The map above was prepared by TonyCohen – Own work, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=22679181
This op-ed in the Wall Street Journal by Reuel Marc Gerecht and Ray Takeyh criticizing the “pivot to Asia” caught my eye this morning. Ignoring the partisan posturing as well as I can, here’s the meat of it:
At home Democrats partly justified exorbitant domestic spending as a means of rebuilding an America better able to resist China. Yet Mr. Biden hasn’t taken any serious military measures, or reinitiated a free-trading alliance, to confront Beijing. This disconnect between words and deeds might have been starkest when, soon after his inauguration, Mr. Biden held a summit meeting with Mr. Putin—whom Democrats had denounced throughout Donald Trump’s presidency as a threat to democracy—where he pressed for a “stable and predictable†relationship with Moscow.
Much of the cheap talk about pivoting stems from U.S. frustrations in the Middle East. The wars in Iraq and Afghanistan caused the political class to question its assumptions about American power. Yet the Middle East remains. Energy markets are still global. Fracking hasn’t made Persian Gulf oil less important to America’s national security. The perverse interplay between Arab authoritarian states and Islamic radicalism (the former feeds the latter) continues. Iran’s nuclear ambitions, unimpeded by arms-control diplomacy, will soon confront the international community. As Mr. Putin has shown, a revisionist leader, armed with nuclear weapons and nursing grievances, can easily rattle, if not upend, financial markets and cherished assumptions.
For the foreseeable future, the Far East will have a prominent place in America’s strategic imagination. China’s conversion from a communist laggard to a rich and militarily powerful fascist state has Western leaders in a bind, given that they literally bet the bank on the hope that investment and trade would somehow pacify Beijing’s ambitions. But China’s rise doesn’t mean that Europe matters little or that the Middle East can be ignored. The U.S. isn’t Sweden. When America retreats, everyone suffers.
Although I think they have a point, I would state things differently.
The map at the top of this page illustrates trade flowing to and from the United states. You can click on it for a larger view. The red arrows illustrate our imports; the green arrows illustrate our exports. To take the most obvious example, our imports from China are a large, red arrow. Inside that arrow is a much smaller dark green arrow—we export a lot less to China than we import from China, i.e. we run a large trade deficit with China.
Our total volume of trade is about $4.5 trillion/year. Imports from China account for about half of our imports. Our top 15 trading partners account for about 70% of our imports. Our imports have been growing slowly over the years while our exports have been pretty flat:
U. S. GDP is around $21 trillion/year.
Rather than paying attention our interests in Asia to the exclusion of all else or to our interests in the Middle East over all else or our interests in Europe over all else I think we should be focused on U. S. interests.
We have an interest in reducing total trade with China, particularly our trade in strategic goods. President Biden can accomplish that with executive order alone and should. He said it pretty well in his State of the Union Address this year:
Instead of relying on foreign supply chains, let’s make it in America.
It could be tricky to write such a directive and even trickier to enforce. I would be a little broader than that. Supply chains for strategic goods, from raw materials all the way to finished good, should be, to the greatest degree possible within the United States, Canada, Mexico, Japan, South Korea, and the rest of our top 15 trading partners with the exception of China and Russia and we should have and use our military to secure that trade. I believe that will mean greater emphasis on our navy and less on our army or air force but I am not an expert in such matters. If we need to continue to import, say, cobalt from the DRC, then we need to be able to secure that part of our supply chain as well.
“we should have and use our military to secure that trade”.
I am trying to understand what that means. Of the top 15 US trade partners, there is India, Brazil, Venezuela, Saudi Arabia, and Singapore which are not covered by US treaties or security guarantees. Three of them (Mexico, Brazil, Venezuela) are deeply suspicious of the US military; one is ambivalent (India); arguably the US fought and lost a war for another (Saudi Arabia).
China dominates world trade, because it has huge production cost advantages. Once upon a time, the production cost advantage was cheap labor, but how it is modern, automated, very high tech factories. And that advantage is being increased because China is using AI plus real 5G to further modernize its factories.
The point is that the only way to get manufacturing back is to go full mercantile, small rigid import quotas and high import taxes, perhaps with subsidies to critical industries. Fat chance. Prices would rise significantly, and real standard of living would fall for the working and middle classes.
It could get worse. Once Trump abandoned the Trans-Pacific Partnership, China took it over and recast it as the Regional Comprehensive Economic Partnership (RCEP). This includes some 15 Asian countries, including all of our Asian allies: Australia, Brunei, Cambodia, China, Indonesia, Japan, South Korea, Laos, Malaysia, Myanmar, New Zealand, the Philippines, Singapore, Thailand, and Vietnam. Canada, Mexico, Colombia, Peru, and Chile are all possible candidates. The US is excluded, although Japan wants us in.
Saudi Arabia is considering selling oil to China in yuans; India and Russia are working on a ruble-rupee exchange system for their trade; Iran and Russia are also working on trade in local currencies; and Russia has just announced that sales of oil and gas to unfriendly countries (the EU mostly) must be paid in rubles.
No one in Africa, Latin America (including Mexico), the Middle East (including NATO’s Turkey), and most of Asia (including Iran, China and India) supports the US sanctions against Russia. Even Germany, Poland and Hungary are resisting the US.
