American Leadership in Foreign Policy

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I was recently asked by a Twitter follower an interesting question: “Do you think an America first agenda and American leadership can coexist ? After trump I’m concerned the public sentiment would be retreating from the globe while China is taking over.”

Let me rephrase and add to this question as a foundation before launching into a more direct answer of this specific question. What are key commonalities or differences of US foreign policy across and between administrations about how American influence is exercised abroad specifically with regards to China? One of the least discussed but most important issues is how different administrations view the role of the United States in global leadership and how power or influence is exercised.

Starting this century, the Bush administration arrived in office with actually a some degree of commonality to the current Biden administration view of some countries. The Bush administration believed that the US had coddled dictators, friend and foe alike, for too long and achieved nothing in advancing US values or interests in various regions around the world. Consequently, they approached many foreign policy issues from the perspective of how to advance liberal values. American values and influence was a good thing and having more democratic countries around the world was good for US and global foreign policy. Advancing those values was a good exercise of US foreign policy influence and power.

Two specific things to note here. First, intellectually this was a relative period during which ideas like the end of history and democratic peace theory was ascendent. Policy makers and professors alike believed that in ideas like establishing democracy in previously autocratic states. Second, the late Clinton administration and much of the Bush administration shared a belief that China could be persuaded to join a responsible community of nations and that maybe it was excessively optimistic to hope for a full fledged democratic transition but it was at least reasonable to expect that Beijing would become a kindler gentler communist.

The Iraqi War changed everything. For our purposes, it resulted in two specific changes with regards to the broader focus of foreign policy. First, it resulted in enormous increased reluctance to exercise American influence in foreign policy whether bilaterally or otherwise, not least because there was heightened cynicism about the goodness of US values or policy. Second, this reluctance manifested itself in much less willingness to push democracy or punish autocrats whether friend or foe. Put another way, the US became much less willing to push to advance US interests and values in foreign policy and due to the perceived risk of instability became much more willing to accept authoritarians.

After the Bush administration the Obama administration viewed weight of US influence and power as something almost not to be used. In many ways, the Obama administration viewed American influence as nearly problematic as the problems they might have viewed. To borrow from some of the most widely cited Obama sayings, the US would lead from behind. Consequently, the Obama administration frequently acknowledged the existence problems in most cases internationally but invested little in trying to solve the problems. This manifestation of foreign policy stems fundamentally from the belief that American influence is not necessarily a good thing and should not be pushed along with a willingness to accept the stability of authoritarians more.

The Trump administration entered with what most people refuse to acknowledge: a striking degree of similarity in what problems they acknowledged compared to the Obama administration. While most people focus on events like withdrawing from the Paris Accords, in reality, there was significant agreement on many major issues across the Obama and Trump administrations. Where the disagreement rested is in more fundamental issues such as potential solutions and specifically the use of US influence and power. The Trump administration was much more willing to impose costs, on itself or others, or segment benefits to preferred parties based upon policies or behavior. The cited reasons for the withdrawal from the Paris Accords is that the costs imposed did not come close to the benefits either broadly across the globe or individually for the United States. This resulted in US withdrawing from treaties or cooperating less with other countries.

This led to an odd similarity between the Obama and Trump administrations. Both the Obama and Trump administrations were both pulling back America from global leadership. Now each did so for different reasons but it had a very similar manifestation. Obama pulled the US back from global leadership because he did not believe American influence was necessarily positive and the risk from involvement and change were significant. The Trump administration pulled the US back from global leadership because America was bearing to much of the burden largely alone and was not able to advance US values and interests within the current frameworks. While there are different underlying motivations, the general pull back from actively seeking to advance US values and policy across administrations was largely consistent.

This leads to a unique question as we anticipate the behavior of the Biden administration: how do we understand and by extension the Biden administration view American influence and power and its use in the exercise of foreign policy?

A major challenge in considering the exercise of influence and power in foreign policy is how to impose costs or allocate benefits and how to segment those costs and benefits. Put within a game theory framework, one way to approach this is a simple game theory model. Effectively every country in Europe has an incentive to “defect”, not spend on defense, in contributing to the NATO security targets. The United States is unlikely to back out of NATO because if Austria falls short of its defense spending. However, Austria (to pick a country at random) will continue to benefit from the US security guarantee. From a US perspective, absent the ability to impose costs or allocate benefits and segment those to parties that cooperate, there is little that can be done to incentivize cooperative behavior.

What we have seen so far in public statements is generally agreement between the Trump and Biden administrations over major foreign policy issues and specifically China. Statements have even been to the effect by Biden administration that they agree with Trump on the problems but disagree with the approach. This returns us to the thorny issue of how to induce change with an Obama administration approach on the exercise of US influence and power. Put another way, how can the United States persuade allies to address what it prioritizes as foreign policy problems absent the ability to impose costs, allocate benefits, and incentivize changes in behavior?

To make the circle complete and return to a modified version of the original question, how can the United States demonstrate leadership without resorting to harder edged isolationism while recognizing the challenges of potential free riding by countries that fail to cooperate?

A fundamental dividing line for me over how to approach the current foreign policy landscape is the willingness to impose costs, either domestically or on partners, and or channel benefits to preferred parties. I think there are lots of valid debates over whether to utilize cost imposition policy A or cost imposition policy B and the accompanying distributional consequence of who will benefit or bear the costs of choosing between A and B, but that is a very different debate than whether we should impose a cost based upon bad behavior.

This leads into how I would advise to approach the exercise of US leadership specifically within foreign policy and approach to challenging China.

First, the United States has to be willing to be the leader in accepting significant new costs and channeling benefits to preferred partners. If modern foreign policy has demonstrated anything it is that China will not alter its behavior based upon persuasive opeds from DC think tanks or economics lessons from US trade reps. Nor will Germany change behavior based upon detailed policy papers from DC think tanks or security presentations from Pentagon officials. Unfortunately, even the US think tanks and politicians radically under estimate conceptually the mercenary nature of global foreign policy and the costs the US must be willing to accept across a range of policy domains.

Let me give just a few examples or ideas of how the US should be willing to accept costs or channel benefits to achieve certain ends. If the United States wants to prioritize sourcing technology from non-Chinese sources from components to manufacturing, it should consider financial incentives (in a variety of ways) to shift electronics and technology manufacturing for US consumption out of China. This may come from reduced tariffs to preferred countries to expanded write offs or tax credits for costs involved with shifting manufacturing. Fundamentally this means helping ally countries whether it the countries with large multinational brand names like South Korea and their range of consumer goods companies to manufacturing hubs like Vietnam and Malaysia. This would extend to a variety of additional areas that could encompass areas like clean tech standards with auditing offices and cooperative agreements in foreign countries similar to how agriculture is currently inspected.

As I have said repeatedly, maybe my biggest critique of the Trump administration foreign policy is not that they went right after many of these issues but that they did not go big enough. The US can make excellent and persuasive arguments with impeccable evidence however absent resources and assets to change behavior, countries and firms will be reluctant to change their behavior. The United States must bring greater resources and assets to bear challenging China or as Evan Feigenbaum has called it the US must compete more.

Second, the United States must be willing to incentivize changes in behavior by imposing costs on countries or firms who do not cooperate and channel benefits to countries or firms who do. This should not be seen or approached as a blank check for countries to free ride or cheat. A word frequently used for this is “conditionality”. The United States should reward countries that cooperate with it to meet certain objectives either for that country, the United States, or jointly.

To take the example of Germany and Europe. Given the lengthy history of German and European refusal to increase defense spending, US should consider reducing security assets in Europe and shifting them to Asia given the relative threat level. Ongoing German and European refusal to consider China a security threat and change behavior, the US should make some cost imposition or benefit allocation conditional upon changes in behavior. The US should not be providing a broad security benefits while being undermined by allies. Put another way, all countries are free to choose the path they wish to pursue or countries they wish to align themselves with but that does not mean they are entitled to all the benefits without any costs, whether direct or behavioral, required of such a policy.

So to complete the circle and answer the question most directly, this requires the United States to build up other countries in partnerships where we can also achieve our own objectives. The United States is leading best when we are bearing costs and getting others to contribute and or cooperate to achieve certain ends. This means leading by example and being the first to bear costs, but it also means ensuring others bear part of the burden and are not free riding, cheating, or undermining our objectives. This means leading first with soft power and soft assets.

Part of the reason this idea fell out of favor was the failure of the Iraqi War to engage in nation building but we must engage in a variant of this to achieve specific objectives and broader aims. If we want to shift technological manufacturing out of China, this means assisting in infrastructure in countries that may experience significant growth in demand for key infrastructure. Countries in Asia and elsewhere seeking greater US involvement will feel much better if the US is bring resources to bear and helping them benefit from a shift out of China than just being lectured on the evils of CCP authoritarianism.

The Marshall Plan worked because it reshaped Europe and provided mutually beneficial framework from which to rebuild countries and challenge the Soviet Union. If China is an enormously larger challenge, we need to bring resources to bear to his challenge and be prepared to channel benefits to countries that cooperate and impose costs on non-cooperators.

I have written extensively about these general ideas and in more very policy specific ways. Here are a couple of links to pieces about these issues:

5G funding for countries willing to block Huawei and or Chinese network providers

A Green New Deal for Emerging Markets

A New Foreign Policy Framework for the United States Part I

A New Foreign Policy Framework for the United States Part II

Revisiting Huawei

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It has been brought to my attention that some Chinese academic has written a paper attempting to refute the paper Donald Clarke and I wrote about Huawei ownership which is now being promoted by Chinese state media affiliates. I have neither the time nor inclination to respond in detail to such a self contradictory illogical factually devoid piece of work but I will lay out merely a couple of problems.

