Your humble blogger is headed to China for the next few days as part of a conference sponsored by the MacArthur Asia Security Initiative and the School of International Studies at Peking University, at which we will be discussing "What roles do power, history, ideas, and other legacies and factors play in shaping the American and Chinese approaches to sovereignty?" and "What is distinctive about the American and Chinese orientations and what are the implications of their preferences for the international order?" and "Could I please have an extra serving of tripe?" OK, that last one will just be a personal quest for yours truly, but you get the idea.
We will also be "Meeting with high-rank officials from the Ministry of Foreign Affairs and the International Liaison Department of the Central Committee of the CPC" -- so with luck, I'll be able to post blog items that will impress Chinese readers more than, say, your average Tom Friedman column. Assuming, that is, that the interwebs are semi-friendly over there.
While I am
praying for an upgrade on my flight to Beijing winging my way to the Middle Kingdom, go and contemplate Gideon Rachman's latest in the Financial Times. He points out that should China supplant the United States during this decade, it will be a very strange superpower indeed:
The ascent of China will change ideas of what it means to be a superpower. Over the course of the American century, the world has got used to the idea that the world’s largest economy was also the world’s most obviously affluent nation. The world’s biggest economy housed the world’s richest people.
As China emerges as an economic superpower, the connection between national and personal affluence is being broken. China is both richer and poorer than the western world. It is sitting on foreign reserves worth $3,000bn. And yet, measured at current exchange rates, the average American is about 10 times as wealthy as the average Chinese....
The power of China – combined with anxiety about the frightening public debts being built up in the US, the EU and Japan – will challenge western ideas about the relationship between democracy and economic success. Ever since the US became the world’s largest economy, towards the end of the 19th century, the most powerful economy in the world has been a democracy. But, if China remains a one-party state over the next decade, that will change. The confident western slogan that “freedom works” will come under challenge as authoritarianism becomes fashionable, once again.
What do you think? More tripe, or go for the chow fun instead?
Ever since I announced the Trumpies, I've been deluged with tweets and e-mails asking if this flub or that blunder or the other mistake in New York culinary etiquette merits a Trumpie nomination. In keeping with the high quality of the Trumpie brand, however, a nomination cannot be earned for simple malapropisms, pizza-eating faux pas, or errors on non-foreign policy topics ("A Trumpie -- the foreign policy mistakes of royalty").
To repeat -- a Trumpie is only earned when the candidate or a kep foreign policy supporter demonstrates willful, assertive ignorance on U.S. foreign policy or world politics. Which brings me to U.S. House Representative Paul Ryan.
Ryan is starting to act like a presidential candidate. The chairman of the House Budget Committee delivered a foreign policy speech to the Alexander Hamilton Society last week, leaking the text to The Weekly Standard no less. After that speech, other commentators have made numerous claims that Ryan deserves multiple Trumpie nominations. Let's review the charges.
Jonathan Chait argues that Ryan deserves a nom for making the sly charge that Barack Obama rejected American exceptionalism. Here's the passage Chait quotes on this point:
There are very good people who are uncomfortable with the idea that America is an “exceptional” nation....
Today, some in this country relish the idea of America’s retreat from our role in the world. They say that it’s about time for other nations to take over; that we should turn inward; that we should reduce ourselves to membership on a long list of mediocre has-beens.
This view applies moral relativism on a global scale. Western civilization and its founding moral principles might be good for the West, but who are we to suggest that other systems are any worse? – or so the thinking goes.
Instead of heeding these calls to surrender, we must renew our commitment to the idea that America is the greatest force for human freedom the world has ever seen; a country whose devotion to free enterprise has lifted more people out of poverty than any economic system ever designed; and a nation whose best days still lie ahead of us, if we make the necessary choices today.
Ryan is referring to, without explicitly saying so, a widespread conservative claim. In April 2009, a reporter asked Obama if he believed in American exceptionalism. Obama began by citing objections to the concept before endorsing it.
Chait is correct that the 2009 Obama speech demonstrates quite clearly that the president believes in American exceptionalism, and that numerous conservatives have taken delight in willfully misreading it. The thing is, the text of Ryan's speech far from clear in asserting this claim. The insinuation is there, but Ryan just refers to "very good people." He could be talking about Obama -- but he could very well be talking about my FP colleague Steve Walt for all its specificity. This is politically savvy, but not a display of assertive ignorance. So, no, no Trumpie nomination for that.
