In my last post I mentioned how China was encountering resistance to its rising power. Now, via Kindred Winecoff, I see a whole mess of reportage about China's mounting internal difficulties. In no particular order:
1) Nouriel Roubini has focused his Dr. Doom-O-Vision on the Middle Kingdom, and doesn't like what he sees:
China’s economy is overheating now, but, over time, its current overinvestment will prove deflationary both domestically and globally. Once increasing fixed investment becomes impossible – most likely after 2013 – China is poised for a sharp slowdown. Instead of focusing on securing a soft landing today, Chinese policymakers should be worrying about the brick wall that economic growth may hit in the second half of the quinquennium....
[N]o country can be productive enough to reinvest 50% of GDP in new capital stock without eventually facing immense overcapacity and a staggering non-performing loan problem. China is rife with overinvestment in physical capital, infrastructure, and property. To a visitor, this is evident in sleek but empty airports and bullet trains (which will reduce the need for the 45 planned airports), highways to nowhere, thousands of colossal new central and provincial government buildings, ghost towns, and brand-new aluminum smelters kept closed to prevent global prices from plunging.
Commercial and high-end residential investment has been excessive, automobile capacity has outstripped even the recent surge in sales, and overcapacity in steel, cement, and other manufacturing sectors is increasing further. In the short run, the investment boom will fuel inflation, owing to the highly resource-intensive character of growth. But overcapacity will lead inevitably to serious deflationary pressures, starting with the manufacturing and real-estate sectors.
Eventually, most likely after 2013, China will suffer a hard landing. All historical episodes of excessive investment – including East Asia in the 1990’s – have ended with a financial crisis and/or a long period of slow growth. To avoid this fate, China needs to save less, reduce fixed investment, cut net exports as a share of GDP, and boost the share of consumption.
The trouble is that the reasons the Chinese save so much and consume so little are structural. It will take two decades of reforms to change the incentive to overinvest.
Now, Roubini is enough of a persistent doomsayer that it would be easy to discount this argument -- if it wasn't for the fact that this jibes with the opinion of other China economy-watchers. This coming-bust prophesizing comes on top of arguments made by Barry Eichengreen, Donghyun Park and Kwanho Shin that as China hits middle-income status, it will hit a "middle income trap" of slower growth. (One interesting question is whether, as China encounters rampant inflation, its eventual decision to let the RMB appreciate will help ease some of these pressures).
2) Meanwhile, China's political leadership appears to be engaged in a full-fledged freakout over the Arab revolutions and any whisper of a similar phenomenon happening in China. Rising food prices are leading to price controls and an anxious government monitoring if/when more expensive staple goods lead to political unrest. That said, Chinese authorities seem to be on top of the whole crushing dissent thing:
According to Chinese Human Rights Defenders, an NGO, by April 4th some 30 people had been detained and faced criminal charges relating to the so-called “jasmine revolution”—an inchoate internet campaign to emulate in China recent upheavals in the Middle East and north Africa. Human Rights Watch, another NGO, reports that a further 100-200 people have suffered repressive measures, from police summonses to house arrest. This has been accompanied by tighter censorship of the internet, the ousting of some liberal newspaper editors, and new curbs on foreign reporters in China, some of whom have been roughed up....
Even more worrying, however, is the increasing resort to informal detentions, punishments and disappearances. These are outside the law, offering the victim no protection at all. The government now dismisses the idea that one function of the law is to defend people against the arbitrary exercise of state power. On March 3rd a Chinese foreign-ministry spokeswoman told foreign journalists: “Don’t use the law as a shield.” Some people, she said, want to make trouble in China and “for people with these kinds of motives, I think no law can protect them.”
3) As for China's assessment of its external security situation, the State Council released its 2010 White Paper on defense last month. As this East Asia Forum summary suggests, there's a slight change in tone from the 2008 white paper:
The introductory assessment of the ‘security situation’ section notes that the ‘international balance of power is changing,’ that ‘international strategic competition centring on international order, comprehensive national strength and geopolitics has intensified,’ and that ‘international military competition remains fierce.’ Despite this sense of turbulence, and as was the case in 2008, the 2010 paper assesses that ‘the Asia Pacific security situation is generally stable.’ But the additional observation in the 2008 paper, namely, ‘that China’s security situation has improved steadily’ does not appear in 2010. One possible reason is that the 2010 paper reports that ‘suspicion about China, interference and countering moves against China from the outside are on the increase.’
In light of all these developments, yesterday's Economist editorial should come as no surprise:
The view from Beijing, thus, is different to the view from abroad. Whereas the outside world regards China’s rulers as all-powerful, the rulers themselves detect threats at every turn. The roots of this repression lie not in the leaders’ overweening confidence but in their nervousness. Their response to threats is to threaten others.
Now, as someone who's pointed out these problems on occasion on this blog, you might think I'm pleased as punch about these developments. Nope. First, from an economic standpoint, a recessionary China eliminates a vital engine of global economic growth. Second, as I wrote back in January:
Exaggerating Chinese power has consequences. Inside the Beltway, attitudes about American hegemony have shifted from complacency to panic. Fearful politicians representing scared voters have an incentive to scapegoat or lash out against a rising power -- to the detriment of all. Hysteria about Chinese power also provokes confusion and anger in China as Beijing is being asked to accept a burden it is not yet prepared to shoulder. China, after all, ranks 89th in the 2010 U.N. Human Development Index, just behind Turkmenistan and the Dominican Republic (the United States is fourth). Treating Beijing as more powerful than it is feeds Chinese bravado and insecurity at the same time. That is almost as dangerous a political cocktail as fear and panic.
Developing.... in very disturbing ways.
In response to my critical post from last week, I see that Ted Galen Carpenter has doubled down on his thesis that, "China benefits from U.S. policy blunders." Let's go through his main points, shall we?
America’s global popularity is still at anemic levels—and the initial euphoria about Barack Obama has faded noticeably. And as shown in the Pew Research Center’s 2010 survey of global attitudes, America’s reputation in the Muslim world is not just anemic, it is hideous. That’s 2010, Dan, not 2006.
Two responses. First, the poll data Carpenter cites reflects attitudes about Barack Obama in particular and not the United States in general. Since what we're both concerned with is America's soft power rather than Obama's, let's take a look at the BBC's latest World Service Country Rating Poll, since that asks the more appropriate survey question:
Views of the US continued their overall improvement in 2011, according to the annual BBC World Service Country Rating Poll of 27 countries around the world.
Of the countries surveyed, 18 hold predominantly positive views of the US, seven hold negative views and two are divided. On average , 49 per cent of people have positive views of US influence in the world--up four points from 2010--and 31 per cent hold negative views. The poll, conducted by GlobeScan/PIPA, asked a total of 28,619 people to rate the influence in the world of 16 major nations, plus the European Union.
In 2007 a slight majority (54%) had a negative view of the United States and only close to three in ten (28%) had a positive view; America was among the countries with the lowest ratings. Views began to rise in 2008, with positive views rising to 32% on average, and now the USA is in a middle tier position, ranking substantially higher than China (emphases added)
Oh, and that's 2011 data, Ted.
Carpernter emphasizes the Middle East, and it's certainly true that U.S. favorability there remains quite low. Even in that region, however, the latest data suggests things aren't getting worse, except in the country where the data is OBE:
As views of the USA continue to improve globally, the upwards trend is also apparent in Muslim countries. For the first time, a majority of Indonesians are now positive about the USA's role in the world (58%, a rise of 22 points over the last year). Negative views of the USA in Turkey have dropped sharply from 70 per cent to 49 per cent, while negative views in Pakistan of the USA have also fallen slightly, from 52 per cent to 46 per cent. Conversely, Egypt, after a lift in 2009 and 2010, has reverted to a predominantly negative view of the USA, with 50 per cent of Egyptians considering that the USA's role in the world is mostly negative.
As for China's ability to exploit the current situation, here's Carpenter's response:
China has shown recent signs of dialing back some of the more objectionable features of its policy. That stands in marked contrast to the U.S. military escalation in Afghanistan, Washington’s transparent efforts to maintain an outsized presence in Iraq after the scheduled withdrawal of its military forces, and the new intervention in Libya. In terms of intrusive policies, China doesn’t begin to compete with the United States....
[China's] weaknesses do not include running $1.5 trillion annual budget deficits (much less having much of that debt funded by one’s principal geopolitical competitor). Nor do China’s weaknesses include overstretching its military forces in Middle Eastern and South-Central Asian snake pits. Those are actions that the United States has taken, and it is naïve in the extreme to assume that China does not benefit strategically and financially from such folly. Yet, oddly, Drezner addresses none of those points contained in my TNI piece.
Carpenter's point about U.S. military overextension is a good one, and is a concern I share. Our disagreement is on the magnitude of the policy externalities that flow from this overextension. Carpenter thinks it's disastrous; I think it's regrettable but not at the root of imminent U.S. decline to China.
First, it's worth noting that while defense spending plays a supporting role in the worsening U.S. fiscal situation, tax cuts and domestic expenditures are far more culpable. Second, I have looked at whether China's holdings of U.S. debt lead to geopolitical weakness -- and concluded that this concern has been vastly exaggerated.
Third, again, looking at global public opinion, there's evidence that China's economic rise has provoked far more anxiety than Carpenter realizes. As Chinese power continues to grow (and that's going to happen regardless of U.S. strategy), more and more countries will be willing to balance with the United States regardless of past military errors. Indeed, the "nationalistic swagger" that Carpenter references among Chinese policy circles is going to exacerbate and not retard this trend.
I agree with Carpenter that it would be better for the U.S. to reduce its overseas military posture, particularly in Iraq and Afghanistan. That said, China has profited surprisingly little from these missteps, and will experience greater geopolitical pushhback over time. I'm also disappointed that Carpenter failed to address the question of how democratizing nations in the Middle East will view a China that continues to act in an authoritarian manner -- particularly towards its own Muslim population in Xinjiang. It's not a coincidence that Iranian protestors started chanting "Death to China!" back in 2009.
The bottom line is that Carpenter's analysis exhibits far too much of the doomsaying and pessimistic thinking that plagues American realists and their cheerleaders.
Over at The National Interest, Ted Galen Carpenter blogs that America's militarized focus on the Middle East is providing a huge strategic opening for China:
Members of China’s political elite who are eager for the Middle Kingdom to displace the United States as the world’s leading power probably can’t believe their good fortune. America has so many natural advantages that such a displacement would normally take several generations, if it occurred at all. Yet clumsy, counterproductive U.S. policies may be shortening that time frame dramatically....
Global meddling is also damaging the American brand with respect to political values and even popular culture. That is especially apparent in the Muslim world, where public opinion surveys reveal that positive views of the United States now sometimes languish in the single digits. But America’s popularity has waned even in Europe and other formerly very friendly regions. Even as Washington’s aggressive behavior alienates populations, especially in Asia, Africa, and Latin America, China is cultivating countries in those regions, portraying itself as a less intrusive, more cooperative political and economic partner.
Um, Ted? 2006 called, and it wants the hackneyed geopolitical analysis back.... and sent via MySpace.
Seriously, this blog post reads like it's five years old. It either ignores or elides the following facts:
2) Contrary to Carpenter's claims, the Libya intervention has gone down rather well on the Arab street.
3) China committed a series of foreign policy blunders in 2009 and 2010 that increased regional and global wariness about the Middle Kingdom and (according to China experts who talk to me) forced Beijing to rethink its grand strategy.
4) Chinese authorities are currently occupied with trying to censor news about the Arab revolutions, play hide and seek with its dissidents, get a grip on its real estate bubble, and avoid populist blowback for its Africa investments. I'm not seeing a lot of successful efforts by Beijing to push the "less intrusive" line elsewhere in the globe.
These are pretty important facts that get in the way of Carpenter's analysis. Now, there is a glimmer of truth to this kind of realpolitik argument. Saudi Arabia, for example, is less than thrilled with how the Obama administration is handling the Arab revolutions, and it might cozy up more to Beijing as a result. That said, if we're really witnessing a fouth wave of democratization in the Middle East, does Carpenter seriously think that these regimes will automatically be more sympathetic to China than the United States? That would be the realist argument, but I think this is one of those situaions when realists don't sound terribly grounded in reality.
There are a lot of good critiques that can be levied against American grand strategy and the Obama administration's foreign policy in the Middle East. The notion that China has gained a strategic advantage in recent months ain't one of them.
