I Agree with Trump Pushing Back Against China

Brig. Gen. Robert Spalding’s 2019 book, “Stealth War: How China Took Over While America’s Elite Slept” raises very serious concerns about China’s rise and its underlying intentions.

But first, we should note Spaulding’s credentials, to see how much credence we should give to his perspective. Spalding was known both inside and outside the Trump administration as a China hawk. From 2014 to 2016 he led the China division at the Joint Chiefs of Staff. He was the chief architect for the National Security Strategy of December 2017. Before joining the Trump White House, he was the U.S. defense attaché at the U.S. Embassy in Beijing. Spaulding retired after 26 year in the U.S. Air Force after being forced out of his role in the Trump administration in the National Security Council after a memo he drafted concerning the concept of nationalization of a 5G network was leaked by undisclosed sources. Conclusion: he certainly was in position to have very informed opinions concerning China and its implications for our national security.

Second, let’s define “China”. Spaulding defines China as the Chinese Communist Party, as it controls everything. Further, he believes that China’s ultimate goal is to strengthen it at every turn, to displace America’s position on the world stage and take its rightful destiny to dominate the world.

To do that, Spaulding believes China has adopted “Unrestricted Warfare” as outlined in a 1999 work by two senior colonels in China’s People’s Liberation Army. While more subtle than Russia in its attempts to undermine the USA, he writes that China has been flying under the radar to destroy the rights and systems crucial to American livelihood for decades. But as described in “The Shadow War: Inside Russia’s and China’s Secret Operations to Defeat America” by Jim Sciutto, (See my blog post We are in an Undeclared War, Whether We Like it or Not, October 29, 2019) China has been engaged in many actions of warfare (“hybrid warfare”) just below the threshold that would elicit a military response from the U.S.

Moreover, our leaders have been misled by the belief that by opening up trade and relations with China and as China advancing economically, it would also transition to more freedoms and democracy. Unfortunately, we have come to learn that is not the case with China. The Chinese Communist Party is determined to retain total control of the country AND Chinese people around the world wherever they are. They are determined not to allow three of the four of FDR’s “Four Freedoms Speech”: the freedom of speech and expression, the freedom of every person to worship god in his own way, and the freedom from fear. It is desperately hoping that by raising many people from poverty, avoiding the fourth “freedom” expressed by FDR - the “freedom from want” - that they can avoid a revolt and retain in power.

The thesis of Spaulding’s book is that China has utilized economic methods to undermine the U.S. By requiring companies that wanted to do business in China to give away its technology, it hoped to close the technology gap and avoid the expensive task of developing technology on its own. This is also accomplished by Chinese students bringing back technology from U.S. research universities, spying and other economic espionage, pirating patented or copywrite products, buying emerging technology companies and hacking into virtually every major U.S. corporation to steal technology and other trade secrets. It has bled the U.S. by attracting investment from the U.S. and other countries but then not allowing the companies to withdraw its capital or earnings from the country – in essence extracting capital from the U.S. that could have been invested here to create American jobs. But what is most distressing is the impact the Chinese have had on people of influence – major corporations, diplomats and elected officials – to affect public policy to prohibit pushback on this behavior – until the Trump administration.

I have long been an advocate of free trade, based on the economic theory of “comparative advantage” – that all countries would be better off if there were free trade as each produced the products for which it had a “comparative” advantage. See my blog post Free Market Economics: Problems and Solutions, May 7, 2019. The theory recognizes that there would be winners and losers within each economy, but that the production inputs from the losing entities would move to more productive uses. The beneficiaries would be dispersed buyers of products at lower prices, while the losers would be concentrated among the uncompetitive producers (companies and their investors and workers). The classic economic response would be to develop policy to facilitate the movement of the productive assets through job training and/or moving expenses subsidies.

Spaulding argues that this theory is good in theory where all economies are free, but not where an economy the size of China does not play by the same rules. Where most, if not all, Chinese companies are owned or controlled, or subsidized or punished, by the Chinese Communist Party, and where the government can simply take a company’s assets (whether it be physical assets, trademarks, patents, or other technology) and assign it to another, this does not fit the economic model.

