Two recent developments presage a forthcoming regime change in Washington – a change that needs no help from the National Endowment of Democracy, whose mandate to incite change of governments does not include the US, in any event.
The surprise arrest of Steve Bannon last week could signify the loosening of another cotter pin in the Donald Trump machine. Bannon, former campaign strategist and intimate adviser for Trump, has been charged with embezzlement and money-laundering. If convicted, he will become the latest to join President Trump’s inner circle of crooks.
Will Bannon squeal?
US federal prosecutors charged Bannon and three others with skimming millions from a fund raised to build a private version of the border wall facing Mexico. If convicted, Bannon could be in for 10 to 20 years in the slammer.
According to one version of their relationship, Trump is estranged from Bannon for not sharing a “license fee” for stealing his idea of the wall and for taking the limelight away from The Donald. Trump called the private wall project “showboating.” Thus Bannon may not be able to count on a presidential pardon to get out of jail.
His other option is to sing vigorously to the federal prosecutors in exchange for a lighter prison sentence. By telling them all he knows about the nefarious shenanigans of Trump and his inner circle of crooks, the wheels of the Trump campaign could be coming off even before the November election.
The other major development is the formal nomination of Joe Biden as the presidential candidate for the opposition Democratic Party. His acceptance speech was forceful, forward-thinking and hard-hitting. He showed none of the signs of a doddering old man that Trump likes to attribute to him.
Instead, Biden spoke about what he would do as president to bring the Covid-19 pandemic under control, put the economy on sound footing, face climate change as opportunities for new high-paying jobs, and continue to fight for racial justice. Not once in his 25-minute address did he brag about himself. The difference between him and Trump, to use Biden’s words, is the difference between light and dark.
As the incoming president, Biden will face the daunting task of undoing the damage wreaked by four years of corrupt and incompetent misrule.
Despite the stock market hitting new highs, the US economy is in terrible shape. Unemployment is at a record high and small businesses are being forced to close at unprecedented rates.
Biden will need China
To restore the economy, the Biden administration will need to work with every part of the global economy, especially with China. China is the second-largest economy and the first to recover from Covid-19. The Chinese and US economies are closely intertwined. China’s recovery will have a pull-through effect for the recovery of the American economy.
Provided, of course, that Biden can undo Trump’s zero-sum confrontation with China, a confrontation that never made sense from its inception. Imposing import duties on Chinese goods was supposed to penalize Chinese manufacturers. Instead, it’s the American consumer who is penalized by having to pay more for products imported from China. The net impact is to raise the cost of living for all Americans.
Increasing the cost of production for China was supposed to encourage the relocation of manufacturing back to the US. Since labor-intensive, low-value manufacturing shifted to Asia decades earlier, the Trump tariffs simply forced the offshoring manufacturer to look for other low-cost countries, such as Vietnam and Bangladesh. American workers continue to be among the world’s highest paid, and those expecting offshore production to move back are naive or suffering from serious delusion.
The Trump administration waged the trade war as if China was not supposed to retaliate, but China most certainly did. Consequently, American farmers are paying the price for losing access to their largest market. After two years of reduced sales and income, some have gone bankrupt and others are wondering how to survive another planting season.
US Secretary of State Mike Pompeo has pushed China to the brink of war based on three doubtful if not wildly off-base premises:
- Even though Pompeo can’t point to specifics, China is a threat to US national security because Pompeo says so. The US has greatly increased its naval presence in the South China Sea to the point that if one of the ships were to run aground on an island occupied by the People’s Liberation Army, Pompeo could charge China with initiating a hostile provocation.
- Any advances in technology from China are based on intellectual property stolen from the US, even for technology that the US does not own. To support his accusations, Pompeo is not embarrassed to cite, as evidence of Chinese infraction, disputes more than 20 years old that were settled amicably at the time.