First, the author does not criticize our findings of fact or provide evidence that the facts presented in our paper are incorrect, false, or misleading. It is important to stress that I am referring here to finding of facts. For instance, we are both in agreement that the party of record owning 99% of Huawei at the holding company level is the employee union. I would have to spend a lot more time to catalogue all these issues so I am not ruling out any factual disagreements, however, on the statements of fact there is minimal disagreement given they are easily documented. The author does disagree on the interpretation of said facts.

Second, the paper is effectively a dressed up version of “foreigners do not understand China” relying on interesting interpretations agreed upon facts, such as the employee union owning Huawei, to arrive at desired conclusions. The author even states as much arguing the legal statement of facts that can be confirmed by corporate records do conform to the “normative” practices. This is very debatable but leave it aside for the moment, this is effectively stating that while the legal records confirm our analysis it is different in reality. Let us go over some of the specifically egregious examples of unique interpretations:

The author does not disagree that the trade union committee owns the 99% share of Huawei but also argues that the trade union committee does not have assets in this case the ownership stake of Huawei. This is a logical and legal contradiction. A legal entity, in this case the trade union committee, cannot both be the legal owner of record of a 99% of a major tech company, in this case Huawei, and simultaneously have no assets. The legal owner of a company by accounting, legal, and logical definition owns an asset, its ownership stake in a company. The value of that asset may be debated but the owner cannot own both own the company and not own the asset in this case the company.

To reconcile this self contradictory position that the union both owns the company but does not own the asset, the author argues that the actual asset is held basically as a type beneficial owner on behalf of the employees. To support the argument, the author cites a Supreme People’s Court opinion that nominal shareholders are not necessarily the real shareholders even if the shares are held in their name. However, the this is second best evidence when first best evidence exists and the author conveniently ignores. Both Huawei and Chinese courts have argued and ruled against employee arguments these are actual ownership shares. Huawei calls them “virtual” shares and Chinese courts have regularly ruled that the employee does not actually own shares either in the trade union committee or in Huawei.

It is important take a second to briefly address a semi-complex point here about ownership. The first question is what specifically is owned? The author argues that because employees put money at risk and return will vary based upon the performance of the company this means they own Huawei. This is factually wrong. There are large numbers of financial products that would meet the description provided by the author that do not provide actual ownership of the underlying company. For instance, investors in Alibaba listed shares on the NYSE do not actually own a share of Alibaba. However, according to the authors definition of equity ownership the NYSE owners would be owners. Take another similar example of securitized products. An entity may put financial capital at risk and provide input about the management of the underlying asset but they do not own the underlying asset they own cash flow rights to the underlying asset NOT the underlying asset. It cannot be stressed enough that having characteristics similar or just like in most ways like ownership does not mean legal ownership.

To briefly expand on this point there is a multilayer relationship here. The trade union committee legally owns the Huawei stake and by pass through the author argues the employees own Huawei. However, this is legally and factually incorrect. Take a two simple comparisons like a direct share fund or mutual ownership. If 10 people pool financial resources to buy a company they form a holding company and each individual holds a share in that holding company equal to their share of the underlying company. In the case of a mutual fund, individuals pool money and the mutual fund buys shares on their behalf. The individuals own shares of the fund that own the shares. In this case however, the employees do not own or have a legal claim upon Chinese trade unions. By law and legal registration, the trade union committee does not have any shareholders. The trade union committee has no debt obligation to the employees so there is no equity or debt obligation to employees. In other words, the employees do not own the company or fund that owns the shares. Put another way, the employees do not have a legal claim upon the entity that holds the Huawei stake.

Stripped down to its core, the author is arguing that while the legal facts are relatively undisputed such as who is the owner of record, what our work fails to understand are the norms and practices of China that foreigners simply do not understand despite what the corporate records, Chinese court decisions, and black letter law state.

If the author wishes to pursue this normative practice debate we are perfectly willing to consider this. As a matter a normative practice, it makes absolutely no difference who legally owns the company everything in China is controlled by the CCP. I believe that should settle that dispute

Approaching the China Challenge and Judging the Biden Administration

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As we prepare to turn over a new leaf with the incoming Biden administration, let us revisit what I believe is the correct way to approach the China challenge and by extension how we should judge the incoming Biden administration China policy.

I start my China policy framework not from some deep knowledge of China but rather some simple game theory insights which direct how to proceed.

First, we have effectively no strong evidence China keeps any agreement. Long before the Trump administration, this was a widely noted state of the world and this only became more true. This informs how we should proceed when viewing agreements with China.

Second, there is no evidence that engagement, change through trade, or persuasion work on China and this insight has only become stronger over the past few years. China has shown less willingness to respond to external cost imposition methods pushing policy change but even less so to persuasive methods. Any strategy that relies heavily on this is problematic.

I have written in more detail about this framework to approaching China in April 2018. It is not that trade restrictions are positive but we cannot continue to tolerate bad behavior and not impose costs especially as persuasion or engagement has proven a failure. The fundamental question for any administration is whether they are willing to impose and bear the costs necessary to challenge China?

These two key points lead to a clear implication about how to approach China policy: if we know that China is a malign actor engaging in deeply problematic behavior who does not abide by agreements and regularly breaks rules even outside of specific narrow agreements that does not respond to persuasion, the fundamental approach must be to continually raise the costs of bad behavior.

Personally, I am more focused on getting the directionality of policy right than some of the more technical policy debates. For instance, imposing costs on China for bad behavior will typically in some way impose costs on US interests maybe in lower trade or foregone opportunities. That is a distributional issue in as much as we debate which segment of society bears the cost. I believe generally speaking getting the directionality of deciding to impose the cost is more important than getting lost in which segment bears the cost and potentially not imposing any cost to behavior.

As I argued in the spring of 2018, it is not that imposing tariffs is an optimal strategy but rather that given the framework of expecting China to “cheat” in game theory terms, this provided the US a dominant strategy of how to respond. The US needed to impose costs to create incentives for China to engage in better behavior. This is why it is reasonable to say the US position is correct with regards to China but incorrect with regards to other partners who have distinctly different and better track records with regards to general and specific behavior.

If we look backwards into the Trump administration, there are definitely valid debates about the distributional issues of specific policies, but when looking at the directionality there is a clear pattern. The Trump administration took a very deliberate approach of signaling to China the coming imposition of costs if behavior did not change then imposing costs when China did not negotiate an agreement or change behavior. Despite a common belief that it was merely trade war tariffs, we see shifts in policy and cost imposition for bad behavior across a wide range of policy domains. Human rights, trade, technology, security both traditional and non-traditional we see a variety of policies designed to raise costs for Chinese behavior.

This sets out a potential path both for the Biden administration and a method by which to judge their China policy. First, China policy must be based in tangible policy actions to challenge China and raise the costs of bad behavior and failure to adhere to agreements or act in accordance with accepted rules, laws, or norms. As with the Trump administration I will personally care more about the directionality than the specific distributional effects of cost imposition though I know others will care enormously about distributional impacts. However, fundamentally this requires the Biden administration to both act not just negotiate or pressure but also impose policies that raise costs on bad Chinese behavior.

Second, this will require significant new investments or spending and changing some external distribution issues. For instance, unless the United States wants to significantly increase total military spending to work more with allies in the Indo Pacific, it could reduce the overall security commitment to Europe. Take another example, could tax or other incentives financial incentives be used to reduce dependency on Chinese tech supply chains that could be shifted to friendlier countries. In other words, to engage in action there are tradeoffs that must be considered about how assets are to be utilized and deployed.

One of my primary critiques of the Trump administration is not that they went too far but that they did not go far enough or think big enough in how to challenge China. Given the difficulty of refocusing the entire US government and securing a shift in spending and relocation in external priorities, I am willing to be a little forgiving on this point but it gives the Biden administration an opportunity to follow through on its promises about China.

The Center for New American Security (CNAS) with the leadership of two key Biden administration appointees in January 2020 wrote a key document for the US government on how to respond to and challenge China. As with the Trump administration, my primary complaint is that the document does not go far enough in rising to the challenge of taking on China.

I believe there is an intellectual error and a strategic mistake being made here. First, an intellectual fallacy has taken hold that the United States will only be able to challenge China after managing internal strife. In reality, throughout the Cold War with the USSR, the United States rose to meet a variety of domestic and international challenges. Just as China will not wait for us to manage our domestic problems, we have no need to wait and can rise to meet both. A variant of this is that we need to invest in things like domestic infrastructure before challenging China. While domestic spending projects should be considered on their own merits, they do not in anyway challenge China and should not be used for that purpose. China will not become a democracy because the United States has high speed rail. If high speed rail is an efficient and quality public expenditure, it should be considered on those merits not to challenge China.

Second, the United States need to bring resources and assets to bear with allies to persuade them to challenge China. The reality is states are mercenary and financially motivated. The United States can make a perfectly rational argument and share intelligence on why Huawei should not be allowed in another countries telecom network but when China is offering effectively a free 5G network for using Huawei, doing the right thing automatically has a very tangible price. This is even more pertinent when dealing with lesser developed countries in places like Asia, Africa, and Latin America.

