After weeks of wrangling over tariffs, the prospect of a US-China trade war has become frighteningly real.
Some would dismiss this as alarmism - despite bouts of volatility caused by trade war talk in the markets, the international financial and business communities remain fairly sanguine and overall seem to be rather naive as to the magnitude of what is now transpiring between Washington and Beijing.
But the underlying shift has already occurred: this spat between the world's two leading economies is no longer about prosperity, but about power; it is no longer a clash between profit-seeking corporations, but between identity-seeking civilizations. Money is already rapidly being relegated to only a means to an end - this is why Wall Street and the global financial community are about to be completely blindsided by the developing course of events.
But Donald Trump's gambit to compel China to change its behavior by dangling the threat of a trade war is already doomed - in fact, practically even before it began. Because for all its stated reluctance to engage in such a conflict, Xi Jinping's communist regime is already resigning and resolving itself to disengage from the United States - and Washington is not aware of how far along this process has come. China has a "Plan B" if negotiations with America fail; the US does not.
China no longer needs the US exclusively for high technology to build up its already formidable economy and military - it can get most or all of that from its European and Asian partners who are caught in the middle of the gathering clash of the titans, who themselves harbor no illusions about being able to challenge China's rise and will thus demand an ever higher price from the US to join in an attempt to stop it, one that Trump has unequivocally stated he is unwilling to pay. Increasingly, China is also developing indigenous capabilities across an entire range of industries and sectors that, while not yet in the same league as those of the West, make it practically impossible to blackmail with sanctions.
Hawkish US commentators tend to be under the impression that the US still holds the ultimate advantage in an economic conflict with China because while it will absorb tremendous pain from a cutoff of cheap Chinese goods, it is China that will risk complete collapse as the social contract between the communist regime and its subjects is shattered by the loss of the export cash cow that is America. This is a dangerous misconception: it is China that will absorb tremendous pain in such an apocalyptic scenario, but the US which could stand to come apart at the seams if the cost of everyday living suddenly skyrockets.
Even when China first entered the WTO in 2001-02, its cheaply assembled consumer goods exports to the US underpinned hundreds of billions of dollars in annual markups to distributors and final retail sellers; today, that figure stands in the trillions. Literally millions of low-end, typically part-time and sparsely benefit-offering retail and service jobs in America - the lifeblood of much of the bottom 80 percent of the workforce - are now intertwined with Chinese products that must be imported in the volume that only the middle kingdom can reliably offer to keep basic expenses at American companies low yet still profitable for their merchants. The disruption to the bottom line of firms across the entire US economic landscape will be great enough to pressure wages and even jobs themselves on a broad and systematic scale; the dislocation need not reach the level of social instability to generate a political backlash that would reverberate powerfully both in state capitals and in Washington.
In the decade since the financial crisis, the other major factor in China's economic clout with the US has likewise exponentially mushroomed: mainland investments in US assets of all classes, of which the $1.2 trillion of US Treasury holdings by Beijing's central bank are only the foundational linchpin.
Chinese firms and financial institutions of all sizes, both private and state-owned, are now marquee players in the global US dollar ecosystem. The $10 to $15 trillion offshore dollar or "Eurodollar" money market has a single undisputed top player: China, whose over $3 trillion in foreign currency reserves doesn't even include the massive and still rapidly growing foreign-denominated liquid assets of Chinese state banks and enterprises and private Chinese individuals and firms - which together amount to perhaps another several trillion US dollars.
As such, the media debate over whether China will "dump" its vast Treasury holdings in economic warfare with America completely misses the point: while China would appear to have no interest in debasing its own assets, it is such a disproportionately large - even "market-making" - factor in global bond and debt markets that even small shifts in its allocation preferences will have powerful repercussions for debt pricing and borrowing costs worldwide. This is already evident in the heart of the Eurodollar money market based in England: largely presaging the looming Chinese switch from dollars to yuan for oil and other commodity payments, the overnight benchmark London Interbank Offered Rate (LIBOR) has shot up in the first months of 2018.
