June 12, 2021

China United States

Historical Background
When they “opened” China in 1972 President Richard Nixon and Secretary of State Henry Kissinger did not anticipate the consequences that would follow. Nixon’s primary motive was to take advantage of the then adversarial Sino-Soviet relationship to open another front in the Cold War with the Soviet Union. Declassified documents published by the National Security Archive and the George Washington University’s Cold War Group of the Elliott School of International Affairs reveal that agreement on Taiwan was absolutely necessary for diplomatic normalization. Indeed, nearly 9 pages of the 46-page record of the First Zhou-Kissinger meeting on July 9, 1971 show that Kissinger disavowed Taiwanese independence and committed to withdraw two-thirds of U.S. military forces from the island once the Vietnam War ended. However, Nixon’s resignation and Ford’s political weakness precluded conclusion of the normalization process. Chairman Mao also was interested in a rapprochement with the U.S. for the very same reason Nixon was –a counter to China’s dangerous confrontation with the Soviets. Near the end of Nixon’s trip to China February 21-28, 1972, the two governments issued what is known as the Shanghai Communiqué. In it the United States declared that it “acknowledges that all Chinese on either side of the Taiwan Strait maintain that there is but one China and that Taiwan is a part of China.” Furthermore, Nixon stated that the United States did not support Taiwanese independence.

Trade between the two countries started to grow in earnest after 2000, when Congress voted to grant China “permanent normal trade relations,” which paved the way for China’s accession to the World Trade Organization in 2001. Since then the Chinese economy has grown exponentially. Now it’s the world’s second largest economy, by some estimates on track to overtake the U.S. by 2030 or earlier.

A Questionable Strategy
The Trump Administration’s strategy was geared to create conditions to slow down, halt, and (hopefully) reverse China’s economic growth. It erected tariffs, ousted prominent Chinese high-tech firms from the American market, and delivered de facto ultimatums to other countries telling them, in no uncertain terms, to do the same. Now the Biden Administration seems to be following the script. So far these efforts have been unsuccessful. The International Monetary Fund (IMF) estimates China’s economy will grow by 8.2% in 2021 and the U.S. by 3.1%, and in 2020 our trade deficit actually rose 17.7 % to $679 billion, highest since 2008. As for America’s efforts to persuade other countries to –in effect- boycott China, there are at least three fundamental reasons why this too is likely to be, to say the least, difficult. Firstly, China is already the number one or number two trading partner with most of the world, including NATO members (it recently became France’s largest customer of cosmetics, surpassing Germany and the U.S.). Secondly, embargoes and tariffs are only going to encourage China even more to redouble its efforts to become self-sufficient in high tech and other critical fields, increase domestic consumption to reduce the role of exports as its primary engine of growth, and open its economy further to attract even more foreign investors eager to sell to its vast pool of increasingly wealthy consumers. Thirdly, and more ominously, President Xi made it clear that while he hopes to reunify Taiwan with China peacefully and even outlined a five-point proposal to do so, he also stated that “we make no promise to renounce the use of force and reserve the option of taking all necessary means.” Accordingly, they have engaged us in an arms race that, given the size of our existing debt and the uncontestable need for long-term massive investment here at home, is simply unsustainable. This begs the question, if this strategy of confrontation fails to deliver, is there a peaceful Plan B waiting to replace it?

Sobering Facts
Higher Education
The United States is trying to preserve the dwindling technological advantage it enjoyed since the end of World War II, but it doesn’t bode well. There’s a high-tech STEM (science, technology, engineering and mathematics) crisis: foreign-born non-citizens currently account for 81% of electrical engineering majors and graduate students in the U.S.; and in computer science –critical for innovation and research in fields such as cyber and artificial intelligence, American-born students make up just 21% of the student body. Furthermore, this is not an aberration. According to the World Economic Forum, in 2016 China had at least 4.7 million native-born recent STEM graduates, followed by India with 2.6 million. In contrast, the U.S. only had 568,000, and of those, half were foreign-born. In addition, although China’s total population is four times larger than the U.S., it has eight times as many native-born STEM graduates. Other estimates see Chinese graduates aged 25 to 34 rising 300 percent by 2030 compared to just 30 percent in the U.S. and Europe. The numbers speak for themselves.

