Essay: Determining the role of the United States in international affairs

KEY POINTS
♣ Determining the role of the United States in international affairs is one of the chief strategic concerns of our time.
♣ China’s growing aspirations in the Asia Pacific region have added another level of complexity to US-China relations. Contrary to the hopes and expectations of the architects of engagement, the United States and China have clearly become geopolitical rivals.
♣ The United States has so far failed to take a sufficiently strong position with China. You need to rectify this by reaffirming American commitments to our allies, international governance rulings, and a philosophy of maintaining global influence.
There are three key areas where the United States urgently needs to clarify its position with China. In order of priority, these are:
1. North Korea: You should seek to engage China’s cooperation to manage the threat from North Korea through diplomacy and containment. This is your top priority.
♣ Demand that China increase its transparency regarding the enforcement of sanctions on North Korea. If this is not agreed to, work with the Treasury Department to sanction Chinese entities that do business with North Korea.
♣ Consider reopening talks on the possibility of a “dual freeze” arrangement.
2. Asia Pacific: You need to reaffirm the United States’ position as a global power by asserting its established positions on SCS and acting to maintain influence in the Asia Pacific region.
♣ Either support the emerging TPP-11 agreement, or (even better) work to bring back the TPP itself.
♣ Encourage the World Bank to devote more resources to infrastructure projects in Asia.
♣ Stay firm on stated SCS positions. This precludes promising to halt freedom of navigation operations (FONOPS).
3. Bilateral Trade: You should demand higher trade standards from China, or be prepared to consider implementing tariffs/quotas to reduce the trade deficit.
♣ Work with the US Trade Representative to seek a settlement for China’s unfair trade practices in the form of compensation or elimination of the trade barrier.
♣ If China does not agree to more fair trade practices, be prepared to advocate for a tariff on Chinese products that compete with American companies.
♣ Pursue WTO litigation for all examples of non-compliance.
BACKGROUND AND PROPOSAL SPECIFICS
I. North Korea: Engage China’s cooperation to manage the threat from North Korea through diplomacy and containment.
The Issue
As one of the principal threats to American national security, defusing the mounting crisis with North Korea needs to be your top priority. China plays a crucial role in advancing negotiations and dialogue. You should repeat the need for China and the United States to work together to restrain North Korea’s nuclear ambitions and temper further escalation. This is a global threat where we have a common objective, and continued cooperation with China will be helpful in preventing the crisis from escalating. That said, it is inadvisable to rely on China completely.
China’s Position: Inconsistent on Sanctions, Favors Diplomacy
Chinese officials have been dragging their feet on the North Korea issue for far too long. Two core factors should be recognized here:
(1) China has extremely strong economic ties to North Korea. China makes up about 91% of North Korea’s foreign trade. Furthermore, some 70,000-80,000 North Korean workers are employed in China. This is a significant source of hard currency (which is not covered by sanctions) for North Korea.
(2) China’s proximity to the Korean peninsula encourages a North Korea policy focused on stability rather than denuclearization. For one, a destabilizing conflict is likely to spill across the Chinese border. In addition, China would like to retain a strategic buffer between itself and U.S. ally South Korea.
Understandably, a regime change or military conflict on Beijing’s doorstep would be dangerously destabilizing (even without the nuclear component of a North Korea conflict). Beijing would prefer a more cautious approach. Indeed, China has repeatedly requested a return to the stalled six-party talks between North Korea, China, Russia, Japan, South Korea and the United States, and has expressed support for a dual-freeze arrangement, which would see a freeze on North Korean testing in exchange for reductions in sanction or US-South Korean military exercises.
More recently, North Korea’s provocations pressed Beijing to halt its imports of North Korean coal until the end of 2017. If followed through on, this represents a significant step from Beijing, considering that exports of coal to China account for a large percentage of North Korea’s trade and GDP. However, China has typically been reticent to leverage the full force of its economic ties with North Korea. With this in mind, it is likely that there is more Beijing could do to tame the unpredictable North Korean regime.
The United States’ Options: Military, Diplomacy, Containment
Regardless of China’s position, there are three main courses for American policy regarding North Korea:
1. Military Option: It is distinctly possible at this point that a military option may yet come to the forefront of discussions on handling this crisis. However, this is absolutely a last resort. There is very little indication that the United States can “totally destroy” North Korea. While the American military is the most destructive force in human history, such a force cannot guarantee that Washington will eliminate every single North Korean nuclear weapon. And if Pyongyang retaliates, potentially with nuclear weapons we are unable to secure, there is no guarantee that our missile defenses can keep us safe. Consequences of a military strike range from a humanitarian crisis to the nuclear abyss.