I held out as long as I could on the Charlie Sheen fiasco -- but damn Will Winecoff and the IR-relevant horse he rode in on!!
From yesterday's Global Times, Hao Leifeng provides a peculiarly... Chinese take on the whole brouhaha:
Actor Charlie Sheen is a classic example of the difference in Western and Eastern values and norms.
Ignoring public pleas from his father, Sheen has continued a weeklong media blitz, exhibiting obvious signs of mania. With no firm hand to guide them, Western media has deliberately goaded him into making increasingly delusional statements, more concerned about "winning" higher ratings than Sheen's own sense of pride, or the negative example his brash public admissions about his private sex life and unverifiable international conspiracies could be setting for society.
How many young people have been led astray by Sheen's boasts about his substance abuse and freewheeling sex life? And that was when he was in character on national television, as a randy bachelor in Two and a Half Men.
Sheen attracted 1 million Twitter followers in just 24 hours, yet more evidence that microblogs spread the most unhealthy contagions in society like a disease. Chinese family, coworkers, or the authorities would have taken firm steps to make sure someone like Sheen did not make a public spectacle of himself.
It's true: the Obama administration has been ridiculously slow on getting a handle on the Charlie Sheen issue. I mean, you know that if Hillary Clinton got Sheen in a room for an hour, this whole problem would go away. This just reinforces the administration's slowness on handling matters of serious popular culture.
OK, seriously, as I understand it, Global Times is not the same kind of official mouthpiece as, say, China Daily or People's Daily, so I wouldn't take this as the official Chinese Communist Party position. Hell, it might be a parody. Still, a few revealing things from this. There's the swipe against Twitter, and the emphasis on familial loyalties.
I see two other interesting reveals, however. The first is the proposed "Chinese" solution to this problem:
His employers are unhappy that he was distracted with prostitutes and drugs, and didn't show up to work on time. Why not take a tip from the Chinese business community, and make visits to a KTV parlor part of Sheen's workday?
And instead of epic parties at his home with porn stars, why not keep Sheen occupied with business banquets?
Sheen goes on television and boasts that he has two girlfriends, who both sleep in the same bedroom. Is he too poor to set up his wives and mistresses in different houses?
In Chinese society, these problems are dealt with delicately and privately. Sheen is like a typical Westerner throwing fuel on the fire with each interview and tweet. It is almost as if he feels no shame and is loving the attention.
Racism, spousal abuse, addiction, politics, mental illness, boasting about mistresses, - these are all subjects best dealt with behind closed doors.
Er... as near as I can determine, Sheen's bosses have been using this playbook for the entire run of Two and a Half Men. It's only when Sheen thoroughly rejected all outaside intervention that everything blew up. In other words, the Chinese solution to this was exactly the same as the American solution to this -- well, minus the massage parlors. This continued right up until the moment when Sheen decided that the "Charlie Sheen" drug could defeat all comers. And then he was suspended and subsequently fired. Perhaps the fact that the government decided not to send him to the countryside and instead just got his children out of his orbit is peculiarly "western."
Second -- and this is a genuine question to readers -- is Charlie Sheen actually a folk hero to anyone other than substance abusers at this point? I see the attention he's getting now as in the category of, "Wow, look at that massive 12-car pileup on the other side of the road!!! It's horrific, but I can't look away!" Granted, he's now a prime candidate for his own reality show -- but I'm not really sure that's winning the future.
This is the only time I will ask this about Charlie Sheen: what do you think?
[I]t's way easier to slip a humour piece disguised as a bizarre anti-US rant past the Chinese censor than it is to get a serious piece that is even vaguely critical of CCP policy published.
According to the Associated Press, Secretary of State Hillary Clinton dropped many pretenses and bluntly explained the birds, the bees, and the bombs with respect to the Sino-American relationship:
The U.S. risks falling behind China in the competition for global influence as Beijing woos leaders in the resource-rich Pacific, Secretary of State Hillary Rodham Clinton said Wednesday.
Her unusually strong comments before the Senate Foreign Relations Committee are certain to anger the communist power, especially in light of Chinese President Hu Jintao's recent high-profile visit to Washington, seen as boosting trust and trade between the world's two largest economies....
[S]he told senators, "We are a competition for influence with China. Let's put aside the humanitarian, do-good side of what we believe in. Let's just talk straight realpolitik. We are in competition with China."
She noted a "huge energy find" in Papua New Guinea by U.S. company Exxon Mobil Corp., which has begun drilling for natural gas there. Clinton said China was jockeying for influence in the region and seeing how it could "come in behind us and come in under us."....
Clinton also said China had brought all the leaders of small Pacific nations to Beijing and "wined them and dined them."...
Charles Freeman, a China expert at the Center for Strategic and International Studies in Washington, said the U.S. was "unquestionably" involved in a "soft power competition with China. But this isn't a hard power, Cold War exercise." (emphasis added)
So this is how soft power works! I can picture the scene......
[Setting: a small banquet hall. Violin music is playing in the background. A sumptuous feast is on a table, as are two large, empty wine glasses.]
CHINA: Say, we sure would love to get exclusive drilling rights to your offshore oil discoveries.
PAPUA NEW GUINEA: I'm not sure I should even be here. I mean, we've been in a long relationship with the United States. So many memories....
CHINA: Well, where is the United States right now? I don't see them paying as much attention to you as they should be.
PAPUA NEW GUINEA: America is a little short on cash now. Washington keeps saying that it will change, but... I've heard that song too many times before. The USA keeps saying, "it's not you, it's me." (grimaces)
CHINA: Say, have you tried the 1960 cheval blanc? It really is heavenly. (pours wine)
PAPUA NEW GUINEA: Oh. Oh my. Well, who would be hurt by an exploratory agreement? (lights dim)
OK, somewhat more seriously, Clinton's comments need to be put into perspective:
Clinton railed against cuts sought by Republican to the U.S. foreign aid program....
America's top diplomat accused China of supporting a dictatorial government in Fiji, where plans to reopen an office of the U.S. Agency for International Development would be shelved under a resolution passed last month by the Republican-led House. That measure proposes sharp cuts to foreign assistance, including a $21 million program to help Pacific islands vulnerable to rising sea levels, as part of efforts to rein in government spending....
She said foreign assistance was important on humanitarian and moral grounds, but also strategically essential for America's global influence.
"I mean, if anybody thinks that our retreating on these issues is somehow going to be irrelevant to the maintenance of our leadership in a world where we are competing with China, where we are competing with Iran, that is a mistaken notion," Clinton said.
Clinton is correct in the short term. If I was the foreign policy budget czar, I'd be transferring at least $100 billion from DoD to State on the premise that problem prevention is always more cost-effective than problem-solving.
The "China is going to eat our lunch" meme is a popular one in Washington for domestic reasons -- it's a great argument to motivate policy. The Obama administration is going to this well an awful lot, however. My concern is that this rhetorical device doesn't lead to any genuine policy change but does lead to blowback - i.e., it scares the crap out of everyone in DC. That's the worst of both worlds.
What do you think?
Last week Reuters' Emily Flitter filed quite the story, entitled "China flexed its muscles using U.S. Treasuries ," about China's financial power over the United States. Here's the opening:
Confidential diplomatic cables from the U.S. embassies in Beijing and Hong Kong lay bare China's growing influence as America's largest creditor.
As the U.S. Federal Reserve grappled with the aftershocks of financial crisis, the Chinese, like many others, suffered huge losses from their investments in American financial firms -- from Lehman Brothers to the Primary Reserve Fund, the money market fund that broke the buck.
The cables, obtained by WikiLeaks, show that escalating Chinese pressure prompted a procession of soothing visits from the U.S.Treasury Department. In one striking instance, a top Chinese money manager directly asked U.S. Treasury Secretary Timothy Geithner for a favor.
This story generated a lot of interest across the mediasphere. FT Alphaville called it "Diplomacy by US Treasuries." AFP reports that the "sensitive cables show just how much influence Beijing has and how keen Washington is to address its rival's concerns."
As someone who's published on this question, you'd think I'd be very happy at the attention this issue is receiving. And Flitter deserves kudos for going through the cables to find clear efforts by Chinese officials to use its financial muscle to get what it wanted from the United States.
The thing is, the reportage is framed to suggest that China not only asked for concessions, but the United States granted them. And Flitter's own story suggests that very little in the way of concessions actually happened.
Here are the portions of Flitter's story that discusses U.S. responses to Chinese pressure:
On Chinese requests to halt/restrict arms sales to Taiwan: Flitter records no response. These concerns were voiced in late 2008 and the arms sales went ahead in early 2010, so there doesn't appear to be much influence here. AFP suggests that this pressure led the U.S. to not sell F-16's to Taiwan, but I don't think that option was ever in the cards.
On Chinese demands that they be provided guarantees for Chinese re-entry into the U.S. repo market:
The U.S. government does not appear to have offered the Chinese a special setup guaranteeing U.S. banks. Instead, the cables show, American diplomats reassured the Chinese by pointing out that Washington had infused banks' balance sheets with $700 billion in fresh capital, effectively propping up the banking system.
On Chinese demands for providing explicit U.S. government guarantees of Fannie Mae and Freddie Mac debt:
To defuse the situation, the Treasury Department sent Undersecretary for International Affairs David McCormick to Beijing for two days in October 2008. The gesture went over well.
"All of Undersecretary McCormick's counterparts appeared to appreciate his willingness to come to Beijing in the midst of a financial crisis," Piccuta wrote in a cable dated October 29, 2008. "Interlocutors stressed that unless leaders' concerns about the viability of banks and U.S. government-sponsored enterprises (GSEs) are assuaged, lower-level officials will be constrained from taking on greater counter-party risks."
The cables show McCormick trying to reassure the Chinese. "In each meeting, Undersecretary McCormick emphasized that even though the U.S. government did not explicitly guarantee GSE debt, it effectively did so by committing to inject up to $100 billion of equity in each institution to avoid insolvency and that this contractual commitment would remain for the life of these institutions," [Deputy Chief of Mission at the U.S. Embassy in Beijing Dan] Piccuta wrote.
On Chinese protests regarding Federal Reserve purchases of Treasuries and agencies in March 2009: Flitter has no response, though the fact that the Fed went ahead with QE2 suggersts that Chinese pressure didn't deter the Federal Reserve.
On responses to Chinese requests that CIC be allowed to participate in bidding on Morgan Stanley's new equity issuance:
There's no record in the cable of how Geithner responded, but it was only a day later, on June 3, that CIC announced plans to purchase $1.2 billion in Morgan Stanley shares.
A spokesperson for the Fed said in the instance of the June 3 CIC investment, no application for an exemption was made to the Federal Reserve Board.
On the general dynamic of Chinese financial pressure:
The cables also indicate a high level of confidence among the Americans that China can't entirely stop buying U.S. debt, a sentiment shared by most economists who describe the dynamic as a form of mutually assured financial destruction.
So, to sum up, the Chinese maybe got a small break on being able to particupate in the Morgan Stanley auction. Beyond that, all of these efforts led to the dilomatiic equivalent of hand-holding and not much else. And, hey, what do you know, that's pretty much consistent with what I wrote about this back in late 2009. So, contrary to some deep-seated fears of mine, the Wikiliaks cables appears to buttress rather than contradict prior scholarship.
Flitter deserves credit for making explicit what had only been inferred, but I'm worried that commentators are drawing the wrong lessons from her article. The big reveal here is not that China tried to exercise its financial muscle. The big reveal is that these efforts generated next to nothing in the way of U.S. concessions. China's financial might does give it the ability to deter U.S. pressure -- but to China's growing frustration, it doesn't yield much else.
Earlier this week Treasury Secretary Timothy Geithner went to Brazil as part of a long-running effort to get that country to pressure China on its exchange-rate policy. This effort had yielded some marginal successes in the past, but it had also yielded comments like Brazilian Foreign Minister saying: "I believe that this idea of putting pressure on a country is not the right way for finding solutions. We have good co-ordination with China and we've been talking to them. We can't forget that China is currently our main customer (emphasis added)."
The mild surprise is that Geithner's plea appeared to find a receptive audience in Brasilia. From the Financial Times' Joe Leahy:
Any alignment with the US on the issue of China’s currency would mark a fundamental shift for Brazil. Luiz Inácio Lula da Silva, Brazil’s previous president, had pursued a trade policy that was partially dictated by his vision of a grand “south-south” alliance among developing countries.
