AMERICA’S ADDICTION TO CHINA MUST END OR IT WILL KILL US

China’s handling of the coronavirus outbreak and its aftermath is evidence, if any further evidence is needed, that the totalitarian regime would rather run roughshod over the community of nations and more perversely over its own citizens than to act with the transparency, honesty, and integrity expected of a presumed superpower. Chinese medical professionals who tried to sound an alarm about the virus when it first sprung were seized by police and muzzled so as not to embarrass the mandarins who run the Communist bureaucracy. President Xi Jinping, who should have been statesmanlike and above the fray, made sure the State-run media omitted any mention of the outbreak for months.

How many Chinese died while the subterfuge was under way will likely never be known. Closer to home, consider that roughly three million Chinese tourists visit the United States annually. Do the math. That means that something in excess of eight thousand Chinese tourists come to the United States each and every day. How many Chinese visitors potentially infected with the virus came to our country before China was met by President Trump’s travel ban? That, too, will likely never be known. The travel ban, not unexpectedly, was met with criticism by China and by Xi Jinping’s acolyte at the World Health Organization (WHO), Director General Tedros Adhanom Ghebreyesus. Worse, White House medical adviser Dr. Anthony Fauci weighed in with his own criticism of the ban and praised China for its transparency!

The Chinese propaganda machine at first caught back on its heels went on the offensive alleging that the virus was first introduced to China by members of the United States Army who attended the Military World Games in Wuhan in October, 2019. No evidence was ever found that American service members tested positive for the virus but the dissembling by the Chinese apparatchiks continued. The new theory being bandied about by China and even some Western scientists is that the virus escaped from the Huanan Seafood Market where both seafood and an endless variety of live animals – including raccoondogs and rats – are sold. The fact that no traces of the virus have been found in any animal samples does not dissuade critics of the possibility that the virus escaped from a laboratory at the Wuhan Institute of Virology. To make matters worse, it is now clear that Dr. Fauci, while he headed the National Institute of Health’s National Institute of Allergy and Infectious Diseases, funded coronavirus research at the Wuhan Institute.

HOW DID WE GET HERE?

The former leader of the People’s Republic of China, Deng Xiaoping, enunciated his famous maxim of tao guang yang hui. Interpreted variously, the maxim is meant as a foreign policy directive that regardless how muscular the nation might become economically, geopolitically, and militarily it is always best to keep a “low profile.” And, it is China’s deft execution of Deng’s maxim that has lured the United States into a state of economic dependence that borders on a compulsive addiction.

Cars, iron, steel, plastics, apparel, furniture, toys, computers, phones, electrical equipment, footwear, power generation equipment, rare earth minerals, pharmaceuticals, and a much longer list of products is exported from China to the United States.  At the height of the coronavirus pandemic – which now has cost the lives of over one million Americans – China, as the world’s largest exporter of medical equipment, was shipping surgical masks, ventilators, gowns, gloves, and other medical equipment and supplies to a United States market desperately in need of those items.

China is now, by far, the largest exporting nation in the world with about $2 trillion worth of exports. The United States has racked up an accumulated trade deficit of approximately $10 trillion during the last four decades. The trade imbalance with China is especially appalling. Of the $10 trillion trade deficit the United States has accumulated, better than 50% or $5.2 trillion comes courtesy of China. The upshot of that imbalance has amounted to millions of jobs lost, the depression of wages, thousands of factory closures, the contraction of R&D, and the export of capital which would better have served our domestic industries. Tragically, it was the worker who lost his job that, in effect, financed the trade deficit. This, while one administration after another in Washington turned the other cheek to our so-called trading partners – China chief among them – who excelled at cheating.

The goods and services trade deficit with China was on the order of $355 billion in 2021. But that is the tip of the iceberg as China purloins roughly $225 billion, at the low end and as much as $600 billion at the high end, annually in counterfeit goods, pirated software, and theft of trade secrets from the United States.  Which is to say, that the United States is in the hole with China to the tune of about $1 trillion each year.

Abetting China’s global trading hustle is the World Trade Organization(WTO). The WTO is seemingly in China’s pocket as it refuses to rein in China’s channeling of state subsidies to manufacturing companies so as to better compete on the world’s stage. Twenty years after joining the WTO, China continues to systematically flout the organization’s principles of abiding free-market principles. China’s protectionist policies, for instance, include a list of hundreds of products which ban our producers from exporting items such as stethoscopes, refrigerators, digital cameras, video games, and television sets. And, it isn’t just hard goods that are proscribed. On the Internet front, China has built yet another Great Wall to keep companies such as Facebook, Google, Twitter, and YouTube from operating in the country. This digital wall doesn’t just aid and abet China’s censors but it limits foreign competition so that homegrown companies like Baidu, Alibaba, and Tencent can thrive in monopolistic markets. In a feeble attempt to justify their misbehavior, the China Ministry of Commerce alleges that China is still a “developing” country.