Based on this perspective, I needed to refine my thinking with regard to my strong support of the free market model and support for free trade. Free trade to fit the economic model must be fair trade, and what China has exhibited is far from fair trade. So the question is, what do we do about it?

Several of President Trump’s initiatives appear to be in the right direction:

1.      Imposing sanctions for China’s action by imposing or threatening tariffs if China does not change course. Critics are right in asserting that American customers are the ultimate payors of the tariffs through higher prices, not Chinese exporters who directly pay the tariffs, but the tariffs do erode the economic advantage of Chinese exporters and are hurting the Chinese economy. Critics are also right in that Chinese reactions to the imposed or threatened tariffs are hurting specific American exporters to China, most specifically the American corn and soybean growers, to whom President Trump has extended some relief. See my blog post, Agreement with China on Tariffs Needed. Whether China is sufficiently worried about its ability to continue its expansion and satisfy the “freedom from want” to give meaningful relief, other than mere promises (which it has failed to honor in the past) is open to question. The Chinese government and Trump administration is both desirous of an “agreement” for domestic politic reasons.

2.      Insisting that any 5G system installed in the U.S. be secure, which likely would not be if constructed using Huawei technology.  Trump says Huawei is a security risk as NATO seeks secure 5G, Reuters.com, December 4, 2019.

3.      Trying to get China off the “developing nations” list for the World Trade Organization, with their favorable treatment.

“The Trump administration on Friday escalated pressure on the World Trade Organization, giving the international group a 90-day ultimatum to alter a provision that the United States argues has long allowed China to game the global trading rules.

In a proclamation, President Trump said that the United States would “use all available means” to secure changes to a provision at the World Trade Organization that allows countries to decide whether they qualify as “developing countries.” Countries that claim that label — which includes nearly two-thirds of the organization’s 164 members — qualify for certain preferential treatment, like longer time horizons to carry out trade agreements.” Trump Presses World Trade Organization on China, The New York Times, July 26, 2019.

4.      Pushing back against favorable loans from the World Bank and the International Monetary Fund to China, which bleeds investment capital from the U.S. This would have the effect of the U.S. stopping funding the Chinese war machine and tilting the balance against U.S. manufacturers. Nonetheless, the World Bank on December 5, 2019 adopted a new plan to aid China with $1 billion to $1.5 billion in low-interest loans annually through June 2025, despite the objections of U.S. Treasury Secretary Steven Mnuchin and several U.S. lawmakers. Mnuchin argued China is too wealthy for such international aid and is itself lending hundreds of billions of dollars of its own to poor countries through its Belt and Road infrastructure drive.

5.      Notifying the United States Postal Service of the intent to withdraw from the pact subsidizing shipping from China which came from U.S. membership in the Universal Postal Union. This eliminated the 40-70% discounts for products shipped from China which was less than a comparable item shipped from a U.S. producer. Previously, according to the U.S. Postal Service, it cost around $20 to mail a small parcel weighing 4.4 pounds from one U.S. state to another, yet mailing the same package from China only cost about $5. 

6.      Cautioning (along with the global development lenders, the International Monetary Fund (IMF) and World Bank) developing nations about borrowing from China for the Belt and Road Initiative infrastructure investments, calling for more transparency about loan amounts and terms and noting concerns the growing debt burden and onerous conditions could sow the seeds of a crisis for such developing countries. They all note the debt crisis in Sri Lanka where Sri Lanka defaulted on the loan to build the port developed by the Chinese, and the Chinese will now have control of the facility for the next 99 years. How China Got Sri Lanka to Cough Up a Port, The New York Times, June 26, 2019.

This brief post barely scratches the surface of the points made by Spaulding and Sciutto, particular about the military national defense issues, but gives you a sense of the dangers China imposes to our economy. Nor does this do justice to Spaulding’s concerns regarding surveillance of U.S. citizens and Chinese here and abroad and the potential loss of freedoms of speech, expression, the press, religion and assembly.