2. Diplomacy: This is the main area where China’s cooperation can be helpful to the United States’ agenda, via Beijing’s ability to advance negotiations and dialogue. At the moment, there is little possibility of productive US-North Korea talks. In the event of a crisis, this means that there is no way for Washington and Pyongyang to rapidly convey their intentions. Some level of negotiation between Washington and Pyongyang, even if only to establish a channel of communication, may therefore be critical in the event of a crisis.
A “freeze for a freeze” deal also falls into this category. This is not an optimal solution, as it would lock in North Korea’s gains and require unreciprocated sacrifices from Washington and Seoul. However, a dual-freeze is far better than a war that may devolve into a nuclear exchange.
3. Economic Sanctions/Containment: While considering what “ultimate approach” the United States will take towards North Korea, economic sanctions against Pyongyang are still being implemented. Recently, South Korea and the United States agreed to strengthen cooperation on sanctions and promised to follow through with United Nations sanctions. Combined with China’s embargo on North Korean coal imports, the overall impact of economic sanctions on Pyongyang’s economy could be palpable, but is yet to be fully determined. While there are signs that the sanctions are biting—gas prices have recently doubled, and electricity is rationed—Kim has also moved to liberalize the North Korean economy in ways that generate growth despite sanctions (with GDP rising 3.9% last year, according to South Korea’s central bank).
Strategy: Key Points
1. In discussions with Beijing, emphasize our common purpose. The United States does not intend to instigate a destabilizing regime change at this moment, but rather to act to contain and manage a dangerous situation that also affects China’s vital national interests.
a. Any realistic diplomatic proposals that Beijing can put forward to mitigate the risks of a nuclear North Korea would be welcome, considering the potential influence that China wields over North Korea. A dual-freeze proposal is not an optimal solution for the United States, but it is better than any current alternatives.
2. Leverage: Remind China that the de-escalation of North Korea’s nuclear program is a top priority for the United States. Increasingly, discussion in the United States involves military options. To be clear, such a conflict remains inimical to American interests, but the proximity of North Korea means that a military conflict represents an even more dire outcome for China. You should therefore emphasize the potential for military action (which Beijing has every reason to want to avoid) in order to underscore the severity of this issue and exert pressure on Beijing to take further action on North Korea of its own accord.
3. Stakeholder analysis: It is important that you cooperate with (1) Secretary of the Treasury Steven Mnuchin and (2) Secretary of Defense James Mattis.
i. The Department of the Treasury can sanction Chinese entities with economic ties to North Korea in accordance with the North Korea Sanctions and Policy Act of 2016. In the past, sanctioning Chinese entities has resulted in their assets being frozen, and several businesses and Chinese nationals being indicted for sanctions violations, conspiracy and money laundering. This pathway has the potential to seriously disrupt the business of major actors in the Chinese economy, and can be leveraged to encourage increased regulation and enforcement of international sanctions.
ii. Mattis has recently made remarks emphasizing the increased urgency of the threat from North Korea. Mattis maintains that diplomacy should remain the preferred course of action, but has also spoken confidently of the massive military response that the United States is prepared to enact in the case of direct provocation. Both of these statements are in line with the strategy you adopt, and Mattis will be a key ally in developing a North Korea strategy.
4. Considerations: Remain mindful of the risk that remarks on the part of Washington be perceived as overly adversarial towards China. It is unwise to overtly antagonize China on North Korea, as it could still be a helpful partner in the event that a diplomatic solution becomes more feasible, and some level of Chinese cooperation with economic sanctions is necessary to their efficacy.
5. Other ways forward: In the meantime, assert the United States’ commitment to working with South Korea to enforce economic sanctions on North Korea, and following through with United Nations sanctions. Insist that all UN Security Council resolutions are followed to the letter, and strengthened any time North Korea tests another missile or nuclear weapon. Embracing a financial-containment strategy focused on limited the amount of illegal money going into North Korea’s nuclear program is of vital interest. Consequences of this economic approach have not yet been entirely manifested, and—especially if China can be encouraged to further limit trade with North Korea, as well—this may be a sufficient mechanism of containment. To this end, you should also call for greater accountability and transparency from China regarding international sanctions on North Korea.
II. Asia Pacific: Reaffirm the United States’ position as a global power by asserting established positions on SCS and acting to maintain influence in the Asia Pacific region.
