President Trump
and Emperor Xi appear to
arrived at an understanding:
tariffs on Chinese
goods will go no higher,
and China agrees to purchase
"substantial"
amounts of grains, energy
(presumably oil),
industrial and other
items from the US, as
well as designating fentanyl
a controlled substance.
The two countries
will continue to negotiate
to address their differences.
However, if no
further progress is made
by April 1st, the
President will raise tariffs
on most Chinese goods –
currently at 10% - to 25%.
The President's tactics
have produced some
results and the Chinese
are negotiating. Good,
one for our team.
But, we don't
know what China is prepared
to do if we raise the
tariffs in April. One commonly
noted concern is
the question of China’s
dominance in the rare
earth market; rare earths
are necessary in the production
of a whole host of
items that make up much
of our modern world,
and China is the largest
single source of rare
earths.
China, of course,
needs to be careful about
what it withholds. For
example, withholding
rare earths might seem
"easy," but rare earths
are, ironically, not terribly
rare; they're just difficult
to extract as they’re
usually found together,
requiring complex separation
processes. Playing
the rare earth card might
well result in the US finding
new sources and or
new technologies, leaving
China out of the market.
Meanwhile, arable
land and crop yields will
be harder for China to
"fix.”
But this really
raises more fundamental
questions: Where does
this end? What does the
US want? What does
China want?
US long-term
goals are actually fairly
clear – and have been for
quite some time: establish
justice, insure domestic
tranquility, provide for
the common defense,
promote the general welfare,
and secure the blessings
of liberty. Those are
more than mere platitudes
in the Preamble to
the Constitution. And
everything that works to
those ends is in our interest.
(Granted, exactly
how you specifically
define each makes for
interesting discussions,
but we have, at least, this
starting point.)
And China?
China's goals are a bit different.
China's goals
revolve around the goals
of the ruling clique, the
Chinese Communist
Power (CCP), which controls
all that nation’s
organs of power.
They say that
action speaks louder than
words and the action of
China over the past
decade and more speak
quite clearly; careful,
deliberate actions to take
de facto control of the
South China Sea – to
include building of
islands where there were
none and then arming
them; building the largest
navy in the world in
number of combatants
(over 500); expanding
economically into poorer
nations across Asia and
Africa, loaning huge
amounts of money and
establishing business
relationships that would
look familiar to Don
Corleone, even as they
purchase farm land
across Africa to address
their increasing need for
more grains and other
agricultural products.
All while continuing
to steal intellectual
property from the West,
and particularly the US,
at prodigious rates.
China has established it’s
first overseas base in
Djibouti, at the southern
terminus of the Red Sea
even as it expands its
control over the South
China Sea, creating a
"pincer” around the
Indian Ocean, a strategy
first described by the
naval strategist AT
Mahan.
China continues
to expand its footprint in
Pakistan and has begun
the first tentative steps
into Afghanistan and
elsewhere in central Asia,
slowly expanding its
presence in the Asian
heartland. Et cetera…
What does all this
mean?
Nothing is
impossible, but the odds
are that China isn’t going
to change its goals. Xi
will attempt to "hedge
his bets” come April 1st,
but there’s no reason to
believe China will stop
intellectual property
theft; in fact, they can’t
survive without it. They
will attempt to continue
to work around the US
Tariffs and can be expected
to cheat. We will need
to be diligent in watching
their actions. Hard bargaining
and tough negotiations
are certain.
We must recognize
that as long as the
CCP rules China, they’ll
continue their efforts to
expand de facto control
through Asia and elsewhere;
to expand their
political and military
influence; to exploit free
markets to their own
good at the expense of the
US and everyone else; to
practice predatory pricing;
and to continue theft
of American technology
and know-how.
The US won this
round. But this is far from
over and will probably
get worse before it gets
better. |