EDITOR’S NOTE: Listen to the complete story and learn a lot more about the US and China on my Politics and Prejudices podcast, available now on Apple Podcast, Stitcher and other platforms. You may also enjoy Tom Watkins’ essay on China and the United States at the latest issue of Domemagazine.com
Needed: A China Policy that Makes Sense
There’s an episode of “Madam Secretary,” the fairly realistic Netflix series about power politics in Washington, in which China’s ambassador is summoned by the U.S. Secretary of State, played by Tea Leoni. The computer systems on Air Force won have been hacked, and she wants to know if China could have done it. The ambassador incredulously denies any involvement.
“Madam Secretary,” he says, “In 2000 China owned only six percent of the U.S. foreign debt. “Today it is more than 20 percent.” The ambassador goes on to explain that when his country decides to take over the United States, they won’t do so by military means.
They won’t have to; they will just assume control of their debtor. Now the show is fiction, of course. But we do now own more than a fifth of our entire foreign debt to China—a little over $1.2 trillion — that’s trillion with a T — dollars. And beyond that, our economies are more and more interwoven. General Motors now sells 43 percent of all the cars they make in China.
That includes the vast majority of Buicks, which is a big reason why Buick survived as a brand when Pontiac and Oldsmobile did not. According to Kristen Dziczek, the well-informed head of Industry, Labor and Economics Group at the Center for Automotive Research, the tariffs the president have imposed or has vowed to impose on China will cost 368,000 jobs.
That’s American jobs, many of them in Michigan, not Chinese jobs. The tariffs would also add two thousand dollars to the cost of a car built in this country, and nearly double that for an import. That doesn’t feel much like winning, whatever the President says.
It seems to me that we are going about this all wrong, and playing a game of dangerous brinkmanship. That doesn’t mean that China isn’t a threat to our economic interests in some way, or that we shouldn’t be a hard and tough negotiator. But as Tom Watkins likes to say, “China’s rise doesn’t have to come at our demise.”
There’s an old and wrongheaded economic theory known as mercantilism that essentially held, more or less, that for one country to do well, another has to do badly. That theory was discredited long ago, but incredibly, it seems that some people still believe it.
The truth is that China has about four times as many people as we do, and is the fastest growing major economy in the world. We can’t possibly ignore that, and if we try to do everything we can to hurt them, in the long run, we will pay. That’s just common sense.
Watkins also likes to say that the China-US relationship is the most important bilateral one in the world, and that going forward, all major issues will intersect at the corner of Washington and Beijing. That’s already becoming the case.
We need to find a way to get along for our mutual benefit, Watkins says. I think we ignore that advice at our peril. Economically, not finding a way to live with China could even be fatal. I’m Jack Lessenberry. Thanks for listening; I hope you will again soon.