But wait -- there's more accusations!! Eunomia's Daniel Larison thinks Ryan deserves a Trumpie for this section:
[O]ur fiscal problems are real, and the need to address them is urgent. But I’m here to tell you that decline is not a certainty for America. Rather, as Charles Krauthammer put it, “decline is a choice.”
It is hard to overstate the importance of this choice. In The Weary Titan, Aaron Friedberg–one of the founders of the Hamilton Society–has shown us what happened when Britain made the wrong choice at the turn of the 20th century.
At that time, Britain’s governing class took the view that it would be better to cede leadership of the Western world to the United States. Unfortunately, the United States was not yet ready to assume the burden of leadership. The result was 40 years of Great Power rivalry and two World Wars.
This recounting of history prompts Larison to write:
I have not read this book. Despite that, I am fairly confident that Ryan is describing its argument incorrectly. For one thing, the British governing class between 1895 and 1905 did not “take the view” that “it would be better to cede leadership of the Western world” to the United States. This was the time of Salisbury’s government when the British were as overconfident and aggressive in their empire-building as ever.
Well.... I have read parts of The Weary Titan, and both Ryan and Larison make valid points here. Friedberg does advance the argument in his book that British foreign policy elites voluntaily ceded aspects of their hegemony to other actors during the 1895-1905 decade -- and that's the point Ryan stresses. That said, Larison is correct to say that Ryan exaggerates Friedberg's thesis. If Ryan had said "Western hemisphere" instead of "Western world," however, he'd be spot-on accurate.
So, closer, but no cigar.
These paragraphs of Ryan's speech, however, are another story:
We cannot face these challenges alone. To the contrary, we need our allies and friends to increase their capacity and willingness to act in defense of our common interests.
The first step in that process is robust and frank engagement with our closest allies. We all share an interest in the maintenance of the international order with its liberal trading system, general tranquility, and abundant opportunity – and we should all share the burden of maintaining it.
The Obama administration has taken our allies for granted and accepted too willingly the decline of their capacity for international action. Our alliances were vital to our victory in the Cold War and they need to be revitalized to see us through the 21st century.
Ryan commits an empirical and a logical error here that meets the bar for a Trumpie nomination. The empirical error is that the notion that the Obama administration has "accepted too willingly" the military decline of key allies. Indeed, even a cursory glance at the Libya operation suggests the exact opposite of that approach. A look at the distribution of effort on Libya suggests that while the United States is still exercising leaedership, they've actually managed to get allies to fly a majority of the air sorties. The attack helicopter gambit is also being led by France and the U.K. As John Burns reports in today's New York Times:
With the costs of the air campaign mounting, and the stresses growing on air crews, finding a way of breaking the stalemate has become a priority for NATO, and particularly for Britain and France, which are carrying the brunt of the campaign.
Mr. Obama has let NATO allies take the lead in the Libyan operations, an unusual role for them in the history of such operations. The United States’ role has been confined primarily to air refueling, airborne command and control, surveillance and the deployment of missile-carrying drones.
The bigger, logical error, however, is exactly what the "robust and frank engagement with our closest allies" would look like. Basically, Ryan's definition of U.S. leadership amounts to "exerting pressure on our allies to take on greater defense expenditures." OK, but how will this conversation take place? Let's imagine this:
PRESIDENT RYAN: Hey, NATO allies -- to be robust and frank about it, you need to goose up your defense expenditures and assist us more vigorously.
NATO ALLIES: What's that? I'm sorry, I couldn't hear you over the protestors in the streets furious about the latest round of bailouts to Greece and Ireland, combined with the cuts in social services we need to make in a nod towards austerity. Hey, you're a big fan of that policy, right? What's that you want us to do again with our increasingly scarce capital in a politically hostile environment?
PRESIDENT RYAN: Uh, never mind, let me try our Japanese allies. Hey, Japan, we've been protecting you for decades, it's time to pony up and contribute your fair share.
JAPAN: I'm sorry, what was that? I couldn't hear you because we're selecting which old people will volunteer to help clean up the Fukushima reactor mess. Gee, this is not going to be cheap, and our debt-to-GDP ratio is already at 200%. You really harped on the debt problem during your campaign, so you know what we're talking about here. Now, what did you want us to do with our dwindling and rapidly agining population again?
PRESIDENT RYAN: Er... (to foreign policy advisors) are there any rich allies left?
Ryan's "robust and frank engagement" is really just one step removed from Donald Trump's claims that the right negotiator could get Saudia Arabia to lower oil prices or China to revalue the yuan. It's the foreign policy of Campaign Fantasyland.
And for that, I congratulate Representative Ryan for his hard-earned Trumpie nomination.
