American Elephants


The Puzzlement of Trading With China by The Elephant's Child

You have probably noticed that I favor columns from Victor Davis Hanson, among others. I think he is an important voice today. Yesterday was no exception with “Trump on the Ground”— which is a comment on contemporary California. Dr. Hansen is currently in Hillsdale for a teaching assignment for some lucky kids at Hillsdale College. Does Trump Get Deserved Credit? he asks. Not necessarily since it wars with the paradox that Trump is now seen by many as useful, but not as presidential. When one is doing well, he has the luxury of dreaming that it might be better to do poorly under a so-called presidential leader. (Do read the whole thing)

Abroad, for all the hatred of Donald Trump, there is a quiet, though usually repressed, recognition that the United States is doing what it long should have been doing—leading the world to an economic recovery, despite Trump’s trash-talking tariffs, and going to the mat with China. Critics concede that China is culpable of all sorts of trade violations. They add in the past that nothing much worked to persuade them to follow the global norms of currency, labor, environmental, and safety regulations, as well as copyright and patent laws. And while they abhor tariffs, they nonetheless have no ideas otherwise how to nudge China to follow the rules of global citizenship.

“The Obama years may have allowed China to infringe on American global power, but under Trump. this tide is turning. As governments around the world watch China’s expanding reach with resignation, the president has signed into law a bill promising to restrict foreign investment in the U.S. Under the Foreign Investment Risk Review Modernization Act, the U.S. government has added a powerful tool to block other countries—namely China—from buying up or funneling money into US companies. This is directly protecting vital strategic assets and know-how.”

In 2015 and 16, Beijing’s corporations went on an overseas acquisitions spree that concluded with multibillion dollar deals throughout the U.S., while the Obama administration stood idly by. U.S. intelligence  has long classified Chinese firms as security risks, raising concerns that China is able to access technologies underpinning American military might and economic power. Now the new investment law and the new National Defense Authorization Act prohibits U.S. government agencies from using telecommunications and surveillance products from Chinese technology firms like ZTE and Hyawei, their voices are now codified into U.S. law.

America has been a major destination for Chinese foreign direct investment (FDI) in the last decade, and the largest target of Chinese capital flows since 2005. But even if Chinese President Xi tirelessly touts the supposed benign nature of investments, don’t be fooled: such investments are a favorite, and more surreptitious, weapon in the Chinese arsenal than the military – a weapon China is employing freely given the country cannot compete with U.S. military might in terms of capabilities and global force projection.

China is clearly trying to undermine America’s global power status through money rather than military might. Beijing’s pockets seem deep. Trump must draw some red lines abroad when it comes to Chinese investments. The consequences of Obama’s years of neglect will give China more of an advantage.

 




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