I have written about two specific programs that for multiple reasons are good use of US tax dollars to invest. First, given the amount annually that will be invested around the world, excluding China, to build 5G networks, the US could easily fund a low or concessionary lending program for countries that exclude Huawei or other Chinese providers from their network. This would only require a few billion dollars a year in capital commitment to an institution like the Development Finance Corporation. Another example is as China funds vast amounts of coal power around the world, the United States could provide low cost funding alternatives for emerging markets that are more environmentally responsible. Given forecast electricity growth in rapidly growing markets that are natural allies against China like India and Vietnam, there is massive scope to hit progressive priorities, bring American resources to bear in working with countries and building alliances, while challenging China.

I will judge the Biden administration on two specific factors with regards to China policy: their actions, not their words and the costs they impose or bear. The Obama administration pivoted to Asia and did nothing but appease.

I sincerely hope the Biden administration continues the work of challenge China and implements a range of policies across domains to raise the costs of bad behavior. We will see.

Report on Biden Activities with China

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A number of months ago, I was approached by an individual I had known for the better half of a decade. I had known this individually professionally and enjoyed their company and deep insight into our overlapping professional interests. Consequently, I would not infrequently seek out their professional opinion. They had written a research report for a client worried about political risk that involved background on the Biden’s in China. This individual believed that the information that had been discovered, and with the approval of the client, needed to make its way into the public domain.

They asked my help in putting the research report in the hands of press asking them just to use the information for their own professional purposes leaving the report anonymous. Knowing this individual and the quality of work they do, I agreed after reviewing in detail the report that was produced. There are a couple of key points about the report.

First, it is almost exclusively taken from public sources and documentation. Everything from Chinese news reports to corporate records. The report is immaculately cited so that anyone who wishes to replicate where a specific piece of information was found or see the underlying documentation can do so.

Second, the complexity of the overall story, attempts have been made to break down the key points about what happened, who was involved, with timelines and indexes.

Third, only three human sources are used in the report. Two human sources only confirmed top line information in the acknowledgement of an individual and no other information. The third human source was not consulted for the story but agreed to let the information be used for the story after the importance of the information became apparent.

For two months I have worked on behalf of my colleague to ensure that this report helped others report on the documented evidence of Biden activities with regards to China. I want to emphasize a couple of things about my own involvement.

First, I did not write the report and I am not responsible for the report. I have gone over the report with a fine tooth comb and can find nothing factually wrong with the report. Everything is cited and documented. Arguably the only weakness is that we do not have internal emails between Chinese players or the Chinese and Bidens that would make explicit what the links clearly imply.

Second, I will not be disclosing the individual who did write this report. They have very valid reasons to fear for both their personal safety and professional risks. Throughout the years that I have known this individual we never discussed politics. I have never heard them criticize any political party other than the CCP. They are not a Republican.

Third, it was my very real wish that the press would have reported on the documented evidence in this report and left me and the author entirely out of this situation. I did not vote for Trump in 2016 and will not vote for him in 2020. This information however is entirely valid public interest information that the press has simply refused to cover due to their own partisan wishes. I have serious policy differences with President Trump. I am pro-immigration. I would like to see more free trade efforts to shift trade away from China and into partner countries from Mexico to Vietnam and India. I believe that institution building in Asia is vital and America needs to take that lead. However, I cannot in good conscience allow documented evidence of the variety presented here go unreported by partisans who are simply choosing to hide information.

Finally, I will not be answering any questions about the report. I had no wish to be involved in Presidential politics. I do not want to be on the news. I will not be answer any questions about who wrote the report. We need to return the focus to the known documented facts.

 

Key Points of the Report:

  1. Joe Biden’s compromising partnership with the Communist Party of China runs via Yang Jiechi (CPC’s Central Foreign Affairs Commission). YANG met frequently with BIDEN during his tenure at the Chinese embassy in Washington.
  2. Hunter Biden’s 2013 Bohai Harvest Rosemont investment partnership was set-up by Ministry of Foreign Affairs institutions who are tasked with garnering influence with foreign leaders during YANG’s tenure as Foreign Minister.
  3. HUNTER has a direct line to the Politburo, according to SOURCE A, a senior finance professional in China.
  4. Michael Lin, a Taiwanese national now detained in China, brokered the BHR partnership and partners with MOFA foreign influence organizations.
  5. LIN is a POI for his work on behalf of China, as confirmed by SOURCE B and SOURCE C (at two separate national intelligence agencies).
  6. BHR is a state managed operation. Leading shareholder in BHR is a Bank of China which lists BHR as a subsidiary and BHR’s partners are SOEs that funnel revenue/assets to BHR.
  7. HUNTER continues to hold 10% in BHR. He visited China in 2010 and met with major Chinese government financial companies that would later back BHR.
  8. HUNTER’s BHR stake (purchased for $400,000) is now likely be worth approx. $50 million (fees and capital appreciation based on BHR’s $6.5 billion AUM as stated by Michael Lin).
  9. HUNTER also did business with Chinese tycoons linked with the Chinese military and against the interests of US national security.
  10. BIDEN’s foreign policy stance towards China (formerly hawkish), turned positive despite China’s country’s rising geopolitical assertiveness.

 

Summary:

Lost among the salacious revelations about laptop provenance is the more mundane reality of influence and money of major United States political figures. Ill informed accusations of Russian hacking and disinformation face the documented reality of a major Chinese state financial partnership with the children of major political figures. A report by an Asian research firm raises worrying questions about the financial links between China and Hunter Biden.

Beginning just before Joe Bidens ascendancy to the Vice Presidency, Hunter Biden was travelling to Beijing meeting with Chinese financial institutions and political figures would ultimately become his investors. Finalized in 2013, the investment partnership included money from the Chinese government, social security, and major state-owned banks a veritable who’s who of Chinese state finance.

It is not simply the state money that should cause concern but the structures and deals that took place. Most investment in specific projects came from state owned entities and flowed into state backed projects or enterprises. Even the deals speak to the worst of cronyism. The Hunter Biden investment firm share of a copper mine in the Congo was guaranteed with assets put at risk by the larger copper company to ensure deal flow to Hunter’s firm.

In another instance, Bank of China working on an IPO in Hong Kong gave its share allocation to the BHR investment partnership. They were able to do this because even though the Hunter Biden firm completed no notable work on the IPO, it is counted as a subsidiary of the Bank of China. The Hunter Biden Chinese investment partnership is literally invested in by the Chinese state and a subsidiary of the Bank of China owned by the Chinese Ministry of Finance.

The entire arrangement speaks to Chinese state interests. Meetings were held at locations that in China speak to the welcoming of foreign dignitaries or state to state relations. The Chinese organizations surrounding Hunter Biden are known intelligence and influence operatives to the United States government. The innocuous names like Chinese People’s Institute for Foreign Affairs exist to “…carry out government-directed policies and cooperative initiatives with influential foreigners without being perceived as a formal part of the Chinese government.”

Interestingly the CPIFA is under the Chinese Ministry of Foreign Affairs. When the investment partnership was struck in 2013, the Minister of Foreign Affairs was Yang Jiechi. Yang would have been very familiar with Hunter Biden from his days in Washington as the Chinese Ambassador to the United States from 2001 to 2005 during which he met regularly with Joe Biden chairing the Senate Foreign Relations Committee. Today the same individual who oversaw institutions helping shepherd Hunter’s investment partnership as the Minister of Foreign Affairs is Xi Jinping’s right hand man on foreign affairs and member of the powerful Politburo.

Most worrying is the financial leverage this gives the Chinese state over a direct member of the Biden family. Despite the widely reported $1-1.5 billion of investment the reality is likely much higher. A co-founder of the investment firm reports the total assets under management as $6.5 billion. While this number cannot be completely replicated, given that two deal alone were worth in excess of $1.6 billion this number is not unrealistic at all. A 2% annual fee on assets under management would generate $130 million annually. Add in the 20% fee on capital gains the firm would recognize and it is not difficult to see Hunter’s stake being worth in excess of $50 million.

According to Hunter’s attorney, he did not invest his $400,000 in the company until 2017. Even assuming the veracity of this statement, this raises a major problem. Founded in 2013, the firm had large amounts of revenue and assets under management by 2017. In other words, his $400,000 stake would have already been worth far more than what he paid for it. This paltry $400,000 investment worth more than $50 million now would have realized a gain of more than 12,400% in three years.

The difficulty in eluding these concerns is their documentability by anyone who cares to look. There is no potential for hacking because it is all public record in China. Any journalist who wishes to look can go review IPO prospectuses, news reports, or corporate records. There is no secret method for discovering this data other than actually looking. There is simply no way to avoid the reality that Hunter Biden was granted a 10% stake worth far in excess of what he paid for a firm that is literally operated and owned by the Chinese state.

I did not vote for Donald Trump in 2016 and have significant concerns about his policies in areas like immigration. Having lived in China for nine years throughout the Xi regimes construction of concentration camps and having witnessed first hand their use of influence and intelligence operations, the Biden links worry me profoundly.

Whether Joe Biden personally knew the details, a very untenable position, it is simply political malpractice to not be aware of the details of these financial arrangements. These documentable financial links simply cannot be wished away.

 

Here is the report if you missed the previous links

Personal Statement on Shenzhen Zhenhua Data Leak

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Last year I began research into Huawei, simply because I thought I was well placed to figure out some basics I had heard people talk about but remained open questions. I never guessed the relatively abrupt turn my research focus would take due to stumbling into what, for China researchers, is something akin to discovering the Holy Grail.