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.
My post last week on the dubious legitimacy/effectiveness of the G-20 has prompted a few responses. Let's take them in order, shall we?
Colin Bradford responds by arguing that I'm judging the G-20 strictly by its summitry, which is unfair:
The G-20 is not just a summit meeting of leaders. The G-20 has a very active track, which has been in existence since the Asian financial crisis in the late 1990s, of at least biannual meetings of finance ministers and central bank presidents. In addition, G-20 deputies and G-20 sherpas often meet to advance the agenda for the leaders. More than that, as a result of the activities in the finance ministers/central bank presidents track, there is now a network of senior officials continuously active not only in preparation for G-20 meetings, but also in dealing with crises and unexpected challenges.
What this means is that the new, more inclusive configuration of major economies from every region of the world that constitutes the G-20 is a process -- communicating, consulting, and even, on good days, coordinating among 20 countries, not eight. The G-20, in other words, is not an event.
Lest this sound too pie-in-the-sky, it should be pointed out that even former Bush administration sherapas are echoing Bradford's point.
As someone who worked on both G-20 and G-7 policy coordinaion while at the Treasury, I've experienced Bradford's point about the value of process first-hand. The thing is, the value-added of said process does require the occasional concrete outcome -- and the last 18 months have been underwhelming on that score. Bradford makes a valid point in observing that the kinds of policy coordination under debate in the G-20 are much more intrusive than anything that was talked about in the old G-7. Still, at some point you want to see some outcomes, and based on what happened over the weekend, I'm fairly confident in my pessimism.
CIGI's The Munk School of Global Affairs' Alan Alexandroff thinks I'm being too pessimistic because I'm relying on the international press coverage:
I and others have pointed out... the persistently negative international financial press – read this as the WSJ, the NYT and the FT at least. Differences are always played up; and agreements are generally characterized as inadequate. And it is here that Dan and I differ.
Fair enough, but I will say that my astringent evaluation of the G-20's recent activities are not only informed by press coverage, but also by off-the-record conversations I've had with both developed and developing-country participants in the G-20 process. [Oh!! Snap! Boom!!--ed. Yeah, that's right, I'm going all insider-y sources on you!] I'll be happy to hear feedback from those sherpas who think the process is working better than my "dead forum walking" characterization.
Art Stein argues that these blog exchanges are missing the key point:
The core issue, then, is whether for the G8 or the G20 disagreement and divergence over policy options are preferable to agreement, coordination, and a concerted response. There is a small literature among economists about whether macroeconomic policy coordination makes things better or worse. Implicit in Bradford’s argument is that disagreement and its policy consequences are not so bad and, implicitly, to be preferred to agreement between a less diverse set of actors. Perhaps. But what is the evidence? Is that true for every policy?
This is an excellent point, and one I made in All Politics Is Global -- sometimes noncooperation is actually the most efficient outcome. On macroeconomic policy coordination in particular, sometimes successful cooperation has brought about underwhelming policy consequences (see: Maastricht criteria).
That said, one could argue that part of the reason for the Great Recession was the absence of any serious effort to rein in mcroeconomic imbalances five years ago. Furthermore, Bretton Woods II is still persisting in the global economy. So, yes, I do think coordination in this case would be a good thing, and for a variety of excellebnt domesticf political reasons in the United States, China and Europe, it ain't happening.
Am I missing anything?
Colin Bradford has written a lot of useful and interesting material on global economic governance. I say this because I'm not really sure that his latest FP contribution meets the high standard of his prior work.
In "Seven New Laws of the G-20 Era," Bradford seems to be arguing that even if there are disagreements within the G-20, it's still an effective public policy forum. Here's a sample "law":
1. Visible disagreements can have positive side effects
Some commentators have argued that, because the G-20 reveals differences and divisions, the group itself must be a failure. Yet gone are the days when we could categorize a summit as a success or a failure based on the outcome document. Dichotomous thinking doesn't really work anymore. So if G-20 meetings display more tension than consensus, that might actually be a good thing. In its discord, the G-20 merely reflects the landscape of this dynamic 21st century. There is order and disorder in our world today, competition and coordination, conflict and consensus -- all going on at the same time. The G-20 is flushing those issues up not only for leaders to deal with but for publics to deal with as well. Unlike the G-8, the G-20 is creating stronger linkages between leaders and publics, because -- not in spite of -- the fact that the conflicts are visible.
Hmmmm..... nope, not buying this spin. Bradford's basic argument is that the G-20 exposes the fundamental disagreements so that the global public sphere can better understand the fundamental faultlines of global economic governance. The publicist that resides inside my brain can appreciate the virtue of this spin, but it's just that.
