(MENAFN – Asia Times) I must begin by thanking George Koo for his interest and important commentary on my recent book, The Upside Down: America, China, and the Struggle for Global Leadership.
To introduce this book to the reader, Koo mentions my previous book, Trading Places, which dealt with trade friction and negotiations between the United States and Japan in the 1980s, when I was the principal American negotiator with the main trade officials. and CEO of Japan as Sony founder Akio Morita.
There were many trade issues between Japan and America at this time, including the Japanese displacement of US producers in industries like consumer electronics, steel, automobiles, and semiconductors. With the US trade deficit soaring and hundreds of thousands of American workers losing their jobs, I was under tremendous pressure to fix what we called the Japan problem.
The game of Japan
There were many causes for this problem, but two factors were fundamental. One was the yen policy in Japan. The Bank of Japan has constantly intervened in currency markets to buy dollars and sell yen, thus keeping the value of the yen low against the dollar and indirectly subsidizing Japanese exports while imposing a hidden tariff on imports.
My colleagues and I negotiated what has come to be known as the Plaza Accord under which Japan agreed to end intervention in the currency market and allow the yen to rise to its real value. . In the end, it increased by over 50%.
The second factor was what I called “the name of the game”.
The United States was playing a game called “ free trade ” with no special subsidies for targeted industries, no industrial development goals, no hidden barriers to imports and foreign investment, no mandatory transfer of technology as a condition of entry. in the market, and without export subsidies that could allow predatory dumping of products into foreign markets in order to drive foreign producers out of business.
Japan was playing a game called “industrial catch-up policy”.
There was a lot of talk back in the days of fair and unfair trade, but it was a misunderstanding. It was as if the Americans were playing baseball and the Japanese were playing American football. No one was cheating and everyone was doing their best. But soccer is a more difficult game than baseball and baseball players are licking each other.
When I recognized this reality, I urged the US government to start playing like the Japanese. Then-President Ronald Reagan listened to me and the US government changed its policy to be more like that of Japan.
He created a government-industry joint venture called Sematech that funded the development of more advanced semiconductor production equipment. Rather than wait for the industry to complain, it itself initiated anti-dumping legal proceedings against the Japanese industry, and it also provided additional funding for semiconductor research and development.
He also negotiated what became known as the Semiconductor Agreement, under which Japan pledged to end all dumping of chips in the US market and allow the market to fully open. Japanese American chips.
I could go on with other details, but suffice it to say that the US trade deficit with Japan has narrowed, Japanese automakers have started producing their cars in America, and the US semiconductor industry remains the world leader. Taiwan’s TSMC has emerged as the main chip maker, but is currently building major manufacturing facilities in America. Thus, the United States will remain the leader in this sector for the foreseeable future.
Regarding China, Koo says I accuse him of rampant intellectual property theft, but that’s not an accusation. It is simply a statement of a simple fact.
I am not blaming China for doing this, because obtaining intellectual property by any means necessary is what every country that has ever achieved industrial development, including the United States, has done.
Few now realize that there was a debate about America’s founding in the 1790s. Thomas Jefferson foresaw a country of young farmers exporting agricultural products and raw materials. Alexander Hamilton saw Britain become the workshop of the world through industrialization and wanted America to do the same. In the end, Hamilton won the debate because America nearly lost the War of 1812 for lack of weapons manufacturing capabilities.
It saddens me that Koo thinks I have such a zero sum attitude that I see any gain for China as a loss for the US and vice versa. I must stress that this is not my attitude. In fact, my wife is Chinese. Thanks to her, I am connected with many Chinese people in America and China. I wish the best to my relatives and all Chinese people.
Indeed, I was one of the leaders of the first United States trade mission to China in 1982. I brought with me to Beijing a group of American business leaders interested in investing and creating companies in China.
The rest of the US government and I urged them to invest, transfer technology to China, build factories in China and thus contribute to the development of China as they had contributed to the development of Europe and Japan. after the Second World War.
