You have probably already read, read about, or listened to the speech on China that Vice President Pence gave at the Hudson Institute at the beginning of last month. If not, we strongly commend it to you. (See the link below.) Like a diplomatic note, the speech had olive branches at the beginning and at the end, but, in the middle, there were lots of arrows, arrows of concern and resolve vis-à-vis challenges from China.
The usual trade issues - America's large and persistent trade deficit with China, the treatment of American firms in China, especially the hard-ball tactics used to acquire U.S. technology, the subsidies and the tariffs - they are all prominently there. We deliberately chose a non-trade passage as today's featured quote, however, because this was emphatically not just a trade speech. We can't really do justice to it here; it is too long. But we can at least talk about four of the themes that run through it, namely trade, control, influence, and the threat of armed conflict, as they play out in the U.S.-China relationship.
TRADE
For us, Trade is the logical place to start, and, as it happens, the trade message is one with broader applicability. The dominant idea is "reciprocity," and the Vice President hit that note in describing the administration's overall approach to China. He said:
President Trump made clear that the United States of America has adopted a new approach to China. We seek a relationship grounded in fairness, reciprocity, and respect for sovereignty, and we have taken strong and swift action to achieve that goal.
It is hard to overstate reciprocity as a touchstone for the Trump administration's trade policy, and it reverberates throughout the Pence speech. In referencing the $250 billion of Chinese exports that are already subject to U.S. tariffs, the Vice President said, "[W]e will levy even more tariffs ... unless a fair and reciprocal trade deal is made." Later, nearer the end of the speech, the Vice President said, "As we respond to China's trade practices, we will continue to demand an economic relationship with China that is free, fair, and reciprocal."
This is not to suggest that the Vice President was simply repeating a mantra when it came to trade. To the contrary, there was a lot of flesh on those rhetorical bones. These three paragraphs illustrate the point:
Over the past 17 years, China's GDP has grown nine-fold; it's become the second-largest economy in the world. Much of this success was driven by American investment in China. And the Chinese Communist Party has also used an arsenal of policies inconsistent with free and fair trade, including tariffs, quotas, currency manipulation, forced technology transfer, intellectual property theft, and industrial subsidies that are handed out like candy to foreign investment. These policies have built Beijing's manufacturing base, at the expense of its competitors -- especially the United States of America.
China's actions have contributed to a trade deficit with the United States that last year ran to $375 billion -- nearly half of our global trade deficit. As President Trump said just this week, in his words, "We rebuilt China" over the last 25 years.
Now, through the "Made in China 2025" plan, the Communist Party has set its sights on controlling 90 percent of the world's most advanced industries, including robotics, biotechnology, and artificial intelligence. To win the commanding heights of the 21st century economy, Beijing has directed its bureaucrats and businesses to obtain American intellectual property -- the foundation of our economic leadership -- by any means necessary.
CONTROL
China's efforts to exercise control over large swaths of human activity-certainly including business-was perhaps the dominant observation of the speech. (Not the theme¬-that was the U.S. response-but the observation.) In addition to forcing technology transfers by American firms in China, Mr. Pence said that:
Beijing now requires American joint ventures that operate in China to establish what they call "party organizations" within their company, giving the Community Party a voice - and perhaps a veto - in hiring and investment decisions.
The China control gene is active almost everywhere, as in:
- The agreement with the Catholic church that give the Chinese Communist Party a role in appointing Catholic bishops.
- The monitoring of the 430,000 Chinese students in America through the Chinese Students and Scholars Associations, complete with severe punishments for students who step out of line. When a University of Maryland student from China dared to speak of "the fresh air of free speech," China punished both the student and the University.
- Letting Hollywood know that portraits of China in U.S. films need to be positive, and
- The drive to develop a "social credit score" for Chinese citizens; the goal, as China has explained it, is to "allow the trustworthy to roam everywhere under heaven, while making it hard for the discredited to take a single step."
- The last of those, by the way, is not just a problem for the Chinese people, at least not as Vice President Pence sees it. History attests, he said, that "a country that oppresses its own people rarely stops there."
INFLUENCE
In the spectrum of relationships, influence is right next to control and sometimes they are indistinguishable.
The port that was built in Sri Lanka with Chinese money is a case in point. The loan gave the Chinese influence up to the point where it became clear that Sri Lanka couldn't repay it. Then it gave the Chinese control.
We'll put aside for now the issue of China's influence in U.S. elections. Vice President Pence mentioned that China's retaliatory tariffs were designed for political effect, and we shall return to that issue in the comment section. But the Vice President went well beyond the tariffs in describing China's efforts to play in America's political ball parks. Quoting the U.S. intelligence community, Mr. Pence said, "China is targeting U.S. state and local governments and officials to exploit any divisions between federal and local levels on policy, like trade tariffs, to advance Beijing's political influence."
THREAT OF FORCE
On September 30, there was a truly disturbing incident in the South China. An American destroyer, the USS Decatur, was threatened with consequences by a Chinese destroyer if it did not change course. The Chinese vessel, the Lanzhou, came within 45 yards of the American. The American ship did change course. As Vice President Pence pointed out, this provocative behavior on the part of the Chinese was in stark contrast to what China was saying back in 2015. The Vice President quoted a Chinese leader saying then that China had "no intention to militarize" the South China Sea. We assume that was from the same Rose Garden event with President Obama, when President Xi said:
"We are committed to respecting and uphold the freedom of navigation and overflight that countries enjoy according to international law."
Something, it seems, has changed.
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