His pragmatic successor, Dilma Rousseff, is more concerned that Brazil exports primarily commodities to China while its domestic manufacturing industry is being undermined by a strong exchange rate and cheap imports.
Ms Rousseff has also toned down her predecessor’s criticism of US monetary policy, which Mr Lula da Silva’s administration blamed for exacerbating global capital flows....
One person familiar with the government’s stance said Brazil was considering a public declaration on global imbalances and China’s undervalued currency during Mr Obama’s visit.
“The idea is we might issue a communiqué in which maybe we can work in common language to try to stress this matter,” the person said.
What's going on? A few things. First, it's probably true that this shift won't amount to all that much in terms of affecting China's policies. Second, this is an effective way for Rousseff to distinguish herself from Lula, and she's backing up the rhetorical shift with action items. Third, Lula's foreign policy on this point was always based more on old-fashioned third world solidarity than anything approximating Brazil's national interest. Not that Lula's foreign policy was all that bad, mind you, but this seems more like a return to Brazil's equilibrium set of interests.
If the Obama administration was smart, they would capitalize on this newfound friendship with Latin America's largest country with some big, meaningful and yet highly symbolic foreign policy initiative. If only there was some moribund-yet-highly-useful foreign policy initiative that would cement the relationship. But that's just crazy talk.…
Your humble blogger likes to occasionally check the interwebs to make sure that no one is abusing Thucydides in making an argument about modern-day international relations. In descending order of offensiveness, examples of Thucydides Abuse include:
1) Blatantly making up what Thucydides actually said in History of the Peloponnesian War;
2) Exaggerating how Thucydides can contribute to understanding world politics today;
3) Writing the truth, but not the whole truth, about Thucydides' history.
Yesterday David Sanger invoked Thucydides in his New York Times Week in Review essay on a rising China and a fading United States. Let's see how he did:
For a superpower, dealing with the fast rise of a rich, brash competitor has always been an iffy thing....
[A]sk Thucydides, the Athenian historian whose tome on the Peloponnesian War has ruined many a college freshman's weekend. The line they had to remember for the test was his conclusion: "What made war inevitable was the growth of Athenian power and the fear which this caused in Sparta."
So while no official would dare say so publicly as President Hu Jintao bounced from the White House to meetings with business leaders to factories in Chicago last week, his visit, from both sides' points of view, was all about managing China's rise and defusing the fears that it triggers. Both Mr. Hu and President Obama seemed desperate to avoid what Graham Allison of Harvard University has labeled "the Thucydides Trap" - that deadly combination of calculation and emotion that, over the years, can turn healthy rivalry into antagonism or worse....
[I]n both capitals, fear makes for good business: It's a proven way to sell weapons systems.
Meanwhile, Thucydides might be appalled at the nationalistic talk that resounds in both countries. In Chinese newspapers these days, it's hard to avoid accounts of "American decline." Meanwhile, some new members of Congress talk lightly of cutting off Chinese access to the American market - as if that could happen in today's global economy.
In both languages, that's fear talking.
You know what? Given the space constraints, Sanger does pretty well. He manages to nail the subtle point about how fear leads to the worst sort of policy decisions. It is telling that, as the war progresses, Athenian decision-making devolves. Initially, the country's leaders understand that "fear, honor and interest" guide foreign policy. By the time the invasion of Sicily comes around, however, the Athenian leadership has reduced this to fear. Sanger actually quotes Thucydides rather than paraphrasing him. By modern journalistic standards, that's pretty extraordinary.
Nonetheless, Sanger commits the misdemeanor of omitting the whole truth of Thucydides. This is important, because the omission gets at how the historical analogy doesn't really hold up.
First, Sparta was never the hegemonic power prior to the war -- at best, they were a co-equal of Athens. That's not the current situation.
Second, Sparta was scolded by its allies -- and implicitly, by Thucydides himself -- for excessive caution when confronted with a rising power. Throughout the History of the Peloponnesian War, Thucydides contrasts Athenian energy and dynamism with Spartan conservatism and risk-aversion. Spartan fear was triggered by past Spartan inaction and caution.
Now, say what you will about American foreign policy, but conservatism and risk-aversion have not been nouns associated with it for quite some time. Similarly, until about mid-2009, China was not thought of as a source of foreign policy dynamism. Furthermore, when China's foreign policy changed, so did the United States'. Comparing the Obama administration's response to Spartan inaction doesn't hold up.
In the sparest structural sense, there are a few parallels that can be drawn between Greece in the fifth century B.C.E. and the present day. On the whole, however, I think the Athens-Sparta historical analogy obfuscates more than it enlightens.
Readers are warmly encouraged to alert the hard-working staff here at the blog for any further abuses of Thucydides. I mean, you know this is going to crop up on the next Jersey Shore episode.
I see that The Powers That Be at FP are highlighting my
unconventional wisdom about China's rise on their splash page.
Given the Hu-Obama summit and subsequent flurry of China commentary this week, it's worth highlighting the most absurd data point I cited in that article -- Forbes' magazine's decision to name Chinese President Hu Jintao the world's most powerful individual. Their explanation:
Paramount political leader of more people than anyone else on the planet; exercises near dictatorial control over 1.3 billion people, one-fifth of world's population. Unlike Western counterparts, Hu can divert rivers, build cities, jail dissidents and censor Internet without meddling from pesky bureaucrats, courts.
With these two sentences, the editors at Forbes managed to demonstrate an even shallower analysis of domestic politics than their Dinesh D'Souza cover story on Obama, which I didn't think was possible.
Let's review just a smattering of coverage about Hu Jintao's current ability to exercise iron-willed control over the Chinese bureaucracy, shall we? First, Gordon Chang in The New Republic:
Hu is sometimes called the world's most powerful person -- Forbes magazine gave him that accolade in November -- but he is a weak leader back home. Just how weak was revealed in two startling incidents within the past three weeks. On Tuesday, after the state-run Chengdu Aircraft Design and Research Institute performed the first flight test of the J-20 stealth fighter -- an unmistakable slap in the face of Defense Secretary Robert Gates, who was visiting Beijing at the time -- Hu professed not to know that the test had occurred....
If the Chinese leader was telling the truth, the test flight reveals a remarkable defiance of civilian authority by the flag officers of the People's Liberation Army, an obvious attempt to undermine the military cooperation Hu said he wanted to foster. Or if, as is more likely, Hu did in fact know about the timing of the test, he nonetheless said something that made himself appear inept. One has to wonder about a political system that creates incentives for its top leader to publicly imply that he is both ignorant and weak.
Either way, the unmistakable impression is that Hu seems to have much less influence than is often assumed. This could be due to the fact that China is in the middle of a transition to the next generation of political leaders -- led by Xi Jinping -- who are gaining in power as Hu loses his in the long run up to the actual handover.
Next, the Economist:
China's new raw-knuckle diplomacy is partly the consequence of a rowdy debate raging inside China about how the country should exercise its new-found power. The liberal, internationalist wing of the establishment, always small, has been drowned out by a nativist movement, fanned by the internet, which mistrusts an American-led international order.
Then there's Drew Thompson in -- hey, it's FP!!
China's national security decision-making process is opaque, and so this worrisome disconnect -- who knew what when -- is difficult to ascertain with certainty. It is highly improbable that Hu was unaware of the development of this major military advancement. His role as chairman of the Central Military Commission ensures that he is well briefed about major programs, and he doubtlessly approves their large budgets. What is not known is how much oversight and control the central government leadership in Beijing had over the PLA's decision-making process that lead to highly visible tests at the Chengdu air base just as Gates was visiting China.
And, finally, David Sanger and Michael Wines in the New York Times:
China is far wealthier and more influential, but Mr. Hu also may be the weakest leader of the Communist era. He is less able to project authority than his predecessors were -- and perhaps less able to keep relations between the world's two largest economies from becoming more adversarial.
Mr. Hu's strange encounter with Defense Secretary Robert M. Gates here last week -- in which he was apparently unaware that his own air force had just test-flown China's first stealth fighter -- was only the latest case suggesting that he has been boxed in or circumvented by rival power centers....
President Obama's top advisers have concluded that Mr. Hu is often at the mercy of a diffuse ruling party in which generals, ministers and big corporate interests have more clout, and less deference, than they did in the days of Mao or Deng Xiaoping, who commanded basically unquestioned authority....
"There is a remarkable amount of chaos in the system, more than you ever saw dealing with the Chinese 20 years ago," Brent Scowcroft, the former national security adviser and Mr. Gates's mentor, said Saturday. "The military doesn't participate in the system the way it once did. They are more autonomous -- and so are a lot of others."
Now, to be fair, it's possible that China is learning how to play the authoritarian equivalent of the two-level game. Even if that's true, however, China is playing that game very badly -- and they're playing it in policy arenas that are guaranteed to trigger a balancing coalition rather than accommodation.
OK, contest for readers -- name the award that I want to give to writers who vastly exaggerate China's rise!
I'm at the point in my life when there are only three occasions that prompt the watching of cable news:
1) An election night;
2) A real-time breaking news event in which video has a comparative advantage over the web;
3) Being on the treadmill on a slow sports day with nothing good on basic cable.
So yesterday was no. 3, and I caught a report on Fox News about "pre-summit brinkmanship" on the part Hu Jintao. The headline was accurate: "China's President Hu Jintao: Dollar-Based System 'Thing of the Past.'" And I should stress that Fox News was hardly the only news outlet to jump on this turn of phrase.
That said, some perspective might be in order. The statement came from a
series of answers that
a committee of propaganda writers with the
stylistic panache of Andrei Gromyko Hu provided to the Wall
Street Journal and Washington
Let's reprint the question and answer in full, shall we?
Q: What do you think will be the US dollar's future role in the world? How do you see the issue of making the RMB an international currency? Some think that RMB appreciation may curb China's inflation, what's your view on that?
HU: The current international currency system is the product of the past. As a major reserve currency, the US dollar is used in considerable amount of global trade in commodities as well as in most of the investment and financial transactions. The monetary policy of the United States has a major impact on global liquidity and capital flows and therefore, the liquidity of the US dollar should be kept at a reasonable and stable level.
It takes a long time for a country's currency to be widely accepted in the world. China has made important contribution to the world economy in terms of total economic output and trade, and the RMB has played a role in the world economic development. But making the RMB an international currency will be a fairly long process. The on-going pilot programs for RMB settlement of cross-border trade and investment transactions are a concrete step that China has taken to respond to the international financial crisis, with the purpose of promoting trade and investment facilitation. They fit in well with market demand as evidenced by the rapidly expanding scale of these transactions.
China has adopted a package plan to curb inflation, including interest rate adjustment. We have adopted a managed floating exchange rate regime based on market supply and demand with reference to a basket of currencies. Changes in exchange rate are a result of multiple factors, including the balance of international payment and market supply and demand. In this sense, inflation can hardly be the main factor in determining the exchange rate policy (emphases added).
Meh. First of all, Hu isn't saying anything here that hasn't been said by other Chinese officials since early 2009.
Second of all, Hu didn't say that the RMB was going to be supplanting the dollar anytime soon. In fact, he pretty much said the opposite of that. China wants a multiple-reserve currency regime, and they're moving veeeerrrrrry slowly to bring their currency into the conversation. And minus the RMB, as I've said before, there ain't much in the way of viable alternatives right now.
If you read the rest of the answers, there's a lot of
"stiffly worded answers" mixed in with "a positive note on
bilateral ties," as Richard MacGregor of the Financial Times notes.
What I don't see is any brinkmanship.
Substantively, however, what about the future? Will a multiple currency reserve system work? It's a vision shared by Barry Eichengreen, Nicolas Sarkozy, and.... well, I'm not sure who else. I have my doubts, but I can't quite convey them in a single blog post.
What do you think?
Theories of International Politics and Zombies is now available for order, not pre-order, but order, at Amazon.com. Right now -- blink and it will change -- TIPZ is in the top 20 ranking among Amazon's international relations books.
To celebrate, and given the ongoing hullabaloo over the Chinese way of parenting, the subsequent claim that the Wall Street Journal Got It Wrong, and the inevitable response by the Jewish mothering clan, let me offer the following zombie perspective:
Why Zombie Moms are Superior
(as told to Daniel W. Drezner behind protective glass)
A lot of people wonder how zombie parents raise such stereotypically ravenous kids. They wonder what these parents do to produce so many biters and gnawers, what it's like inside the family, and whether they could do it too. Well, I can tell them, because I've done it. Here are some things my daughters were never allowed to do:
• attend a sleepover with breathing humans
• have a playdate with humans
• be in a school play, unless the eating of humans was called for
• complain about not being in a school play with humans
• watch TV or play computer games, especially Left 4 Dead
• choose their own extracurricular activities -- zombies have no extracurricular activities
• bite anything less than grade A braaaaaaaaaaaaaiiiiiinns
• not be the No. 1 student in keeping their teeth razor sharp
• play any instrument.
