Chas W. Freeman, Jr.
America in Distress:
The Challenges of Disadvantageous Change
Remarks to the Watson Institute for International and Public Affairs
Ambassador Chas W. Freeman, Jr. (USFS, Ret.)
Senior Fellow, Watson Institute, Brown University
20 February 2020,
Providence, Rhode Island
The 21st century arrived belatedly – but with a bang – on September 11, 2001, when aircraft repurposed as improvised cruise missiles blew up the World Trade Towers and part of the Pentagon. In the two short decades since the shock and awe of that attack, most of the previous century’s American efforts to bolster peace and prosperity have been undone. Gone are the constraints on the strong bullying the weak provided by international law, multilateral institutions, and plurilateral and bilateral commitments to mutual aid and cooperation. The norms that long moderated international and domestic behavior have been largely erased. Incivility is now ubiquitous.
Political systems everywhere have been overtaken by socioeconomic and technological change. There is no sign they are catching up. In the United States and other democracies, political and economic systems still work in theory, but not in practice. In some ways, the scene in Washington now resembles that in Saint Petersburg in the last days of the Tsar, with sycophants and charlatans running amok and government capacity in rapid decline. And like Tsarist Russia, America is losing its aura of imperial purpose and invincibility.
American media and public discourse are dominated by bogus narratives and frenzied bigotry. Nothing seems true, but everything seems plausible. Almost everyone acknowledges that there are serious unattended problems, but no one seems able to do anything about them.
All this has spawned an age of soul-sickening worry. Both abroad and at home, the signposts of the past provide no reassurance. We have become pathfinders in the gloom, fumbling our way toward a better future that may or may not exist.
Many analysts attribute the current global and American despondency to President Trump, a self-centered sociopath whose incorrigible ignorance, relentless pettiness, and winner-take-all approach to international negotiations have catalyzed the deconstruction of the global political economy and established legal order. But the trends that underly the shocks we are experiencing began long before anyone other than Deutsche Bank, Russian oligarchs, or Gary Trudeau had even heard of Mr. Trump.
Here are some notable trends that have culminated under the current administration.
Washington has given up on diplomacy and turned to aggressive reliance on exclusively coercive means to exercise influence abroad, turning instead to taunts, threats, unilateral sanctions, ultimatums, cyberwarfare, drone and missile attacks, assassinations, proxy warfare, and military invasions and pacification campaigns. Might once again makes right. The United States now has over thirty active financial and trade sanctions programs, which it can and does impose on friends and foes alike. The Trump administration is averaging 1,000 new sanctions on countries, companies, and individuals per year. The United States currently allocates almost 5 percent of GDP to military and related budgets for past, present, and future wars, a total of $1 trillion. (This is about one third more than the usually cited U.S. “defense budget,” which fails to include many categories of spending accounted for in other countries’ defense budgets.) Money spent on warfare amounts to about two-thirds of all “discretionary” spending in the federal budget. This doesn’t leave much for investment in anything else. The ill-conceived “Global War on Terrorism” has continued to snowball. In 2001, anti-American terrorists with global reach were found in only one or two countries. Today, according to the Watson Institute’s Cost of War project, the United States is engaged in combat with terrorists in 80 nations. We respect no sovereignty other than our own and are currently bombing at least seven nations without their permission. The military operations kicked off by the “Global War on Terrorism” have so far cost $5.4 trillion, plus another $1 trillion in veterans’ care. No end is in sight. The relatives and friends of the more than half-a-million Muslims killed since the U.S. anti-terrorist campaign began in 2001 continue to queue up for revenge. Despite the immensity and prowess of the American war machine, the United States has lost or is clearly losing every conflict it has fought in this century. With no fixed objectives or termination strategies for any of these wars, they go on forever. And history strongly suggests that once American troops establish a presence in a country, they do not withdraw. Seventy-five years after defeating Germany and Japan, the U.S. still garrisons them, as it does Korea, Afghanistan, and Iraq. Washington has sneered at recent Iraqi demands that it remove American troops from Iraq; it has instead promised to punish Iraq if it persists in pressing for U.S. withdrawal. This is the behavior of an imperial occupying force, not the deference to local pride and sovereignty characteristic of an ally. Such arrogance makes the humiliating expulsion of U.S. forces or terrorism by local nationalists inevitable. Once famous for steadfastness and the value of our word, the United States has definitively repudiated the long-established principle of PACTA SUNT SERVANDA (“agreements must be kept”) and replaced it with capricious abrogation of treaties, arbitrary withdrawal from accords, wanton sabotage of multilateral compacts, and money-grubbing hedging of security commitments. Examples include arms control treaties, the UN Security Council-approved nuclear deal with Iran, the Paris climate accords, the Trans-Pacific Partnership (TPP), the Arms Trade Treaty, and previously unquestioned commitments to defend allies in Europe and Northeast Asia. The United States has not just forsaken, but in some instances sought to hamstring the multilateral institutions engaged in global governance and cooperative rule-setting it once sponsored, setting their mechanisms for dispute resolution aside in favor of bilateral confrontations and tests of strength. Examples include the United Nations, the World Trade Organization (WTO), UNESCO, and the UN Human Rights Commission. Washington has replaced market-driven trade based on comparative advantage with the tariffs, quotas, and government-managed exchanges characteristic of mercantilism. Trade policy is now a national security function embodying economic nationalism and the vested interests of the corporate and military-industrial elites. As China has continued to cut tariffs and eliminate quotas for other trading partners, U.S. tariffs on imports from China have risen from an average of 3.1 percent to 19.3 percent, a level last seen in the Smoot-Hawley tariffs that helped bring on the Great Depression. America’s other major trading partners are on notice to expect protectionist pressures like those imposed on China. Rapacious rent-seeking is replacing the national interest as the justification for U.S. overseas military commitments. The Trump administration has begun to demand that U.S. military installations and troop deployments be paid for by the nations they help defend. This is a significant contributor to the growing dissensus in U.S. alliances. It treats the U.S. armed forces as mercenaries rather than the defenders of U.S. national security. As U.S. defense commitments originally formulated to assure strategic denial of defeated adversaries to the Soviet empire erode, these former adversaries – nations like Germany and Japan – have been left with no choice but to rebuild their capacities to act independently of the United States. Finally, U.S. unilateralism threatens to bring about de-dollarization of the global economy. The dollar is used everywhere as a unit of account, store of value, and medium of exchange. Roughly 90 percent of global foreign exchange transactions currently involve a dollar leg. About 40 percent of global trade outside the United States is still invoiced and settled in dollars. Almost 60 percent of U.S. dollar banknotes circulate internationally, generating seignorage revenues that the Federal Reserve transmits to the Treasury. (Seignorage is the difference between the face value of dollar bills and the negligible cost of printing them.) The universal use of the dollar as a global currency has meant lower transaction costs for U.S. businesses engaged in international commerce, lower financing costs for borrowers of dollars, and lessened sensitivity to global economic fluctuations for the U.S. economy. These “exorbitant privileges” (as a French finance minister once called them) have been a significant U.S. competitive advantage. But, as the United States increasingly restricts the international use of the dollar through unilateral sanctions, the dollar is ceasing to be usable everywhere. Dollar dominance has enabled the United States to wield enormous extraterritorial influence in support of its geopolitical objectives. But there is growing international resistance to Washington’s now routine abuse of dollar sovereignty to turn foreign banks into instruments of punitive U.S. policies opposed by their own governments. America’s friends and foes alike are considering how best to end the dollar’s central role in global trade settlement. No one can now take the primacy of the dollar in international trade and investment and the American geopolitical hegemony it has underwritten for granted.