It's true that governance structures can serve as arenas of contestation. The problem with this logic is threefiold, however.
First, as a general rule, mass publics don't pay too much attention to high-falutin' economic summits. The issues are too arcane and the remove from daily life seems to large. So the only thing the public will digest from G-20 deadlock is that leaders can't agree on something.
Which leads to the second point -- in the end, publics usually want to see outputs from governance structures. There can be virtues from policy deadlock, but I'm thinking that if an issue makes it to the G-20 agendas it's because a lot of people want concrete policy action rather than additioonal bloviation. Continued disagreement will lead to mounting public frustration.
Which leads to the third point -- many national governments can endure long-lasting policy deadlocks because their domestic legitimacy is unquesioned. In the United States, for example, despite mounting frustration with a sclerotic policy process, there's not a huge groundswell for amending the Constitution to make it easier to pass laws. That's because both the Constitution and the U.S. government have been around for a while.
The G-20 doesn't have this legitimacy "cushion" to fall back on. It's not a national government with a monopoly on authority within its bailiwick. It's not a treaty body like the WTO or IMF. Unlike even the G-8, it can't point to decades of existence as a justification for its continued relevance. The G-20 rises and falls with its perceived effectiveness. While the forum had a good 2008 and a decent 2009, last year was a friggin' disaster. If the trend of policy gridlock continues, it won't matter what Nicolas Sarkozy proposes, the G-20 will be a dead forum walking.
Unfortunately, Bradford's essay sounds like a marriage counselor telling a troubled couple to "own your problems... embrace the discord." Sorry, not buying it.
Am I missing anything?
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.…
While I was obsessing about Egypt last week, I see that John Quiggin, William Winecoff and others have been having a rollicking debate about the status of American hegemony, the fungibility of military power, and Boeing/Airbus subsidies. OK, that last one is less interesting, but I strongly encourage readers to go through the comment thread to that blog post.
Essentially, Quiggin contends that:
[T]he decline of the US from its 1945 position of global pre-eminence has already happened. The US is now a fairly typical advanced/developed country, distinguished primarily by its large population.
Ergo, other large market jurisdictions, like the European Union, are equal to the U.S. in terms of relative power.
This cheesed off Winecoff and others into pointing out the myriad ways in which the U.S. power profile is a) still outsized; and b) largely shaped the current global order we live in; and c) allowed entities like the EU to focus on welfare maximization rather than security.
Dan Nexon, in a comment to Quiggin's last rejoinder, gets at one nub of the debate:
John’s pointing out, quite rightly, that military power isn’t necessarily fungible. He’s doing so in the context of economic and regulatory power, which is the most “multipolar” dimension of global power right now. His IR critics are pointing out that the US still has outsized influence across a number of domains, and that some of those domains involve international (economic) institutions. They’re both onto something.
I pretty much agree with Dan here. In the military sphere, the U.S. remains a hegemonic power. In the economic and regulatory realms, well, I wrote a whole book arguing that until recently we lived in a bipolar world, so I'll side with Quiggin on that score.
There's something missing from this debate that is worth raising, however -- a proper definition of power. For example, in his first post, Quiggin noted that "[advanced industrialized countries] might be said to have declined in relative terms. But this doesn’t seem to me to constitute 'decline' in any important sense." This is heresy to an international relations scholar, in that power is viewed as a zero-sum commodity.
Beyond that, however, it is useful to think about the power to deter change from the status quo vs, the power to compel change in the status quo. In a deterrence scenario, countries use their capabilities to ward off pressure from other actors, or from structural pressures. In a compellence scenario, a powerful government threatens to use statecraft to extract concessions from other actors, or use power to alter the rules of the global game.
Deterring pressure by others is different than applying such pressure to others. With military or economic statecraft, it is generally easier to defend than attack. Many IR scholars argue that the ability to deter is a necessary condition of the power to compel. Only after an actor has the ability to resist pressure from others will they contemplate whether they can be the actor to generate pressure. Countries possessing sufficient reservoirs of power should therefore have both greater autonomy of action and be better placed to apply pressure on other actors.
What the past few years have demonstrated is the relative decline of U.S. compellence power and the rise of other countries deterrence power. Certainly the recent uses of U.S. military force haven't yielded the expected results. In the economic realm, countries like India and Brazil can veto WTO negotiation rounds in a way that simply wasn't possible 15 years ago. Similarly, China can resist U.S. jawboning on its exchange rate policy far more than in the past.
