Saturday, May 25, 2019

Tom Friedman on Chinese-American Competition

It is not very nice to say it, but when was the last time that anyone cared about Thomas Friedman? When was the last time the world stood up and took notice of Friedman’s New York Times op-ed column? OK, your memory does not go back that far.

To the extent that mine does, I recall that in a seemingly endless series of columns Friedman was arguing that the solution to our and the world’s woes lay in a carbon tax. It didn’t matter what the problem was, a highly regressive tax on carbon was the Friedman solution.

No wonder people tuned him out. If you know what a writer is going to say before he says it, you are going to tire of him, no matter who he is.

Anyway, Friedman offered some begrudging praise to President Donald Trump in his column last Tuesday. He did so while addressing a point that most politicians, even those of a Democratic persuasion, agree upon. They all agree that Trump is right to take a hard line in negotiating with China over trade. When the trade negotiations broke down a little while back, everyone understood that China was at fault, for reneging on certain already agreed-upon matters. One can only conclude that the Trump policy has gotten the Chinese authorities somewhat flustered.

As of now, the Chinese tactic of shutting down grain purchases, to undermine Trump politically in the Midwest, seems not to be working.

So, discussions seem to have broken down, but one understands that both sides have an interest in finding a middle ground. And that both sides must enact a sufficient number of face saving gestures to make it appear that they are not backing down or yielding to pressure.

One must also note that while Chuck Schumer and other Democrats applauded the Trump approach, leading Democratic presidential contender Joe Biden has already claimed that China is not a problem. As you recall, former Defense Secretary and former CIA director Robert Gates has notably pointed out that Biden has been wrong on every major foreign policy for the past two decades. At least, he's consistent.

As for Friedman, he usefully puts the China-America contention into perspective.

Since the 1970s, the U.S.-China trade relationship has been pretty constant: We bought China’s toys, T-shirts, tennis shoes, machine tools and solar panels, and it bought our soybeans, beef and Boeings.

And when the trade balance got too out of whack — because China grew not only by hard work, by building smart infrastructure and by educating its people, but also by forcing technology transfers from U.S. companies, subsidizing its own companies, maintaining high tariffs, ignoring W.T.O. rulings and stealing intellectual property — Beijing placated us by buying more Boeings, beef and soybeans.

These points are worth emphasis. It would be shortsighted to attribute China’s economic ascent merely to the fact that it cheats on trade. Though, to be sure, it does. The other reasons why China is advancing have to do with hard work, infrastructure investment and a good educational system.

Some Americans still value hard work, but most prefer lives of entitled leisure. We have fallen woefully behind in infrastructure investment. If you want to plumb the depths of the question you should ask yourself where all of that 2009 Obama administration shovel-ready infrastructure spending went. As for America’s educational system, thanks to Common Core and to political correctness and identity politics it has been failing spectacularly.

As for the value of stolen technology, Friedman offers a chilling example:

And how much money did China save — to subsidize its own companies — when its military stole the plans for Lockheed Martin’s F-35 stealth fighter and then made its own carbon copy, avoiding all the R & D costs?

And then, China has started flexing its muscles. We need to emphasize the point. What will we do when China can foster technological innovation without having to steal anything from anyone? Now, many high tech advances are not based on stolen intellectual property:

And then some changes too big to ignore set in. First, China under Xi announced a “Made in China 2025” modernization plan, promising subsidies to make China’s private and state-owned companies the world leaders in supercomputing, A.I., new materials, 3-D printing, facial-recognition software, robotics, electric cars, autonomous vehicles, 5G wireless and advanced microchips.

This was a natural move for a China aiming to leap out of the middle-income ranks and to reduce its dependency on the West for high-tech. But all these new industries compete directly with America’s best companies.

Surely, this gives us far less leverage:

If the U.S. and Europe allowed China to continue operating by the same formula that it had used to grow from poverty to compete for all the industries of the future, we’d be crazy. Trump is right about that.

Of course, Friedman feels obliged to point out that Trump is wrong to see it as a war. How Friedman knows this, I do not have a clue. In truth, a great deal of what the respective governments have been saying is face-saving posturing. And Trump always makes clear that he has a close friendly relationship with the Chinese president. Someone briefed him on the importance of such relationships when dealing with Asian leaders. He has obviously learned the lesson.

Friedman does not think that Trump understands that the negotiations can be win/win. I recommend that we await further developments before we try to figure out what the Trump attitude really is:

Where he is wrong is that trade is not like war. Unlike war, it can be a win-win proposition. Alibaba, UnionPay, Baidu and Tencent and Google, Amazon, Facebook and Visa can all win at the same time — and they have been. I’m not sure Trump understands that.

As for Xi’s attitude, all we know now is that his right hand man, his leading trade negotiator, Liu He, agreed to provisions of a new trade agreement that were overruled in Beijing. We ought to note that someone lost face over this:

But I’m not sure Xi does, either. We have to let China win fair and square where its companies are better, but it has to be ready to lose fair and square, too. Who can say how much more prosperous Google and Amazon would be today if they had been able to operate as freely in China as Alibaba and Tencent can operate in America?

The new competitive arena is in 5G telecommunications equipment. As Huawei takes a dominant international position, it opens the world’s communications to Chinese intelligence services. Of course, the Trump administration has been responding:

In particular, 5G equipment like that made by China’s Huawei, which can transfer data and voices at hyperspeed, can also serve as an espionage platform, if China’s intelligence services exercise their right under Chinese law to demand access.