From these aforementioned financial and commercial realities, there is little doubt that Beijing - not Washington - already truly calls the shots in the global economy. Indeed, if anything the Trump trade spat is only highlighting how skillfully China has managed to continue keeping its profile low, per Deng Xiaoping's famous maxim, "Hide your strength, bide your time": when China was already a rising superpower in the 1990s and 2000s, it gave the appearance of merely a normal great power; now that China has already become the new superpower on the block, even its increased bouts of assertiveness on the world stage - especially in its own neighborhood - are still fooling its opponents and critics into the impression that Beijing is arrogantly overreaching and overextending itself.
But with Donald Trump in the picture, everything that is hidden is being dramatically brought to the light. The maverick US president was elected largely on the premise that something is deeply, deeply amiss about a postwar global order that purportedly was still under Washington's control for the benefit of the American people, yet was ever more obviously serving other nations, even competitors like China, better than America itself.
The Trump administration is now barreling towards the point of no return: it is Washington, starting from a weak and losing position that it is ever more fully conscious of, which is pushing this imminent clash with Beijing that one way or another stands to fundamentally reset the entire architecture of international relations and indeed alter the trajectory of world history itself.
In already backing away from actually imposing tariffs that amount to a paltry fraction of a percent of annual GDP, Trump has unwittingly signaled just how badly unprepared his administration is for a trade war that he has blithely declared to be "good, and easy to win."
It is good and easy to win alright: for China, because the middle kingdom has already won (something Trump, yet again unwittingly, admitted).
The talks between Washington and Beijing are essentially futile in substance no matter how substantive in appearance: they are basically negotiations over the terms of US surrender to China. (In fact, their opaque nature of late is itself an indication of just how little there is to really discuss, i.e. how practically nonexistent is any positive spin that the White House PR department can put on it.)
Because China is the party that can walk away and call a total victory. Its "Plan B" isn't even a plan: it's simply to stay still and virtually mum in its dealings with America even as the latter howls in protest for more "talks" and the like.
While it's true that Beijing is also accelerating already well-developed and partially implemented contingencies for joining with Russia to counter US military provocations across the periphery of Eurasia - the clearest evidence of all that Trumpian Washington is getting totally taken to the cleaners by its old Cold War rivals - even this is merely secondary.
The American system will itself fall apart should Trump finally and actually push the envelope on the Celestial Empire: its own internal dichotomy between a bipartisan globalist elite and an increasingly nativist Republican party base will not survive the headwinds of a clash that pits individual profit and interest against collective responsibility and cohesion. China will be the death knell for American liberal democracy and free-market capitalism - the coming realignment will be utterly epoch-changing, because it will spell the end of the supremacy of modern Western civilization itself.
Saturday, April 7, 2018
Wednesday, January 31, 2018
What's behind the China-Taiwan air dispute?
Relations between China and Taiwan have hit an arguably decade-plus low in recent weeks, as an intensifying row over acceptable civilian air routes over the Taiwan Strait has apparently jeopardized all current and future transport integration of the island with the mainland. What could be behind such a drastic deterioration of the atmosphere?
Beijing's displeasure with the self-ruling island's independence-leaning president, Tsai Ingwen, stems from the latter's refusal to reaffirm the so-called "1992 consensus" that posits that Taiwan is an inseparable part of "one China" even if it practically interprets this differently from the communist-ruled mainland. Since taking office in spring 2016, Ms. Tsai has held the line on this core campaign pledge to her liberal Democratic Progressive Party (DPP) base, to gradually formalize the island's de facto independence by removing recognition of Beijing's wish for eventual reunification as a precondition for cross-strait relations.