These changes in U.S. policies and practices and their impact on the evolving international system are inevitably eliciting foreign reactions and counteractions, many of them detrimental to American interests. Each implies a very different set of world orders than the one we have known. And each entails a diminished role for the United States in decisions that affect global stability and prosperity.
Sadly, there is now no policy process in Washington capable of considering how to shape the American and global futures. Congress has unconstitutionally delegated most of its authorities relating to peace, war, and foreign affairs to the executive branch. But the great departments and agencies of that branch are no longer effective participants in national decision-making. They have become little more than stages on which political performers sing the president’s praises and strut their stuff in hopes of celebrity, future riches, higher office, or all three.
The U.S. ability to adapt to change is severely constrained by fiscal incapacity. Tax revenues are chronically short of expenditures. The last time Washington balanced a budget was in 2001. The federal revenue shortfall (i.e. the budget deficit) is now about $1 trillion annually – about the same size as overall military spending – and it’s destined to grow. Roughly 40 percent of any U.S. deficit is currently borrowed abroad. There is no money for the maintenance of human and physical infrastructure, let alone new initiatives to enhance economic competitiveness or project American power abroad. Sixty percent of the world’s reserves are held in dollars. But some day a few astute foreigners will notice that the United States has no plan to finance its mounting debt with anything but further credit rollovers and borrowing. Those foreigners will then switch to currencies more likely to hold value than the dollar.
Meanwhile, years of diplomacy-free foreign policy and rampant militarism have gutted American diplomatic capacity. This has left the U.S. military to manage America’s international relations. But the generals and admirals have no answers to the dilemmas their own regime-change interventions and forever wars have created, let alone the pressing economic, technological, global governance, and financial challenges now facing the country. The deficit-induced inability of the United States to invest in human and physical infrastructure, science or medical services at home or anything other than military activities abroad continues to erode American competitiveness. China and other rising or resurgent powers are building rival competencies as American non-military capabilities erode. So, China and other nations are likely to play a larger role than the United States in determining what is to come. You get what you can pay for, not what you believe past leadership entitles you to.
After 9/11, Americans began a program of hit-and-run attempts to democratize other countries. As America’s founders had warned, such military and ideological adventurism is lethal to democratic constitutionalism. U.S. regime-change policies have stimulated smaller powers to develop their own means of striking back at the United States from afar, including with nuclear weapons. North Korea is the prime example of this. But, given recent events, it is hard to imagine that Iran and others will be far behind.
America’s amazing global success derived less from our military might than from our embrace of equality of opportunity and shaping of the world’s multilateral institutions, our openness, and our ability to constantly redefine ourselves as we assimilated and were changed by successive waves of immigrants. These were qualities that others everywhere admired and aspired to emulate. Border walls, Muslim bans, and the mean-spirited refoulement (or turning back) of refugees tell the world that the United States has set aside the values that long made it internationally inspiring to others.
And if democracy means citizen participation in setting policies, budgets, and national priorities, it is hard for foreigners to find much evidence of it in the contemporary United States – a nation now led by plutocrats and manipulated by deceptive media. Instead, they see American politics as both cynically venal and indecisive. The United States is now a nation in which intransigent partisanship appears to have succeeded the separation of powers as the basis of decision-making about public policy and personnel. To many abroad, America has lost its mojo.
It is against this unpromising background that the United States has decided that the only way to influence foreign nations is to use economic sanctions and military power to bring them to their knees. The Trump administration has leavened this approach to problematic opponents by coupling what it calls “maximum pressure” on them and their national interests as they see them with transparently insincere flattery of their leaders and appeals to their greed.
So far, however, the application of this bizarre approach to U.S. relations with nations like China, Iran, north Korea, Pakistan, and Turkey, as well as to Europe, has yielded nothing but pushback. Maximum pressure without the flattery has done nothing to advance U.S. interests in Cuba or Venezuela, while flattery without pressure has gained America nothing with Israel, Russia, or Saudi Arabia. Clearly, the United States needs to revamp its diplomatic doctrine.
In the meantime, Americans must expect increased hedging on the part of their traditional security partners. Even Britain now seeks to reduce dependence on the United States and its military technology. Germany and Japan are cautiously rebuilding the capacity to act on their own interests internationally without regard to the United States. As they do so, they are rearranging their strategic environments. It is unlikely that any foreign nation will attack the United States, since the consequences for an attacker would be too severe. But in time, many of America’s erstwhile military allies and protected states will reemerge as at least limited rivals of U.S. power in third countries and regions. Their previously confident dependence on the defense capabilities of the United States had successfully precluded this. But as they look only to their own interests, they will be ever less likely to make common cause with the U.S. on matters that concern them less than Americans.
That is unfortunate. For decades to come, both the security of Americans abroad and their safety at home are almost certain to be imperiled by delayed reactions from the relatives, friends, and coreligionists of the many dead in our so-called Global War on Terrorism. International cooperation is essential to manage and mitigate these threats, which are largely of our own making. Given U.S. self-centeredness and unilateralism, cooperation by other countries will be significantly less forthcoming than it might have been. Meanwhile, the foreign adversaries of the United States will begin to subject Americans to the deadly techniques Washington has devised to kill presumed terrorists since 9/11 – assassinations, cyberwar, drone attacks, and the like.