Out of this initial research question, a series of events and introductions took place that unveiled enormous amounts of data collected by activists from China. This data provides proof of activities that China was believed to engage in, but for the first-time, data confirmed these activities.

Our team has an enormous amount of work provided to us that we are working through and intend to publicize about the authoritarian threat that is China under Chinese Communist Party rule. Reviewing the raw data, even Chinese “experts” continue to radically underestimate the investment in monitoring and surveillance tools dedicated to controlling and influencing, not just its domestic citizens and institutions, but assets outside of China.

We are working with governments, journalists, and select academics or think tanks around the world to help provide the necessary range of expertise needed to analyze and understand the data. What cannot be underestimated is the breadth and depth of the Chinese surveillance state and its extension around the world. The world is only at the beginning stages of understand how much China invests in intelligence and influence operations using the type of raw data we have to understand their targets.

A project of this size would not be possible without multiple people. The first thanks goes to Rob Potter and his entire team at Internet 2.0. They brought significant technical expertise to the data across a range of areas. From working through how databases were constructed, to how governments use this data, their work has been vital to realizing this project.

The individual who provided the Shenzhen Zhenhua database by putting themselves at risk to get this data out has done an enormous service and is proof that many inside China are concerned about CCP authoritarianism and surveillance.

The journalists who worked so hard on this story to understand the data, its intended use, the company, and the technical tools behind the database deserve enormous praise. This was a difficult and complex story, but their commitment to working collaboratively and in good faith as a team and with us to understand and fact check everything represent the standard journalism strives for.

Finally, there are many people who contributed in big and small ways that deserve recognition, but for various reasons wish to remain or need to remain anonymous. Their contribution was instrumental in bringing this project forward and for their work I am deeply grateful for seeing the vision.

I am motivated by the concern that the scope of the authoritarian threat from Communist China remains poorly understood, by even many China experts. The depth and capabilities of their desire to engineer the soul, as John Garnaut so eloquently put it, must be acknowledged. They have and are building the tools to accomplish these objectives. Hopefully, this provides some small evidence to their objectives and that we in open liberal democracies begin taking them seriously.

Statement on Shenzhen Zhenua Data Leak

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The People’s Republic of China under Party Chairman Xi Jinping presents an unprecedented challenge to open freedom loving rule of law states around the world. Constructing a techno-surveillance security state that gives the Communist Party powerful means to control citizens domestically. We now have evidence of how Chinese firms partner with state agencies to monitor individuals and institutions globally.

The database built by Shenzhen Zhenhua from a variety of sources is technically complex using very advanced language, targeting, and classification tools. Shenzhen Zhenhua claims to work with, and our research supports, Chinese intelligence, military, and security agencies use the open information environment we in open liberal democracies take for granted to target individuals and institutions. Our research broadly support their claims.

The information specifically targets influential individuals and institutions across a variety of industries. From politics to organized crime or technology and academia just to name a few, the database flows from sectors the Chinese state and linked enterprises are known to target.

The breadth of data is also staggering. It compiles information on everyone from key public individuals to low level individuals in an institution to better monitor and understand how to exert influence when needed.

Compiling public and non-public personal and institutional data, Shenzhen Zhenhua has likely broken numerous laws in foreign jurisdictions. Claiming to partner with state intelligence and security services in China, Shenzhen Zhenhua operates collection centers in foreign countries that should be considered for investigation in those jurisdictions.

Open liberal democracies must consider how best to deal with the very real threats presented by Chinese monitoring of foreign individuals and institutions outside established legal limits. Increased data protections and privacy limits should be considered.

The threat of surveillance and monitoring of foreign individuals by an authoritarian China is very real. Open liberal democratic states can no longer pretend these threats do not exist. Today’s database is compiled primarily from open sources, other databases China holds present much greater risks to Chinese and foreign citizens.

Is Trump Foreign Policy a Radical Departure from Historical US Foreign Policy?

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The short answer: absolutely not.

There is a profound inability to think rationally about policy pervading the Acela Corridor so that every decision means the end of democracy or some other vast rhetorical flourish implying rampaging Godzilla. The latest is the intellectually vacuous think tank crowd of DC debating such profound questions of whether US foreign policy can be repaired or how radical a departure Trump foreign policy represents. The absolute reality is that focused strictly on policy, leaving aside Tweets, Trump foreign policy is well within the historical boundaries of traditional US foreign policy.

Before I lay out the case for this, I want to define and limit some of what I mean or am going to do. First, I am not going to use Trump rhetorical flourishes whether in reported conversations, Tweets, or live mic. We are going to focus on the policies that are being carried out by the US government. Second, I am going to strictly limit (as much as I can) any judgement on whether the actions are right or wrong, but rather where there is policy continuity or breaks between the Trump administration and the Obama administration and even where possible previous administrations. Third, we are going to judge an action by whether it was either previously used by the US government or advocated by mainstream individuals or institutions from either party. The goal is here is not to determine a policies rightness or wrongness but whether this carries forward or breaks with existing policy and whether that break or continuity is considered a mainstream policy. Make sure to understand the limits and parameters of what we are setting out to do here. Finally, we won’t be able to hit every issue so I apologize in advance.

Russia: This one gets a lot of focus for obvious reasons (which I am going to mostly avoid) but the reality is one reviews the list of policy initiatives towards Russia, what we basically see is policy continuity between the Obama and Trump administrations. Trump administration policies on sanctions and other areas have been pretty consistently in line with the continued policy pressures escalating used by the Obama administration and have largely used similar tools and in similar magnitudes. Based strictly on the policy record, there is little evidence of any real break with recent Obama administration in the few years prior to Trump election. Furthermore, this is largely a return to more hawkish Russian policy of previous administrations and the later part of the Obama administration after the early Russian reset. While some may argue the Trump administration should be harder or that the public signaling has been problematic, both have some merit, the Trump administration is clearly in line with historical US and the last couple years of Obama policy.

Saudi Arabia: The Trump administration has received a lot of criticism for their Saudi policy, primarily due to their bone sawing of a prominent critic and Washington Post columnist. In reality again, their Saudi policy is clearly in line with historical US policy towards Saudi Arabia. Let me strongly emphasize this is no defense of Saudi Arabia or bone sawing critics. It is however the clear headed recognition of the history of US, and yes Obama administration, foreign policy alignment towards Saudi Arabia. While Obama may have expressed some unease about Saudi Arabia, he was a full fledged supporter of their war in Yemen (which we will get to in a minute in another case) and defended them regularly in different areas. This is not a critique of Obama as he was very much within the mainstream of how US foreign policy has treated Saudi Arabia over time, but it points to the intellectual bankruptcy of critics of Trump Saudi policy. Trump policy on Saudi Arabia is actually rather continuous of Obama and historical US foreign policy towards Saudi Arabia.

Europe: From NATO to trade to individual countries many have seen the actions of the Trump administration towards Europe as unprecedented and attacks on allies. In reality, I would argue it is, to use a simple distinction, neither broadly contiguous nor a full break but rather an escalation or expansion of previously existing thought and policies of previous administrations. Many of Trump policies on NATO and Germany, to take two simple examples, build upon existing policies and signaling of previous administrations from both parties dating back to the first Bush administration. The Obama administration (not blaming) removed US troops from Germany just as the Trump administration has done. Also forgotten are the relational difficulties the Obama administration had with key European leaders such as when Angela Merkel found out US intelligence had hacked her phone. This is not to blame Obama as this behavior likely would have occurred regardless but caused significant relational difficulties and has definitely tainted US German relations to this day specifically in light of the Huawei decision. It may be entirely fair to debate the delivery of policy expansions or key decisions, the timing in light of other events, but just as with other policy domains, what we see is mostly continuity with some definite expansion of policy thinking.

Iran: This is a rather unique case. Trump most definitely broke with Obama policy on Iran but, and this is very important, Obama policy was a significant break with historical US policy. Quite arguably, the Trump administration is merely returning US Iranian policy towards a historical norm. Importantly, neither Obama nor Trump should be considered outside the mainstream for either decision. It is not the intention of this exercise to litigate Obama or Trump’s decision but I will briefly note my personal opinion is that Obama set too low a bar to reach a deal which was likely to result in significant problems and the Trump administration likely set too low a bar in ending the deal. However, it is rather clear at this point that Iran was cheating on the deal barely after the ink was dry if they ever stopped violating it at all. What makes the Iran matter rather unique is its centrality to pretty much every problem in the Middle East from Yemen to Syria. This is a case where yes, the Trump administration clearly broke with the Obama administration but it was really Obama who moved the US away from historical US policy. Nor is Trump policy on Iran in anyway outside mainstream or remotely radical thinking on Iran.