In recent months, Tsai's defiance has acquired a more urgent undertone for the communist authorities, who since October's 18th Party Congress which cemented the authority of Xi Jinping have made nationalism even more prominent as China's primary ideological organizing principle and foundation. This is in no small part because Taipei has increasingly turned to its main ally - the United States - for backup.
By approving a $1.5 billion arms package for Taiwan in mid-2017, the Trump administration has signaled its willingness to continue America's role as the island's security guarantor per the 1979 Taiwan Relations Act; meanwhile various military and civilian contacts between Taipei and Washington have accelerated since the second half of last year, adding to the growing impression that a new push is underway to support the island as a principal buffer against red Chinese expansionism in the Western Pacific.
This kind of US-Taiwan engagement would not be particularly troublesome for Beijing except that it's happening in the context of a Taipei administration which has made no secret of its desire for formal independence - or at the very least, refused to rule that out as a viable option.
Especially because Beijing considers the Taiwanese people as belonging to its own, it has always been loathe to assert itself too intrusively on their internal affairs - and this is especially so in the present moment, when pro-reunification sentiment on the island has dipped to an all-time low as younger Taiwanese in particular bask in their separate identity apart from China. But as Beijing sees it, it is nonetheless still Taipei which is upsetting a carefully balanced and mutually agreed upon status quo of non-independence in exchange for non-interference; it thus behooves it to put the Tsai administration in its place by showing it that its aspirations for internationally recognized statehood are no closer today than they were during the first DPP-led independence bid of the early 2000s.
For the Taiwanese people's distinctly forged identity is not the only major change that has occurred since then: China itself has also risen dramatically. In economic, political, and military terms, the balance of power has tilted to the mainland's advantage so much that even as Taiwan seeks its own way, that way is increasingly defined by how it recalibrates its relationship with China.
To put it another way: the 1992 consensus may be long defunct, but if Taipei pushes the envelope on shoving this fact in Beijing's face, it will find that the 1979 Taiwan Relations Act with the US is also practically untenable in its status quo format.
America can no longer save Taiwan from China. Previously, it pledged to do so only within the context of acknowledging Beijing's own "one China principle" - never permitting let alone encouraging independent Taiwanese statehood, even as a separate "Republic of China" which in fact it had recognized as the legitimate government of all China until the 1970s rapprochement with the communists.
And so, as Tsai's Taiwan has nurtured and acted upon hopes of American support for its assertion of a separate destiny, the Xi regime has moved to constrict the actual free space that the island still affords to do so. In unilaterally declaring new routes for its civilian airliners over the Taiwan Strait, the mainland intends to show that it doesn't need any permission from Taipei - and Washington for that matter - to change facts on the ground (i.e. in the air) to match its claims of sovereignty over all Taiwan.
The Taiwanese retaliation - canceling earlier approved mainland carrier flights to its territory - will not succeed in altering the communist regime's calculations. With two-fifths of the island's exports going to the mainland, there is little doubt who holds the upper hand in the economic relationship - especially as Taiwan's long vaunted technological edge over its increasingly sophisticated and capable rival further diminishes. And any attempts by the Taiwanese military to (re)establish control of the truncated airspace will immediately trigger a more powerful PLA response.
Ms. Tsai for the first time last week grudgingly acknowledged the possibility, even likelihood, of a mainland attack should Taiwan move towards formal independence; that it took her so long - and required such a concrete crisis imposed by China - to wake up to the harsh reality, indicates how patiently and confidently Beijing has been playing its hand against her.
Meanwhile, the US under the bombastically "America First" banner of Donald Trump could hardly notice the China-Taiwan spat less; its Asia focus appears to continue to be consumed by the singular problem of North Korea, and even that in a highly insular and even ad-hoc manner.