The good news is that the “attack surface” – the bases and deployments accessible to enemy attack – that the United States presents to foreign foes will shrink as American forces are brought home either at U.S. initiative or at that of the countries they have garrisoned. Circumstances have changed. In the Cold War, a U.S. military presence was valued by other countries as both a deterrent and a tripwire against foreign attack. Now a continuing U.S. presence is likely to be seen as both an attractive nuisance and an impediment to the negotiated resolution of the issues dividing nations by the peoples of those nations themselves. Examples include Afghanistan, Iraq, China, and Korea. The tension between the U.S. focus on deterring changes in the status quo and host-country citizens’ eagerness for the restoration of national unity makes longstanding military deployments increasingly precarious. Some U.S. overseas presences seem certain to generate unwelcome surprises.
Afghanistan. The ill-considered U.S. pacification campaign in that fractious country has failed. There has been neither clarity nor fixity about our objectives there. The main American goal now seems to be to withdraw without having to admit defeat. For now, however, U.S. and NATO forces remain a feature of the politico-military landscape to be exploited by all sides in their ongoing ethnic and religious conflicts and struggles to siphon off foreign aid and control the drug trade. As long as foreign troops remain in their country, Afghan factions will avoid the compromises with each other that the foreign presence enables them to sidestep or delay. The withdrawal of U.S. and other Western forces would remove a key impediment to peace. The United States should let Afghans work out Afghanistan’s problems even as we retain the ability to return to Afghanistan if it once again becomes a haven for terrorists with global reach. Iraq. The Shi`ite Arab majority in the Baghdad parliament has now formally demanded the departure of U.S. and other foreign forces. But the Kurds and many Sunni Arabs in Iraq view a continuing U.S. military presence as essential to preserve their ability to defy the authorities in Baghdad. The United States has inadvertently become the essential bulwark of the ethno-religious divisions that its invasion and occupation of Iraq energized. S. withdrawal would force Kurds, Sunnis, and Shi`i to attempt to hammer out a modus vivendi of some sort within a more unified Iraq. If successful, this would dilute Iraq’s sectarianism, deprive the so-called Islamic State of space to maneuver in a divided Iraq, revive Iraqi nationalism as the antidote to Iranian domination of Iraqi politics, and reopen the possibility that Iraq might once again balance Iran. Taiwan. The separation of the island from the rest of China resulted from a civil war among Chinese that was suspended but not ended by U.S. naval intervention in June 1950. Taiwan has since emerged as a far more attractive society than that on the mainland. But the military balance in the Taiwan Strait has shifted overwhelmingly against it. In this context, the Taiwan Relations Act’s vague unilateral U.S. undertaking to help defend the Chinese on Taiwan from those across the Strait provides Taiwanese with a persuasive rationale to avoid pursuing an agreed relationship with Chinese on the mainland. As frustration with the direction of Taiwan’s politics and American policy mounts in Beijing, a resumption of the Chinese civil war is becoming more rather than less likely. Less, rather than more U.S. military involvement would arguably both improve prospects for a negotiated resolution of Taiwan’s status by the Chinese parties themselves and eliminate the most likely casus belli between China and the United States. An active conflict over Taiwan could easily escalate to the level of a nuclear exchange. U.S. policies that sustain involvement in the latest phase of China’s civil war are long overdue for some sort of strategic triage. Korea. S. intervention in 1950 successfully prevented Korea’s unification under Pyongyang. The Korean War resulted in an armistice but no peace. In the 1950s, ‘60s, and ‘70s, a large U.S. troop presence was almost certainly the principal deterrent to renewed attack on the South by the North. But, the balance of power on the peninsula has long since shifted decisively in favor of the South, which has become one of the most successful societies on the planet. Today, South Korea’s economy is fifty times bigger than that in the North. Its armed forces are also vastly better equipped. In this century, an increasingly self-confident Seoul has begun to explore the possibility of peace with Koreans north of the 38th parallel. But the United States has remained focused solely on the north Korean military threat. Seoul and Washington are no longer in sync, still less in lockstep. “Kachi kapsida” – “we go together,” the US-ROK alliance slogan – rings increasingly hollow. Some South Koreans favor a continuing U.S. military presence in their country but ever more seem to view it as humiliating. Despite President Trump’s three meetings with Kim Jong-un, the United States continues to reject addressing North Korea’s security concerns as a prerequisite to facilitating arms control, including denuclearization, and intra-Korean détente. The American warfare state is adamantly opposed to any troop drawdown in Korea. But the possibility that South Koreans will insist on such withdrawals is increasing. This is in part because they do not want to be caught up in escalating Sino-American tensions and in part because they want a free hand to craft a relationship with their fellow Koreans to the North. The consequences for the U.S. position in Northeast Asia of a falling out over troop withdrawals could be as strategically damaging as north Korea’s unbroken drive to acquire a nuclear deterrent capable of striking the continental United States.
As Washington replaces staunch commitments to other countries with noncommittal stands and U.S. alliances decay, the risks of American self-isolation from multilateral bodies are also becoming ever more apparent. American repudiation of multilateral agreements like TPP and the Paris climate accords did not kill these institutions or cause others to discard their objectives. Japan took the lead in refashioning TPP into an eleven-member grouping that others now seek to join. It is now forging a loose Japanese-led order in East Asia to balance China. When Syria belatedly signed on to the Paris accords, the United States became the only nonmember on the planet. As these groups agree on programs and rules, Americans have no say in them. Indeed, there is a real danger that compensatory tariffs will eventually be applied to imports from countries that are not in compliance with multilaterally agreed rules about carbon emissions. The main, if not the only target of such tariffs would be the United States.
Washington’s efforts to incapacitate the WTO are now spurring the creation of more efficient tribunals for trade and investment dispute resolution. At the end of January, the EU, China, Brazil, South Korea, and twelve others agreed on a system to stand in for the WTO appellate process, which the United States had hamstrung. Another example is the Comprehensive Economic and Trade Agreement (CETA) between Canada and the EU. CETA eliminates tariffs on 98 percent of EU-Canada trade, harmonizes standards for regulated professions, facilitates staff transfers between companies operating in multiple jurisdictions, and stiffens the enforcement of intellectual property rights. It contemplates the establishment of a permanent multilateral investment court with improved rules for its members. By contrast, the so-called “phase one” trade deal with China entrenches U.S. protectionism and leaves future disputes to be resolved through bilateral tests of strength that amount to renewed trade wars.