On the other hand, neither U.S. deterrent power nor other countries' compellence power has changed all that much, even in the economic realm. The rest of the G-20 can scream as loud as they want, but quantitative easing is going to continue. China has tried to find ways to use its newly found financial muscle to force changes in the international system, to little avail. To be sure, Russia, China and others can compel countries on their immediate periphery, but even a glance at the 2008 Russian-Georgian war suggests that even modest efforts like these are expensive and messy.
So... we live in a world in which more actors have vetoes over systemic change but no actor has the ability to truly compel change. This leads to lots of talk about "G-zero worlds" and so forth.
Just to be provocative, however, I wonder if what's truly changed is the extinction of compellence power as we know it. The primary, ne plus ultra tools of compellence require a willingness to kill, jail or starve a lot of people. Recent flare-ups like Iran in 2009 and Egypt right now suggests that such actions are possible at the domestic level, but pretty damn costly; even authoritarian countries flinch at using brute force on a domestic population. Cross-border efforts are even more expensive in terms of both material and reputational costs.
This isn't the end of power, but it might be the end of one particular dimension of power. I'm not entirely convinced that this supposition is true, and am willing/eager to hear counterarguments. That said, I still hereby claim The End of Power as my title, so everyone else just back off, OK?
More seriously, am I missing anything?
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.
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.
As I'm typing this very sentence, it looks like the New START treaty will be passed. This happened even though GOP arms control pointman Senator Jon Kyl
acted like a petulant child for the last month came out in opposition to the treaty (along with Mitch McConnell).
David Weigel Fred Kaplan has an excellent summary of why the GOP leadership failed to halt ratification, even though the threshold for blocking it was only 34 senators:
If a Republican were president, the accord would have excited no controversy and at most a handful of diehard nays. As even most of its critics conceded, the treaty's text contains nothing objectionable in substance.
There were two kinds of opponents in this debate. The first had concerns that President Barack Obama would use the treaty as an excuse to ease up on missile defense and the programs to maintain the nuclear arsenal. In recent weeks, Obama and his team did as much to allay these concerns as any hawk could have hoped—and more than many doves preferred.
So that left the second kind of opponent: those who simply wanted to deny Obama any kind of victory. The latter motive was clearly dominant in this debate (emphasis added)
Let's step back here for a second and contemplate the truth and meaning of that last sentence. Is it true? Kevin Drum and Greg Sargent clearly think the answer is yes, and they've got some damning quotes to back up their argument. Rich Lowry is particularly revealing on this point:
As the sense builds that ratification is inevitable, Republicans are lining up to get on the “right side.” Lamar Alexander’s support, noted below, is a crucial sign of which way the wind is blowing, although he’ll probably be the only member of the Republican leadership to vote for it. At least Jon Kyl was able to get more money for modernization and that letter from President Obama making assurances on missile defense. Otherwise, this is a dismaying rout (emphasis added)
Um... at best, this is a dismaying rout for the GOP, not the USA. As
Weigel Kaplan points out, however, it's not elements of the GOP didn't favor the treaty:
The task of Obama and the Democratic floor managers, Sens. Harry Reid and John Kerry, was to convince enough Republicans to view the issue not as political gamesmanship but as an urgent matter of national security. Hence their rallying of every retired general, former defense secretary, and other security specialist—Republican and Democrat—that anyone had ever heard of. (At one point, Sen. Susan Collins, R-Maine, said she might vote for the treaty if former President George H.W. Bush endorsed it. A few days later, Bush released a statement doing just that.)
A few other things happened as well. Beyond the U.S. foreign policy establishment, the Eastern European foreign policy establishment got behind the treaty. There's also the fact that some GOP senators are still nursing a grudge against other GOP senators. Josh Rogin also points out that the treaty always had GOP supporters. And, finally, the Obama administration wisely decided to go to the mat on what was a rather unobjectionable treaty, no matter how hard John Bolton bloviates on the matter.
What does this mean going forward? In my bloggingheads with Matthew Yglesias last week, I was optimistic that Kyl's blatant obstructionism was a step too far, and that maybe this will lead to a little less needless obstructionism when it comes foreign policy. There's also the fact that the American people seems to really like what's happened during the lane duck session. Perhaps the GOP legislators that want to get re-elected will take note of that fact and decide that some cooperaion with the Obama administration on things like KORUS and arms control are a decent idea (there's also the fact that more GOP legislators from Democrat-friendly territory means more moderate Republicans).
