John Kerry In Beijing: Four Good Reasons Why The Chinese View American Leaders As Empty Suits
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It is hard to exaggerate the audacity with which China now kicks sand in Uncle Sam’s face. On everything from trade barriers to industrial espionage to intellectual property theft, Washington is regarded in Beijing as an empty suit.
Washington never finds the courage to confront Beijing. And the result is that American economic power has been ebbing away at a rate unprecedented in Great Power history.
Secretary of State John Kerry, who is currently in Beijing for an annual Sino-American summit, is unlikely to reverse the trend. Quite the contrary, he gives every indication that he has brought to Sino-U.S. relations the standard Beltway mindset. It is a mindset of fudge, compromise, and peacock-like strutting. It is a mindset that the Chinese have come to know and love. The betting is he will return from China with a panoply of Chinese promises that both sides know are no more than empty posturing.
Even if most Americans haven’t realized it yet (and probably won’t be told by their media for decades to come), China is now the senior partner in the China-America relationship. The key to the relationship is America’s utter dependence on Chinese finance to fund the federal budget deficits. In return, China helps itself to massive transfers of American manufacturing technologies. Washington now seems powerless to staunch the hemorrhaging.
As for U.S. manufacturers, they have long since stopped thinking in national terms. Led by Ford and General Motors, they see no alternative but to cooperate with Beijing’s technology transfer agenda. After all they would get no support from Washington if they were to resist Beijing’s demands. Meanwhile if they go along with Beijing’s demands, they might earn some brownie points with the new superpower.
Of course, once transferred, American technologies quickly leak to local Chinese competitors. But for today’s top U.S. business leaders that will be someone else’s problem. By the time – five to ten years down the road – when the Chinese start competing seriously in the industries concerned, today’s U.S. CEOs will long since have retired – and cashed in their stock options.
Even where U.S. corporations try to withhold technology, their efforts may come to nothing. As Pat Choate has recorded in Hot Property: The Stealing of Ideas in an Age of Globalization, the Chinese automaker Chery even went to the extent of making a replica of a General Motors car when it created its so-called QQ model. The QQ’s components were knockoffs of those in the Spark, a locally-made GM car!
In recent years Chinese spies have even been emboldened to launch cyber attacks on top American media organizations, not least theNew York Times and Washington Post. Other major victims of in-your-face Chinese espionage have recently included Alcoa and Allegheny Technologies.
America’s laidback approach contrasts remarkably with how China is viewed elsewhere – not least in the European Union. The Europeans are far more willing to stand up to Beijing. The result is that European exports generally enjoy far greater access to the Chinese market than American ones.
Posturing in Beijing. (Photo credit: Wikipedia)
Germany in particular has been a major beneficiary and on a per-capita basis its exports to China last year ran nearly 2.4 times America’s. Virtually everything Germany sells to China moreover counts as advanced technology. By contrast China buys little from America other than coal, iron ore, wheat, and other commodities in which America’s comparative advantage going forward will be cheap labor.
Where did America go wrong? From a Chinese point of view – and a German one – the issue is American intellectual leadership: no serious nation in modern history has been led by such naifs.
American China policy has failed on four key points:
1. American policymakers have backed the wrong horse in prioritizing the information economy over traditional manufacturing. Little discussed in the American media, a hidden problem with the information economy is that it is remarkably labor-intensive. By comparison modern advanced manufacturing (of the sort typically dominated by Japan and Germany) is highly capital intensive. For a nation that aspires to rise in the global wages league table, labor-intensive industries are a hiding to nothing. The problem is that opportunities for increased productivity are heavily circumscribed. The information economy moreover comes up short on exports – in large measure because many of its most significant advances can be easily reverse-engineered by other nations, not least such mercantilist nations as China. By comparison, China’s manufacturing-focused economy is, of course, a prodigious exporter and as a result has been able to accumulate the massive financial surpluses that fund deficit nations such as the United States.
2. American policymakers have procrastinated in meeting the Chinese challenge because they have constantly – for more than a decade now – been misled by siren American voices predicting an imminent Chinese financial collapse. China is a big economy and large financial collapses are not inconceivable. But even the most disastrous such collapse would be unlikely to stop the Chinese export drive in its tracks. American policymakers have failed to pay sufficient attention to the central objective of Chinese policy, which is to take over from the United States, Japan and Germany as the world’s premier source of advanced manufactured products.
3. American policymakers have grossly overestimated America’s comparative advantage in innovation. In the standard version, the United States holds an ace in the hole in competing with China: America’s supposedly incomparably more innovative culture. The secret, it is widely held in Washington, is America’s free and open society. China can never come even close to American levels of economic success without first opening up to American-style freedom. A moment’s reflection is all that is necessary to see that this is nonsense. After all, none of the most creative societies of the ancient world was free. Ancient Egypt, with all those slaves who built the pyramids, was far from free. But it was without doubt one of the most creative societies in history. By comparison, the British Isles, for instance, which were then undoubtedly much freer, were far less creative. Mesopotamia, another highly creative society of the ancient world, was also hardly a model of American-style freedoms. Meanwhile – in the lifetime of many Americans still alive today – there is the evidence of Nazi Germany. Germany in the 1930s was hardly free. Yet the evidence is that on a per-capita basis it was one of the world’s most creative societies. In reality what drives creativity is wealth not freedom. The richer a society becomes, the more it can afford to invest in developing new ideas and technologies. China is already becoming markedly more innovative and is now the global leader in such a key field of future growth as genomics. For further details check out this article in MIT’s Technology Review.
4. In one of the most remarkable delusions in modern diplomatic history, American policymakers have imagined they have stolen a march on Beijing by adopting an increasingly “proactive” foreign policy. Perhaps the most outspoken recent statement of this view has come from the Washington-based China watcher David Shambaugh. Writing in The National Interest magazine, Shambaugh has commented: “China is a passive power, whose reflex is to shy away from challenges and hide when international crises erupt. The ongoing crises in Ukraine and Syria are only the most recent examples of Beijing’s passivity.” This may pass for commonsense in Washington but it doesn’t in Beijing – or indeed in virtually any other foreign capital. The view in Beijing, of course, is that Washington has covered the American nation in disgrace by compulsively meddling in the affairs of nations like Iraq and Afghanistan whose cultures are misunderstood by American policymakers and policy analysts alike.
4. In one of the most remarkable delusions in modern diplomatic history, American policymakers have imagined they have stolen a march on Beijing by adopting an increasingly “proactive” foreign policy. Perhaps the most outspoken recent statement of this view has come from the Washington-based China watcher David Shambaugh. Writing in The National Interest magazine, Shambaugh has commented: “China is a passive power, whose reflex is to shy away from challenges and hide when international crises erupt. The ongoing crises in Ukraine and Syria are only the most recent examples of Beijing’s passivity.” This may pass for commonsense in Washington but it doesn’t in Beijing – or indeed in virtually any other foreign capital. The view in Beijing, of course, is that Washington has covered the American nation in disgrace by compulsively meddling in the affairs of nations like Iraq and Afghanistan whose cultures are misunderstood by American policymakers and policy analysts alike.
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