The Cream of the Jest

Here’s the kernel of Jacob L. Shapiro’s post at Geopolitical Futures on the “frenemy” relationship between the United States and China:

The U.S. and China do not see eye to eye in three areas: Chinese territorial claims in the South and East China seas, how to deal with North Korea, and the parameters of the U.S.-China trade relationship. The last one is the most important to both sides. While both countries are dependent on each other, their relationship is heavily weighted in the U.S.’ favor. China needs the U.S. more than the U.S. needs China, and many of China’s current moves, particularly regarding North Korea, attempt to develop as much leverage with the U.S. as possible. These were the same issues the administration of former President Barack Obama faced with China, the only difference being that the Trump administration means to push even harder on the trade issue than its predecessor.

A tremendous flaw in our negotiations with China is that neither American leaders nor American diplomats seem to recognize that the U. S. is negotiating from a position of strength.

In my view that’s the heart of the matter. American leaders have been weak-minded and weak-willed; Chinese leaders have been strong-minded and strong-willed. That more than compensates for China’s material position of weakness. The joke is on us.

8 comments… add one
  • Ben Wolf Link

    Our leaders think we need money from Chinese dollar factories and can’t risk upsetting them too much.

  • bob sykes Link

    Just what is this “position of strength”? China has the factories, skilled workers and a mountain of T-Bills. We have hollow companies like Apple. In a trade war, China has to find markets for its products, and Apple goes out of business because it has no products.

  • You might want to check your facts. Real manufacturing output in the U. S. is the highest in our history, tripling over the last three decades, and the “mountains” you refer to are actually more of a sliver. Less than 8% of our federal debt. China’s holding those Treasuries to control the value of the yuan. The leverage they have over China is greater than the influence they have over us.

    China’s military is mostly pointed inwards; it has relatively little ability to project power. Its economic growth is slowing—almost nobody believes it’s over 5% at this point. Median family income in China is about 20% of what it is here.

    The U. S. in contrast has an unmatched ability to project power. The future of manufacturing is breaking in our direction not China’s. And in terms of soft power almost nobody other than the world’s worst dictators aspire to the Chinese model.

    IMO the Chinese need us a lot more than we need them.

  • michael reynolds Link

    I think I wrote before that I understood early American tolerance of Chinese misdeeds as wanting to see that a market-based (ish) economy took hold there. But I kinda think the Chinese have gotten on-board the money train now, and it’s been time to push back for a while now.

    But as for American soft power, that is in severe decline since November. I expect when the next Pew numbers come out they will show a serious drop in US prestige, especially among our allies.

    But you see the level of misinformation out there. Economically, geo-strategically, we are still unquestionably the most powerful nation on earth. We still make lots and lots of stuff – we just don’t make lots and lots of stuff in the rust belt.

    The ten largest holders of T-bills are Japan, China, Ireland, Brazil, The Caymans (riiight), Switzerland, Luxembourg (um, sure), the UK, Hong Kong and Taiwan. Ireland, Brazil, the Caymans and Switzerland together, own as much as China, despite populations and economies that are fractions of China’s. Japan is number one and I don’t recall many people worrying that Tokyo was going to dictate to the US.

    The underlying premise – he who holds a trillion dollars in debt can dictate terms in an 18 trillion dollar a year economy – is just wrong. You don’t want to buy our T-bills and securities, China? Then feel free to park your cash in. . . um. . . Euros? GBPs? Pesos? Rubles?

  • Japan is number one and I don’t recall many people worrying that Tokyo was going to dictate to the US.

    They sure did in the late 80s. Have you ever seen the Ron Howard flick Gung Ho? Japan’s 1980s strategy consisted mostly of buying overpriced U. S. assets; the Chinese strategy has been sinking everything into T-bills. The net effect is the same. The bank (us) owns them.

    I’d rather that we prohibited selling T-bills to foreign governments, banks, and individuals because I want the dollars that Japan, China, Germany, etc. receive in trade to come back in the form of purchases of U. S. goods and services rather than gathering electronic dust in somebody’s computerized accounting system. I recognize that would go over like a lead balloon. I care more about American workers than I do about the guys who are collecting commissions on the sales.

    You don’t want to buy our T-bills and securities, China? Then feel free to park your cash in. . . um. . . Euros? GBPs? Pesos? Rubles?

    That’s right.

  • michael reynolds Link

    Yeah, I do remember the 80’s Japan freak out. And the “Arabs are buying the world,’ freak out. And I’m pretty sure I’m forgetting one.

  • michael reynolds Link

    Oh, I remember. There was a brief flurry of the EU is going to replace the US.

  • CuriousOnlooker Link

    On my comment about the assumptions that underlie US policy towards China, I mentioned that negotiating with China is hard — it is more then weak minds and will vs the strong.

    While the US is the stronger party, China has advantages. First, the Chinese government know more about American policy and policy makers then vice versa due to America’s open society.

    Second, the CCP are experts at exploiting the differences of opinion in a democratic society to gain an advantage; for example see Hong Kong, Taiwan, Philippines, and South Korea.

    Third, as part of negotiations, the Chinese usually insist the other party accept they are the weaker party in some symbolic or substantive manner to opening negotiations — its surprising how effective the tactic is in resulting results favorable to the Chinese.

    Fourth, without an independent judiciary, there is no domestic way to hold the Chinese government to a promise — a really big problem for commercial trade, South Korea is finding that out the hard way. Finally, the Chinese can focus their attention on the US and its Asian allies; the US has a “cold” conflict in Eastern Europe, and a “hot” conflict in Middle East which limits the resources to bear on the Chinese. This in fact was a big reason why Obama’s pivot to Asia (mostly) failed.

    Okay, now the hard part. Suggestions on how to get better results. First, get the priorities straight. What is it we really want from the Chinese, is it the South China Sea, North Korea, or trade. I think its trade unlike a lot of the confront China folks who feel its the South China Sea. Trade is directly hurting American workers and is fueling political instability. A lot of the South China Sea seems to be advancing the interests of American allies which don’t seem all that passionate about it themselves (see Philippines).

    Second, the US could start treating our agreements with China more like how they treat these agreements; political agreements that are enforced only by the goodwill of the executive branch, not judicially enforceable. In this regard, the WTO is a big stumbling block.

    Third, this is probably the most controversial; restore a “normalized” relationship with Russia. The rupture in relations between the US and Russia means Russia has to maintain good relations with China, which affords China the space to be more aggressive towards America. Also, we’d split our attention less. We could do the same by winding down our wars in the Middle East, but I think that is harder then dealing with Russia.

Leave a Comment