Human rights and democracy: The issues are not as neatly linear as they are with a specific country policy, but the policy comparisons between Obama and Trump are interesting here. In global human rights, Obama’s record is at spotty at best. From Yemen to democracy protests in the Middle to Syria, the Obama record is weak at best. The Obama administration was decidedly better at rhetoric than the Trump administration but as a matter of policy, the Obama administration has significant problems. Leaving aside the rhetoric, the Trump administration record has been spotty but as a matter of policy no worse than the Obama administration and likely better. From Taiwan to Xinjiang and Hong Kong, the Trump administration has implemented a slew of policies to address these issues. However, there have been other areas where the Trump administration has been decidedly weaker. The Trump administration, just like the Obama administration, has largely chosen to stay out of Syria and continuing to follow Obama or general US historic policies in the Middle East. On democracy, Trump has strongly supported Hong Kong and Taiwan, however, has spoken minimally about Belarus and come under fire for not doing more on Venezuela. One can fault both Presidents for choosing to prioritize some democratic changes in foreign countries and not others but there is little to believe the Trump administration represents any clear break on from Obama or historical US policy. Fundamentally, both the Trump administration and the Obama, as well as previous administrations, pursued limited human rights agendas using sanctions or financial penalties as the primary channel with clear mistakes. One can fault Trump or Obama but it is difficult to see how anything in the Trump administration represents a clear break fundamentally or philosophically with historical policy. It may focus on different areas or utilize different calculus, but there is little to indicate a move outside historical policy trends.

International organizations: The record here could generally be classified as somewhat in line but expanding on previous thinking within the USG and mainline thinking somewhat similar to how I classified Europe. The Obama administration and historically true of recent administrations, say post Reagan, have demonstrated a growing ambivalence and wariness about many international institutions. They may do so for different reasons, but both political parties have grown increasingly distrustful of major international institutions. To take one example, despite the criticism of the Trump administration over WHO, Dr. Tedros was elected under the Obama administration as the preferred candidate of China. Now to the Obama administrations credit, they worked hard against Dr. Tedros seeing him as problematic. However, whether it is the WHO, WTO, UN Human Rights Council, many international institutions have fallen under increasing criticism from individuals of both parties and Democratic and Republic administrations have reasons to be very concerned about the failures and unreformability of these institutions. Trump can be considered an extension of historical policies in that many Republicans for a long time have complained, for a variety of reasons, about these institutions and Democrats have increasingly acknowledged their weaknesses even if preferring to try to continue to work with them.

China: The change in China policy might be classified just beneath the complete break I classify Iran as but distinctly beyond any mere policy extension. The Obama administration executed a broadly weak policy on China doing very little. They engaged regularly but have almost no tangible results that can be pointed to. They were entirely too trusting of China and rarely pushed back against China. The only reason I do not call this a complete break is some of the basics were there though little was done on them. US policy on companies like Huawei and ZTE has been long standing and bipartisan in both the Executive and Legislative branches. Though the Obama administration was entirely too trusting of Chinese promises over the South China Sea and did little when China revealed its building plans, they at least conducted occasional Freedom of Navigation operations though they were very restrictive. The Trump administration has expanded policy efforts in both of these areas. More broadly however, Trump policy is a clear break. From working to enforce laws pertaining to university transfer of data and foreign donations to increasing counter intelligence efforts imposing sanctions, there has been a very clear break with both historical and Obama China policy. One final area of note is tariffs. Obama actually imposed numerous tariffs on Chinese firms for things like dumping. Trump has significantly expanded on this policy but even this would not be considered the clear distinct break many consider it. Fundamentally, nor does anything Trump is doing represent radical breaks from pretty main stream thinking or policy issues that people can argue over. The Joe Biden campaign policy, not saying it would be true if he is elected, is that Trump has not been HARD enough on China. In fact Biden policy is as one person described it, Trump on steroids. Other criticisms are that there is no grand strategy behind it. This is not a criticism that the policy represents a break or departure from mainstream thinking or historical policy trends rather that the ideas are not knit together in a strategic manner.

There are many valid debates, as there are with any administration, about policy outcomes, inputs, and strategies. I think there are valid debates about China, international organizations, timing, and issues like the public communications strategies. I would not have left TPP and while I generally agree on troop draw downs in Germany, the timing and roll out are very debatable.

However, Trump foreign policy, again focusing on the policy, is for the most part a continuation and expansion of existing US foreign policy thinking or policies. In most areas it is right in line with historical policy or expanding on previous initiatives or thinking that was mainstream in both parties. There are policy differences between the two administration but policy differences are not major breaks with historical US or Obama foreign policy. In fact, we only see two real areas where there are major breaks of policy and that is Iran and China. Importantly, and again not relitigating the decision, rightly or wrongly Trump is returning Iran policy to its more historical norm rather than deviating from the norm. China is much more of a break with both history and Obama. One can validly debate these policy decisions but it is completely false to argue that these policies are in some way far outside the mainstream or over turning historical policy.

On the record: The U.S. administration’s actions on Russia

https://www.politico.com/story/2016/09/obama-saudi-arabia-228521

https://www.politico.com/magazine/story/2016/07/barack-obama-world-popularity-cuba-egypt-ukraine-bbc-documentary-214032

https://www.foxnews.com/politics/obama-administration-criticizes-u-n-human-rights-council-but-still-wants-to-keep-its-seat

Framing Disengagement with China

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One of the biggest challenges facing foreign policy thinkers on either side of the China debate and even foreign policy strategists around the world is what does US disengagement with China look like? China has ended One Country Two Systems in Hong Kong, oversees genocidal concentration camps in Xinjiang, just to get started. Look the other way uncritical engagement is not an option.

Critics of recent policy moves have attacked every restrictive move taken by the US government against China. As I have long argued, it is completely fair to debate or argue over whether restrictive policy A is better than restrictive policy B but there is no point in arguing between restrictive policy A and no restrictive business as usual policy. What critics of recent policy moves have not done is provide any real sense of what restrictive moves would appease the China pigeon crowd.

Before we begin let us think about some framing about how to think and about how we make decisions about specific policies and then move into specific of disengagement.

I am by nature and experience entirely pro-engagement. I have lived for 9 years in China, 2 in Vietnam, worked almost exclusively with Chinese, Vietnamese, and other students from around the world My colleagues have overwhelmingly been non-American. My children have gone mostly to Chinese and Taiwanese international schools going to school entirely in Chinese. Philosophically, I lean economic and social libertarian in that the free market is good and government should also stay out of personal and social decisions. This means the free movement of capital, labor, goods, and services to where they can be most productive. I am entirely in favor of engagement.

Too often however, whenever we use these words, there is little thought given to the meaning we imbue in these words that bring conflict. I have found myself more than once irrationally criticized because I am not blindly and entirely in favor of all forms unquestioningly of engagement. I am entirely in favor of engagement but we also need to define or frame what we mean by engagement or potential limits to engagement.
There is a key distinction or underlying assumption when we talk about engagement that most people overlook and that is what is the purpose of engagement? Proponents of engagement talk about it as if it is an unqualified (i.e. no possible negative) good. Is engagement a good in and of itself or is engagement a means to an end? Put another way, is engagement the objective or does engagement help realize another objective?

Proponents of engagement confuse these two concepts to such a degree they do not even realize they do it. Take a simple example. The underlying intellectual value (not used in an economic sense) of engaging in educational exchanges is that freedom of thought is attractive and as more people are exposed to freedom, it will win friends, build relationships, and change the state of affairs between states. While total factor productivity in terms of higher quality research output and improved educational outcomes are important, as occurs under freeing of international trade, the value proposition is that exposing people to freedom will change thinking.

If improving research output or student flows to the US are the only metric of “engagement” then this effectively removes the unspoken implied value of spreading liberal principles from any role in the underlying reason for engagement. Engagement is reduced to a valueless concept focused only on revenue from student and increases in research. Put another way, engagement is used for the pure self interest of universities and professors not for the much touted principles of the academy.

If we believe that engagement has some purpose beyond pure economic interest, in the case I am using here of universities increasing research and student revenue, it then becomes incumbent to think how one can alter the terms of engagement to pursue the value proposition that alter how states and societies interact.

Too many university spokesman confuse the two. Ezra Vogel of Harvard University argued for continued engagement citing specific examples of success. What he never cited was the broad failure of engagement with China to impact the governing ethos of China. Even if we posit that no shift to democracy should be expected or set as the metric of success, one could have stated then and now that engagement should change the broad direction of government both domestically and internationally. Instead, what we see is a China that for most of its modern history (here being used as since 2000) that has become increasingly illiberal and makes no secret of its intent to change the world to become more illiberal. Put another way, even if we say we do not expect China to become a democratic state, we expect they would at very least not oppose the broad spread democracy and would not work to spread authoritarianism any concept of engagement as promoting values fails completely.

Another professor, makes another similarly defense of valueless engagement. Rory Truex argues that “we have no idea whether engagement with China “worked” or not. China has not become democratic, but it is undoubtedly better governed today than it was during the isolated Mao era.” Prof. Truex is making the argument that engagement worked because Chinese government workers are more efficient but clearly removes any concept of the importance of engagement being a value based proposition. Prof. Truex is effectively arguing that engagement is a success because Chinese technocrats are better trained and more efficient due to engagement to enact illiberal policies that build concentration camps. If engagement is divorced from any underlying value system, then yes, by that metric engagement with China should be considered a roaring success. China is much better equipped to spread authoritarianism.

When many, professors and universities as is the case here, talk about the principles and importance of engagement, the clear implication is that engagement is a means to spread liberal values. Engagement merely provides a method for that to take place. However, when pushed many, professors included as noted by two examples here, fall back on valueless engagement partially because values based engagement has been a complete, total, unmitigated failure. Most people when using engagement in general usage take it as an epistemological given that there are larger reasons for engagement not simply describing an economic transaction.