The EU has adopted CETA as a model for future free trade agreements (FTAs). China’s Belt and Road Initiative similarly eliminates barriers to trade as well as transit and creates special courts to resolve trade and investment disputes among its participants. The new African Continental Free Trade Area does the same. The biggest things these initiatives have in common are their affirmation of multilateralism and their exclusion of the United States. The world is inventing post-WTO arrangements to expand trade and investment. It is doing so both despite America and without it.
Meanwhile, the United States has stepped up its use of the dollar as an instrument of economic warfare. America’s unilateral application and enforcement of dollar-based sanctions – including secondary sanctions that penalize third countries and their banks and companies for dealing with any country backlisted by Washington – reflects open U.S. contempt for the United Nations, international law, and other countries’ sovereignty. It is deeply resented internationally. This has driven the world’s major trading nations into a serious search for ways to end dollar supremacy. Their efforts have included the creation of alternatives to SWIFT (the Society for Worldwide Interbank Financial Telecommunications) to handle money transfer instructions.
The Russian “System for Transfer of Financial Messages” (STFS) has already de-dollarized 70 percent of trade within the Eurasian Economic Union. China’s UnionPay still uses dollars when converting currencies but, later this year, Beijing is expected to expand its Cross-Border International Payments System (CIPS) to connect some twenty banks in a worldwide payments superhighway for clearing and settling transactions in yuan. It will link up with the Russian STFS and an Indian system now being designed. Earlier, the EU established a “special vehicle” to conduct trade with Iran outside SWIFT. The BRICS group of countries (Brazil, Russia, India, China, and South Africa) is joining forces to create a single payment system – BRICS Pay.
The People’s Bank of China recently announced plans to issue a digital (blockchain-based) version of the Chinese yuan, allowing the world’s largest non-dollar economy to extend its almost cash-free domestic systems for settling transactions to the world. The link-up between a digitized yuan and emerging alternatives to SWIFT represents a major threat to the dollar’s continued near-monopoly of international trade settlement. It also threatens traditional banking because it promises a faster, much cheaper way to handle international transactions. Still the main driver of this and other new clearance mechanisms is the desire to evade the extraterritorial enforcement of U.S. policies that most of the world considers both illegal and obnoxious.
An erosion of dollar primacy would have profound effects on American hegemony. The U.S. ability to print money and exchange it for foreign goods and services would be reduced, if not ended. Dollar notes held overseas represent interest-free loans to the U.S. Federal Reserve Bank. Lessened demand for dollars overseas would lower the dollar’s value in relation to other currencies, reduce its credibility as a vehicle for storing value, and negate the rationale for its continued dominant role in foreign exchange reserves. The emergence of digital alternatives to the dollar in the global economy would lead to less liquid capital markets in the United States and increased costs to participants in them.
In these circumstances, America could no longer run persistent balance of trade and payments deficits. The overvaluation of the dollar that its primacy has sustained would end. The American standard of living would plunge. Degradation of the dollar’s status would greatly erode U.S. global influence. In short, the confluence of foreign resistance to U.S. bullying and the emergence of new fintech has created the possibility of a devastating monetary earthquake.
The causes and catalysts of the many nasty possibilities before us are, for the most part, decisions made in Washington, not abroad. The rise of China and India and the resurgence of Russia are not irrelevant but hardly central to what is happening. When one creates a strategic vacuum, it’s easier to blame the powers that are sucked into it than oneself.
But it is not China that has substituted the use of force and the pursuit of regime change for diplomacy. Other countries are not engaged in global drone warfare or “forever wars.” They do not occupy or maintain multiple bases in lands far from their borders or bill other countries for contributions to the common defense. They have not felt free to repudiate treaties and agreements to which they are party. Neither China nor other countries are trying to destroy the institutions of global governance or replace free-market transactions with government-managed trade. With the notable exception of Israel, other countries are not asserting a right to assassinate foreign officials. And they are not imposing unilateral sanctions or waging financial warfare on others. All these things are examples of American self-sabotage, not predatory foreign behavior. Curing these deviations from past practice and their pernicious consequences requires introspection and reform in Washington more than anywhere else.
If no such introspection and reform are forthcoming, the United States will have to compete with others under the law of the jungle that it has reintroduced. It will face mounting opposition from a loose coalition of resistance to its faltering hegemony. At the moment, America is trying to best China by pushing it into economic stagnation rather than acting to enhance U.S. economic dynamism. This is not working, and there is no reason to believe it ever will. In the end, America can be competitive only if it does what is necessary to rectify home-grown deficiencies and strengthen domestic capabilities and competencies.
This means addressing obvious areas of weakness and the trends that cause them, including:
A continuing refusal to raise taxes to fund the government. This guarantees competitive incapacity. Budget deficits preclude maintenance of existing infrastructure, let alone new initiatives to improve competitiveness at home and abroad. An undemanding educational system that is content with mediocrity in both world knowledge and vocational training. (Siemens reports that to make American workers competitive with German workers, it must give them six months of remedial training in math and other basic skills.) Domestic opposition to science and rejection of its findings, coupled with declining funding for basic scientific research and bans on the publication of politically unwelcome scientific data. Disinvestment in what have long been the world’s best universities and their increasing subjection to national security-derived restrictions on international collaboration. Visa bans and disapprovals that discourage foreign students, visitors, and investors. Inadequate and often irrelevant retraining of workers displaced by automation, foreign competition, or changes in industrial structure. Complacent but mistaken assumptions of superiority to other societies, which remain uncorrected out of disinterest in examining and adopting foreign best practices. (Recall the sneer with which Hillary Clinton dismissed Bernie Sanders’ 2016 suggestion that America might have a thing or two to learn from Denmark.) A tax structure that directs wealth to the plutocracy at the expense of both the middle class and an increasingly disaffected working class, and that hinders rather than supports socioeconomic mobility. (Among European countries, only Slovenia, Italy, and the U.K. now have less movement between classes than the contemporary United States.) Racial prejudice and growing barriers to the admission and absorption of foreigners and their ideas. An economy dominated by uncompetitive oligopolies, in which laws and regulations protect vested interests at the expense of new market entrants, and in which – contrary to the conventional wisdom – innovation is in secular decline. Disdain for expertise and a marked decline in the competence of government officials.