When two global powers with competing regional strategies extend into one’s another security and economic spheres, the geopolitical landscape is ripe for friction. Recent Chinese initiatives—including OBR, AIIB, RCEP, and FTAAP—demonstrate and increasingly ambitious and expansionist agenda that could substantially reduce the United States’ influence in the Asia Pacific region. Especially if paired with inadequate response from the United States, the growing regional influence of China represents the troubling rise of a country with very different values from our own. As a champion of democracy and human rights, the United States is especially compelled to maintain its global significance and regional influence as a counterweight to the rise of China.
Courses of Action
Embrace strategic competition by reaffirming the United States’ interest in the region.
This competition is not to be feared but to be expected and embraced. Explicitly conveying to Beijing that the SCS is a U.S. national interest, and making the SCS a “bilateral” U.S.-China issue may lead Beijing to rethink and recalibrate its strategy. Put simply, turn the table and make Beijing decide which is more important to its national interests – the SCS or its strategic relationship with Washington. It is vital that you dispel any perception in Beijing that Washington can be influenced or ignored as China expands its regional influence.
Counter economic influence with economic integration.
Trade agreements (bilateral and multilateral) can be powerful and effective strategic signals – even in the absence of the defunct Trans-Pacific Partnership. From the vantage point of national security, there are a number of arguments to be made in favor of regional free trade pacts:
♣ Even if their economic impact is limited, FTAs can serve as tokens of U.S. commitment to the welfare as well as the security of its friends and allies. By contrast, refusing to enter into such agreements or imposing new restrictions on imports from friendly countries could stir resentment among their populations and weaken long-term ties.
♣ Reducing remaining barriers to trade and investment among other Asian countries and between them and the United States can help to reduce the extent to which they become economically dependent on China.
♣ Regional free trade agreements that exclude China, such as the now-defunct TPP, NAFTA, and a possible Transatlantic Trade and Investment Partnership, could also generate strategically significant relative gains, increasing growth rates in the United States, its friends, and allies but not China.
Maintain the United States’ position of global leadership relative to China’s growing influence through the continued acquisition and maintenance of such strategically relevant technological advantages.
The United States and its key allies still have a number of important and strategically significant advantages that they should seek to protect, including in the design and fabrication of advanced semiconductors and aircraft engines. While this will be more difficult in the future, since China is increasingly able to access the same technologies, through its own enterprise or as the result of technology obtained through a variety of open and covert means.
♣ On the positive side of the ledger, a renewed focus on strategically relevant technology is as simple as promoting the general climate for innovation in the United States, including through funding for education and basic scientific research and immigration laws that encourage a continued influx of talent in relevant fields.
♣ More direct interventions are likely needed to slow the diffusion of strategic technologies. To this end, the U.S. needs to consider domestic initiatives including:
o Strengthening cybersecurity to prevent exploitation of U.S. companies;
o Strengthening domestic counterintelligence agencies to prevent more traditional forms of scientific, technical, and commercial espionage;
o Monitoring and restricting research and educational exchanges;
o Broadening the scope of existing procedures for monitoring and restricting Chinese investment in the U.S. to include activities other than mergers and acquisitions;
o Increasing government oversight of commercial transactions—including joint ventures and compulsory transfer of technology by U.S. firms seeking access to the Chinese market—that are permissible under current regulations but could have harmful strategic consequences, etc.
Strategy: Key Points
1. In order to maintain influence in Southeast and Central Asia, Washington must implement diplomatic, information, military, and economic policies that message strategic resolve toward vital national interests and support for regional allies and partners. This will blunt Chinese advancement of its regional strategy to supplant U.S. influence in the Indo-Asia-Pacific.
2. The most promising and enduring counter to China’s developing economic influence over the Asia Pacific region is economic integration. To this end, Washington should move forward on bilateral agreements:
a. Either support the emerging Trans-Pacific Partnership-11 (TPP-11) initiative – original 12 minus the United States – to rework the multilateral trade agreement without Washington; or reconsider bringing back the TPP itself to bind the United States to 11 other regional economies, guarantee an international trading system with higher standards, and complement the other instruments of national power.
b. If the U.S. fails to provide support and a framework for economic integration for friendly countries in the region, we may inadvertently drive Southeast Asian nations toward economic alternatives, in the form of the China-led Regional Comprehensive Economic Partnership (RCEP), Asian Infrastructure Investment Bank (AIIB), and Belt and Road Initiative (BRI), etc.
3. In addition, the U.S. may encourage the World Bank to devote more support to infrastructure projects in Asia that compete with and diffuse the influence of hegemonic Chinese initiatives in the region.