I'm using the term "zombie mother" loosely. I know some members of the Donner Party, West African, Papua New Guinean, Maori, and vampire parents who qualify too. Conversely, I know some mothers, almost always born in Haiti, who are not zombie mothers, by choice of their voodoo master or otherwise. I'm also using the term "human parents" loosely. Human parents come in all varieties and tastes....
Even when human parents think they're being strict, they usually don't come close to being zombies. For example, my human neighbors who consider themselves strict make their children bus their plate to the sink when they've finished dinner. Maybe. For a zombie mother, cleaning the plates is the easy part. It's teaching the children to go forage for live human braaaaaaiiiiiiins, drag them back to the house, and then devour them in full that gets tough. They never like to finish the frontal lobe....
There are all these new books out there portraying zombie mothers as scheming, callous, overdriven people indifferent to their kids' true interests. For their part, many zombies secretly believe that they care more about their children and are willing to sacrifice much more for them than humans, who seem perfectly content to let their children turn out badly. I think it's a misunderstanding on both sides. All decent parents want to do what's best for their children. The zombies just have a totally different idea of how to do that.
Human parents try to respect their children's individuality, encouraging them to pursue their true passions, supporting their choices, and providing positive reinforcement and a nurturing environment. By contrast, the zombies believe that the best way to protect their children is by preparing them for the future, letting them see who they're capable of eating, and arming them with skills, work habits and inner confidence that no breather can ever take away.
And if none of that works, we will always be prepared to have our limbs shot off to secure a tasty braaaaaaiiiiiiin for our children. Would human parents to that for their kids? I didn't think so.
The scary part of this is how little I had to do to adapt the source material for this post.
UPDATE: Chas Homans alerts me to the fact that Chinese mothers might have more incommon with zombie moms than I originally thought:
In [Lac Su's] case, PTSD, which stands for post-traumatic stress disorder, could easily mean "parental trauma stress disorder." His parents, thinking he was "slow," subjected him to hours of supplemental tutoring -- and when he still failed to meet their standards, tried a different kind of intellectual supplement, making him eat an entire cow brain every Saturday until he was eight years old (emphasis added).
Of course, zombie moms are way more unrelenting than Chinese moms. That kid would have had to consume brains every day in a zombie household.
Foreign Policy asked many smart people, and then me, for some nuggets of unconventional wisdom heading into 2011. My contribution is on how China isn't all that and a bag of chips.
My closing paragraph:
Exaggerating Chinese power has consequences. Inside the Beltway, attitudes about American hegemony have shifted from complacency to panic. Fearful politicians representing scared voters have an incentive to scapegoat or lash out against a rising power -- to the detriment of all. Hysteria about Chinese power also provokes confusion and anger in China as Beijing is being asked to accept a burden it is not yet prepared to shoulder. China, after all, ranks 89th in the 2010 U.N. Human Development Index, just behind Turkmenistan and the Dominican Republic (the United States is fourth). Treating Beijing as more powerful than it is feeds Chinese bravado and insecurity at the same time. That is almost as dangerous a political cocktail as fear and panic.
Be sure to read the rest of them -- really, the other contributors are all smarter than me.
Earlier this week I speculated as to why North Korea did not respond to a series of South Korean military drills. In the list of possibilities I provided, I was somewhat skeptical that Chinese pressure was the answer.
In today's New York Times, however, Mark Landler quotes some Obama administration sources suggesting that Chinese (and Russian) pressure was a determining factor:
after a tense week, when the threat of war hung over the Korean Peninsula, the Obama administration and Beijing seem finally to be on the same page.
Administration officials said the Chinese government had embraced an American plan to press the North to reconcile with the South after its deadly attacks on a South Korean island and a warship. The United States believes the Chinese also worked successfully to curb North Korea’s belligerent behavior.
China’s pressure, several senior officials said this week, might help explain why North Korea did not respond militarily to live-fire drills conducted this week by the South Korean military, when a previous drill drew an artillery barrage from the North that killed two South Korean civilians and two soldiers.
As evidence of the policy shift, officials pointed to recent remarks by China’s foreign minister, Yang Jiechi, in which he urged the North and South “to carry out dialogue and contact.” Previously, Beijing’s response had been to propose an emergency meeting of the six-party group that negotiates with North Korea over its nuclear program, a step the United States opposed as rewarding the North’s aggression....
China swiftly dispatched a senior diplomat to Pyongyang, the North Korean capital, and officials said he conveyed a strong message about “the unacceptability of attacks and killings of South Koreans,” said a senior American official, who spoke on condition of anonymity in order to discuss sensitive diplomatic matters.
“The idea that there could be these one-off provocations without expectation of a military response, as the North had behaved in the past, the Chinese now understand that this is no longer the reality, no longer acceptable,” he said.
John Pomfret hits similar notes in his Washington Post story. Actually, it's an even more optimistic assessment :
The United States and China are closing out the year on a positive note on many fronts - including trade, military ties, climate change and global security - as both sides prepare for their presidents' second summit, set for next month.
After a tense year during which U.S. officials, including President Obama, openly criticized China, and their Chinese counterparts returned the favor, there is a sudden switch in tone from the Commerce Department to the National Security Council. Instead of portraying China as protectionist or as an "enabler" of North Korea's provocations, administration officials are praising China, referring to it again as a responsible partner....
The most remarkable about-face has occurred in the administration's attitude toward China over the Korean Peninsula. Two weeks ago, a senior administration official accused China of creating the conditions that allowed North Korea to start a uranium-enrichment program and launch two deadly attacks on South Korea. The tensions on the peninsula threatened to dominate the summit.
But in recent days, senior administration officials have praised China for pressing North Korea not to react to a South Korean military drill Monday. Officials referred specifically to a visit by China's top diplomat, Dai Bingguo, to North Korea on Dec. 9. After the meeting, China's state-run Xinhua News Agency reported that China and North Korea had reached a "consensus" on the situation on the peninsula - which many analysts interpreted as meaning North Korea had agreed not to provoke South Korea in the short term.
Administration officials also commended China for soft-pedaling a proposal to hold emergency talks between South and North Korea, China, Russia, Japan and the United States as part of a way to calm the situation. Instead, the officials said that China had accepted a U.S. plan that put improving ties between the South and the North ahead of any multilateral talks on North Korea's nuclear weapons program.
Administration officials portrayed the United States and China as working in lockstep in dealing with the crisis, which many thought had reached the brink of war last weekend. China continued to urge restraint on North Korea, they said, while the United States worked with Seoul to ensure that its exercises were "firm" but also "non-confrontational and non-escalatory," a senior administration said, speaking on the condition of anonymity because of the sensitivity of the topic.
Nonetheless, it is not clear whether China's pressure has worked. On Thursday, North Korea threatened to launch a "sacred" nuclear war that would "wipe out" South Korea and the United States if they started a conflict.
Chinese President Hu Jintao is scheduled to make a state visit to Washington on Jan. 19. Obama visited China in November 2009.
China's approach on the Korean peninsula is certainly interesting, but what I find really interesting is the Obama administration's conscious decision to talk about this to the Times and Post. Part of this might be the warming up of relations that traditionally precedes a great power summit. Part of it, however, might be the administration's effort to signal to their Chinese counterparts that they understand that Beijing has engaged in a policy shift -- and the Obama administraion genuinely appreciates that shift.
This point is likely
banal obvious to longtime foreign policy hands, but I bring it up in the context of the Wikileaks cables. The attention paid to these diplomatic cables can lead to the impression that all diplomacy that matters is conducted in secret corridors. This kind of coordinated official leaking, however, is the bread and butter of 20th and 21st century statecraft -- and it's not going away anytime soon.
Well, it was a very exciting weekend on the Korea peninsula, as South Korea vowed to go ahead with live-fire artillery exercises on Yeonpyeong Island, site of the artillery exchange between ROK and DPRK earlier this month. North Korea vowed to retaliate, the U.N. Security Council met all day yesterday without any agreement on the matter, Seoul recommended island residents go to bunkers, and everyone urged restraint by everyone else.
Very exciting!! How would today's exercise play out? Mark McDonald and Martin Fackler report for the New York Times:
Defying North Korean threats of violent retaliation and "brutal consequences beyond imagination," South Korea on Monday staged live-fire artillery drills on an island shelled last month by the North.
The immediate response from Pyongyang was surprisingly muted, however. A statement from the North's official news agency Monday night said it was "not worth reacting" to the exercise.
"Maybe we had a little impact," said Gov. Bill Richardson of New Mexico, who as an unofficial American envoy was in Pyongyang when the drills ended. Mr. Richardson, a former ambassador to the United Nations, said earlier that the North had offered concessions on its nuclear program, including a resumption of visits by United Nations inspectors.
Wait, that's it? Pyongyang issues threat after threat and then claims the whole thing isn't worth their bother? Let's dig a little deeper into the Times story:
The question now is whether the North will make good on its promises to retaliate, and how it might do so. Mr. Lankov, the analyst, said he did not expect a massive response by Pyongyang because the recent incidents are part of a North Korean "strategy of tensions," meaning that North Korean leaders want to choose when and where to strike.
"I do not think the North Koreans will do much this time," Mr. Lankov said. "They'd rather deliver a new blow later when they will be ready. But the maneuvers still mean a great risk of escalation."
Meanwhile, Mr. Richardson said the North had agreed to concessions related to its nuclear program, a main source of tension on the peninsula. A former United States special envoy to North Korea, Mr. Richardson was on an unofficial trip approved by the State Department. He met with high-ranking military officials, the North Korean vice president and members of the Foreign Ministry over four days.
Mr. Richardson said the North had made two significant concessions toward reopening six-party talks on the country's nuclear program. The North's proposal would allow United Nations nuclear inspectors back into the Yongbyon nuclear complex to ensure that it is not producing enriched uranium for a nuclear bomb. The North recently showed an American nuclear expert a new and stunningly sophisticated facility there. It expelled international inspectors last year.
North Korean officials also told Mr. Richardson that their government was willing to sell 12,000 plutonium fuel rods to South Korea, removing bomb-making material from the North, he said. "I would describe this as important progress," he said of the concessions.
So now North Korea also wants to restart the Six-Party Talks? What just happened? As always, trying to explain North Korean behavior is a challenging task. Here are some possible explanations:
1) North Korea finally got caught bluffing. True, they have the least to lose from the ratcheting up of tensions, but that doesn't mean they have nothing to lose from a military escalation with the ROK. The past month of tensions got everyone's attention, and North Korea is only happy when everyone else is paying attention to them.
2) Kim Jong Un was busy. One of the stronger explanations for the DPRK's last round of provocations was that this was an attempt to bolster Kim the Younger's military bona fides before the transition. Reading up on what little is out there, it wouldn't shock me if he planned all of this and then postponed any retaliation because he'd organized a Wii Bowling tournament among his entourage.
Somewhat more seriously, it's possible that there are domestic divisions between the military, the Foreign Ministry, and the Workers Party, and that the latter two groups vetoed further escalation.
3) China put the screws on North Korea. For all the talk about juche, North Korea needs external aid to function, and over the past year all the aid lifelines have started to dry up -- except for Beijing. As much as the North Koreans might resent this relationship -- and they do -- if Beijing leaned hard on Pyongyang,
4) North Korea gave the ROK government the domestic victory it needed. Bear with me for a second. The shelling incident has resulted in a sea change in South Korean public opinion, to the point where Lee Myung-bak was catching hell for not responding more aggressively to the initial provocation. This is a complete 180 from how the ROK public reacted to the Cheonan incident, in which Lee caught hell for responding too aggressively.
Lee clearly felt domestic pressure to do something. Maybe, just maybe, the North Korean leadership realized this fact, and believed that not acting now would give Lee the domestic victory he needed to walk back his own brinksmanship.
5) Overnight, the DPRK military hired the New York Giants coaching staff to contain South Korean provocations. Let's see... a dazzling series of perceived propaganda victories, followed by the pervasive sense that they held all the cards in this latest contretemps. Then an inexplicable decision not to do anything aggressive at the last minute, after which containment policies fail miserably. Hmmm… you have to admit, this MO sounds awfully familiar.