It’s a little late, Nikita Khrushchev was premature, but we seem to be heading to the trash heap of history.
“we should have and use our military to secure that tradeâ€.
Me too.
“Iran’s nuclear ambitions, unimpeded by arms-control diplomacy, will soon confront the international community.”
Couldn’t resist this. Since at least 1995, earliest I can find but probably earlier, we have heard that Iran is just a couple of years away from having nukes.
“where he pressed for a “stable and predictable†relationship with Moscow.”
First, the Democrats were right that he was a threat to democracy. Still, why was the meeting a bad idea? It didnt work but not sure it was bad to attempt.
Sorry, this is mostly just a pretty partisan hit piece even though the WSJ isn’t partisan. SNR is low.
Steve
“Rather than paying attention our interests in Asia to the exclusion of all else or to our interests in the Middle East over all else or our interests in Europe over all else I think we should be focused on U. S. interests.”
I didn’t take from their piece that they were advocating “to the exclusion of all else.” I think we should all take a comprehensive view, starting with strategic materials and products. I’m not sure this Administration is capable, as we see from their posture on US energy production.
Which brings me to Bob’s comments. Yes, what started as cheap assembly labor has been parlayed into modern technological and complex productive capabilities. And in his second paragraph he cites a point I have held for a long time: to prevent US voters from throwing the globalists out due to standard of living pressures resulting from stagnant wages they had to constantly import cheaper consumer goods. (I know you, Dave, always say the benefit is captured by corporations, but prices have fallen.)
I think Bob is too pessimistic in his view. The obstacle isn’t US citizens (look at the Trump phenomenon), its politicians and the large corporations who own them.
Which brings me full circle. I think the authors of the article were simply arguing that – in an 80/20 rule fashion – China is the primary problem. US consumers, I think, would understand, because its China. The politicians and large corporates are whores.
As the link I provided in comments points out in some cases, like solar cells, much of the advantage is not due to factory automation but to production subsidies, export subsidies, and forced labor–those factories aren’t automated.
Politicians have a great deal of difficulty walking and chewing gum at the same time. If they can only focus on one thing, why not the United States?
@Curious, I think Dave is referring to using the military to secure freedom of navigation, retooling an armed forces that has been geared toward fighting inland wars in the sand at the expense of naval power.
It’s my understanding that there have been bills (mostly or all bipartisan) for improving America’s supply chains, but while some have passed either the House or the Senate, none have passed both. At some level, and I think the finger has to pointed at the leaders of the House and the Senate, they don’t think it’s that important.
Dave,
I agree with the sentiments in this piece. I think, at a minimum, we need to evaluate our strategic vulnerabilities WRT supply chains. Chips are one obvious issue, which is why an independent Taiwan is critical to US strategic security.
Where I disagree with you is Executive action. The President might be able to do some things, but the changes that need to take place must be consistent and enduring – and Executive action is not.
“…but to production subsidies, export subsidies, and forced labor–those factories aren’t automated.”
Oh, trust me, I understand. Remember, I came out of the steel industry where “dumping” (subsidies) was real.
I think we can all get past the contortions over details. We aren’t in Kansas anymore; the Chinese intend to eviscerate our strategic materials and production capabilities to the extent we will allow. As I have pointed out, we are no longer a serious people, with serious politicians or serious regulators. Its all money, power and crazed ideology 24/7.
As I write this Biden is still beholden to the environmentalists and their bizarre agenda. Energy. Materials required for his beloved EV’s. And so on. But I sense a change in attitudes.
Andy:
The reason for executive action with respect to securing the supply chains of defense contractors is urgency. It’s an urgent necessity. And it’s completely within the president’s constitutional powers.
” And it’s completely within the president’s constitutional powers.”
Would that include oil? Could he order oil companies to start running the rigs they shut down during the pandemic?
Steve
The president has plenary powers in the areas of defense, foreign policy, and the management of the executive branch of the federal government but precious little else.
He could direct the DoD not to let any contracts without proof and affirmation that they rely, for example, solely on domestic supply chains end-to-end. I’m not sure that applies to ordering oil companies in the way you suggest.
Maybe its me but I don’t know how one can limit using a military to secure trade.
As an example; the US military used to defend the West German border to protect West Germany. Then it defended the Poland border to defend Germany. And now its involved in an economic war to defend the Ukraine border to protect Poland.
Or take the Middle East. It went from defending the strait of Hormuz from Iranian attack to defeating Iraq to protect Saudi Arabia in the Gulf War; finally to the occupation of Iraq.
What’s our policy vis a vis Venezuela. If it starts exporting oil to China instead of the US; is the policy to do a naval blockade to enforce their exports come to this country? What about Saudi Arabia; if the Houthis start damaging Saudi production, is the US going to get involved in that war? Or get involved in a civil war in the Congo?
I’m talking about securing freedom of navigation not securing national borders, CuriousOnlooker. Like it or not our navy is the only tool we have for securing that.
“securing freedom of navigation not securing national borders” — history would say it is very hard (for American policy makers) to differentiate between the two.
No argument. I think they should learn.