This week's
Washington debut by China's prospective new President Xi Jinping provides an
excellent opportunity for President Obama to un-confuse his administration's
economic and security policies with regard to China and Asia.
In the fall,
the president announced a drawdown of U.S. military deployments in Europe and
the Middle East and a simultaneous strengthening of the U.S. presence in the
Asia-Pacific region including the deployment of Marines to a new base in
Darwin, Australia. These maneuvers, which also occurred in conjunction with expressions
of U.S. concern about Chinese territorial claims in the South China Sea (or
West Philippine Sea per Hillary Clinton), were all said to constitute a "Pivot
to Asia" not only of U.S. forces but also of U.S. focus and priorities. At the
Honolulu meeting of leaders of the Asia Pacific Economic Cooperation (APEC)
forum in November, Obama emphasized that this Pivot is not aimed at any
particular country but rather is being undertaken because the region is central
to America's future prosperity. But this was transparent nonsense. U.S. forces
have long patrolled China's coast and China's force modernization is clearly
aimed at denying unimpeded access to its coastal waters to the U.S. Navy. In
turn, Washington clearly sees China's build-up and its assertion of claims in
broad reaches of the South China Sea as a security threat to certain allies and
perhaps even to itself.
But then
here comes the contradiction. China's ability to pose a threat is, of course,
based on its increasing industrial, technological, and economic and financial
prowess. China's rising power and influence arise not from its military
strength, but from its economic success dynamism. Conversely, the decline of
America's power and influence is the result not of loss of military capability
but of economic competitiveness. Yet, in this circumstance, the United States
is doing just about everything possible to enhance China's economic power and
virtually nothing to counter the negative impact of that on the U.S. economy or
to enhance its own competitiveness. Consider, for example, that the chairman of
the President's Commission on Jobs and Competitiveness, GE Chairman Jeff
Immelt, has just completed a deal to merge GE's avionics activities with those
of a Chinese state owned company and to move a significant part of the activity
to China. Intel has just opened a factory to produce Pentium microprocessors in
China in part because China offered investment incentives that Washington
refused to match. Everyone knows that China is manipulating its yuan in
violation of both World Trade Organization(WTO) and International Monetary Fund
(IMF) guidelines, but Washington not only refrains from doing nothing about it,
it also even denies that China is manipulating.
In my mind,
the whole concept of the threat from China is skewed. In the first place, the
notion that Asia is central to America's future prosperity is wrong. Asia buys
relatively little from the United States, engages in mercantilism that costs
America investment and jobs, and subsidizes the off-shoring of U.S. production
facilities and technology. Asia is a drag on American prosperity. Of course,
that could change and we must hope that it does. But to think that America now
has vital economic facilities in Asia that need to be protected by more
American military presence is very wide of the mark at the moment.
But just for
the sake of the argument, let's suppose Asia is central to America's future
prosperity. Just what is China doing or likely to do in any military sense that
would constitute a threat. Is China going to invade the United States or Japan
or South Korea or any other significant country in the region? The answer is no. Is
it going to occupy certain reefs and islands the ownership of which are in
dispute? Possibly, but so what. Is it critical to American security that the
highly questionable claim of the Philippines to certain coral reefs is
forcefully defended? No. What about the claims of the Japanese and Koreans?
Those are perhaps more serious in terms of U.S. obligations to defend Japan and
Korea, but, on the other hand, Japan and Korea are major rich countries with
large military forces that are capable of doing a fair amount for themselves.
And they certainly should do the maximum before the United States jumps in and
the United States should certainly not jump in if the Koreans and Japanese are
not doing so. So all in all, it's hard to reason for the Pivot. The Chinese see
it as a hostile move and it kind of is -- unnecessarily so.
The real
problem is on the economic side. Here, if Washington thinks there is a threat
from China, it should stop feeding the beast. But even if, as I argue, there is
no military threat, there certainly is a threat that American power will be
eclipsed by a combination of Chinese economic dynamism and American economic
decline.
Thus, the
best way to defend and assure the future prosperity and power, both military
and economic, of the United States is to figure out how to compete with China
and the rest of Asia. For starters this would mean telling Xi that neither he
nor China should take anything personally because it's all just business. But
the United States will initiate some investigations into how best to counter
the problem of dollar over-valuation and will take steps to prevent it. He
should further explain that the United States will be matching the investment
off-shoring investment incentive packages of China and others and that he will
take every legal step to convince Chinese and other producers that if they are
selling in America they should make every possible effort to produce here as
well and he will pressure and use tax incentives to persuade U.S. business
leaders to make it in America. Finally, he should lay out the proposals he will
make for adoption of a value added tax, a reduced corporate tax, a greatly
increased government R&D budget, and other steps to spark a renaissance of
American competitiveness.
This kind of
program in conjunction with an actual reduction of the U.S. military presence
in the Asia-Pacific area would constitute a Pivot to America. Xi might
appreciate that as much as the American people.
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