China - even under the stridently nationalistic Xi regime - has always seen itself as playing a long game that the sheer force of history assures it of winning; its intent for Taiwan's independence proclivities - which it has soberly come to recognize as a permanent fact of cross-strait relations - is to merely disabuse them of what they don't in fact render possible for the self-ruling island. That is to say, it ultimately matters not a whit how much the less than 25 million people of Taiwan may feel they are a separate people and nation deserving of recognition as such by the international community - so long as the communists rule the mainland, the nearly 1.4 billion people there will have a final veto.
Beijing's displeasure with the self-ruling island's independence-leaning president, Tsai Ingwen, stems from the latter's refusal to reaffirm the so-called "1992 consensus" that posits that Taiwan is an inseparable part of "one China" even if it practically interprets this differently from the communist-ruled mainland. Since taking office in spring 2016, Ms. Tsai has held the line on this core campaign pledge to her liberal Democratic Progressive Party (DPP) base, to gradually formalize the island's de facto independence by removing recognition of Beijing's wish for eventual reunification as a precondition for cross-strait relations.
In recent months, Tsai's defiance has acquired a more urgent undertone for the communist authorities, who since October's 18th Party Congress which cemented the authority of Xi Jinping have made nationalism even more prominent as China's primary ideological organizing principle and foundation. This is in no small part because Taipei has increasingly turned to its main ally - the United States - for backup.
By approving a $1.5 billion arms package for Taiwan in mid-2017, the Trump administration has signaled its willingness to continue America's role as the island's security guarantor per the 1979 Taiwan Relations Act; meanwhile various military and civilian contacts between Taipei and Washington have accelerated since the second half of last year, adding to the growing impression that a new push is underway to support the island as a principal buffer against red Chinese expansionism in the Western Pacific.
This kind of US-Taiwan engagement would not be particularly troublesome for Beijing except that it's happening in the context of a Taipei administration which has made no secret of its desire for formal independence - or at the very least, refused to rule that out as a viable option.
Especially because Beijing considers the Taiwanese people as belonging to its own, it has always been loathe to assert itself too intrusively on their internal affairs - and this is especially so in the present moment, when pro-reunification sentiment on the island has dipped to an all-time low as younger Taiwanese in particular bask in their separate identity apart from China. But as Beijing sees it, it is nonetheless still Taipei which is upsetting a carefully balanced and mutually agreed upon status quo of non-independence in exchange for non-interference; it thus behooves it to put the Tsai administration in its place by showing it that its aspirations for internationally recognized statehood are no closer today than they were during the first DPP-led independence bid of the early 2000s.
For the Taiwanese people's distinctly forged identity is not the only major change that has occurred since then: China itself has also risen dramatically. In economic, political, and military terms, the balance of power has tilted to the mainland's advantage so much that even as Taiwan seeks its own way, that way is increasingly defined by how it recalibrates its relationship with China.
To put it another way: the 1992 consensus may be long defunct, but if Taipei pushes the envelope on shoving this fact in Beijing's face, it will find that the 1979 Taiwan Relations Act with the US is also practically untenable in its status quo format.
America can no longer save Taiwan from China. Previously, it pledged to do so only within the context of acknowledging Beijing's own "one China principle" - never permitting let alone encouraging independent Taiwanese statehood, even as a separate "Republic of China" which in fact it had recognized as the legitimate government of all China until the 1970s rapprochement with the communists.
And so, as Tsai's Taiwan has nurtured and acted upon hopes of American support for its assertion of a separate destiny, the Xi regime has moved to constrict the actual free space that the island still affords to do so. In unilaterally declaring new routes for its civilian airliners over the Taiwan Strait, the mainland intends to show that it doesn't need any permission from Taipei - and Washington for that matter - to change facts on the ground (i.e. in the air) to match its claims of sovereignty over all Taiwan.
The Taiwanese retaliation - canceling earlier approved mainland carrier flights to its territory - will not succeed in altering the communist regime's calculations. With two-fifths of the island's exports going to the mainland, there is little doubt who holds the upper hand in the economic relationship - especially as Taiwan's long vaunted technological edge over its increasingly sophisticated and capable rival further diminishes. And any attempts by the Taiwanese military to (re)establish control of the truncated airspace will immediately trigger a more powerful PLA response.