For those who argue that President Trump’s import tariffs on China were, in effect, a “tax” on U.S. citizens they need to sharpen their pencils as the nation’s trade imbalance has saddled citizens with a de facto tax that makes the effect of import tariffs miniscule by comparison.

THE SUPPLY CHAIN TO CHINA: A NATIONAL SECURITY THREAT TO AMERICA

The United States needs to reconfigure its supply chain not so much for the production of toys and games and baby strollers but for critical commodities, equipment, and supplies. Take the case of pharmaceuticals. Ninety percent of antibiotics, and anti-inflammatory drugs such as ibuprofen and hydrocortisone come from China. The production of penicillin and the blood thinner heparin is similarly dominated by China.

China, has also been the dominant source of fentanyl entering the United States although of late the Mexican cartels are giving China a run for its money. The drug is the opioid of choice for drug abusers – 50 times more powerful than heroin and 1,000 times more powerful than morphine – and was responsible for the deaths of over 71,000 Americans in 2021.

The extraction of rare earth minerals – a group of seventeen chemical elements – is similarly monopolized by China. The United States is dependent on China for about 80% of the rare earth elements needed for the production of not just consumer products such as pollution control catalysts, and electric car batteries but for Defense Department applications such as precision-guided weapons, projectiles, and guidance systems. And, with the ignominious and bloody retreat by the United States from Afghanistan, China has gained a new partner rich in cobalt, lithium, copper, and uranium as well as rare earth minerals.

American companies remain complicit in China’s exploitation of our supply chain weaknesses to include cheap labor. How else can one reconcile that hundreds of S&P 500 companies choose to do business in China? Companies such as Texas Instruments, Apple, Nike, General Motors, Boeing, Microsoft, Qualcomm, Caterpillar, AMD, and Wynn Resorts rely on a strictly economic calculus for doing business in China while turning a blind eye to the country’s horrific human rights abuses. Professional sports leagues – most notably, the NBA who grosses roughly a billion dollars a year in China and whose many players kneel before the American flag but who, like their corporate brethren ignore the human rights abuses of the communist government – also covet the huge market that China represents.

That over a million Uyghur Muslims and other ethnic minorities languish in internment camps; that religious freedom, freedom of assembly, and freedom of expression are proscribed; that Hong Kong and Tibetan citizens are repressed; and that the quintessentially peaceful adherents of Falun Gong are harassed, persecuted, tortured, and at times executed play no part in quarterly earnings and executive pay package calculations.  

CHINA POSES MORE THAN A SOFT POWER THREAT TO THE UNITED STATES

Taiwan, an island at the confluence of the East and South China Seas, and roughly 100 miles to the east of China is a democratically-governed nation and ally of the United States. It is also East Asia’s Silicon Valley producing 90% of the world’s most sophisticated semiconductors. Yet, it is in the cross-hairs of what China calls its “reunification” strategy with Taiwan. Attempts to intimidate Taiwan from adopting policies, and strategies inimical to China are clearcut and aggressive. Flyovers by Chinese fighter jets and bombers which violate Taiwanese airspace, naval exercises in the East China Sea, missile launches, and submarine runs all are meant to unnerve Taiwan and keep it on the “straight-and-narrow” as far as China is concerned.

China’s aggressive rhetoric and actions have also influenced America’s foreign policy which continues to adhere to a One-China policy, a principle which harkens back to 1979 when the United States formally recognized the People’s Republic of China. The policy, whose origins are murky, may have had more to do with the United States wanting to have greater influence in the region. Regardless, the One-China policy is now obsolete and should be abandoned.

The United States has no formal ties with Taiwan. In the event of an all-out invasion of Taiwan by China, therefore, it remains to be seen whether the United States would become directly involved in the defense of the island nation or whether it would cower to China in the same manner it has cowered to Russia in its invasion of Ukraine.

China’s economic and diplomatic coercion have also had worldwide consequences. In December, 2019 when Taiwanese health officials warned about the infectiousness of the coronavirus, the WHO refused to share Taiwan’s warnings with the rest of the world. To this day, Taiwan, at China’s behest, is boycotted from participating as a full-fledged member of the WHO and thereby from sharing its epidemiological expertise with the rest of the world.

The United States simply cannot ignore the potential of a military threat posed by China in the South China Sea. In these contested waters, the United States faces a territorially aggressive and technologically advanced Chinese Navy. Already, an armada of sophisticated dredging vessels is reclaiming land from the sea for the sole purpose of building military airfields and naval port facilities. China’s aggressive building plan for its navy has borne fruit as it now has a numerical advantage over the United States of 355 warships to 305. And, while the United States’ navy enjoys a clear advantage in weaponry the fact remains that China can concentrate all its forces in its own backyard while the United States must remain vigilant in the Atlantic, Pacific, and Mediterranean Sea.

All in all, however, the heavy dependence of America’s supply chain for Chinese products critical to our economy, our well-being, and our national security poses a far more insidious threat and is perhaps China’s most powerful weapon pointed in our direction.

Management Advisor

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