If I had to make a semi-informed guess -- and it's just that - I'd wager a combination of (1) and (4).
Alternative explanations welcomed in the comments.
Sorry, students -- Erik Voeten at The Monkey Cage took up my challenge earlier this week to explain "what were the key factors that determined a country's decision not to attend Lu's Nobel [Peace Prize] ceremony?" Click here and then here -- there are cool graphs.
[Then why not replicate them here?--ed. Because more of my readers should be reading The Monkey Cage anyway.]
What's interesting is that, in the end, a few countries that originally signaled their intention to abide by China's wishes reversed course in the end. In particular, some of the anomalous countries -- Colombia and the Philippines, for example -- reversed course and sent representatives.
In doing so, Voeten found a pretty straightforward correlation between domestic press freedoms and attendance. That is to say, the countries that declined to send a representative were the countries that censored their domestic press the most. Foreign policy alignment, as represented by UN votes, does not appear to play a role.
Voeten cautions that this does not mean that China's political and implicit economic pressure played no role, however:
All of this does not mean that international pressure is irrelevant to the story. China can probably credibly threaten small punishments to most countries for attending but not big ones. So, the cost of attending may be pretty similar across states. There is much greater variation in the domestic cost for giving in to Chinese pressure. So, press freedom does a pretty good job in accounting for the variation in who attends and who does not. Yet, without China's ability to credibly threaten repercussions, the whole thing would not have been an issue.
Voeten is correct that China's power was in some ways a necessary condition for them to even consider organizing a boycott. Looking again at the list of attendees and non-attendees, however, I'd mildly disagree with Voeten on China's ability to pressure others. Voeten assumes that Beijing's ability to apply "small punishments" was constant across countries. Looking at the list of target countries, however, there were quite a few with significant export dependence on the Middle Kingdom. China is either the largest or second-largest export market for Argentina, Brazil, Chile, Iran, Japan, and Kazakhstan. One would expect both Thailand and the Philippines to also have a pretty strong desire not to ruffle China's feathers.
In the end, however, the only countries that complied with China's request were the countries that already shared China's domestic policy preferences on this issue. Strictly in terms of assessing Chinese power, it is to Beijing's credit that it was able to get these countries to comply. The country's inability to use implicit and explicit threats to compel other countries well within its power orbit to change their minds, however, is... let's say interesting.
Pssst… international relations majors and masters students. Having a hard time coming up with a BA or MA thesis topic? Worried that too many of your friends are writing about Wikileaks?
Here's a fun little project, courtesy of the Financial Times' Andrew Ward and Geoff Dyer:
China's campaign to boycott this year's Nobel Peace Prize was shown to have had some success after 18 countries joined Beijing in declining invitations to Friday's award ceremony for Liu Xiaobo, a jailed democracy activist.
Russia, Saudi Arabia, Colombia and Pakistan are among 19 countries, including China, that have declined invitations to the prize-giving.
The Norwegian Nobel committee has accused Beijing of applying "unprecedented" pressure on countries to boycott the Oslo ceremony, amid Chinese anger over the award to the jailed dissident.
The other absentees are expected to be Kazakhstan, Tunisia, Serbia, Iraq, Iran, Vietnam, Afghanistan, Venezuela, the Philippines, Egypt, Sudan, Ukraine, Cuba and Morocco, according to the Norwegian Nobel Institute, which is organizing the ceremony....
Ambassadors from all countries with embassies in Oslo are invited to the ceremony each year. As of Tuesday, 44 countries had indicated they would be represented on Friday.
Two countries - Algeria and Sri Lanka - had not replied.
It was not clear that all 19 absentees were staying away because of China but the Nobel Institute said the number of expected no-shows was higher than usual.
In 2008, for example, when the prize was won by Martti Ahtisaari, a relatively uncontroversial Finnish politician, 10 embassies were not represented at the ceremony for various reasons (emphases added).
OK, here's your thesis topic: what were the key factors that determined a country's decision not to attend Lu's Nobel ceremony? How much of this was due to Chinese pressure, how much was due to ideological affinity with the Chinese regime, and how much was due to the ambassador's spouse renting The Expendables on Netflix and absolutely needing to watch it that night?
The obvious variables to consider are alliance patterns, regime type, trade with/aid from China, proximity to Beijing, and maybe a corruption measure. That said, if you look at the list of all foreign embassies in Oslo, there are some interesting questions to ask. Why is Thailand attending but not the Philippines? Why is Colombia joining Venezuela in not attending? Why is Vietnam, an enduring rival of China, allying with China on this issue?
Go to it, students! And check out the lively comments that I'm sure will be posted down below that provide additional hypotheses. And remember, "A day without social science is like a day without sunshine."
UPDATE: Reuters does some preliminary field work. The most interesting and candid admission:
Embassies are not required to explain why they accept or decline a Nobel invitation, but a senior Filipino diplomat spoke candidly, underlining China's growing power, especially in Asia.
"We do not want to further annoy China," he said.
There's going to be a lot of scholars, policy analysts and enthused amateurs who are going to drink up the Wikileaks documents as a great new empirical resource. So they should -- they did nothing to cause their release, and these are documents that ordinarily would have taken 25 years minimum to be declassified.
That said, there's going to be a natural inclination to think that any Wikileaks document will endow it with the totemic value of Absolute Truth. "If it was secret, then it must be true," goes this logic. That's a more serious problem. For Exhibit A, let's go to Simon Tisdall of The Guardian's interpreting what the Wikileaks documents reveal about how China views North Korea:
China has signaled its readiness to accept Korean reunification and is privately distancing itself from the North Korean regime, according to leaked US embassy cables that reveal senior Beijing figures regard their official ally as a "spoiled child"....
The leaked North Korea dispatches detail how:
In highly sensitive discussions in February this year, the-then South Korean vice-foreign minister, Chun Yung-woo, told a US ambassador, Kathleen Stephens, that younger generation Chinese Communist party leaders no longer regarded North Korea as a useful or reliable ally and would not risk renewed armed conflict on the peninsula, according to a secret cable to Washington.
Ah, OK, this explains why China has slowly distanced itself from North Korea's recent actions. Oh, wait, I'm sorry, China has done nothing of the sort.
I don't doubt that Chinese officials said everything reported in the documents. I do doubt that those statements mean that China is willing to walk away from North Korea. It means that Chinese diplomats are... er.... diplomatic. They will tell U.S. and South Korean officials some of what they want to hear. I'm sure that they will say somewhat different things to their North Korean counterparts.
The key is to determine whether China's actions reflect their words. And over the past six months, China has not acted in a manner consistent with Tisdall's claims.
This is not to imply that China is acting in a particularly perfidious or underhanded manner, by the way. They're acting like any great power would -- stall for time while trying to figure out the best way to handle a troublesome ally. The point is, just because someone says something in a Wikileaks memo doesn't make it so.
You know, as insults go, this one is pretty bush league:
China's credit-rating agency on Tuesday downgraded its rating for U.S. sovereign debt and warned of further cuts, in a pointed move ahead of this week's Group of 20 major economies meeting.
Dagong Global Credit Rating Co. Ltd., the only wholly Chinese-owned rating agency, cut its rating on U.S. debt to A from AA, citing the Federal Reserve's move last week to initiate another round of asset buying, worth $600 billion. It also placed the U.S. sovereign credit rating on negative watch.
"The new round of quantitative easing monetary policy adopted by the Federal Reserve has brought about an obvious trend of depreciation of the U.S. dollar and the continuation and deepening of credit crisis in the U.S.," Dagong said.
"Such a move entirely encroaches on the interests of the creditors, indicating the decline of the U.S. government's intention of debt repayment," the agency said.
Sounds very, very serious, until we get to this part of the story:
The downgrade of the U.S. rating by Dagong comes just over a month after the U.S. Securities and Exchange Commission denied the firm's application to officially rate bonds in the U.S.
At that time, Dagong called the SEC's move discriminatory and said it was considering legal action.
The SEC said in denying the application that "it does not appear possible at this time for Dagong to comply with the record keeping, production and examination requirements of the federal securities laws."
Indeed, even the New York Times' now-thrice-weekly story about rising Sino-American tensions observes:
In the rest of the world, the United States is still the strongest of credit risks, and the Chinese downgrade is not expected to have much real impact....
[T]hose critics, mostly countries that fear that recent American policy will devalue the dollar and undercut their competitiveness, do not appear poised to offer an alternative to an economic order that has been led by the United States since the end of World War II, or to the role the dollar has played for decades as the de facto world gold standard.
The Chinese, who have protested that the Federal Reserve is trying to unilaterally manipulate the dollar for the purpose of creating jobs at home, have been accused of doing exactly that for years - the root of many of the world's economic tensions today, in the eyes of Mr. Obama and his economic aides.
Look, clearly China is suffering from... an insult gap. Americans have been leading the world in trash-talking for decades now. China is trying hard to catch up, but I think the authorities in Beijing need some assistance in their game of catch-up.
I hereby call on all readers to offer, in the comments, ways that Chinese authorities can really sharpen their rhetorical jabs at the United States. In the spirit of kicking off the conversation, here are a few suggestions:
"Chinese Halitosis Institute Downgrades American Fresh Breath Index to BB: 'Seriously, What's The Deal With All The BBQ,' Asks Agency Head"
"Chinese Election Monitors Accuse Obama Administration of Rampant Ballot Fraud During Midterm Elections: 'It's No Myanmar, I'll Say That' According to Chief Monitor"
"Chinese Dietary Institute says American Food Leaves Them Hungry After Only 12 Hours"
Go to it.
Blogging will be light for the next few days. Here's a topic for discussion, however. Apparently, the New York Times' standard operating procedure is to recycle the same story every week about how the U.S. is now lining up allies in the Pacific Rim to ward off a rising China. The Financial Times is reporting on how the United States is encouraging India to step up inthe region. Stronger bilateral ties with China's enduring rivals (Japan, Vietnam, India) are simply an ad hoc response to China's recent strategic missteps, however. Chinese intentions are unclear, and if you read western pundits, there are an array of contradictory recommendations about how to suss them out.
Question to readers: if you had to engineer the U.S. strategy in the Pacific Rim, what would you do to deal with a rising China? In your answer, be sure to acknowledge the risks and costs, as well as the benefits of your strategy.
Trying to pick the most offensive campaign ad of this election season is not easy -- there's a long and distinguished list of truly offensive ads out there. However, my award for Most Offensive Ad goes to the Democratic Senatorial Campaign Committee with this attack ad on Pennsylvania Republican senatorial candidate Pat Toomey:
I'll give credit to the DSCC: Not everything in the ad is offensive, just 98 percent of it. By far, however, the worst part is the DSCC's suggestion that Pennsylvanians not vote for Toomey because he thinks that "it's great that China is modernizing and growing." Using that logic, apparently the DSCC supports doing everything to keep China backwards and impoverished. Which, if you think about it a little bit, is really disgusting.
I'd love to say that this is the only anti-globalization ad of this election cycle, but that's obviously not true. In another ad, the DSCC blasts Toomey for -- God forbid -- spending part of his career overseas. Forbes' Shikha Dalmia points out, however, that both sides have been throwing up mercantilist ads as fast as they can produce them:
Virg Bernero, the Democratic gubernatorial candidate in Michigan, where I live, has dubbed his opponent, Rick Snyder, Chief Executive Outsourcer (ha, ha). Mr. Snyder's crime is that he is a successful businessman who invested in a semiconductor company that once employed five -- five! -- people in Shenzen to sell its products in China. In other words, it is no longer a sin to buy from China. It is also a sin to sell to China! (Where did Bernero get his views on trade theory, anyway? The Kim Jong Il School of Autarky?)
Nor is Bernero alone in the Democratic Party: California Sen. Barbara Boxer is accusing her opponent Carly Fiorina, former CEO of Hewlett Packard, of outsourcing thousands of jobs to "Shanghai instead of San Jose"; Senate Speaker Harry Reid is calling Sharron Angle "a foreign worker’s best friend"; and Richard Blumenthal, Connecticut Attorney General running for Senate, who lied about serving in Vietnam, has the temerity to attack his opponent, the former CEO of World Wrestling Entertainment, for "outsourcing" American jobs because her company got toy action figures manufactured in China instead of America.