4. Washington should also stay firm and consistent to stated SCS positions:
♣ No additional island-building;
♣ No further militarization;
♣ No use of force or coercion by any of the claimants to resolve sovereignty disputes or change the status-quo of disputed SCS features;
♣ Substantive and legally binding Code of Conduct (COC) that would promote a rules-based framework for managing and regulating the behavior of relevant countries in the SCS; and
♣ Permissibility of military activities in the exclusive economic zone (EEZ) in accordance with United Nations Convention on the Law of the Sea (UNCLOS).
5. In addition, the U.S. should continue the deliberate, calibrated, and quiet campaign of presence operations and freedom of navigation operations (FONOPS), a principle of customary international law, to challenge China’s excessive and contested maritime claims in the SCS. Otherwise, failing to conduct routine operations in the aftermath of the Arbitral Tribunal ruling, particularly FONOPS, would send the wrong strategic signal and further embolden Beijing. Consider eventually expanding FONOPS to other nations and holding “combined (multi-national)” exercises to underscore the universal maritime right of all nations to fly, sail, and operate wherever international law permits.
6. Furthermore, if the United States wants to maintain a qualitative edge over China across a wide array of military systems, it will need to accelerate the pace at which it develops and applies relevant technologies while doing what it can to slow the rate at which they diffuse. The extent to which such measures are advertised, specifically to the Chinese, may depend on the character of future talks, but these are important tasks as US-China tensions progress.
7. Stakeholder Analysis: Two key allies will be (1) Secretary of Defense James Mattis and (2) CIA Director Mike Pompeo.
a. Mattis has publicly stated that the construction and militarization of artificial islands in the SCS undermines regional stability, and has promised that the U.S. would continue to challenge Beijing’s activities with FONOPS. Mattis is one of the administration’s principal actors in shaping American defense and foreign policy in Asia, and aligning your message will be valuable for projecting a consistent diplomatic message.
b. Pompeo has expressed the opinion that China is currently the United States’ greatest rival for international power, and described the importance of projecting U.S. might in response. He also agrees that there is a threat that China is increasingly devising or stealing military technologies to rival that of the U.S., with a Chinese dissident recently revealing that China has a network of tens of thousands of spies operating on U.S. soil. This is an area where leveraging the C.I.A.’s intelligence-gathering mechanisms could be increasingly vital.
III. Bilateral Trade: Demand higher trade standards from China, or be prepared to consider implementing tariffs/quotas to reduce the trade deficit.
The Issue
With the world’s second largest economy by nominal GDP and the world’s largest economy by purchasing power parity according to the IMF, it is no surprise that China has come to play a prominent role in international trade. China is a major nexus of global manufacturing; it is the largest manufacturing economy in the world, and the world’s largest exporter of goods. China was by far the U.S.’ largest goods trading partner in 2016, with $578.6 billion in total goods trades. Goods exports totaled $115.8 billion; goods imports totaled $462.8 billion. Critically, the U.S. goods trade deficit with China was $347.0 billion in 2016.
For more than two decades now, China engaged in various practices in order to boost its exports to the United States while carefully restricting imports, including:
♣ Currency manipulation;
♣ Subsidies that reduce the cost of exports; and
♣ Various tariff and non-tariff barriers designed to protect Chinese companies by keeping foreign competitors out of the domestic market.
The United States’ trade deficit with China has had serious economic and social consequences, and is a situation that requires rectifying. Consider that the cheap import of manufactured goods has contributed to the dramatic drop in employment in the manufacturing sector since 2001. This is a principal concern of the U.S. administration, as the loss of manufacturing jobs has in turn led to, or is implicated in, various other problems plaguing the United States:
o Stagnating middle and working class incomes;
o Growing income inequality; and
o Social ills, including increased drug abuse, rising suicide rates, and declining average life expectancies.
The trade deficit itself also contributes to slower overall growth through a variety of mechanisms, including its impact on the composition of the United States economy. Because manufacturing industries have historically spent substantial sums on research and development, a diminished manufacturing sector is likely to mean less funding for research, less innovation, and, in the long run, slower economic growth.
The United States’ large and persistent bilateral trade deficit with China is one of the most telling symptoms of the distorted and damaging economic relationship between the two countries. Reducing that trade imbalance is essential to restoring the health of the U.S. economy, and is one of the main political priorities of the administration.
Courses of Action
There are a variety of mechanisms to consider in pursuit of this goal, principally:
I. Quotas/Protectionism: Requiring federal agencies (and encouraging ordinary citizens) to “buy American” might also help to reduce present imbalances. This may be popular domestically, but note that such actions could expose the U.S. government to complaints that it is violating its WTO commitments.