Indeed, the controversy around Huawei shines a spotlight on this whole new moment: Huawei increasingly dominates the global market for 5G infrastructure, which used to be controlled by Ericsson and Nokia. America’s Qualcomm is both a supplier of chips and software to Huawei and a global competitor.

As it happens, the Chinese government is not allowing the free market to work its magic when it comes to telecommunication. Friedman does not say it, but he seems to suggest that we need a more coordinated policy to direct America’s energies, the better to become more competitive:

But the Chinese government has curbed competition against Huawei in China — by both foreign and Chinese companies — to enable Huawei to grow bigger, more quickly and cheaply. Huawei then uses that clout and pricing power to undercut Western telecoms and then uses its rising global market dominance to set the next generation of global 5G telecom standards around its own technologies, not those of Qualcomm or Sweden’s Ericsson.

And then there is the question of values-- of values like trust, which means, what is the collected data being used for. And of values like the rule of law, which means, not stealing intellectual property:

In the old days, when we were just buying China’s tennis shoes and solar panels and it our soybeans and Boeings, who cared if the Chinese were Communists, Maoists, socialists — or cheats? But when Huawei is competing on the next generation of 5G telecom with Qualcomm, AT&T and Verizon — and 5G will become the new backbone of digital commerce, communication, health care, transportation and education — values matter, differences in values matters, a modicum of trust matters and the rule of law matters. This is especially true when 5G technologies and standards, once embedded in a country, become very hard to displace.

Somehow or other the best laid plans about China’s growth and development have been proven short sighted. One notes, as Friedman does not, that the feckless insouciance of the Obama administration, echoed now in the words of always-wrong Joe Biden, gave China licence to militarize the South China Sea:

Instead of China getting richer and becoming more of a responsible stakeholder in globalization, it was getting richer and militarizing islands in the South China Sea to push the U.S. out. And it was using high-tech tools, like facial recognition, to become more efficient at authoritarian control, not less.

So, we all agree with Friedman that we hope that this can be resolved without going to war:

All of this is now coming to a head in these trade talks. Either the U.S. and China find a way to build greater trust — so globalization can continue apace and we can grow together in this new era — or they won’t. In which case, globalization will start to fracture, and we’ll both be poorer for it.


Ignatius Acton Chesterton OCD said...

“If you want to plumb the depths of the question you should ask yourself where all of that 2009 Obama administration shovel-ready infrastructure spending went.“

To Obama’s friends. Like Jefferey Immelt, GE CEO, who giggled with him on the dais.

Ignatius Acton Chesterton OCD said...

Friedman: “Unlike war, [trade] can be a win-win proposition.”

True, so long as both sides are bargaining constructively, and in good faith. The Chinese are not.

I find it funny that Friedman has come out on all this speaking as though it were obvious. For all his disdain for Trump, it took Trump’s bold action on Chinese trade for Friedman to (finally) write an article about it. That F-35 IP theft is a BIG deal, especially since China could never have done that R&D on its own. Not a chance.

Makes one wonder what other issues are so glaringly obvious to the American intelligentsia, yet not talked about because of ideological loyalties. For example, do they recognize that the U.S. intelligence apparatus has been being weaponized to target American citizens who (just coincidentally) happen to be the political opponents of the Ruling Class? And that it’s been going on since 2012? Is that a problem?

trigger warning said...

Having just submitted a comment on the temptation to invent bizarre, counterintuitive theories to burnish one's genius creds, here's a doozy:

"Adding China [to the WTO] would link Beijing to Western economies and reduce the government’s ability to control its vast population, [President Clinton] said in a speech that March at Johns Hopkins’s School of Advanced International Studies. 'By joining the WTO, China is not simply agreeing to import more of our products, it is agreeing to import one of democracy’s most cherished values, economic freedom,' Mr. Clinton said. 'When individuals have the power not just to dream, but to realize their dreams, they will demand a greater say.'”
--- WSJ, 2018 [emphasis added]

Ahhhh. Such genius.

In fact, the US has been in a trade war with China for decades, but only one side - China - was aggressing. The US continuously gave ground, basing its strategy on the Progressive hope that China would become less dictatorial, re Clinton above. Instead, the government, now an economic powerhouse on par with the US and EU, has raised a Maoist communist, Xi Jinping, to lead the nation, and (with Google's help), is establishing an AI-powered total surveillance system to assign "social credits" to punish dissenting citizens; the next plus ultra of Obama adviser Cass Sunstein's "Nudge: Improving Decisions about Health, Wealth, and Happiness".

Claiming we aren't in a trade "war" is like claiming the Russian annexation of Crimea wasn't a "war". Maybe not in the strictest definitional sense, but I'll wager the Ukranians don't see it that way. Nevertheless, it's imperative that Trump be wrong, so whatever works...

Now, the blackmail escalates with rare earths, the Green Philosophers' Stone. At least the right people are getting Gored, good and hard.

Sam L. said...

The last time I cared about Tom Friedman.... Hmmm. Dang. That would be never, as there was never a time I cared about him.

"If you want to plumb the depths of the question you should ask yourself where all of that 2009 Obama administration shovel-ready infrastructure spending went." Nowhere. NO WHERE, Well, OK, probably Democrat "benefactors". None for infrastructure. Plenty of lip service, but no money.

Sam L. said...

You don't need to be nice to Tom Friedman. He isn't nice to us.