Take for a minute another similar issue immigration. When we talk about immigration, everything about immigration is value laden rather than simply reductionist into GDP input units. Proponents believe the act of accepting immigrants is not merely an economic transaction but filled with values implication on the part of the receiver and the leaving immigrant. Proponents further believe, and research supports, that immigrants widely adopt American values from languages to respect for American values like free speech. There is an implied assumption that engagement is a value laden proposition.

Notably, China considers the implied meaning of engagement as a value laden concept. While professors at Harvard and Princeton, among others, may try to remove all value from the concept of engagement, China above all others understands that engagement is meant to convey and spread a specific value set. This is why China censors news, employs the Great Firewall, will require foreign teachers to respect Chinese national honor, sends students and Party members to monitor students abroad, produces vast amounts of propaganda about the infiltration of foreign ideas, centralizes Xi thought, and arguably most importantly urges all counter parties to reduce productive engagement to purely economic transactions. China treats engagement as the value laden concept that it is.

This results in a perverse outcome: to ensure continued engagement with China, universities (as well as other individuals or institutions) adopt Chinese demands about a variety of things such as censorship. This transforms the engagement into effectively a one way flow whereby the non-Chinese entity adopts Chinese norms such as stripping engagement of any value meaning and transforming the engager into the changed while China reduces enormously the scope for any change.

The question of engagement then no longer rests upon demanding engagement at any cost but reframing engagement into what type of engagement we should have with China? Put another way, rather than creating a binary of total engagement or no engagement how much engagement and what type of engagement should we have with China?

There is really no universal standard upon which we should engage or disengage from China but I would suggest highlighting the importance a principled engagement. Rather than just opting to disengage, we should centralize the importance of engaging on our terms not Chinese terms. Just as US university research has ended up helping China in Xinjiang concentration camps, we can no longer take all engagement with China as a positive out. So how should we consider standards around which disengagement occurs?

Let me give for universities, since that is the primary use case I am focusing on today, reasonable steps or things to think about on how to engage on US terms. First, vet US China research collaborations regardless of funding source for potential misuse. As China has used US university research in ways that would never be allowed domestically, just as there is an institutional review board for various types of research and related ethical issues, it bears worth considering how to vet research that involves a Chinese partner or co-author.

Second, if Chinese students are to be valued beyond their full tuition payment, what steps need to be taken by universities to meet these specific needs that fulfill the universities mission on liberal education? This could mean working harder to make sure that Chinese students do not live with other Chinese students. Changing the curriculum for international students that involve classes on philosophy and learning so they understand the centrality of free speech and open inquiry. There are other steps but universities need to better think about how to ensure that engagement with Chinese students is not appeasing the CCP or fostering isolation.

Third, reconsider study abroad and Chinese based campus operations. Let me strongly emphasize that this does not mean ending them but reconsidering their viability and how to use these options. Major universities have effectively given the CCP control over their brand in China and willing block most nature of liberal education to expand in China. Professors invited by Chinese institutions have been arrested and are required to avoid any topic remotely sensitive in China. Just as US universities send students and professors to work with and study in other authoritarian countries, it seems like problematic to end all of those ties. It also is very problematic to acquiesce to demands for control over curriculum and silence on key issues by the university.

The key to disengagement, or as it is known in economic terms, is how to selectively disengage or decouple from China? This is not calling for nor is it believed to currently warrant a total disengagement or decoupling but how to selectively disengage. Put another way, there must be punitive measures taken to address behavior or reallocate resources or economic interdependence, how and what should be reallocated?

If we look at economic flows, we probably need to revisit as a simple technology exposure to China. The US government has already begun requiring vendors to certify no made in China components. Especially for more products like cameras that have the potential to be involved in sensitive matters, it probably warrants greater consideration. Part of what we need to consider when discussing decoupling or disengagement is not blocking economic or financial flows based upon the national origin of the sender or receiver but based upon the broad security risk of the product or potential uses.

The other aspect of decoupling from China is engaging with trusted partners using this as an opportunity to reorient aspects to trusted or similarly minded states even if not official allies against China. Take a simple example which we have already seen movement towards. Given the concern about Chinese 5G vendors such as Huawei, the US has brought together 30 countries who are considered trusted where companies make components for a 5G network. As another example, Japan is subsidizing firms that relocate from China to other countries.

Two recent pieces even make the argument in different ways for one way engagement with China. An FT piece and CSIS argue for various forms of allowing China to engage with the US on their terms while allowing China to remain walled off from the US. The CSIS piece actually argues for allowing Huawei into US networks as one way engagement. Leaving aside the technical issues of how grossly wrong this analysis is, this is arguing for further one way engagement with no demands on China. Continually engaging on their terms in not actually two party engagement.

While new engagement steps could go on and on (and may be turned into another blog post) we need to think about not just how to disengage from China but how to re-engage with other countries specifically when trying to move resources or reliance away from China to other countries to ensure that the same mistakes are not repeated and that engagement is not stripped of value in the way it has been in engagement with China.

One the interesting things is how after the Gulf War II, the United States in many ways made clear decisions both in government and business to project less influence focusing primarily on the economic transaction. (I use the Gulf War II more as a simple dividing line as I think there are many reasons for the resultant changes). President Obama in a wide reflection of social appetite opted to lead from behind and do very little to project US influence. In many ways, he adopted the current German thinking that simply by exposure behavior would change by osmosis. I think it has become clear that this only emboldens China to pursue pushing engagement on its terms and its values around the world and in bilateral relations.

Decoupling or disengagement should not mean walling ones self off from China, but nor should it mean business as normal flows preferring willful blindness to the risks of engagement with China on their terms. It also means laying out terms of engagement with other countries.

The Unreality of the China Pigeon

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There is a new breed of China watcher stalking editorial pages. Potentially concerned, though not always, about various China misdeeds which few deny but clinging to unrealistic beliefs about solutions or simply unwilling to adopt firm beliefs about solutions, the China pigeon is unable to target workable solutions with difficult choices. We see this easily tossed softness in a variety of guises that remain unable to grasp the difficulty facing the world today.

The first failure of the China pigeon is an unrealistic belief in the non-China state of the world. For many this is an obvious defense mechanism. Many of them agree that China has done bad things like Xinjiang and Hong Kong so clearly they cannot be faulted because they agree with you. Where this pigeon goes wrong is in holding unrealistic views on the non-Chinese world. The most obvious, but just one of many that could be cited is the oft repeated but poorly understood phrase of relying on allies to challenge China.

In reality the fall back on clichés about allies are a defense mechanism revealing little more than intellectual emptiness about actual realistic state of the world or steps that could be taken to challenge China. They do not demonstrate any great profundity of thought but lack of understanding about the world outside their university campus or newsroom. Look around the world, talk to civil servants or political appointees in governments throughout Asia and Europe and one quickly discovers relative lack of interest for a variety of reasons to take any tangible steps to challenge China. Europe is in the midst of doing its best to appease China and Asia generally wants to avoid the topic as much as possible. The commendable idealism of those talking up the importance of allies to challenge China is quickly drowned in a sea of 2020 real economik politik.

We can seek to remake the world more to our liking but we must work with the world now as it is not as we hope it to be. The reality is that almost no countries have any real interest in addressing the myriad of problems obvious to the China hawk and China pigeon.

The second primary defense of the pigeon is the ability to spout profound sounding clichés that are nothing more than empty words devoid of policy steps that could be taken to balance reasonable concerns. China pigeons lack concrete thinking about how to address the myriad of challenges China presents. Skilled at critique and clichés, they lack ability to provide concrete policy steps to challenge China. The examples of allies reveals the bankrupt nature of these cliched talking points. Recruitment of allies, leaving aside the state of countries, is positive only if they can be marshalled into taking tangible policy steps to challenge China. China pigeons talk only of allies with no thought that this is only an intermediate step and not an end in and of itself. Most allies lack the willingness to even issue anything beyond vague concern over Chinese behavior but somehow these allies are the bedrock of enlightened foreign policy thinking.

Take a simple example. The leader of Europe Germany cannot bring itself to offer even any statement on China other than vague unspecified concerns about Chinese behavior. Falling back on the importance of allies is only valuable if those allies move much closer to the US position on China rather than the US moving closer to a German position on China. The inclusion of allies ultimately requires them to both honor commitments and gives them influence over the position. It would be a terrible tragedy if working with allies required watering down the US position on China. However, the China pigeon unable to recognize either the state of the world or requirements of allies believe that allies are simply a basic unqualified good.

Examples of the China pigeon as stunningly common despite the widely held perception that China hawks dominate. A recent blog post by Brookings capture this charade well. The post entitled “Why now? Understanding Beijing’s new assertiveness in Hong Kong” spends most of the piece analyzing Beijing’s strategy in passing the National Security Law. While reasonable people could have reasonable disagreements the author posits various theories about why Beijing chose the summer of 2020 to pass the NSL and gives nod to the fears they create. At this stage of the piece, if one read no further, you could be forgiven for believing the author would be in favor of any number of policies that would seek to punish Beijing. However, the blog closes with a few paragraphs that call for “goal of America’s presence in Hong Kong should be to keep as many relationships open with as wide a range of key figures as possible…(and hoping) the “one country, two systems” model can be preserved.” This is not any type of debatable policy response to CCP termination of civil rights like free speech. This is nothing less than dressed up appeasement of the rankest nature.

