatory economy”. Again, there are legitimate concerns not only about our national security, but also about our economic competitiveness, when Beijing changes the terms of the game in its favor.
According to the author, the United States should protect the “royal regalia”: Among other things, Washington should ensure that the Committee on Foreign Investment in the United States (CFIUS) has the resources and analytical capacity to identify Chinese investments that really threaten national security. A bipartisan bill introduced in 2017 by Senator J. It is an attempt to solve these problems, but it risks creating an overly regulated process and has a negative impact on the legal attraction of foreign investment.
Moreover, the Americans believe that they cannot play only in defense. According to Goodman, there are two important things that America needs to do when attacking. First, the United States needs a positive economic agenda that expands on its decades-long work to stimulate growth around the world, open markets and high standards of the game. US Secretary of State Tillerson, and later President Trump in his speech in Vietnam, was on the right track in calling for a “free and open Indo-Pacific region”.
But the American president gave away the most powerful tool that the United States had to advance this goal, the Trans-Pacific Partnership (TPP), and replaced it not with a reliable regional trade strategy, but simply with criticism of trading partners, including key strategic allies, for “unfair” practices that feed the bilateral trade imbalance.
This was accompanied by tough, but vague conversations about the conclusion of one-sided bilateral agreements, with which none of the interested Asian countries will agree. (for more constructive US plans in the region, see the report published by CSIS in October 2017, the updated report of the Commission on Economic Strategy for Asia 2017-Center for the Study of China).
Another important task for the United States, according to an American expert – is investing in itself. Without updating the weakening domestic infrastructure, without re-equipping the education system and training programs on the economy of the twenty-first century, and without promoting scientific research in the industries of the future, the United States has little chance to compete with China, which is making a concerted effort to achieve all of the above. And foreign policy experts, as well as those who work in the CSMI, can no longer leave these issues for consideration by the internal political community; they are a necessary basis for public support for international efforts, and the United States should have something to say about this.
According to the author, all four directions of the successful US response to the problem of China, which the American expert noted – holding Beijing accountable, protecting the royal regalia, adopting a positive economic agenda and investing in oneself – will be crowned with success only if the US works closely with like-minded people and partners.
M. Goodman believes that the United States has neither a large-scale concept nor an adequate lever of influence on China. In his opinion, Washington needs the help of its North American, European and Asian partners in considering joint WTO cases, exchanging information on China’s strategic technological acquisitions, working together on multilateral infrastructure financing rules, and even investing in American domestic infrastructure.
In 1967, the French intellectual Jean-Jacques Serban-Schreiber published Le defi Americain (“The American Challenge”), a fundamental work warning of the threat to the economic and cultural prosperity of Europe from the spreading American technologies and ideas. Servan-Schreiber did not accuse the Americans of “predatory” behavior and did not advocate raising drawbridges to protect the fortress of Europe; rather, he called on Europeans to learn from the Americans and join forces to cope with this problem. The United States today needs to learn from this when, according to M. Goodman, they face “le défi chinois” (the Chinese challenge, fr.).
The author opines that by claiming in his recent Asian trip that “I don’t blame China,” President Trump has gone too far in absolving Beijing of responsibility for mercantilist actions that undermine the global economic order. Moreover, the unilateral and protectionist solutions proposed by him are erroneous and harmful to the interests of the United States. But, according to M. Goodman, he is right in one respect, in putting “America first”: Without its own coherent international economic strategy built on strong domestic foundations, the United States has little chance of accepting China’s current challenge.
In general, this short but very emotional note very succinctly and accurately reflects the difficult reflections in American political, business and expert circles of the United States regarding the dynamic development of China, which seeks not only to take a leading position in the world, but also to change the model of international relations (according to its Chinese principles, which directly challenges the established international rules of Pax Americana – Center for the Study of China).
Source: https://www.csis.org/analysis/predatory-economics-and-china-challenge
Number of shows: 1634