II. Tariffs: A tariff on Chinese products, especially those from industries perceived as being in unfair competition with American manufacturers, would likely be immensely popular, and could help reduce the trade deficit.
Effects of Barriers to Trade
Note that imposing tariffs (or non-tariff barriers) to reduce the imbalance with China alone without adjusting underlying macroeconomic policies would simply shift the trade deficit to other nations. However, if some of these were U.S. friends, allies, or security partners, such a development might be desirable for strategic reasons. If expanded exports to the United States led to faster growth in India, Indonesia, and Vietnam, for example, it would be easier for those countries to afford bigger defense budgets, thereby helping to maintain a favorable balance of power with China.
Conversely, if a constriction of the U.S. market led to slower growth in China, the result would either be an increased defense burden (i.e. a larger share of national output devoted to defense) that could force potentially difficult trade-offs with other forms of spending, or a reduction in the pace of Beijing’s ongoing military buildup.
Strategy: Key Points
1. From a strategic standpoint, the optimal approach is a mix of measures that (1) reduce the overall size of the U.S. trade deficit while (2) shifting the distribution of what remains away from China and toward friendly trading partners, with the effect of (3) maintaining a favorable balance of power with China. To this end, the following steps are appropriate:
a. In conversation with Beijing, reassert that China must cut subsidies, reduce its own tariff and non-tariff barriers to trade, and stop manipulating the value of its currency, or risk losing access to the vast U.S. market.
b. Increase monitoring of China’s actions towards their currency. In the event of any evidence of manipulation or undervaluation, the United States should be prepared to impose tariffs on Chinese imports.
2. Advocate for increased trade with India. India has been the traditional regional power in South Asia, and checking the rise of India remains a significant regional concern for China as it develops its own regional influence. India has already moved towards more proactive engagement with the United States, and this strategy could have substantial mutual benefit for both India and the United States as far as limiting the effects of China’s growing power
a. The 2015 “Joint Strategic Vision for the Asia-Pacific and Indian Ocean Region” from the U.S. and China was a good first pass at indicating a mutual strategy of cooperation in economics and security. However, competition from India’s long-held belief in “strategic autonomy” may slow down the process of economic integration, so it is important that you continue to highlight its potential for mutual benefit.
3. Recommend a tariff to protect American industries from unfair Chinese trade practices. Although economic theory may suggest caution when leveraging any “protectionist” tools, remember that allowing China to rig the market in their favor is antithetical to the conservative goal of promoting market efficiency.
a. Remind Beijing that the U.S. is one of China’s most important trade partners: the U.S. is the largest importer of Chinese goods (18.3%), and forcing U.S. policymakers to cut back significantly on Chinese imports will slow China’s economic growth.
4. Considerations: While at first glance it would appear preferable not to have as a creditor a country that is also a major strategic competitor, it is possible that under some circumstances Chinese decision-makers might feel even more vulnerable and constrained by financial imbalances than their U.S. counterparts. Not fully resolving the deficit right now may therefore provide some benefit as the United States attempts to maintain a working relationship with China. Therefore, the threat of a tariff may be thought of initially as a bargaining chip as the U.S. works to realign the distribution of its trade toward friendly partners while increasing its regional influence.
5. Stakeholder analysis: Expect to receive some pushback on any protectionist measures from actors focused on economic evaluations (National Economic Council Director Gary Cohn and Secretary of Energy Rick Perry, for instance). However, the short-term economic costs do not necessarily outweigh the long-term benefit of signaling confidence in our national businesses to China and to Americans.
a. Your main focus should be cooperation with US Trade Representative Robert Lighthizer. Lighthizer, who was responsible for triggering a Section 301 investigation into China’s intellectual property practices, has concluded that China’s trade practices constitute an unprecedented threat global trade practices, which current WTO regulations fail to adequately combat. Under Section 301 of the Trade Act of 1974, the US Trade Representative also has the authority to take any feasible action to obtain the elimination of the unfair trade practices. Lighthizer has repeatedly demonstrated a willingness to look for new solutions to defend American companies and workers from the Chinese trade threat, and will be a critical collaborator as you explore a trade agenda that actively protects American interests.
b. National Economic Council Director Gary Cohn could be a principal adversary if you advocate for a tariff on Chinese goods, as he has repeatedly urged caution on this issue and remains committed to the principles of free trade.
i. In response to critics; labels of protectionism, emphasize that taking measures to protect American businesses is a core tenet of conservative politics, dating back to the pro-business politicians who founded the Republic party. Protecting American businesses is good for Americans and will help signal to China that their adherence to fair trade practices is essential.