Ms. Tsai for the first time last week grudgingly acknowledged the possibility, even likelihood, of a mainland attack should Taiwan move towards formal independence; that it took her so long - and required such a concrete crisis imposed by China - to wake up to the harsh reality, indicates how patiently and confidently Beijing has been playing its hand against her.
Meanwhile, the US under the bombastically "America First" banner of Donald Trump could hardly notice the China-Taiwan spat less; its Asia focus appears to continue to be consumed by the singular problem of North Korea, and even that in a highly insular and even ad-hoc manner.
China - even under the stridently nationalistic Xi regime - has always seen itself as playing a long game that the sheer force of history assures it of winning; its intent for Taiwan's independence proclivities - which it has soberly come to recognize as a permanent fact of cross-strait relations - is to merely disabuse them of what they don't in fact render possible for the self-ruling island. That is to say, it ultimately matters not a whit how much the less than 25 million people of Taiwan may feel they are a separate people and nation deserving of recognition as such by the international community - so long as the communists rule the mainland, the nearly 1.4 billion people there will have a final veto.
Monday, January 15, 2018
The US empire's last stand in the Asia-Pacific
Even as the Koreas begin historic new peace talks, here in the US the neocon hawks are making sure their case for war is still heard loud and clear. Perhaps this is nothing beyond the obvious substitution of a war of words for a war of bombs and missiles; but in fact there is something more profound behind it.
If the North-South detente succeeds, it will mark a new chapter in US-Korean relations: one that diminishes the seven-decade role of Washington as Seoul's security guarantor, perhaps to the point of a complete pullout of US forces from their remaining outpost on the Asian mainland. In the immediate term at least, this will be viewed as a major blow to American power and prestige.
Even without such a pullout - which will likely be the concession given to the North in exchange for the latter's nuclear disarmament - from now on the US will no longer be in the driver's seat with respect to Korean security policy. Already, its freedom of action is sharply constrained by South Korean politics; if and when a North-South thaw really takes hold, unless some corresponding policy shift also occurs in Washington, the US will find itself left out in the cold and wondering why it has to continue defending an ally who so much no longer sees eye-to-eye with it on very fundamental matters.
Inertia is the most powerful force in politics - but especially in international relations. As a whole, the US policy class inside the Beltway has completely failed - in reality, refused - to adjust to the new glaring realities of a China-centric East Asia (with Russia an effective satellite of Beijing in the region which also happens to be the latter's ultimate security enforcer). This new environment is one in which US free-market democracy is not the dominant socioeconomic system, but increasingly an also-ran clawing for any bit of traction in whichever small would-be dependency it can; and an environment in which the high-priced US military so deeply worshiped by the Washington policy class is simply not an effective tool anymore to deter authoritarian expansionism.
That second part was already pretty much clear to common-sense observers around the beginning of this decade; that they still haven't sunk in in the minds of the career bureaucrats making decisions about US policy in the Far East shows the depths to which American leadership and initiative in the region has decayed and atrophied.
To his great - but politically posthumous - credit, Barack Obama understood that any continued and indeed expanded US military presence in the Asia-Pacific would only be effective in countering China's imperial ambitions if it were integrated into a more overarching geoeconomic strategy to compel Beijing to open its markets on US terms or risk being isolated into its own command-economy bloc. While he ended up being unrealistic about the actual achievability of this objective, he at least understood its practical necessity: in the Asia-Pacific policy void that his administration has left behind it, there is now little left but a series of haphazard and uncoordinated American reactive measures to retain influence in a critical part of the world that Trump effectively handed to China on his third day in office by leaving the Trans-Pacific Partnership (TPP).
