Tag: One China Policy

What to do about China?

“China’s much anticipated post-pandemic recovery appears to have flopped, with signs of a significant slowdown after decades of supercharged growth and data flashing warning signs.” Bloomberg “China’s failing recovery”

“Signs of deflation are becoming more prevalent across China, heaping extra pressure on Beijing to reignite growth or risk falling into an economic trap it could find hard to escape.”

What, if anything, should the U.S. response be? That depends on whether we see China as a competitor or an enemy. That should depend on our assessment of China’s objectives. Does China want to expand its territory one way or another, or to expand its influence in the global order? China’s behavior might support either assessment.

China claims sovereignty over almost the entire South China Sea, including the Paracel and Spratly islands, which are also claimed by Vietnam, the Philippines, Malaysia, Brunei, and Taiwan. In 1947 China asserted its claims with a map depicting a U-shaped line covering almost 70 percent of the South China Sea, known as the nine-dash line. In 2016, an Arbitration Tribunal rejected many of China’s maritime claims as lacking a basis in international law.

The UK returned Hong Kong to China July 1, 1997, with the understanding that it would be self-governed independently of the Peoples Republic of China for fifty years. China violated this agreement with its full takeover in 2020.

In 1972 President Richard Nixon confirmed that Taiwan was part of the People’s Republic of China but would continue to govern itself independently until it agreed to merge its government with the mainland’s. In the Taiwan Relations Act of 1979, the U.S. committed to providing defensive weapons to Taiwan to defend itself from invasion (as opposed to the volunteer absorption into the Peoples Republic envisioned in the One China Act). What we provided instead were heavy weapons irrelevant to Taiwan’s defense but prized by America’s defense industries. “Taiwan-China policy assurances military” The U.S. has more recently seemed to even question its commitment to the One China agreement.

These aggressive moves by China are better seen as solidifying its borders (much in the same way the US worries about its borders with Cuba) than military expansions. On the other hand, China joining the World Trade Organization, pressing for representation in the IMF and World Bank that is more reflective of its economic size, and its Belt and Road, Asian Infrastructure Bank and BRICS initiatives reflect China’s desire to gain status in the global system comparable to that of the U.S. In short, they reflect the behavior of a rising economic competitor.

We seem to be treating China as an enemy rather than the trade and economic competitor they see themselves as. Among sportsmen, competition takes the form of doing your best—of being the best you are capable of. Within our economy we rightly see competition as good and healthy. With fair competition, both sides benefit. The world is made wealthier. Kneecapping our competition is the approach of bad guys. I explored this more fully in my blog “Competing with China”

But China is not competing fairly either. We would be wiser to use the mechanisms of the global system of rules to push and pull them into compliance. We should end our own tariff—industrial policy violation of these rules as well. We might start by restoring the dispute resolution body of the WTO. While there will be genuine security justifications for trade restrictions, they should be very limited.  They should not include taxing steel purchased from Canada. Trade is win, win.

A recent G-7 statement clarified that: “We are not decoupling or turning inwards. At the same time, we recognize that economic resilience requires de-risking and diversifying.” US Treasury Secretary Janet Yellen stressed this message during her recent visit to China. We should facilitate and encourage China’s economic rise as it contributes to our own. The opposite direction—treating China as an enemy—ends in war.

America’s Unipolar period has corrupted us. We demand that others follow rules that we violate ourselves when we don’t find them convenient. We have become a bully. My hope is that we adjust to the fact that we are no longer the world’s sole superpower by strengthening the rules we helped develop and competing fairly under them: “Goodbye unipolar world and good riddance”

Why do we promote growth in other countries?

The world’s twenty largest economies give around $100 billion in aid to poorer countries each year, about 40% of which is to promote economic development. Promoting economic development and growth in other countries is not just charity or to buy peace. More prosperous countries, those that produce more, contribute to our own prosperity more directly as well. 

It is easiest to understand this fact if we think of growth within our own country or state or town. https://wcoats.blog/2023/01/22/trade-once-again/  When you sell something you made and/or own, you benefit from the sale or you wouldn’t have undertaken it. Similarly, the buyer benefits or it wouldn’t have made the purchase. As you have heard or read me and other economists state over and over again, trade is win-win.

But the benefits go beyond the win-win benefits of the transaction itself. Being able to buy some of what I need from others rather than having to make it myself frees up my time to specialize in producing for sale to others what I am best at. In short, and forgive me for repeating this for the umpteen time, world out increases from the specialization that trade enables. As the result of trade world GDP skyrocketed in just 50 years from $1.3 trillion in 1971 to $96.5 trillion in 2021. https://wcoats.blog/2018/03/03/econ-101-trade-in-very-simple-terms/

We benefit from the inventions of entrepreneurs anywhere in the world and should encourage such developments. Pfizer’s Covid vaccine was developing in Germany by BioNTech, with whom Pfizer partners to produce to large quantities demanded. China’s incredible growth over the last thirty years has contributed to our own growth as well. In 1991 the US exported to China $5.2 billion worth of goods, which had grown to $151.i billion in 2021. In 1991 the US imported $12.7 billion worth of goods, which had grown to $506.4 billion in 2021. Following Nixon’s famous trip to and recognition of China in 1972, I remember well a friend who asked “what would we possibly want to buy from China?” We should cheer the fact that China’s economy has grown dramatically to the benefit of us all.