Hostility to trade is par for the course for Democrats perennially beholden to Big Labor, but what is the excuse of Republicans -- the alleged believers in free markets? In race after race, they too are hitting China to beat Democrats. In West Virginia, Spike Maynard, a Republican running for the House is airing ads against his opponent, complete with Asian music in the background, castigating him for giving stimulus money to a Texas company that happens to be buying windmills from China. Meanwhile, in Virginia Republican Robert Hurt is accusing Rep. Tom Perriell of supporting tax breaks for foreign companies "creating jobs in China."
Well, it's not that surprising to see this. Americans think about trade through a mercantilist, relative gains lens, as opposed to the radical concept that trade can generate win-win outcomes. The Obama administration has abetted this mindset with a trade policy that careens between an
idiotic exclusive focus on exports and complete radio silence. And, of course, China has been taking steps in recent months in order to perfect their role as economic bogeyman.
I'd love to say that if the Obama administration mounted a full-throated defense of trade liberalization, this mindset would go away. The thing is, I don't believe that. As the Gallup data suggests, even decent growth rates won't eliminate the zero-sum mindset that people have when it comes to free trade.
Developing… in a thoroughly depressing manner.
Keith Bradsher reports on the latest move in Chinese economic statecraft:
China, which has been blocking shipments of crucial minerals to Japan for the last month, has now quietly halted some shipments of those materials to the United States and Europe, three industry officials said this week.
The Chinese action, involving rare earth minerals that are crucial to manufacturing many advanced products, seems certain to further intensify already rising trade and currency tensions with the West. Until recently, China typically sought quick and quiet accommodations on trade issues. But the interruption in rare earth supplies is the latest sign from Beijing that Chinese leaders are willing to use their growing economic muscle.
"The embargo is expanding" beyond Japan, said one of the three rare earth industry officials, all of whom insisted on anonymity for fear of business retaliation by Chinese authorities.
They said Chinese customs officials imposed the broader restrictions on Monday morning, hours after a top Chinese official summoned international news media Sunday night to denounce United States trade actions....
The signals of a tougher Chinese trade stance come after American trade officials announced on Friday that they would investigate whether China was violating World Trade Organization rules by subsidizing its clean energy exports and limiting clean energy imports. The inquiry includes whether China's steady reductions in rare earth export quotas since 2005, along with steep export taxes on rare earths, are illegal attempts to force multinational companies to produce more of their high-technology goods in China.
Despite a widely confirmed suspension of rare earth shipments from China to Japan, now nearly a month old, Beijing has continued to deny that any embargo exists.
Industry executives and analysts have interpreted that official denial as a way to wield an undeclared trade weapon without creating a policy trail that could make it easier for other countries to bring a case against China at the World Trade Organization.
So far, China seems to be taking a similar approach in expanding the embargo to the West.
Hat tip to Will Winecoff, who asks, quite reasonably, "What in samhell is China thinking?"
Assuming that the New York Times story is accurate, there are three ways to think about what Beijing is doing. First, this could just be all about domestic politics. Bradsher notes that the decision was made after a Central Committee meeting. It's possible that as the currency wars heat up, and as the U.S. starts complaining to the WTO, there was a need to assuage some nationalist outrage. Of course, no one really knows what Chinese domestic politics looks like, so who the hell knows how much validity to give to this argument.
The second way to look at it is that China's leaders have been reading The Sanctions Paradox. I argued in that book that high expectations of future conflict between the sanctioning and the sanctioned state would lead to frequent episodes of economic coercion, but each attempt would yield only minimal concessions. So far, this model holds up: the past month of China's rare earth export controls have yielded them exactly one returned fishing boat captain. Maybe they are hoping that extending the ban to the United States will force Washington to back down in their WTO complaints. Given rising conflict expectations, that's about the most they're going to get from this action.
The third way to think about it is that China is being ridiculously short-sighted in their use of economic coercion. As Patrick Chovanec notes at Seeking Alpha:
[China] really shot itself in the foot. By flexing its muscles so eagerly, over a relatively minor incident, it alarmed its customers and possibly frightened them off, when a softer approach might have lulled them into continued and deepening dependence. There's no question that China can extract rare earths at the cheapest price, in purely monetary terms. But now China's trading partners must be seriously wondering, what could the real price amount to, when the bill eventually comes due?
China's foreign economic policies with respect to raw materials suggests that Beijing doesn't think market forces matter all that much -- what matters is physical control over the resources. This is a pretty stupid way of thinking about how raw materials markets function, and it's going to encourage some obvious policy responses by the rest of the world. Non-Chinese production of rare earths will explode over the next five years as countries throw subsidy after subsidy at spurring production. Given China's behavior, not even the most ardent free-market advocate will be in a position to argue otherwise.
More importantly, China's perception of how economic power is wielded in the global political economy is going to have ripple effects across other capitals. If enough governments start reacting to China's economic statecraft by taking similar steps to reduce interdependence with that country, then China will have created a self-fulfilling prophecy in which geopolitics trumps economics. Another possibility is that the rest of the world will operate as before in dealing with each other, but treat China differently, developing CoCom-like structures and fostering the creation of explicit economic blocs.
That really would be the worst of both worlds for Beijing. China is growing, but the economic weight of countries that prefer market-oriented ways of doing business is still much, much larger.
In going for the short-term gain, China is inviting a long-term containment policy. That might allow for some rally-round-the-flag support at home, but it's going to be a massive net loss for their economy.
Today's Tom Friedman column on China's future is a pretty good one, in that it demonstrates how and why Friedman excels at a craft that flummoxes the best essayists. First, he asks a great question:
[O]ne of the most intriguing political science questions in the world today is: Can China continue to prosper, while censoring the Internet, controlling its news media and insisting on a monopoly of political power by the Chinese Communist Party?
Then, he makes a coherent argument in less than 800 words that the most populous nation in the world will have no choice but to liberalize and democratize. Friedman's thesis:
The “Beijing Consensus,” of economic liberty without political liberty, may have been a great strategy for takeoff, but it won’t get you to the next level....
My reason for believing China will have to open up sooner than its leadership thinks has to do with its basic challenge: It has to get rich before it gets old....
The only stable way to handle that is to raise incomes by moving more Chinese from low-wage manufacturing jobs to more knowledge- and services-based jobs, as Hong Kong did. But, and here’s the rub, today’s knowledge industries are all being built on social networks that enable open collaboration, the free sharing of ideas and the formation of productive relationships — both within companies and around the globe. The logic is that all of us are smarter than one of us, and the unique feature of today’s flat world is that you can actually tap the brains and skills of all of us, or at least more people in more places. Companies and countries that enable that will thrive more than those that don’t.
This argument is clear enough for the average New York Times reader to get it. It's also clear enough for
us foreign policy bloggers in pajamas online analysts to point out where and how he's wrong. In particular, Friedman makes two large errors:
1) It's not clear that China has to get to "the next level" of economic development in order to become the most powerful country in the world. China's GDP could be larger than America's while still possessing only 1/3 the per capita income of the United States. If the rest of China were to enjoy the infrastructure and living standards or, say, Shenzhen, China would be doing quite well for itself. And as Chinese consumers demand more goods and services, the domestic jobs that power the rise of middle-class professionals -- teachers, lawyers, consultants , environmental engineers, travel agents, etc. -- will start to emerge in large numbers.
Just to be clear here -- Friedman is right to say that greater liberty is likely to lead to more innovative growth. My point is that a population of a billion plus people allows the government to focus on intensive growth for an awfully long time and still prosper an amazing amount.
2) In a world of network technologies and externalities, the best and most innovative technology does not always win -- the technology used by the most customers develops the lock-in. China doesn't have to have a technological edge, it just has to ensure that the largest market in the world embraces China-friendly technologies. Hey, come to think of it, you know what institution could ensure that occurrence? The Chinese Communist Party.
[Still, you hope Friedman is right and you're wrong.... right? --ed. Well, in theory yes, but...... after reading this SPIRI paper on China's new foreign policy actors, I'm not so sure. The common thread in that paper is that the more pluralist actors were also the most nationalist. It's entirely possible that a freer China is also a more reckless China.]
The past week has seen an escalating series of news stories about a looming "currency war," as country after country tries to drive their currency downward, the United States blames China as the source of original sin on this, and China
pisses off yet another country responds by digging in its heels, and the IMF wrings its hands.
If you need to read one article on why things are going down the way they are, it's Alan Beattie's excellent survey in the Financial Times of how countries as responding to this situation:
Washington is looking for allies -- particularly among the emerging economies, who complain about their own competitiveness and volatility problems -- in its campaign for exchange rate flexibility. Trying to take on Beijing single-handed makes the US vulnerable to the charge that it is a lone complainant blaming its own profligate shortcomings on the country that is kind enough to lend it money, holding the best part of $1,000bn in U.S. Treasury bonds…
Yet despite U.S. claims of broad support, backing appears sporadic…
[S]ome U.S. policymakers privately complain that European backing is patchy and tends to go up and down with the euro. In the first half of the year the euro was pushed lower by the gathering Greek crisis, by early summer falling 17 per cent below its January level. Focused on local difficulties, and with the German export machine powering ahead, European officials saw little need to take on Beijing over currencies and had little energy to do so…
Across the emerging economies, the plan of attack seems to be to keep quiet and pass the ammunition. Despite widespread recognition of the distortions China’s exchange rate policy appear to be causing, governments have generally preferred unilateral intervention to a public slanging match.
True, in April the governors of the Reserve Bank of India and the Central Bank of Brazil complained that Beijing was hurting their exporters.
But recently Celso Amorim, Brazil’s foreign minister, told Reuters: "I believe that this idea of putting pressure on a country is not the right way for finding solutions." Significantly, he added: "We have good co-ordination with China and we’ve been talking to them. We can’t forget that China is currently our main customer…"
With the prospect of diplomatic progress limited, currency policy in the U.S. and Europe may end up being conducted through domestic monetary policy. If, as seems possible, the U.S. Federal Reserve, the Bank of Japan and the European Central Bank return to quantitative easing in order to boost growth, their currencies are likely to weaken -- as the yen briefly did after the Bank of Japan’s announcement of looser monetary policy this week.
So, to sum up:
1) Every country is free-riding/buckpassing on this issue, hoping that the United States can dislodge China on its own.
2) The international regimes designed to prevent free-riding like this -- namely the G-20 and the IMF -- are not up to this task. [What about the WTO? -- ed. Fuggedaboutit.]
3) The source of China's rising power is not its hard currency reserves or its command over scarce rare earths, but its burgeoning domestic market.
4) Ironically, the United States and other countries want China to accelerate the growth of its domestic market, which would in turn give it more power. Even more ironically, China doesn't want to do this right now.
5) The sum effect of all of this will be a series of uncoordinated interventions into currency markets that will increase market volatility, political posturing, and eventually lead to the erection of capital and/or trade controls.
Developing… in a very disturbing manner.
MANDEL NGAN/AFP/Getty Images
FP's own Steve LeVine has an essay at The New Republic that notes the Obama administration's efforts to dial down U.S. intervention in Central Asia. LeVine is clearly ambivalent about this policy shift:
President Obama's public rationale for this shift is clear. He wants arms control agreements, victory in
Afghanistan, and the denuclearization of Iran -- and Russia has a role to play in all three. Reset has lubricated new agreements with Russia that enable, for example, the speedy overflight of U.S. military planes across the North Pole and on to Kyrgyzstan, in support of the war in Afghanistan; the sale of Russian military helicopters, to be paid for by the Pentagon, to the Afghan government; and a tighter financial squeeze on Iran. Meanwhile, on the domestic front, absent any other fulfillment of Obama’s campaign vow to win hearts and minds abroad through civility, the "reset" is Exhibit Number One that good manners work.
In addition, Obama officials believe that, while the great-power-rivalry strain of geopolitics in the region may have been necessary in the 1990s, it is now obsolete. When Heslin's policy was initially drawn up, its concrete objective was to provide the Caucasian and Central Asian states with a financial channel independent of
Moscow's grip. That meant the construction of energy pipelines to alternative markets, especially the Baku-Ceyhan oil pipeline from the Caucasus to Turkey. But that policy has largely succeeded: The full flow of oil Baku-Ceyhan began in 2006. The Central Asian states of Kazakhstan and Turkmenistan are not linked in -- and given their cautious nature, they are unlikely to risk Russia’s ire by agreeing to be connected by pipeline with the West -- but they have also developed alternate export routes through China, which has constructed its own pipelines that serve precisely the same function....