During my tenure as a senior official, the US Department of Commerce strongly encouraged US investment in China as well as Chinese exports to the United States.
Later, as a consultant, I helped Intel Corporation and other American companies establish themselves in China. I have no fear that the Chinese economy will become bigger than America’s. Indeed, I think it should be bigger considering that China has four times the US population. Objectively speaking, its economy should be four times greater.
Having said that, I think China, like Japan in the 1980s, is playing a different game than the United States. Much like Japan at the time, China is now playing a “catch-up” process, which involves the government getting the technology, subsidizing and / or protecting the development of certain industries.
The best example is the program called “Made in China 2025”. This aims for essential autonomy for China in a long list of key high-tech industries such as semiconductors, robotics, aviation and many more. These industries receive special assistance from the Chinese government.
Let me stress that I think Beijing is right to give special assistance to these industries. I would do the same if I ruled China.
However, this policy of “catching up” is at odds with many rules of the World Trade Organization. This leads officials in the United States and elsewhere to accuse China of playing unfairly. I don’t blame so much. Rather, I am saying that America should do the same. It should have a Made in America 2025 or 2030 program.
Rather than complaining about China’s “unfair trade”. the United States should copy the smart things China is doing.
Belt and road
For example, China has undertaken the Belt and Road project. It’s a brilliant concept that I deeply admire because it addresses a major global need while promoting China’s global strategic expansion and influence. I advise the United States to launch a similar program with other countries as partners. It should be a real win-win effort.
George Koo suggests that I have problems with China because it is ruled by a Leninist political party, the Chinese Communist Party.
A Leninist Party is a party formed on the principles dictated by Lenin when the Bolshevik Party was founded in 1917. Such a party is entirely dedicated to holding complete power in a society and to concentrating that power in the hands of very few people. at the top of the party.
It is a party that recognizes no limit to its power and no untouchable rights of the individuals it leads. It is a totalitarian party which does not trust anyone and which suspects and monitors everyone.
I make a distinction between the Chinese people and the Chinese Communist Party. I wish people the best. I have concerns about the Party. I admit that he has achieved many positive things. Yet it also clearly defined its core values in Document 9, the “Communiqué on the Current State of the Ideological Sphere over the Ideological Sphere”.
Here, the CCP clearly declares its opposition to “ Western constitutional democracy ”, to the concept of “ universal values ” (such as “ all men are created equal to certain inalienable rights ”), to civil society. and journalism “ not subject to Party Discipline. This, in fact, is a denunciation of everything America stands for and the rest of the free world.
If the CCP doctrine was applied only to China, the conflict might not be too serious. But Beijing has used its growing wealth and power to expand the reach of these anti-liberal doctrines.
Of course, repression in Hong Kong is technically an internal affair, but since Hong Kong has always been an international city, the overthrow of its one-country-two-system regime well within the 50 years initially promised by Beijing has global repercussions, as has the expulsion of most foreign journalists from China.
More and more, foreigners have no knowledge of what is going on in the most populous country in the world. Beijing’s shutdown of broadcasting of U.S. professional basketball games in China over tweet from Houston Rockets coach supporting protesters in Hong Kong appears to be effort to end free speech not only in China but also in the United States.
Beijing’s sudden and unexpected suspension of various imports from Australia because Prime Minister Scott Morrison called for an investigation into the origins of the Covid-19 virus appears to be an attempt to impose censorship on Australia.
Beijing’s advice to Mercedes-Benz that it is better to remove the Dalai Lama from all publicity, even outside China, if he wishes to continue doing business in China is just another example of the attempt. to export CCP censorship abroad.
The militarization of the South China Sea reefs and the swarming of Chinese fishing boats and para-police around the Philippine, Malaysian, Vietnamese and Indonesian islands and reefs send a hostile, threatening and intimidating message.
I wish China peace, prosperity and happiness. I also want the free world to continue to enjoy freedom of expression, the rule of law and human rights.