The unfolding of the North Korean crisis has been but the logical outcome of an America gone AWOL in the region in every sense except brandishing its sheriff's guns - as if there weren't already a new sheriff in town there. The neocons are dead right in one respect, even if they won't admit it: this is for all practical purposes the US postwar empire's last stand in the Asia-Pacific...and yes, it carries profound implications for the US empire elsewhere, especially the Middle East, where Iran's Ayatollahs are inevitably drawing the lesson from Kim Jong-Un that Washington is powerless to stop a determined foe from acquiring the means to render itself invulnerable to imperialist bullying.
The neocons may be paranoid, but behind every paranoia is a quite rational fear of loss - the object feared to be lost may well be blown completely out of proportion to its actual value, but the very process of undergoing loss itself is the true issue at hand for any mind or mindset that has for so long been accustomed to thinking of world domination as its birthright.
If the North-South detente succeeds, it will mark a new chapter in US-Korean relations: one that diminishes the seven-decade role of Washington as Seoul's security guarantor, perhaps to the point of a complete pullout of US forces from their remaining outpost on the Asian mainland. In the immediate term at least, this will be viewed as a major blow to American power and prestige.
Even without such a pullout - which will likely be the concession given to the North in exchange for the latter's nuclear disarmament - from now on the US will no longer be in the driver's seat with respect to Korean security policy. Already, its freedom of action is sharply constrained by South Korean politics; if and when a North-South thaw really takes hold, unless some corresponding policy shift also occurs in Washington, the US will find itself left out in the cold and wondering why it has to continue defending an ally who so much no longer sees eye-to-eye with it on very fundamental matters.
Inertia is the most powerful force in politics - but especially in international relations. As a whole, the US policy class inside the Beltway has completely failed - in reality, refused - to adjust to the new glaring realities of a China-centric East Asia (with Russia an effective satellite of Beijing in the region which also happens to be the latter's ultimate security enforcer). This new environment is one in which US free-market democracy is not the dominant socioeconomic system, but increasingly an also-ran clawing for any bit of traction in whichever small would-be dependency it can; and an environment in which the high-priced US military so deeply worshiped by the Washington policy class is simply not an effective tool anymore to deter authoritarian expansionism.
That second part was already pretty much clear to common-sense observers around the beginning of this decade; that they still haven't sunk in in the minds of the career bureaucrats making decisions about US policy in the Far East shows the depths to which American leadership and initiative in the region has decayed and atrophied.
To his great - but politically posthumous - credit, Barack Obama understood that any continued and indeed expanded US military presence in the Asia-Pacific would only be effective in countering China's imperial ambitions if it were integrated into a more overarching geoeconomic strategy to compel Beijing to open its markets on US terms or risk being isolated into its own command-economy bloc. While he ended up being unrealistic about the actual achievability of this objective, he at least understood its practical necessity: in the Asia-Pacific policy void that his administration has left behind it, there is now little left but a series of haphazard and uncoordinated American reactive measures to retain influence in a critical part of the world that Trump effectively handed to China on his third day in office by leaving the Trans-Pacific Partnership (TPP).
The unfolding of the North Korean crisis has been but the logical outcome of an America gone AWOL in the region in every sense except brandishing its sheriff's guns - as if there weren't already a new sheriff in town there. The neocons are dead right in one respect, even if they won't admit it: this is for all practical purposes the US postwar empire's last stand in the Asia-Pacific...and yes, it carries profound implications for the US empire elsewhere, especially the Middle East, where Iran's Ayatollahs are inevitably drawing the lesson from Kim Jong-Un that Washington is powerless to stop a determined foe from acquiring the means to render itself invulnerable to imperialist bullying.
The neocons may be paranoid, but behind every paranoia is a quite rational fear of loss - the object feared to be lost may well be blown completely out of proportion to its actual value, but the very process of undergoing loss itself is the true issue at hand for any mind or mindset that has for so long been accustomed to thinking of world domination as its birthright.
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