In general, we should welcome and encourage the economic growth of all countries around the world. The exceptions might be for countries that threaten war on their neighbors or us. We might well block the export of our products and related technologies with clear military applications to countries that might pose a military threat. And we might be cautious not to rely on such products from such countries. While these would be sensible policies, they are also easily abused by domestic industries wanting to be protected from competition.

When I was in China in the summer of 2002 to help its compliance with the requirements of the World Trade Organization, those I met were excited about growing into the world trading system. China was a rising power, most certainly not an enemy. How did they become an enemy, if indeed they are. In a word, Taiwan. But I can see nothing China has done to violate their agree with the US about Taiwan as part of One China. If China has become an enemy—a threat to the US—we are largely responsible in my opinion by raising doubts about our commitment to the One China policy.

This is not to say that China has always behaved according to the rule. I and many others were there to help them move in the right direction. Now we have pushed them backward for no good reason. Hopefully the Biden administration is beginning to recognize this and we will return to promoting China’s growth rather than repressing it.   https://wcoats.blog/2022/10/23/competing-with-china/

Nancy Pelosi in Taiwan

Nancy Pelosi, the Speaker of the U.S. House of Representatives, just arrived in Taiwan. Why is this a big deal? Shouldn’t anyone be able to visit any country that has opened their doors to them? It depends on the context and purpose.

The civil war for control of China was won by the Chinese Communists lead by Mao Zedong in 1949. The opposition, led by General Chiang Kai-shek, fled to Taiwan and reestablished the Republic of China (POC) there. The civil war was fought on and off between 1927 and 1949 when the victorious Mao established the Peoples Republic of China (PRC) and designated Taiwan as its 23rd province. Both the PRC and POC claimed to be the legitimate governments of all of China.

Following President Richard Nixon’s historic visit to China in 1972, “the United States moved to recognize the People’s Republic of China (PRC) and de-recognize the Republic of China (ROC) in 1979, [and] the United States stated that the government of the People’s Republic of China was ‘the sole legal Government of China.’ Sole, meaning the PRC was and is the only China, with no consideration of the ROC as a separate sovereign entity.

“The United States did not, however, give in to Chinese demands that it recognize Chinese sovereignty over Taiwan (which is the name preferred by the United States since it opted to de-recognize the ROC). Instead, Washington acknowledged the Chinese position that Taiwan was part of China. To this day, the U.S. ‘one China’ position stands: the United States recognizes the PRC as the sole legal government of China but only acknowledges the Chinese position that Taiwan is part of China.

“Congress passed the Taiwan Relations Act in 1979 to protect the significant U.S. security and commercial interest in Taiwan. The TRA provided a framework for continued relations in the absence of official diplomatic ties….  The TRA sets forth the American Institute in Taiwan as the corporate entity dealing with U.S. relations with the island; makes clear that the U.S. decision to establish diplomatic relations with the People’s Republic of China rests upon the expectation that the future of Taiwan will be determined by peaceful means;… mandates that the United States make available defensive arms to Taiwan; and requires that the United States maintain the capacity to resist any resort to force or other forms of coercion that would jeopardize the security, or the social or economic system, of the people on Taiwan.”

“What is US one China policy and why does it matter?”

All American Presidents have affirmed this one China commitment while maintaining its “strategic ambiguity”. “U.S. Secretary of State Rex Tillerson said [that] the Trump administration is committed to the long-standing ‘One China’ policy as it reviews U.S. policy toward China, but also intends to keep all of its commitments to Taiwan.” June 13, 2017. “USA China-Tillerson committed to one China policy”

More recently: “Joe Biden made a potentially dangerous statement on Monday. In Tokyo, he gave a flat ‘yes’ to a reporter’s question of whether he was willing to ‘get involved militarily to defend Taiwan’. ‘That’s the commitment we made,’ the president claimed. In fact, the United States scrapped its formal commitment to defend Taiwan in 1979…. This is the third time in less than a year that Biden has publicly declared that the United States would use force to keep Beijing from seizing the island.  “Biden defend Taiwan-China invasion”

Pat Buchanan asks: “But if the U.S. went to war to defend Taiwan, what would it mean? We would be risking our own security and possible survival to prevent from being imposed on the island of Taiwan the same regime lately imposed on Hong Kong without any U.S. military resistance.”  “Is Taiwan’s independence worth war?”

What is Pelosi’s objective in going to Taiwan? What does she hope to accomplish with her poke in the Chinese eye? Our interest should be to promote the integration of Taiwan with the rest of China “by peaceful means.” Our diplomacy should be deployed to that end. President Biden’s repeated slips and Nancy Pelosi’s Taiwan visit do not provide the tone nor context for such diplomacy. I believe that her visit to Taiwan is a dangerous mistake. While we would be hard pressed from thousands of miles away to win a war with China, China would suffer enormously as well and probably has better sense than to start such a war. But what is the purpose of such a challenge?