Another recent piece by Harvard professor Ezra Vogel talked about the need to continue engagement policies between China and the United States. Leaving aside the obvious failure of historical engagement that brought us to the point in time and enmity we are at now, the author compounds the original error by failing to grasp the state of the world outside of the college campus. It trots out the agency and context free one sided view that “it is not in the United States interest to turn the Chinese into our enemies. If we want to encourage them to work with us for our common interests, we need some fundamental rethinking of our policies.” The simplistic view of 2020 China makes two fundamental errors. First, the United States has worked for years to that end while China has engaged in an unceasing pattern of adversarial behavior. The shift in US policy and attitudes is not happening in a vacuum as the author supposes. Second, it further assumes the US is the only side in this relationship removing agency from the Chinese. At what point do the Chinese become responsible for their own country and making it a responsible actor in the global liberal international order? The last major problem of this piece is its complete lack of any mention of Chinese behavior. Forget Xinjiang. Hong Kong is never mentioned. Security threats are made up stories divorced from reality. Complicating this is that the author literally works at an institution where a colleague has been charged with illegally working with the Chinese but yet we are supposed to believe America is turning Chinese into enemies.

In the last highlighted piece, the author at least gives a nod the misbehavior of China in recent years writing in quiet confession that “I cannot excuse China’s behaviour in recent years…”. However, after this seemingly heartfelt and honest acknowledgement it falls a part in misguided logic and appeasement. The author actually argues that the current behavior is nothing more than a long pattern of behavior that should have been fully expected writing “What it is doing is not shocking if you have paid attention to the way it obtained power and has held it over the past seven decades.” If this is the case why was the United States engaging with this type of power so hard at all? This leads into the next piece of misbegotten and tortured logic. What has caused this conflict between China and the United States given the authors recognition of China’s “current behavior”? It is not China that is responsible for the state of affairs but the United States! The author argues that relations were driven by engagement which allowed, if we follow the authors logic, a malign state to metastasize but now the United States challenging these nefarious actions is driving the current state of conflict. This misguided logic is at least part right in that the relationship has tumbled because the United States has said this type of behavior will no longer be tolerated. Instead the author chalks the problems between the United States and China up to “blind confrontation” by the Trump administration. The author offers absolutely no suggestion, however misguided, of even a policy worth of consideration that might better respond to China’s acknowledged misbehavior other than continued engagement. Like many who will at least nod towards China’s behavior he authors nothing other than vague clichés. The reality is that the problems of decoupling are driven fundamentally and overwhelmingly by an increasingly intolerant and totalitarian China. While I personally sympathize and have lived the upheaval the author talks about of moving from China after living there for many years, it is nothing less than misguided appeasement of racial authoritarianism to continue a failed policy of engagement.

I could continue to cite example after example of people or institutions who try to sound enlightened looking at US China relations but fundamentally struggle to grasp the fundamental nature of the problem.

I believe there are three specific points that must be addressed for any argument to be considered reasonable. First, is the given state of the world an accurate representation of the reality we must deal with? To take a simple example, one is free to argue that greater ally involvement is positive, but any argument that fails to grasp the national level concerns of individual states can be considered nothing more than cliché writing. The hard reality is that irrespective of President Trump, countries have a myriad of issues that cause them to be reluctant or opposed to challenging China. That is the state of the world we must deal with.

Second, any argument of serious weight must present actual policy solutions. Let me emphasize, this is not clichés about challenging China or critiquing current policy but what are tangible policy options in the same tangible policy domain that would result in improved outcomes? For instance, when the Trump administration announced PLA linked graduate students would no longer be allowed to attend university in the United States, the policy proposal came under all nature of criticism such as cutting off lines of communication to racism but I know of no proposal to address the valid security concerns linked to an adversarial military power and key research put forth by any interested party. We must recognize the state of the world about China and the PLA and valid American interest in protecting certain information. In reality, barring PLA graduate students impacts a relatively small number of students and is not racially motivated and protects relatively narrow specific types of research. If universities want to argue for better policies designed to address specific downside risks or threats, I for one would be interested in how to better address valid and documented security issues. Until that time, there public demonstrations of concern are sound and fury signifying nothing.

Third, any serious argument about China must focus on the relative costs and benefits of cost imposition policy A v. cost imposition policy B rather than cost imposition policy v. status quo. In each of the examples cited, the underlying argument being made is that the deterioration in US China relations was due to US actions to punish or challenge Chinese behavior and that a return to engagement or no action should be taken. The Brookings piece actually said the recommended course of action was do nothing. This is simply not a remotely reasonable position. It is reasonable to debate whether an expedited visa policy, human rights sanctions, financial sanctions, or other policy actions should be taken or the details of these policies but returning to a policy of engagement or inability to take tangible actions against Chinese misbehavior is simply an untenable position. We should only be debating which cost imposition policy are we prepared to impose, accept the costs, and specific policy outcomes desired with comparison to results.

When the China pigeon is prepared to recognize the true state of the world, put forth words beyond cliched critiques, and engage in debate between cost imposition policies that challenge Chinese behavior, then and only then will they be considered credible.

1. https://www.brookings.edu/blog/order-from-chaos/2020/07/17/why-now-understanding-beijings-new-assertiveness-in-hong-kong/
2. https://www.washingtonpost.com/opinions/2020/07/22/us-policies-are-pushing-our-friends-china-toward-anti-american-nationalism/
3. https://www.businesstimes.com.sg/life-culture/kicked-out-of-china-and-other-real-life-costs-of-a-geopolitical-meltdown

Framing the Conflict with China

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There has been a lot going on in all things China and I think it is important to step back and put what is happening into a bigger picture framework and better understand the evolving conflict and specifically what the conflict is not. Let us start off by saying what the conflict with China is not.

1. The conflict with China is not due to Trump administration policy. This is an argument that to me is both nonsensical lacking any factual basis but speaks directly to many of the domestic political conflicts rather than the reality of China 2020. It would be fair to debate whether specific policy actions might have individually brought slightly different responses in narrow specific cases, but China has made clear across policy domains the nature, character, and direction of its domestic and foreign policy. The change and direction in Chinese foreign policy has been apparent for most of the past decade, definitely at least demarcated by the ascendance of Great Leader Xi in late 2012. Since then China has made no secret of its muscular foreign policy from the South China Sea to Uyghurs around the world and in Xinjiang to economic and industrial warfare. This strain of Chinese foreign policy began well before President Trump and will outlast a one or two term President Trump.

2. The conflict with China is not due to needing better communication or better understanding. Many have argued that due to Trump communication style, ending regular meetings, or lack of nuance the true failure lies with an inability to effectively communicate with China. This attributes to China a lack of intent about their actions rather than recognizing the reality that these actions and the larger framework within which they occur happens in a well planned manner to achieve specific objectives. The reality is that the policies that China is executing now have been planned and discussed clearly for years. Xinjiang, Taiwan, South China Sea, economic protectionism, Hong Kong, techno-authoritarianism these are clearly stated objectives by China across a variety of institutional formats that have been discussed widely within formal governmental forums and permissible propaganda type forums. To argue that the current escalated conflict is due to poor communication between the US and China is nothing less than staggering ignorance about what China has stated clearly and repeatedly as its objectives.

These two points, and various derivatives of the same generalized arguments, are made by China apologists, think tankers, and Open Letter writers as a form of condescending infantilization of China as if it needs to be shown the enlightened path upon which peace and harmony will reign. There are a couple of problems with this general line of thinking. First, it effectively believes the CCP and Chinese lack agency. If only they could be shown the light it would result in rapid change of events. In fact, Chinese writers have written at length both in official and unofficial circles about the projected growth of China in both political and economic terms. Official and unofficial China has thought long and hard about their preferred policy path and have the agency to make their own decisions about how to proceed.

Second, it implies that decision makers lack information about their decision set. In other words, engagers implicitly believe that due to wide spread state censorship in China, decision makers and political leaders have censored information and would benefit from better access to information and how their political decision making would result in better outcomes. However, decision makers have vast access to information and exposure to these ideas and policy options. Whether it has been studying abroad or censoring the specific ideas, it is a failed savior complex to believe that different information would change their behavior. They know why they are behaving in a certain manner and the decisions they are taking.

Third, this line of thinking require ignoring vast amounts of Chinese government work about what Beijing and the CCP sees as viable decision sets or alternatives. Put another way, China has said repeatedly over the years what they want to attain and they have dedicated vast amounts of of resources to attain its desired ends. Peter Mattis from the Congressional China Commission did a great Twitter thread on the wealth, depth, and modern history of documentation in planning and statement of intentions by China. I fundamentally disagree with their philosophy and objectives but they have put enormous amount of work and thought into their intentions, objectives, and reasoning. Believing any variation on the two themes of what the conflict is not requires one to believe that China has not done this, which we know is not true.
Fourth, engagers present this push to engage China as a brand new strategy when in reality their strategy has been the dominant strategy since the turn of the century. Their preferred strategy of how to prevent deepening problems between the United States and China is the exact strategy that brought relations to this point. If anything we have seen the complete and absolute failure of this strategy over the past 20 years but true believers, like communists, believe just a little more will make all the difference. Engagement advocates have truly had unfettered ability to demonstrate the efficacy of persuading China over the past 20 years and simply failed spectacularly. That this is even still discussed as a remotely viable strategy speaks nothing less than to the delusion of its advocates.