Many Americans know what we need to do to up our game. Still, there is next to no public discussion of our competitive weaknesses, their causes, or their remedies. We are in an election year. But few candidates have offered anything other than vague, cost-free prescriptions for restoring American competitiveness.
On one issue – the costs of war – the Watson Institute has stepped up to collect the data and raise the issues the Congress should have but hasn’t. There is a role for our great universities in stimulating the debate about the state of the nation and its future that the vested interests that dominate Washington have stifled. And there is a long list of neglected issues for the academy to choose from. Is it too much to hope that American civil society will intervene where an increasingly ineffectual government has failed to?
Did you like this article? Share it with your friends!
Written by Chas Freeman
Ambassador Freeman chairs Projects International, Inc. He is a retired U.S. defense official, diplomat, and interpreter, the recipient of numerous high honors and awards, a popular public speaker, and the author of five books.
Leo Semashko: How to overcome the main, deadly misfortune of the United States - militarism? What does the author think about the spherons as a nonviolent way to overcome militarism?
On Hostile Coexistence with China
Chas Freeman2019-05-03China, Diplomacy, Economics, Finance, Global, Intelligence, Military, Nuclear, Science, Speeches, Strategy, Taiwan, U.S. Foreign Policy, U.S. Politics, War
On Hostile Coexistence with China
Remarks to the Freeman Spogli Institute for International Studies China Program
Ambassador Chas W. Freeman, Jr. (USFS, Ret.)
Senior Fellow, Watson Institute for International and Public Affairs, Brown University
Stanford, California, 3 May 2019
President Trump’s trade war with China has quickly metastasized into every other domain of Sino-American relations. Washington is now trying to dismantle China’s interdependence with the American economy, curb its role in global governance, counter its foreign investments, cripple its companies, block its technological advance, punish its many deviations from liberal ideology, contest its borders, map its defenses, and sustain the ability to penetrate those defenses at will.
The message of hostility to China these efforts send is consistent and apparently comprehensive. Most Chinese believe it reflects an integrated U.S. view or strategy. It does not.
There is no longer an orderly policy process in Washington to coordinate, moderate, or control policy formulation or implementation. Instead, a populist president has effectively declared open season on China. This permits everyone in his administration to go after China as they wish. Every internationally engaged department and agency – the U.S. Special Trade Representative, the Departments of State, Treasury, Justice, Commerce, Defense, and Homeland Security – is doing its own thing about China. The president has unleashed an undisciplined onslaught. Evidently, he calculates that this will increase pressure on China to capitulate to his protectionist and mercantilist demands. That would give him something to boast about as he seeks reelection in 2020.
Trump’s presidency has been built on lower middle-class fears of displacement by immigrants and outsourcing of jobs to foreigners. His campaign found a footing in the anger of ordinary Americans – especially religious Americans – at the apparent contempt for them and indifference to their welfare of the country’s managerial and political elites. For many, the trade imbalance with China and Chinese rip-offs of U.S. technology became the explanations of choice for increasingly unfair income distribution, declining equality of opportunity, the deindustrialization of the job market, and the erosion of optimism in the United States.
In their views of China, many Americans now appear subconsciously to have combined images of the insidious Dr. Fu Manchu, Japan’s unnerving 1980s challenge to U.S. industrial and financial primacy, and a sense of existential threat analogous to the Sinophobia that inspired the Anti-Coolie and Chinese Exclusion Acts.
Meanwhile, the ineptitude of the American elite revealed by the 2008 financial crisis, the regular eruptions of racial violence and gun massacres in the United States, the persistence of paralyzing political constipation in Washington, and the arrogant unilateralism of “America First” have greatly diminished the appeal of America to the Chinese elite.
As a result, Sino-American interaction is now long on mutual indignation and very short on empirically validated information to substantiate the passions it evokes. on each side, the other is presumed guilty of a litany of iniquities. There is no process by which either side can achieve exoneration from the other’s accusations. Guesstimates, conjectures, a priori reasoning from dubious assumptions, and media-generated hallucinations are reiterated so often that they are taken as facts. The demagoguery of contemporary American populism ensures that in this country clamor about China needs no evidence at all to fuel it. Meanwhile, Chinese nationalism answers American rhetorical kicks in the teeth by swallowing the figurative blood in its mouth and refraining from responding in kind, while sullenly plotting revenge. 君子报仇十年不长.
We are now entering not just a post-American but post-Western era. In many ways the contours of the emerging world order are unclear. But one aspect of them is certain: China will play a larger and the U.S. a lesser role than before in global and regional governance. The Trump administration’s response to China’s increasing wealth and power does not bode well for this future. The pattern of mutual resentment and hostility the two countries are now establishing may turn out to be indelible. If so, the consequences for both and for world prosperity and peace could be deeply unsettling.
For now, America’s relationship with China appears to have become a vector compounded of many contradictory forces and factors, each with its own advocates and constituencies. The resentments of some counter the enthusiasms of others. No one now in government seems to be assessing the overall impact on American interests or wellbeing of an uncoordinated approach to relations with the world’s greatest rising power. And few in the United States seem to be considering the possibility that antagonism to China’s rise might end up harming the United States and its Asian security partners more than it does China. Or that, in extreme circumstances, it could even lead to a devastating trans-Pacific nuclear exchange.
Some of the complaints against China from the squirming mass of Sinophobes who have attached themselves to President Trump are entirely justified. The Chinese have been slow to accept the capitalist idea that knowledge is property that can be owned on an exclusive basis. This is, after all, contrary to a millennial Chinese tradition that regards copying as flattery, not a violation of genius. Chinese businessfolk have engaged in the theft of intellectual property rights not just from each other but from foreigners. Others may have done the same in the past, but they were nowhere near as big as China. China’s mere size makes its offenses intolerable. Neither the market economy in China nor China’s international trade and investment relationships can realize their potential until its disrespect for private property is corrected. The United States and the European Union (EU) are right to insist that the Chinese government fix this problem.