That said, the nuclear negotiations with Russia only get harder from here. Plus, my gut tells me that the GOP leadership will become even more obsteperous going forward in order to bolster their reputation as the really tough bargaining party and eliminate the bitter aftertaste they're feeling from the lame duck session.
What do you think?
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.
Gideon Rachman correctly points out the Wikileaks cables do reveal some interesting stuff. One of the oddities that intrigues him:
The sheer bleakness of America's view of Russia -- and this despite all the happy talk of improved relations and a "reset." It is also interesting that the Americans seem to semi-endorse the popular theory that Putin is personally very wealthy, and even name the oil-trading company that could be being used as a siphon.
Yeah, if Wikileaks reveals that the U.S. thinks Russia is such a kleptocratic basket case, why is the Obama administration so intent on resetting the relationship?
Well, first, you could have divined the administration's opinion of Russia without needing Wikileaks.
Second, I suspect the reset was chosen precisely because Russia is such a kleptocratic basket case. For once, I'm ahead of the curve, as I made this point in a paper for the American Academy of Arts and Sciences earlier this year. The key section:
I characterize current U.S. policy toward the Russian Federation as a form of "realist internationalism," By realist internationalism, I am referring to the kind of foreign policy doctrine espoused during the George H.W. Bush administration. This approach recognizes Russia's great-power status and the utility of a great-power concert in dealing with global trouble spots. Rather than prioritizing human rights, democratization, or even economic interests in the bilateral relationship, this policy position prioritizes great-power cooperation on matters of high politics, such as nuclear nonproliferation and the containment of rogue states that transgress global norms....
Russia's demographic situation is a nightmare: the country's population has been shrinking since 1992. The country has experienced positive economic growth over the past decade, but it has been due almost entirely to the run-up in energy prices. The price spike also had a "Dutch Disease" effect on the Russian economy, with an ever greater share devoted to natural resource extraction in general and oil and natural gas in particular. Over the past year, President Medvedev has lamented multiple times that "trading gas and oil is our drug." Russia's other great-power capability is its nuclear arsenal, but because it has failed to modernize the arsenal that is also a deteriorating asset....
At present, Russia's geography, natural resources nuclear stockpile and global governance prerogatives mean that Moscow is still a great power. Compared to the other BRIC (Brazil, Russia, India, and China) economies, however, Russia's future trajectory is far from promising. This assessment appears to reflect the consensus view of the U.S. intelligence community as well.
Given this state of play, it is not surprising that U.S. foreign policy has reverted to the "equilibrium position" of realist internationalism; over time, the distribution of power between Russia and the United States will trend in America's direction. A pragmatic approach that alleviates Russian concerns about its relative decline echoes the George H.W. Bush administration's approach to a fading Soviet Union.
I'd be happy to hear alternative explanations for the reset in the comments section.
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.
So I see that Jackson Diehl's Washington Post column attracted a lot of eyeballs yesterday. He argued that Obama thinks that the same things that were important 25 years ago are important now. Diehl closes with the following:
[T]his administration is notable for its lack of grand strategy - or strategists. Its top foreign-policy makers are a former senator, a Washington lawyer and a former Senate staffer. There is no Henry Kissinger, no Zbigniew Brzezinski, no Condoleezza Rice; no foreign policy scholar.
Instead there is Obama, who likes to believe that he knows as much or more about policy than any of his aides - and who has been conspicuous in driving the strategies on nuclear disarmament and Israeli settlements. "I personally came of age during the Reagan presidency," Obama wrote in "The Audacity of Hope." Yes, and it shows.
1) If one takes Diehl's list of grand strategists as given, I'd have to conclude that presidents do much better without one. If you reflect on the Nixon, Carter and Bush 43 administrations, only one of them had a grand strategy that looks even semi-respectable at the present moment. Maybe grand strategists don't lead to great foreign policy (then again, I'm not sure I'd take Diehl's list as given -- Condi Rice is many things, but no one thought of her as a grand strategist. Even if she was, I don't think the Buswh administration's foreign policy followed this blueprint at all. And, let's face it, the word "strategist" is already in mortal danger of being demeaned into nothingness).
2) Having edited a book on the subject, I've become more and more dubious of those who complain about grand strategy in foreign policy. Bemoaning the lack of a grand strategy is the first refuge of the foreign policy critic. Often, it's not that the president in question lacks a strategic vision, it's that the president has a grand strategy that the critic doesn't like. If the last decade has taught us anything, it's that it is possible to have a coherent, well-articulated grand strategy that is nevertheless completely counterproductive in advancing the national interest.