President Obama must realize that his new policy ultimately represents a trade-off. While the geopolitical gains from deemphasizing the Great Game have been substantial, the local costs of
America's hands-off approach have been quite high. In Kyrgyzstan, which is still embroiled in ethnic strife, deferring to Russia has meant leaving a largely powerless government to its own devices. Azerbaijan has nervously struck up negotiations over natural-gas with Russia’s Gazprom in order to forestall any possible trouble of its own with Moscow. And the United States has adopted a far different approach toward local leaders, swallowing Kazakhstan's backsliding on what they believed was the country's private commitment to release imprisoned opposition political activist Yevgeny Zhovtis, and deepening relations with Uzbekistan's President Islam Karimov, probably the most brutal leader in the former Soviet Union. In other words, the reset has a serious downside: By deciding that the politics of Central Asia are what they are, Washington risks losing its justly earned reputation as the region's protector of political and economic independence.
From a U.S. perspective, this is fine. Let Russia and China jockey for influence. Geographic proximity and the 'stans' own geopolitical interests will prevent either great power from establishing hegemony over the region. This will allow them to maintain as much political autonomy as possible when bordering two civilizational entities.
I can't get too worked up about this. First, Central Asia is about as far away from the United States as one can get -- if there was any region in which a low U.S. profile was called for, this is the region.
Second, Central Asia is not being left to Russian hegemony. Indeed, my official U.S. sources tell me that the Russians don't care about the U.S. influence in the region. What freaks them out is China's growing regional influence. That's understandable. With a rapidly growing and energy-thirsty economy, China has a compelling interest in the 'stans.
Third, I'm not sure that the U.S. is sacrificing all that much. LeVine argues that the U.S. has played a constructive role by fostering human rights and political autonomy. I don't think the latter is going away. As for the former, to be blunt, the U.S. doesn't have all that shiny a track record. With the partial exception of Kyrgyzstan, the countries in this region have ranged from mildly authoritarian (Kazakstan) to wacky totalitarian (Turkmenistan). U.S. human rights interventions accomplished little in the 1990s, and have been even less effective since 9/11 -- indeed, Kyrgyzstan has backslid pretty dramatically.
There are a lot of regions in the world where I think a robust U.S. presence is a good idea. Central Asia is no longer one of them.
Scott Olson/Getty Images
A few days ago Brazil's finance minister mentioned the phrase "international currency war." The Financial Times' Jonathan Wheatley and Peter Garnham are all over it.
An “international currency war” has broken out, according to Guido Mantega, Brazil’s finance minister, as governments around the globe compete to lower their exchange rates to boost competitiveness.
Mr Mantega’s comments in São Paulo on Monday follow a series of recent interventions by central banks, in Japan, South Korea and Taiwan in an effort to make their currencies cheaper. China, an export powerhouse, has continued to suppress the value of the renminbi, in spite of pressure from the US to allow it to rise, while officials from countries ranging from Singapore to Colombia have issued warnings over the strength of their currencies.
“We’re in the midst of an international currency war, a general weakening of currency. This threatens us because it takes away our competitiveness,” Mr Mantega said. By publicly asserting the existence of a “currency war”, Mr Mantega has admitted what many policymakers have been saying in private: a rising number of countries see a weaker exchange rate as a way to lift their economies.
A weaker exchange rate makes a country’s exports cheaper, potentially boosting a key source of growth for economies battling to find growth as they emerge from the global downturn.
The proliferation of countries trying to manage their exchange rates down is also making it difficult to co-ordinate the issue in global economic forums.
South Korea, the host of the upcoming G20 meeting in November, is reluctant to highlight the issue on the gathering’s agenda, also partly out of fear of offending China, its neighbour and main trading partner.
On the other hand, South Korea is putting together an awesome ice sculpture for the summit. Seriously.
The FT's Alan Beattie details the abject lack of policy coordination and its implications in further detail:
Aside from China, whose intervention is one of the main causes of the global currency battle, several big economies have been intervening for some time. Switzerland started unilateral intervention against the Swiss franc last year for the first time since 2002 and did not sterilise it by buying back in the domestic money markets what it had sold across the foreign exchanges.
In common with several east Asian countries, South Korea, host of the Group of 20 summit, has been intervening intermittently to hold down the won during the course of this year. Deliberately weakening a currency while running a strong current account surplus has raised eyebrows in Washington.
Recently it was revealed that Brazil itself, which has been expressing concern since last year about inflows of hot money pushing up the real and unbalancing the economy, had given authority to its sovereign wealth fund to sell the real on its behalf.
The resort to unilateralism bodes ill for US hopes of assembling an international coalition of countries at the forthcoming G20 meeting to put pressure on China over its interventions to prevent the renminbi rising. While most of the countries currently intervening would be likely to welcome a revaluation of the renminbi, few emerging market governments seem to want to stand up to China publicly – barring sporadic criticism such as that from Brazilian and Indian central bankers earlier this year.
Last week Celso Amorim, Brazil’s foreign minister, said that he did not want to become part of an organised campaign. Following a meeting of the Brics countries – Brazil, Russia, India and China – in New York, he told Reuters: “I believe that this idea of putting pressure on a country is not the right way for finding solutions.”
Mr Amorim added: “We have good co-ordination with China and we’ve been talking to them. We can’t forget that China is currently our main customer.” Brazil exports commodities to China. (emphasis added)
It's also possible that Brazil and others fear a security dilemma kind of response from China. Either way, this demonstrates that, on the economic front, China's deterrent power is formidable (even if its compellence power has been exaggerated).
Now, there are some who argue that this kind of beggar-thy-neighbor policy could be a blessing in disguise, because it might amount to massive monetary easing. I tend to side with Michael Pettis, however:
[W]e know how that game ends. In 1930, following France’s very successful 1928 devaluation and Britain’s tightening of trade conditions within the Commonwealth, the world’s leading trade-surplus nation passed the Smoot-Hawley tariffs in a transparent attempt to gain a greater share of dwindling global demand. This would have been a great strategy for the US had no one noticed or retaliated, but of course the rest of world certainly noticed, and all Smoot-Hawley did was accelerate a collapse in global trade which, not surprisingly, hurt trade surplus countries like the US most.
We seem to be following the same path, and in a beggar-thy-neighbor world any country that does not participate in retaliatory policies will suffer. The only question is which retaliatory policy. I suspect that countries that can intervene in the currency and manipulate domestic interest rates will select those polices as the most efficient way of intervening in trade. Countries that cannot will almost certainly resort to trade tariffs. And it is probably too late for global policy coordination to make much of a difference.
To be fair, the demand for global policy coordination since 2008 has been much higher than normal. That said, it seems that on this issue, the G-20 has fallen flat on its face.
Developing … in a very depressing way. Literally.
Hey, remember last week, when I was blogging about how China was threatening Japan with a rare earth ban because the Japanse government had a Chinese boat captain in custody? And remember how I said that, "given the spate of flare-ups between Japan and China as of late, the last thing Tokyo will want to do is back down in the face of Chinese economic coercion"?
Japanese prosecutors have released the captain of a Chinese fishing boat, two weeks after a collision in disputed waters sparked a dramatic deterioration in ties between Beijing and Tokyo....
Prosecutors on the southern Japanese island of Okinawa, where Zhan was detained, said they would monitor both governments' response to their decision before deciding whether to indict him, but that course of action is looking increasingly unlikely.
They said the row caused by Zhan's detention and the possible impact on Japan-China ties had been a factor in their decision....
Japanese officials had earlier warned that the swift deterioration in bilateral ties posed a threat to the economies of both countries.
China was Japan's largest trading partner last year and Japan was China's third largest. Bilateral trade reached $147bn (£93.6bn) in the first half of this year – a jump of 34.5% over the same time last year, Japanese figures show.
"A cooling of relations between Japan and China over the Senkaku problem would be bad for Japan's economy, but it would also be a minus for China," Japan's finance minister, Yoshihiko Noda, said.
"It's desirable that both sides respond in a calm manner."
A few commentors to my last post took this opportunity to tell me to
go suck a lemon the errors of my ways. To which I must respond.... not so fast.
I had four points to make in that post:
A) Japan was unlikely to bow to economic pressure from China;
B) China's use of a rare earths export ban was not likely to have much leverage;
C) China was overestimating its overall ability to translate economic power into political leverage; and
D) Because of these actions, the rest of the Pacific Rim was going to start getting much closer to the United States.
Now, let's go through these in the context of this Associated Press story about the latest in this Sino-Japanese kerfuffle:
Tension between China and Japan bumped back up a notch Monday when Tokyo asked Beijing to pay for damages to patrol boats hit by a Chinese fishing vessel in disputed waters, countering China's demand for an apology over the incident.
The diplomatic back-and-forth shows that nationalistic sentiments stirred up by the incident — and the territorial dispute behind it — are not fading even after Tokyo released the ship's captain Friday amid intense pressure from China.
Welcoming the skipper home as a hero, China stunned Japan over the weekend by demanding an apology and compensation over his arrest, a move that reflects Beijing's growing self-confidence and its attempts to test the resolve of key neighbors like Japan, Washington's closest ally in the region.
Criticized at home for caving in to Chinese pressure, Prime Minister Naoto Kan's government responded by issuing its own demand for compensation and calling on Beijing to decide whether it wanted to repair frayed ties.
"At this point, the ball is now in China's court," said Chief Cabinet Secretary Yoshito Sengoku....
Some experts saw China's demand for an apology as overreaching — and bad publicity in a region where neighbors are already concerned about the nation's expanding military and political clout. China is embroiled in several other territorial disputes.
"Beijing has scored an own-goal here. It really reflects badly on them," said Jeff Kingston, director of Asian studies at Temple University's Tokyo campus. "All that smile diplomacy, reassuring regional neighbors that the rise of China is unthreatening, has just gone up in smoke."
More broadly, the dispute and others like it has created openings for greater U.S. engagement in Asia as China begins to vie with the U.S. for dominance in the region.
On Friday, President Barack Obama and Southeast Asian leaders sent China a firm message over territorial disputes, calling for freedom of navigation and peaceful resolution of disputes in seas that China claims as its own. Obama said the U.S. plans to "play a leadership role in Asia."
Hmmm.... well, Japan did hand over the captain, so it seems that I was pretty wrong on (A). That said, this story also suggests I'm a little right on (A) and very right on (C) and (D). China overreached -- again -- in demanding compensation and an apology (though looking past this latest episode, there are some indications that China recognizes its overreaching vis-a-vis the USA). This caused Japan to dig in its heels. And, finally, all of this is pushing the region closer to the United States.
[What about the rare earth lever?--ed.] Damien Ma knows more about this than I do:
Given the expansive universe of Japanese high-tech sectors, Japan depends on China for the bulk of its RE supplies. Now, China produces roughly 95% of global RE supplies, but has only about 1/3 of the world's total reserves. Having such immense control over a particular resource naturally leads to suspicion, especially among buyers, that China could wield "supplier leverage" to manipulate prices and supplies, much like how a cartel would behave....
China's supply dominance was driven by market dynamics in the first place. Other RE mines closed production, in part because of environmental issues, while China continued to produce at a low price. Now that price is rising in China, it might be more cost-effective to start mine development elsewhere. If China really is trying to be the "OPEC" of rare earth elements, then global markets would react to cartel-like behavior, probably by accelerating development, eventually undermining Chinese monopoly on supply. Problem is, development takes time, so for now, it's tough to get off Chinese supply.
At worst, I was slightly wrong on (B) in the short term -- and this doesn't get into Japan's stockpiling of rare eaarths. Furthermore, I am going to be much less wrong about this over time. China's market power over rare earths is clearly temporary. Regardless of whether they were trying to use their monopsony power to extract concessions from Japan, the perception of China's economic statecraft is going to encourage a lot of countries to subsidize their domestic supply.
So, to sum up: I was more right than wrong. I hereby dare my thoughtful and cantankerous readers to
go suck two lemons demonstrate the error of my interpretation yet again in the comments section.
There's been a lot of oh-my-God-China-is-eating-America's-lunch-have-you-seen-how-pretty-their-infrastructure-is?-kind of blather among the commentariat. And, to be sure, China has had a good Great Recession. But one of the points I've been making on this blog repeatedly is that, for all of China's supposed deftness, "China's continued rise seems to be occurring in spite of strategic miscalculations, not because of them."