So this brings us to the fundamental question, and something that China apologists refuse to grasp, and many even hawkish to semi-hawkish China focused personnel struggle with: the conflict between China and the United States is a fundamental conflict between the values of open liberal democracy with human rights, and free markets at its core versus the closed authoritarian state centric governance system of China.
This sounds so simple but so difficult to grasp because it fundamentally changes the understanding of the conflict and how to resolve it. Take a simple example. In the first scenario, two countries are in a trade dispute. However, both countries agree that free trade is the driving objective, they agree what the rules of trade are, they recognize this as a narrow specific technical dispute that does not affect their other cooperation, they both accept how disputes are settled, and to accept the ruling in good faith and abide by the ruling making any changes. Now take another example. Two countries are in a trade dispute. However, the countries do not agree that free trade is the driving objective, they do not agree what the rules of trade are, it does impact their relationship in other areas beyond the narrow technical area, they do not accept how disputes are settled, and they do not in good faith accept rulings and implement rulings. There is an entire set of pre-dispute rules and framing that alter how we view the dispute and this this changes the entirety of how we approach the same exact same set of facts depending on the framing of each party.

What we have seen is that most people at the beginning believed this was a simple trade dispute between China and the United States. Even when the trade deal was announced, the structuring of the deal reflected a framework reflecting a fundamental dispute (refusal to negotiate foundational issues like subsidies), disagreement over the framing rules (managed trade in Stage 1 with free trade negotiated in Phase 2), and mistrust of the counterparty (target dollar purchases for China) even though most people continued to analyze it as a simple trade dispute. However, we knew as I said in April of 2018 how China would behave and using simple game theory this instructs us about how the Trump administration should behave and what the expected payoff from Presidential strategy replace given challenging China as the underlying principle. China is not approaching and has not behaved as if it is a marginal or technical dispute but cuts directly to the core of their entire political and economic governance philosophy. Why this comes as any type shock to any China watcher is a rather puzzling question but let us set that aside for now.

This understanding guides us into what to expect about the general path of the conflict between China and what will ultimately become large parts of the world. This is not a conflict about specific policies but about an entire system of human governance. This gives us a couple of principles moving forward about how to frame this conflict.
First, openness and engagement is relatively pointless with the objective to change Chinese government policy. I want to be very clear as I know how many will want to read this. Openness is good and useful policy across many policy domains and it still should be pursued pretty generally but we must realize it has little to no impact on changing Chinese government policy in a range of areas that would fit US government satisfactory policy sets or ranges. If openness and engagement with China actually changed Chinese government policy in the general direction of US or developed country democracy acceptable sets, the past 20 years would have yielded vastly different outcomes than where we stand. If anything the generalized policy of openness and engagement towards China has been shown to produce the opposite of its claimed outcome. I will leave aside the arguments for openness and engagement for now as they do not pertain to our argument about what type of conflict this is or the benefits but this should not be taken as an argument for closing up and blocking any interaction with China or Chinese.

Second, better negotiation or communication will have little to no impact on Chinese government policy. A common argument whether it is on bilateral basis, whether the personnel at the negotiating table, or at international organizations, a common argument is that better communication or negotiation strategies will give the US influence. However, the CCP will never negotiate its authoritarian stranglehold on China willingly. The CCP will not change its intent to establish a loose alliance of global authoritarians as a bulwark against open democracy due to better PowerPoint slides from well meaning DC think tanks. The CCP will not change its policies on import substitution and policies after reading a report from about what is really in its best interest in a Washington Post oped. It has not happened in since the turn of the century and it is not going to happen going forward.

Unfortunately this leads to a rather sobering direction on what it does mean for the conflict between the United States and China. It basically means a type of cold conflict will take place and we have already started seeing this effectively. I have no real interest in the specific linguistic terminology used. My preferred nomenclature is Cold War 2.0 but historians and linguists get puffy because the parallels are not exact but I do not have a strong opinion so if there is some type of widely adopted phrasing I will use it but for now I’m going to call it Cold War 2.0.

As the conflict is a fundamental conflict over the state of the world and system of governance, this leaves little room for negotiation but rather competition and conflict in most every policy domain promoting divergent visions of power and state to state interaction at every locus. In reality, this is what we have already been seeing for years. China has been a clearly revisionist power for example in the South China Sea seeking to take by force international waters in contravention of international treaties. China, as it has been for sometime well before the Trump administration, is actively working to cast forth a different vision for international organizations like the WHO. The xat Chinese strategy depends on the exact institution. At the WTO, Beijing will have difficulty changing the underlying agreements to its liking but they can drive it into irrelevance by keeping counterparties from pursuing disputes there, prevent any market opening reforms, and ignore agreements either technically or via lack of enforcement. Just as the United States built a variant of its own technocratic state on to the international arena after WWII and countries joined because the rules based system being projected globally, China is attempting to replicate its own domestic system globally.

It further implies that global institutions will become increasingly meaningless as they drift from their original technical mandate and agreement on either the terms of the institution itself mean and require of members or lack enforcement mechanisms (think WTO) or they become bogged down adrift in politics that prevent it from focusing on and executing its most basic tasks (think WHO or WIPO). We must remember that many of these institutions were created for the express purpose of challenging a major authoritarian communist or demarcating friendly states not trying to reform an existent authoritarian communist. Research across many disciplines have found that generally speaking whether a business or religion or other organizations that the more they dilute their membership the weaker it becomes in focusing on the mission, driving voluntary adherence, or that coalescing idea that made it great to start. In an era when China openly censors criticism on itself from pretty much any global organization, this creates problems in viewing global institutions as a channel for change in Chinese policy.
It will also require broad direct competition and challenges to China across policy domains and the establishment of a new international system. Cold War 2.0 will require United States competing and challenging China across virtually every policy domain about how best to project liberal open democratic human rights free market vision on to the world. Whether this is new international institutional arrangements or competing telecommunications standards or development funding for lesser developed countries, the United States must be prepared to challenge and compete with China across every policy domain. Every policy domain. The United States has been waking up to these challenges and is moving to address them but an enormous amount of work remains ahead.

If we exclude any type of armed conflict, which for two countries the size and technical sophistication of the United States and China would truly be catastrophic, the objectives and field of conflict become rather clear. It is an economic and world view conflict between closed authoritarian states and open liberal democratic system of governance. We can already see evolving soft alliances with China surrounding itself with DPRK, Iran, Syria, and other authoritarian states and building up other authoritarian states. This framework provides a few clear implications for how to approach the China challenge.

First, the United States must build alliances and institutions whether bilateral or multilateral but must be willing to exclude countries that are not good partners. The weakness of the global multilateral system is the total dilution of any agreed upon norms and values to which the members aspired. Even if the signed up for the words and the document, it is perfectly clear they did not agree with the mean and adjust their actions and policies accordingly. Just as China has built its own salad bowl of bilateral and multilateral institutions, the United States must challenge and compete with China whether in Asia or Latin America to work with countries that aspire to the same values.
Second, we need to recognize and behave as if there is an evolving type of Cold War split and countries need to treated as extensions of the larger framework. To take an example, though it may seem hard nosed, the United Kingdom cannot expect to receive special benefits and access to United States assets or markets while simultaneously allowing dangerous access to Chinese intelligence gathering assets. Other countries face similar decisions or tradeoffs. This makes it incumbent on the United States to both increase its cooperation and work with other countries while also making it clear that benefits can be excluded as well. Values need to be defended and that may come with a cost but if you respect those values the United States will support you.

Third, this means challenging countries that are align themselves with China. Just as we would take issue with allies funding the Soviet Union in the Cold War, we should understandably raise concerns about allies cooperating with China. Many have the concern that this is forcing countries to choose between China and the United States. This frames the questions incorrectly. One cannot both cooperate heavily with China like Germany is in Xinjiang, for instance, while also claiming to uphold the values of liberal open democracies. Germany and Volkswagen are simply funding brutal racist authoritarianism though kudos to remaining true to Volkswagen founding principles. It is not the United States forcing these questions but merely imposing costs. The same holds for states that are not allies like Iran. We cannot have détente and cooperation with countries that seek the benefits of working with the United States and its market without altering practices and policies. All sharing of benefits much be accompanied with specific sets or ranges of policies. Otherwise it is not us influencing them but us being influenced by brutal authoritarians.

Fourth, change in countries to whom we are in conflict with will come not by reasoned change of policies towards optimized sets but by imposition of painful outcomes from non-military policies. In other words, if we are in conflict with China and the CCP and we accept they will not negotiate into more open liberal democratic policy ranges accepting foundational beliefs, we must be prepared to impose upon them costs for their behavior that may ultimately force them to make those changes. For instance, that means taking action that may result in the collapse of a firm like Huawei. Enough of these individual actions together can increase the pain or narrow the decision set forcing changes in policy or raising the costs to maintaining the system. Make no mistake this is likely over time to impose significant costs and cause collateral damage to Chinese and Chinese allies but the United States must raise the costs of non-compliance to the values and norms we hold. To take one future possibility, if the United States were to begin crimping USD flows to Hong Kong due to its loss of special status, this may cause economic pain in Hong Kong as firms look to relocate and dislocates labor. While the United States should be careful, it cannot be held hostage by the CCP and must understand that when seeking to avoid any military confrontation, it must be prepared to impose these policies to raise the costs of behavior.

Fifth, we need to plan for and anticipate a long and costly shift in relations between the United States and China. We have crossed the Rubicon and China has laid bare their intentions. We cannot return to the days of blissful ignorance when the learned could feign ignorance on the goals, objectives, and intentions of China. That’s the reality. This is the conflict.