Many Chinese agree. Not a few quietly welcome foreign pressure to strengthen the enforcement of patents and trademarks, of which they are now large creators, in the Chinese domestic market. Even more hope the trade war will force their government to reinvigorate “reform and opening.” Fairer treatment of foreign-invested Chinese companies is not just a reasonable demand but one that serves the interests of the economically dominant but politically disadvantaged private sector in China. Chinese protectionism is an unlatched door against which the United States and others should continue to push.
But other complaints against China range from the partially warranted to the patently bogus. Some recall Hermann Göring’s cynical observation at Nuremberg that: “The people can always be brought to the bidding of the leaders. That is easy. All you have to do is tell them they are being attacked and denounce the pacifists for lack of patriotism and exposing the country to danger. It works the same way in any country.” There is a lot of this sort of manipulative reasoning at play in the deteriorating U.S. security relationship with the Chinese. Social and niche media, which make everything plausible and leave no truth unrefuted, facilitate this. In the Internet miasma of conspiracy theories, false narratives, fabricated reports, fictive “facts,” and outright lies, baseless hypotheses about China rapidly become firm convictions and long-discredited myths and rumors find easy resurrection.
Consider the speed with which a snappy phrase invented by an Indian polemicist – “debt-trap diplomacy” – has become universally accepted as encapsulating an alleged Chinese policy of international politico-economic predation. Yet the only instance of a so-called a “debt trap” ever cited is the port of Hambantota, commissioned by the since-ousted autocratic president of Sri Lanka to glorify his hometown. His successor correctly judged that the port was a white elephant and decided to offload it on the Chinese company that had built it by demanding that the company exchange the debt to it for equity. To recover any portion of its investment, the Chinese company now has to build some sort of economic hinterland for the port. Hambantota is less an example of a “debt trap” than of a stranded asset.
Then too, China is now routinely accused of iniquities that better describe the present-day United States than the People’s Middle Kingdom. Among the most ironic of such accusations is the charge that it is China, not a sociopathic “America First” assault on the international status quo, that is undermining both U.S. global leadership and the multilateral order remarkably wise American statesmen put in place some seven decades ago. But it is the United States, not China, that is ignoring the U.N. Charter, withdrawing from treaties and agreements, attempting to paralyze the World Trade Organization’s dispute resolution mechanisms, and substituting bilateral protectionist schemes for multilateral facilitation of international trade based on comparative advantage.
The WTO was intended as an antidote to mercantilism, also known as “government-managed trade.” China has come strongly to support globalization and free trade. These are the primary sources of its rise to prosperity. It is hardly surprising that China has become a strong defender of the trade and investment regime Americans designed and put in place.
By contrast, the Trump administration is all about mercantilism – boosting national power by minimizing imports and maximizing exports as part of a government effort to manage trade with unilateral tariffs and quotas, while exempting the United States from the rules it insists that others obey.
I will not go on except to note the absurdity of the thesis that “engagement” failed to transform China’s political system and should therefore be abandoned. Those who most vociferously advance this canard are the very people who used to complain that changing China’s political order was not the objective of engagement but that it should be. They now condemn engagement because it did not accomplish objectives that they wanted it to have but used to know that it didn’t. It is telling that American engagement with other illiberal societies (like Egypt, the Israeli occupation in Palestine, or the Philippines under President Duterte) is not condemned for having failed to change them.
That said, we should not slight the tremendous impact of America’s forty-year opening to China on its socioeconomic development. American engagement with China helped it develop policies that rapidly lifted at least 500 million people out of poverty. It transformed China from an angry, impoverished, and isolated power intent on overthrowing the capitalist world order to an active, increasingly wealthy, and very successful participant in that order. It midwifed the birth of a modernized economy that is now the largest single driver of the world’s economic growth and that, until the trade war intervened, was America’s fastest growing overseas market. American engagement with China helped reform its educational system to create a scientific, technological, engineering, and mathematical (“STEM”) workforce that already accounts for one-fourth of such workers in the global economy. For a while, China was a drag on human progress. It is now an engine accelerating it. That transformation owes a great deal to the breadth and depth of American engagement with it.
Nor should we underestimate the potential impact of the economic decoupling, political animosity, and military antagonism that U.S. policy is now institutionalizing. Even if the two sides conclude the current trade war, Washington now seems determined to do everything it can to hold China down. It seems appropriate to ask: can the United States succeed in doing this? What are the probable costs and consequences of attempting to do it? If America disengages from China, what influence, if any, will the United States have on its future evolution? What is that evolution likely to look like under conditions of hostile coexistence between the two countries?
Some likely answers, issue by issue.
First: the consequences of cutting back Sino-American economic interdependence.
The supply chains now tying the two economies together were forged by market-regulated comparative advantage. The U.S. attempt to impose government-dictated targets for Chinese purchases of agricultural commodities, semiconductors, and the like represents a political preemption of market forces. By simultaneously walking away from the Paris climate accords, TPP, the Iran nuclear deal, and other treaties and agreements, Washington has shown that it can no longer be trusted to respect the sanctity of contracts. The U.S. government has also demonstrated that it can ignore the economic interests of its farmers and manufacturers and impose politically motivated embargoes on them. The basic lesson Chinese have taken from recent U.S. diplomacy is that no one should rely on either America’s word or its industrial and agricultural exports.
For these reasons, the impending trade “deal” between China and the United States – if there is one – will be at most a truce that invites further struggle. It will be a short-term expedient, not a long-term reinvigoration of the Sino-American trade and investment relationship to American advantage. No future Chinese government will allow China to become substantially dependent on imports or supply chains involving a country as fickle and hostile as Trump’s America has proven to be. China will instead develop non-American sources of foodstuffs, natural resources, and manufactures, while pursuing a greater degree of self-reliance. More limited access to the China market for U.S. factories and farmers will depress U.S. growth rates. By trying to reduce U.S. interdependence with China, the Trump administration has inadvertently made the United States the supplier of last resort to what is fast becoming the world’s largest consumer market.
The consequences for American manufacturers of “losing” the China market are worsened by the issue of scale. China’s non-service economy already dwarfs that of the United States. Size matters. Chinese companies, based in a domestic market of unparalleled size, have economies of scale that give them major advantages in international competition. American companies producing goods – for example, construction equipment or digital switching gear – have just been put at a serious tariff disadvantage in the China market as China retaliates against U.S. protectionism by reciprocating it. one side effect of the new handicaps U.S. companies now face in the China market is more effective competition from Chinese companies, not just in China but in third country markets too.