- Nationwide Black Lives Matter protests in the US notwithstanding, China’s alleged human-rights abuse justify making China an enemy of America. Pompeo based his accusation heavily on the claim that China has a million Uighurs in concentration camps in Xinjiang. This patently ridiculous charge came from one alleged observer of doubtful veracity reinforced by Uighur dissidents living in Washington.
What China can bring to the party
Pompeo’s China strategy has been an unequivocal disaster for the US. Biden has the opportunity to refute the confrontational approach, make a bold move and hit the reset key in the relationship with China. He doesn’t have to go soft on China and he doesn’t have to coddle the Beijing leadership. He just needs to see reality and not engage in make-believe.
Biden should consider the benefits of getting along with China instead of incurring the cost for continuing to demonize China à la Pompeo and Trump.
First, canceling the trade war would immediately normalize bilateral trade and help restore the US economy.
There are Chinese companies with billions to invest in the US just waiting for a more receptive Washington. Many of these investments would involve transferring their manufacturing know-how along with capital to make products for the US market. Needless to say, these investments would be made in America and create jobs for American labor.
Some Chinese companies are already in the US to work on infrastructure projects and assembling state-of-the-art subway cars to replace dilapidated units more than 50 years old. They could do a lot more if bipartisan xenophobia from leaders in Washington could refrain from obstruction.
Part of Pompeo’s drive to decouple the two economies is to obstruct the normal operation of a leading Chinese technology company, Huawei. The US has caused the arrest of the daughter of the founder, and denied market access to Huawei not only in the US but in as many other countries as will follow the US lead.
When none of these actions seem to stop Huawei, the US denied semiconductor technology to the company. This has ominous consequences.
In the short term, American semiconductor companies stand to lose multiple billions in revenue to one of their major customers, if not the largest.
Over the long term, some say in three to five years, Huawei will find ways to work around American technology. When it does, American companies will not only lose an important customer but will face a formidable competitor. That competitor won’t be just Huawei but an entire ecosystem of Chinese companies in the semiconductor industry that partnered with Huawei.
Huawei is not the only Chinese company that is technologically more advanced than any US firms. Use of smartphones for mobile payment and use of artificial intelligence for facial or voice recognition are some other examples. It will be a waste of valuable resources for the US to suppress these advances using the whack-a-mole approach.
Collaboration between two technologically advanced countries can be mutually beneficial as each give and receive. Qualcomm, for example, was the recipient of US$1.8 billion in license fees from Huawei for the most recent year.
China has been working to combat climate change during the last four years, which Trump has not. Controlling the emission of greenhouse gases is of common interest of both countries. The US can benefit from China’s advances in environmental control to create new green technology-based jobs.
China has more than four times the population of the US. By and large, the Chinese are well educated and motivated and more than 90% of them believe in their one-party government. It’s inevitable that the Chinese economy will surpass the American economy. Washington needs to get used to the idea.
A bigger economy does not automatically mean that China will assert dominance over the US. China has learned from 5,000 years of experience that peace leads to stability, which leads the society to prosperity. Even when China’s gross domestic product exceeds the US in the next few years, the individual Chinese citizen will be nowhere near as wealthy as an American.
China’s priority will continue to be to raise the income of its citizens. Differences in ideology are not a matter China cares about or will compete or fight with the US over.
Most recently, Pompeo demanded that the UN Security Council extend a ban on arms sales to Iran. Only the Dominican Republic supported the US. China and Russia voted no. France and UK, the other permanent members of the council, along with Germany and eight other members abstained, in effect also a no. It was the most insulting slap in the face the US has experienced since the founding of the United Nations.
China will continue to want to collaborate with America. It will be good for America if Biden can find ways to work with China. Seeing the US getting along with China will help restore the world’s confidence that the US has reverted to being a reasonable and rational global leader and the Biden administration can look to regain the respect that Pompeo has squandered.
George Koo retired from a global advisory services firm where he advised clients on their China strategies and business operations. Educated at MIT, Stevens Institute and Santa Clara University, he is the founder and former managing director of International Strategic Alliances. He is currently a board member of Freschfield’s, a novel green building platform.