Student Debt
According to the College Board, over the past 30 years the average cost to attend a public four-year institution has more than tripled, and at private four-year schools it more than doubled. This documented trend far outpaced the incomes of the lower and middle-classes. As a result –according to the Federal Reserve Bank of New York- about 54% of all American students take out loans to pay for college. Their average debt topped $37,500 in 2020, and collectively they now owe $1.6 trillion. Based on the current rate of growth, by some estimates student loan debt will reach $2 trillion by 2024. For students, paying off student loans as soon as possible after graduation is a fundamental priority. Unlike mortgages, which can be extinguished in foreclosure, and credit card loans, which are dischargeable in bankruptcy, student loans are not. Students that are unable to pay the loans back for any reason are haunted by collectors for life and their credit scores depressed. This state of affairs strongly encourages youngsters to choose careers with the highest possible rates of compensation, and STEM-related are not at the top of the list. Employment in them is limited and neither guaranteed nor widespread, and more lucrative options are widely available. That is detrimental to the national interest. It all but ensures that in just a few years we’ll find ourselves lagging further and further behind China and India, a prescription for irrelevance.

Military Aspects
According to the U.S. Department of Defense’s 2020 Annual Report to Congress about military and security developments in China, the latter is for practical purposes mobilizing “all relevant aspects of its society and economy for use in competition and war.” The report further warns that “China has already achieved parity with –or even exceeded- the United States in several military modernization areas, including (a) shipbuilding (it already has the largest navy in the world, currently with 350 ships and submarines including over 130 major surface combatants; in comparison, the U.S. Navy’s total battle force is approximately 293 ships as of early 2020. In addition, China is the top ship-building nation in the world by tonnage and is increasing both its production capacity and capability for all naval classes); (b) land-based conventional ballistic and cruise missiles, and (c) integrated air defense systems. On June 2, 2012, at the Shangri-La Dialogue in Singapore, then Secretary of Defense Leon Panetta disclosed that “by 2020 the Navy will redeploy its forces from today’s roughly 50/50 percent split between the Pacific and the Atlantic to about a 60/40 split between those oceans.” If Secretary Panetta’s ratio still applies as of this writing, the U.S. has approximately 176 ships in the Pacific. That amounts to just 50% of China’s current (and growing) fleet, deployed mostly near its protective home-based missile umbrella. In view of these facts and given the rate of Chinese shipbuilding is it reasonable to expect that the U.S. Navy will be able to overpower its Chinese counterpart 10,000 miles away just a few years from now?

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Innovative Thinking is in Order
Presidents Eisenhower, Kennedy and Reagan as well as the Bulletin of Concerned Scientists have repeatedly warned us about the consequences of nuclear war. Clearly it’s not lack of awareness but that they lacked –and lack- the power to abolish them. One wonders, who does, and might fear of a new world order beyond their control be behind this?

When Winston Churchill replaced coal with oil for the Royal Navy he also transformed it into a strategic commodity. Ever since then direct or indirect control of the world’s deposits has been a bone of contention among the industrialized powers. When the U.S. embargoed Japan’s oil supplies, the latter, in desperation, attacked Pearl Harbor to destroy the American Fleet which they perceived as a threat, and invaded the (then) Dutch East Indies to get the oil it needed to run its economy. Similarly, Hitler, blockaded by the Royal Navy (with U.S. help), and afraid of a possible future Soviet embargo of indispensable raw materials, including oil, attacked the latter. We all know the result, no point in counting the dead. There are two things we as a species must learn from this –if we want to survive. The first is that the devastation of World War II would be nothing more than a dress rehearsal if it were to be repeated with today’s (and future) weapons. The second is that the bone of contention must be replaced with a non-polluting, universally and easily available energy carrier that cannot be controlled or hoarded by any one nation or group of nations: hydrogen. More explicitly, we must trade all fossil fuels, including oil and the wealth derived from them, for survival. It’s as simple as that. The technology to do so exists, and climate change is firmly and relentlessly nudging us in that direction. We just need to heed.