Second: the U.S. effort to block an expanded Chinese role in global governance.
This is no more likely to succeed than the earlier American campaign to persuade allies and trading partners to boycott the Chinese-sponsored Asian Infrastructure Investment Bank (AIIB). That has isolated the United States, not China. Carping at the Belt and Road initiative and related programs from outside them does nothing to shape them to American advantage. It just deprives American companies of the profits they might gain from participating in them.
The United States seems to be acting out of nostalgia for the simplicities of a bipolar world order, in which countries could be pressured to stand with either the United States or its then rival. But China is not hampered by a dysfunctional ideology and economic system, as America’s Soviet adversary was. What’s more, today’s China is an integral member of international society, not a Soviet-style outcast. There is now, quite literally, no country willing to accept being forced to make a choice between Beijing and Washington. Instead, all seek to extract whatever benefits they can from relations with both and with other capitals as well, if they have something to offer. The binary choices, diplomatic group-think, and trench warfare of the Cold War have been succeeded by national identity politics and the opportunistic pursuit of political, economic, and military interests wherever they can be served. Past allegiances do not anywhere determine current behavior.
The sad reality is that the United States, which led the creation of the Bretton Woods institutions that have been at the core of the post-World War II rule-bound international system, now offers these institutions and their members neither funding nor reform. Both are necessary to promote development as balances of supply, demand, wealth, and power shift. The new organizations, like the AIIB and the New Development Bank, that China and others are creating are not predatory intrusions into the domain of American-dominated international finance. They are necessary responses to unmet financial and economic demand. Denouncing them does not alter that reality.
Other countries do not see these organizations as supplanting pre-existing lending institutions long led by the United States. The new institutions supplement the World Bank Group and regional development banks. They operate under slightly improved versions of the lending rules pioneered by the Bretton Woods legacy establishments. China is a major contributor to the new development banks, but it does not exercise a veto in them as the U.S. does in the IMF and World Bank. The AIIB’s staff is multinational (and includes Americans in key positions). The New Development Bank’s first president is Indian and its principal lending activity to date has been in South Africa.
Washington has chosen to boycott anything and everything sponsored by China. So far, the sad but entirely predictable result of this attempt to ostracize and reduce Chinese influence has not curbed China’s international clout but magnified it. By absenting itself from the new institutions, the United States is making itself increasingly irrelevant to the overall governance of multilateral development finance.
Third: the U.S. campaign to block China’s international investments, cripple its technology companies, and impede its scientific and technological advance.
The actions of the Committee on Foreign Investment in the United States (CFIUS) to prevent Chinese investment in American industry and agriculture are well publicized and are becoming ever more frequent. So are official American denunciations of Chinese telecommunications companies like Huawei and ZTE amidst intermittent efforts to shut them down. In an ominous echo of World War I’s anti-German, World War II’s anti-Japanese, and the Cold War’s anti-communist xenophobia, the FBI has begun issuing loud warnings about the menace posed by the large Chinese student presence on American campuses. Washington is adjusting visa policies to discourage such dangerous people from matriculating here. It has also mounted a strident campaign to persuade other countries to reject Chinese investments under the “Belt and Road” initiative.
In the aggregate, these policies represent a decision by the U.S. political elite to try to hamstring China, rather than to invest in strengthening America’s ability to compete with it. There is no reason whatsoever to believe this approach can succeed. China’s foreign direct investments have more than doubled over the past three years. Third countries are openly declining to go along with U.S. opposition to intensified economic relations with China. They want the capital, technology, and market openings that Chinese investment provides. U.S. denunciations of their interest in doing business with China are seldom accompanied by credible offers by American companies to match what their Chinese competitors offer. You can’t beat something with nothing.
It’s also not clear which country is most likely to be hurt by U.S. government obstruction of collaboration between Chinese and American STEM workers. There is a good chance the greatest damage will be to the United States. A fair number of native-born Americans seem more interested in religious myths, magic, and superheroes than in science. U.S. achievements in STEM owe much to immigration and to the presence of Chinese and other foreign researchers in America’s graduate schools. The Trump administration is trying to curtail both.
China already possesses one-fourth of the world’s STEM workforce. It is currently graduating three times as many STEM students annually as the United States. (Ironically, a significant percentage of STEM graduates in the United States are Chinese or other Asian nationals. Around half of those studying computer sciences in the United States are such foreigners.) American loss of contact with scientists in China and a reduced Chinese presence in U.S. research institutions can only retard the further advance of science in the United States.
China is rapidly increasing its investments in education, basic science, research, and development even as the United States reduces funding for these activities, which are the foundation of technological advance. The pace of innovation in China is visibly accelerating. Cutting Americans off from interaction with their Chinese counterparts while other countries continue risks causing the United States to fall behind not just China but other foreign competitors.
Finally: the U.S. military is in China’s face.
The U.S. Navy and Air Force patrol China’s coasts and test its defenses on a daily basis. U.S. strategy in the event of war with China – for example, over Taiwan – depends on overcoming those defenses so as to be able to strike deep into the Chinese homeland. The United States has just withdrawn from the treaty on intermediate nuclear forces in part to be able to deploy nuclear weapons to the Chinese periphery. In the short term, there is increasing danger of a war by accident, triggered by a mishap in the South China Sea, the Senkaku Archipelago, or by efforts by Taiwanese politicians to push the envelope of mainland tolerance of their island’s unsettled political status quo. These threats are driving growth in China’s defense budget and its development of capabilities to deny the United States continued military primacy in its adjacent seas.
In the long term, U.S. efforts to dominate China’s periphery invite a Chinese military response on America’s periphery like that formerly mounted by the Soviet Union. Moscow actively patrolled both U.S. coasts, stationed missile-launching submarines just off them, supported anti-American regimes in the Western Hemisphere, and relied on its ability to devastate the American homeland with nuclear weapons to deter war with the United States. on what basis does Washington imagine that Beijing cannot and will not eventually reciprocate the threat the U.S. forces surrounding China appear to pose to it?
Throughout the forty-two years of the Cold War, Americans maintained substantive military-to-military dialogue with their Soviet enemies. Both sides explicitly recognized the need for strategic balance and developed mechanisms for crisis management that could limit the risk of a war and a nuclear exchange between them. But no such dialogue, understandings, or mechanisms to control escalation now exist between the U.S. armed forces and the PLA. In their absence Americans attribute to the PLA all sorts of intentions and plans that are based on mirror-imaging rather than evidence.