Now, I had also assumed that China's leadership would quickly move down the learning curve and practice a more subtle form of statecraft. After reading Keith Bradsher in the New York Times today, however, I guess I was wrong:
Sharply raising the stakes in a dispute over Japan’s detention of a Chinese fishing trawler captain, the Chinese government has blocked exports to Japan of a crucial category of minerals used in products like hybrid cars, win turbines and guided missiles.
Chinese customs officials are halting shipments to Japan of so-called rare earth elements, preventing them from being loaded aboard ships this week at Chinese ports, three industry officials said Thursday.
On Tuesday, Prime Minister Wen Jiabao personally called for Japan’s release of the captain, who was detained after his vessel collided with two Japanese Coast Guard ships about 40 minutes apart as he tried to fish in waters controlled by Japan but long claimed by China. Mr. Wen threatened unspecified further actions if Japan did not comply.
Is this effort at economic statecraft going to accomplish Beijing's objectives? In a word, no. True, according to Bradsher, "China mines 93 percent of the world’s rare earth minerals, and more than 99 percent of the world’s supply of some of the most prized rare earths."
It's also true, however, that Japan has been stockpiling supplies of rare earths. Furthermore, this kind of action is just going to lead to massive subsidies to produce rare earths elsewherein the world (including the United States) and/or develop rare earth substitutes. Oh, and one other thing -- given the spate of flare-ups between Japan and China as of late, the last thing Tokyo will want to do is back down in the face of Chinese economic coercion.
Don't get me wrong -- if China persists in this ban, there will be come economic costs to the rest of the world. Those costs just won't translate into any political concessions. [UPDATE: The Wall Street Journal has an excellent follow-up story suggesting that China is not imposing a ban.]
It is hardly surprising that (reported) actions like these are leading the entire Pacific Rim right to Washington's door:
[R]ising frictions between China and its neighbors in recent weeks over security issues have handed the United States an opportunity to reassert itself — one the Obama administration has been keen to take advantage of.
Washington is leaping into the middle of heated territorial disputes between China and Southeast Asian nations despite stern Chinese warnings that it mind its own business. The United States is carrying out naval exercises with South Korea in order to help Seoul rebuff threats from North Korea even though China is denouncing those exercises, saying that they intrude on areas where the Chinese military operates.
Meanwhile, China’s increasingly tense standoff with Japan over a Chinese fishing trawler captured by Japanese ships in disputed waters is pushing Japan back under the American security umbrella....
“The U.S. has been smart,” said Carlyle A. Thayer, a professor at the Australian Defense Force Academy who studies security issues in Asia. “It has done well by coming to the assistance of countries in the region.”
“All across the board, China is seeing the atmospherics change tremendously,” he added. “The idea of the China threat, thanks to its own efforts, is being revived.”
Asserting Chinese sovereignty over borderlands in contention — everywhere from Tibet to Taiwan to the South China Sea — has long been the top priority for Chinese nationalists, an obsession that overrides all other concerns. But this complicates China’s attempts to present the country’s rise as a boon for the whole region and creates wedges between China and its neighbors.
This latest rare earth ban is just going to accelerate this trend. The ironic thing about this is that it's not like U.S. grand strategy has been especially brilliant. The U.S., however, has two big advantages at the moment. First, it's further away from these countries than China. Second, Washington's actions and rhetoric have been far more innocuous than Beijing's.
In yet another New York Times story, David Sanger provides a small clue as to whether Beijing either knows or cares about the blowback from its recent actions:
Early this month Mr. Obama quietly sent to Beijing Thomas E. Donilon, his deputy national security adviser and by many accounts the White House official with the greatest influence on the day-to-day workings of national security policy, and Lawrence H. Summers, who announced Tuesday that he would leave by the end of the year as the director of the National Economic Council....
[O]fficials familiar with the meetings said they were intended to try to get the two countries focused on some common long-term goals. The Chinese sounded more cooperative themes than in the spring, when two other administration officials were told, as one senior official put it, that “it was the Obama administration that caused this mess, and it’s the Obama administration that has to clean it up.”
Well, that is learning, but it's of a very modest kind.
Now, it is possible that Beijing has simply decided that its internal growth is so big that it can afford the friction that comes with a rising power. My assessment, however, is that they're vastly overestimating their current power vis-a-vis the United States, and they're significantly undererstimating the effect of pushing the rest of the Pacific Rim into closer ties with the United States (and India).
More significantly, and to repeat a theme, China is overestimating its ability to translate the economic interdependence of the Asia/Pacific economy into political leverage. With these misperceptions, however, China is risking some serious conflicts down the road.
Am I missing anything? I'm serious -- this problem ain't going away anytime soon.
This week Japan has provoked the ire of the United States and Europe by unilaterally intervening in currency markets to depreciate the yen against other major currencies. Japanese Prime Minister Naoto Kan has responded to these criticisms by
telling the US and EU to go suck a lemon stating that further "resolute actions" would be taken on this front.
This comes on the heels of mounting U.S. frustration with China's "go-slow" policy on letting the yuan appreciate against the dollar. [What do you mean by "go slow"?--ed. Let's put it this way: the tortoise thinks that China is being pokey on this question.]
So, is this the beginning of beggar-thy-neighbor? Will other countries start intervening in foreign exchange markets to gain a competitive advantage for their export sectors?
The New York Times' Hiroko Tabuchi thinks not, because Japan can't unilaterally devalue its currency like in the old days:
It is unlikely, though, that intervention by Japan alone will sway currency markets in the long term. The global volume of foreign exchange trading has grown rapidly in recent years, which prevents intervention by a single government from countering bigger market trends.
Other countries are unlikely to help Japan’s cause, because they need to keep their own currencies weaker to bolster exports. A weak currency makes a country’s exports more competitive and increases the value of overseas earnings.
Much of the yen’s weakening came from investors selling the currency on expectations that the Japanese government would be more active in keeping the yen in check. Japan did not disclose how much it had spent in currency transactions, but dealers put the initial amount at 300 billion to 500 billion yen ($3.5 billion to $5.8 billion).
But as Switzerland found this year, a single government’s efforts to weaken its currency can prove futile. Switzerland abandoned that effort, after its central bank had lost more than 14 billion Swiss francs ($14 billion) in foreign currency holdings in the first half of the year, after a fall in the euro’s value ate into the bank’s reserves.
The Swiss franc is also seen by investors as a relative haven and has also strengthened amid global financial unrest. This month, the franc hit a record high against the euro.
Hmmm.... maybe. Japan's economy is much larger than Switzerland, so I'm not sure the comparison holds up. The real problem, however, appears to be that countries perceived of as "safe havens" wind up with overvalued currencies.
This little parable also makes me wonder whether we might see beggar-thy-neighbor policies in a different guise this time around. This is going to sound a little crazy, but here goes: rather than explicit exchange rate intervention, what if countries decided to play fast and loose with Basle III and other measures to strengthen financial integrity?
This really does sound crazy -- it suggests that governments would be willing to tolerate a higher risk of domestic banking collapse in order to avoide being a "safe haven" status for capital. That said, think of how much Europe benefited from the depreciation of the euro due to the Greek crisis. Basle III, by taking so long for banks to meet standards allow those countries with more insolvent financial institutions **cough** Germany **cough** to take their own sweet time in having them meet new capital adequacy standards. This would allow Germany to have the euro stay relatively cheap without abandoning its anti-inflationary zeal.
Now, in all likelihood, not even the Germans would purposefully do this. This is crazy talk. What I'm suggesting, however, is that there is more than one way for a country to have its currency depreciate, and these policies are substitutable. Looking only at explicit exchange rate intervention might be just a bit too narrow. And if more countries find more ways of keeping their currency undervalued, well then, the days of beggar-thy-neighbor would have arrived.
At APSA today I attended a panel on what political scientists can offer to political journalists. Mark Schmitt, Marc Ambinder, Matt Yglesias, Mark Blumenthal, and Ezra Klein all offered interesting advice. Two messages that came through loud and clear:
1) Be willing to advertise one's research wares; and
Mr. Gorbachev, tear down these paywalls Make the research accessible to people without a JSTOR account.
So, in that spirit, let me announce that I have an article in the latest issue of International Relations of the Asia-Pacific entitled "Will Currency Follow The Flag?" It's on the future of the U.S. dollar as the world's reserve currency. The abstract:
The 2008 financial crisis and its aftermath have triggered uncertainty about the future of the dollar as the world's reserve currency. China and other countries in the Asia-Pacific region have voiced support for a new global monetary regime. There are both economic and geopolitical motivations at the root of these challenges. Going forward, what will the future hold for the international monetary system? Crudely put, will currency follow the flag?
This article addresses this question by considering the economic opportunity and geopolitical willingness of actors in the Pacific Rim to shift away from the current international monetary system – with a special emphasis on China as the most powerful actor in the region. While the dollar has shifted from being a top currency to a negotiated one, neither the opportunity nor the willingness to shift away from the dollar is particularly strong. The current window of opportunity for actors in the region to coordinate a shift in the monetary system is small and constrained. The geopolitical willingness to subordinate monetary politics to security concerns is muted.
The entire article is free for anyone to download and read. So read the whole thing, political journalists!!
I'm still getting all the cotton out of my head from my Israel sojourn, but what I find striking about the debate is how Middle-East-focused it is. Walt focuses on four key areas: Iran, Iraq, Afghanistan, and Israel/Palestine. All important hot spots, to be sure -- but shouldn't a good realist be concerned about great power politics? (to be fair, Walt does link to Thomas Wright's intriguing essay in The Diplomat about how the Obama administration is rethinking its China policy).
As a global political economy person with a strong realpoliitik streak, here are the four issues I think should be given the largest weighting in any grading of Obama:
1) Great power politics: This is where Obama deserves his best marks, despite some occasional rocky patches. It's safe to say that relations with Russia have been on the mend for quite some time. Wright is correct to point out the ups and downs with China, but the administration has reacted quite adroitly to China's renewed confidence on the regional and global stage. U.S. relations with key Pacific Rim allies -- South Korea, Japan, Indonesia, India, and even Vietnam if you want to go that far -- have all been trending upwards. China now has to process these events, and whether its desire to throw its weigtht around is worth the price of a balancing strategy. This wasn't how Obama planned things to go with China, but given Beijing's behavior, I think they improvised and adapted quite well in this sphere. GRADE: A-
2) Correcting imbalances in the global economy: The last G-20 summit in Toronto demonstrated how poorly the Obama administration has done on this front. The administration went into that summit arguing that some countries need to continue priming the fiscal pump. The resulting communique did not reflect that assessment. Deficit hawks have won the war of ideas here -- which would be fine if surplus countries like Germany and China balanced that approach by consuming more. They ain't going in that direction, however. There's been minimal progress on yuan revaluation, and real foot-dragging in the Eurozone about fixing what ails that region. Given the high hopes Obama administration put on the G-20, this has been a thoroughly disapponting performance to date: GRADE: D
3) Trade: Blech. Let me repeat that -- blech. I understand that the administration is on barren political terrain when dealing with this issue. Still, the phrase "Obama administration's trade agenda" is pretty much a contradiction in terms at this point. The Doha round is dead, and the only trade issue that has the support of policy principals is the National Export Initiative -- and you know what I think about that. Unlike the other three issues, the administration hasn't even bothered to put much effort onto this one -- though the recent pledge to get the Korea-U.S. Free Trade Agreement (KORUS) ratified is promising. GRADE: F
4) Nuclear nonproliferation: Even an IPE guy like myself appreciates the virtues of a world in which nuclear weapons are heavily regulated. The Obama administration's performance in this area has been mixed. START has been negotiated but not ratified, and the Nuclear Safety Summit seems like it was a success. Iran and North Korea seem unbowed, but at the same time the Obama administration has reinforced the multilateral arrangements designed to contain both countries (though this is interesting). At the same time, you can't just grade for effort at this level, and the results have been disappointing with both countries. There is also something of a strategic mismatch between the Obama administration's nuclwar ambitions and grand strategy ambitions. GRADE: B-
All grades are incomplete at this stage, but looking above, I'm more than a bit troubled. I don't see the rebalancing or trade grades impriving anytime soon. If Obamas was one of my advisees, I'd probably have him stop by my office hours for a friendly but firm chat at this juncture.
Question to readers: what important issues did Walt, Lynch, and I overlook ? And how would you grade Obama?
Daniel W. Drezner is professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University.