3) Even though it's possible to nitpick Diehl's op-ed to death, there's a grain of truth buried in those last few paragraphs. No one disputes that Obama has a White House-centric foreign policymaking process, but I'm not sure Obama's White House staff merits that allocation of power. The recent shifts in foreign policy personnel have narrowed the foreign policy circle even more than before. And there are real mismatches between the Obama administration's grand strategy and its current foreign policy priorities.
4) Ordinarily, none of this would matter. So long as really stupid policies are avoided, I don't think that grand strategies matter for most countries most of the time -- what matters are good fundamentals like a robust economy. The thing is, this is one of those rare moments when strategy does matter. Any time you have a systemic shock -- like a great power war or a massive global recession -- you get massive uncertainty about the future direction of world politics. Add on the fact that there's now a potential challenger to the most powerful state in the world, and there are a lot of key actors in the world wondering what's going to happen next.
These are moments when a well-articulated and executed gramd strategy can reassure allies and signal possible rivals about a country's future course of action. And I'm unconvinced that the Obama administration's existing strategy documents provide any kind of clear signal at all.
What do you think?
In an ironic twist of fate, I don't have the time to fully comment on the global political economy of the G-20 summit outcomes (except to say I told you so) because… er… I'm attending a global political economy conference.
So talk amongst yourselves about the
massive fail demonstrably non-cooperative outcome to answer the following query: Who wins and who loses in a world of non-cooperation? And if the G-20 countries can't agree on what they're supposed to negotiate, what will they talk about instead?
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.
The unholy trinity in open economy macroeconomics is pretty simple. It's impossible for a country to do the following three things at the same time:
1) Maintain a fixed exchange rate
2) Maintain an open capital market
3) Run an independent monetary policy
One of the issues with macroeconomic policy coordination right now is that different countries have chosen different options to sacrifice. China, for example, has never opened its capital account. The United States, in pursuing quantitative easing, has basically chucked fixed exchange rates under the bus, no matter how many times Tim Geithner utters the "strong dollar" mantra
in his sleep to reporters.
These policies are generating a fair amount of blowback from the rest of the world, forcing President Barack Obama to defend the Fed's actions. And it appears that the developing countries are mostly following China's path towards regulating their capital account to prevent exchange rate appreciation and the inward rush of hot money.
How does this end? I think it's gonna end with a lot more capital controls for a few reasons:
1) It's the political path of least resistance;
2) Capital controls are seen as strengthening the state;
3) The high-growth areas of the world don't need a lot of capital inflows to fuel their continued growth.
What intrigues me is how the financial sector responds to a situation in which their freedom of action in emerging markets becomes more and more constrained. It's possible that they could pressure the Fed to change its position in the future. It's also possible, however, that big firms could see these controls as a useful barrier to entry for new firms.
My money is on the former response, however.
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.
According to Bloomberg, Brazilian Finance Minister Guido Mantega would like the real to stop appreciating and for the rest of the world to cooperate on currency matters:
Brazil's real dropped the most in two weeks after Finance Minister Guido Mantega raised taxes on foreign inflows for the second time this month to prevent appreciation and protect exports from what he called a global "currency war."
Brazil, Latin America’s largest economy, raised the so- called IOF tax on foreigners' investments in fixed-income securities to 6 percent from 4 percent. It also boosted the levy on money brought into the country to make margin deposits for transactions in the futures market to 6 percent from 0.38 percent…
"This currency war needs to be deactivated," Mantega told reporters. "We have to reach some kind of currency agreement.” …
Mantega cited the Plaza Accord of 1985, when governments agreed to intervene to devalue the U.S. dollar against the yen and the German deutsche mark, as the kind of agreement that might be required. International policy makers failed to narrow their differences on intervention in currency markets during the International Monetary Fund’s annual meeting this month.
Hey, you know, I bet the G-20 would be a decent forum for Mantega to foster this kind of cooperation. It's a good thing that there's a G-20 Finance Ministers meeting this weekend in Seoul.
Brazilian Finance Minister Guido Mantega will not attend a meeting of Group of 20 member-country finance officials in South Korea this week, a Finance Ministry spokesman said Monday.
The spokesman said Mantega would remain in Brazil while the government studies possible introduction of foreign exchange policy measures to curb the strengthening of the country's currency, the real.
Brazil's government will be represented at the meeting by Finance Ministry International Affairs Secretary Marcos Galvao and Central Bank International Affairs Director Luiz Pereira.