The possibility that mutual misunderstanding will intensify military confrontation and increase the dangers it presents is growing. The chances of this are all the greater because the internal security and counterintelligence apparatuses in China and the United States appear to be engaged in a contest to see which can most thoroughly alienate the citizens of the other country. China is a police state. For Chinese in America, the United States sometimes seems to be on the way to becoming one.
It’s hard to avoid the conclusion that, if Washington stays on its current course, the United States will gain little, while ceding substantial ground to China and significantly increasing risks to its wellbeing, global leadership, and security.
Economically, China will become less welcoming to American exports. It will pursue import substitution or alternative sourcing for goods and services it has previously sourced in the United States. With impaired access to the world’s largest middle class and consumer economy, the United States will be pushed down the value chain. China’s ties to other major economies will grow faster than those with America, adversely affecting U.S. growth rates. Any reductions in the U.S. trade deficit with China will be offset by increases in trade deficits with the countries to which current production in China is relocated.
China’s role in global governance will expand as it adds new institutions and funds to the existing array of international organizations and takes a larger part in their management. The Belt and Road initiative will expand China’s economic reach to every corner of the Eurasian landmass and adjacent areas. The U.S. role in global rule-making and implementation will continue to recede. China will gradually displace the United States in setting global standards for trade, investment, transport, and the regulation of new technologies.
Chinese technological innovation will accelerate, but it will no longer advance in collaboration with American researchers and institutions. Instead it will do so indigenously and in cooperation with scientists outside the United States. U.S. universities will no longer attract the most brilliant students and researchers from China. The benefits of new technologies developed without American inputs may be withheld rather than shared with America, even as the leads the United States has long enjoyed in science and technology one-by-one erode and are eclipsed. As cordiality and connections between China and the United States wither, reasons for Chinese to respect the intellectual property of Americans will diminish rather than increase.
Given the forward deployment of U.S. forces, the Chinese military has the great advantage of a defensive posture and short lines of communication. The PLA is currently focused on countering U.S. power projection in the last tenth or so of the 6,000-mile span of the Pacific Ocean. In time, however, it is likely to seek to match American pressure on its borders with its own direct military pressure on the United States along the lines of what the Soviet armed forces once did.
The adversarial relationship that now exists between the U.S. armed forces and the PLA already fuels an arms race between them. This will likely expand and accelerate. The PLA is rapidly shrinking the gap between its capabilities and those of the U.S. armed forces. It is developing a nuclear triad to match that of the United States. The good news is that mutual deterrence seems possible. The bad news is that politicians in Taiwan and their fellow travelers in Washington are determinedly testing the policy frameworks and understandings that have, over the past forty years, tempered military confrontation in the Taiwan Strait with dialogue and rapprochement. Some in Taiwan seem to believe that they can count on the United States to intervene if they get themselves in trouble with Chinese across the Strait. The Chinese civil war, suspended but not ended by U.S. unilateral intervention in 1950, seems closer to a resumption than it has been for decades.
As a final note on politico-military aspects of Sino-American relations, in the United States, security clearances are now routinely withheld from anyone who has spent time in China. This guarantees that few intelligence analysts have the Fingerspitzengefühl – the feeling derived from direct experience – necessary to really understand China or the Chinese. Not to worry. The administration disbelieves the intelligence community. Policy is now made on the basis of ignorance overlaid with media-manufactured fantasies. In these circumstances, some enterprising Americans have taken to combing the dragon dung for nuggets of undigested Chinese malevolence, so they can preen before those in power now eager for such stuff. There is a Chinese expression that nicely describes such pretense: 屎壳螂戴花儿—又臭又美–“a dung beetle with flowers in its hair still stinks.”
All said, this does not add up to a fruitful approach to dealing with the multiple challenges that arise from China’s growing wealth and power. So, what is to be done? 该怎么办？
Here are a few suggestions.
First, accept the reality that China is both too big and too embedded in the international system to be dealt with bilaterally. The international system needs to adjust to and accommodate the seismic shifts in the regional and global balances of wealth and power that China’s rise is causing. To have any hope of success at adapting to the changes now underway, the United States needs to be backed by a coalition of the reasonable and farsighted. This can’t happen if the United States continues to act in contempt of alliances and partnerships. Washington needs to rediscover statecraft based on diplomacy and comity.
Second, forget government-managed trade and other forms of mercantilism. No one can hope to beat China at such a statist game. The world shouldn’t try. Nor should it empower the Chinese government to manage trade at the expense of market forces or China’s private sector. Governments can and – in my opinion – should set economic policy objectives, but everyone is better off when markets, not politicians, allocate capital and labor to achieve these.
Third, instead of pretending that China can be excluded from significant roles in regional and global governance, yield gracefully to its inclusion in both. Instead of attempting to ostracize China, leverage its wealth and power in support of the rule-bound order in which it rose to prosperity, including the WTO.
Fourth, accept that the United States has as much or more to gain than to lose by remaining open to science, technology, and educational exchanges with China. Be vigilant but moderate. Err on the side of openness and transnational collaboration in progress. Work on China to convince it that the costs of technology theft are ultimately too high for it to be worthwhile.
Fifth and finally, back away from provocative military actions on the China coast. Trade frequent “freedom of navigation operations” to protest Chinese interpretations of the U.N. Convention on the Law of the Sea for dialogue aimed at reaching common understandings of relevant interests and principles. Ratify the Convention on the Law of the Sea and make use of its dispute resolution mechanisms. As much as possible, call off military confrontation and look for activities, like the protection of commercial shipping, that are common interests. Seek common ground without prejudice to persisting differences.
In conclusion: both China and the United States need a peaceful international environment to be able to address long-neglected domestic problems. Doing more of what we’re now doing threatens to preclude either of us from sustaining the levels of peace, prosperity, and domestic tranquility that a more cooperative relationship would afford. Hostile coexistence between two such great nations injures both and benefits neither. It carries unacceptable risks. Americans and Chinese need to turn from the path we are now on. We can – we must – find a route forward that is better for both of us.
 For a gentleman, a decade’s wait for revenge is not too long.
From M. Brenner, 11-06-21