Is this rank hypocrisy by Mantega? Not entirely. It's something worse -- a judgment by Brazil's policy principals that more will be accomplished by staying in Brasilia to stem the tide of inward capital flows than to go to Seoul to seek a multilateral solution to the current lack of macroeconomic policy coordination.
There's plenty of blame to go around on this, but if Brazil thinks the G-20 is not going to accomplish much… then the G-20 is a dead forum walking.
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.]
My post yesterday on
following Vizzini's advice U.S. retrenchment from Central Asia generated a bit of pushback. I should point out that my concern here is that the U.S. husbands its power resources with a bit more acumen. Sure, Central Asia has some strategic significance, but the thing is, every region in the globe has some strategic significance. If I'm rank-ordering U.S. strategic priorities, it would go as follows: 1) East Asia; 2) Latin America; 3) Europe; 4) Middle East; 5) South Asia; 6) Central Asia; 7) Africa (there's also a big gap between 4 and 5 on this list). Scarce resources devoted to Central Asia have to be siphoned from somewhere, and I don't want too much of a diversion from other strategic priorities.
That said, I want to clarify that I'm not saying that the U.S. is in terminal decline and therefore should engage in a systematic strategic retreat. David Bell makes an excellent point in The New Republic today -- there has been a perpetual declinism industry in the United States since the launch of Sputnik.
Twenty-two years ago, in a refreshingly clear-sighted article for Foreign Affairs, Harvard's Samuel P. Huntington noted that the theme of "America's decline" had in fact been a constant in American culture and politics since at least the late 1950s. It had come, he wrote, in several distinct waves: in reaction to the Soviet Union's launch of Sputnik; to the Vietnam War; to the oil shock of 1973; to Soviet aggression in the late 1970s; and to the general unease that accompanied the end of the Cold War. Since Huntington wrote, we can add at least two more waves: in reaction to 9/11, and to the current "Great Recession."....
What the long history of American "declinism" -- as opposed to America's actual possible decline -- suggests is that these anxieties have an existence of their own that is quite distinct from the actual geopolitical position of our country; that they arise as much from something deeply rooted in the collective psyche of our chattering classes as from sober political and economic analyses.
For whatever reason, it is clear that for more than half a century, many of America's leading commentators have had a powerful impulse consistently to see the United States as a weak, "bred out" basket case that will fall to stronger rivals as inevitably as Rome fell to the barbarians, or France to Henry V at Agincourt.
On the foreign policy front, selective U.S. retrenchment doesn't imply terminal decline so much as a temporary realignment to ensure that American power and interest are matched up going forward.
Question to readers: does retrenchment presage resurgence?
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.
Gideon Rachman notes that the WTO has been denuded of controversy, and wonders why:
It’s strange to recall that - just a decade ago - the World Trade Organisation was a deeply controversial organisation. It was the WTO that was fingered by the anti-globalisation movement as the handmaiden of ruthless western capitalism and oppressor-in-chief of the poor. The WTO summit in Seattle in 1999 degenerated into a street riot.
On Wednesday morning, however, the WTO staged a public forum in Geneva, without the need for riot police - and indeed without much public fuss at all. I chaired the opening session at the organisation’s modest headquarters on the banks of Lac Leman.
I think that one of the main reasons why the WTO is no longer in the line of fire is that the change in the pattern of world trade over the last decade - combined with a slump in the West and a boom in China and India - makes the idea that global free trade is a tool of western domination look increasingly absurd. The world has got a lot more complicated than that; and even the anti-globalisation movement has had to acknowledge that complexity, if only tacitly. These days, it is the developing nations that are pressing for completion of the Doha Round and the rich countries that are dragging their feet.
Hmmmm..... well, let's call Rachman's explanation the optimistic interpretation for why the WTO doesn't attract demonstrators anymore. Let me offer a more pessimistic explanation, which consists of two parts:
1) Finance is the new bogeyman. The 2008 financial crisis and the subsequent Great Recession were caused by bubbles in financial markets -- trade, at best, played a marginal role. Perhaps it's not that trade has become less controversial so much as finance and capital flows have become way more controversial.
2) The WTO is no longer liberalizing. The WTO does an impressive job of ensuring that the status quo of a (largely) open trading system keeps functioning. What has exercised protestors in the past however, was the notion that further liberalization was going to take place. Since the Doha round is deader than a doornail. why bother with protesting?
Now imagine a world where there was forward progress on the Doha round -- do you seriously think there would be no protests associated with the WTO? Oddly enough, in this case, a lack of protest is a bad sign for trade.
I would much prefer Gideon to be right -- but I'm pretty sure he's wrong.
Daniel W. Drezner is professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University.