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Issue 3

The Challenge of China

VI: In terms of foreign policy challenges and national security concerns, you've been focusing a lot on China. Do you want to elaborate on why you think that is a primary, and perhaps, an overriding national security and foreign policy concern?

Tarun Chhabra: My view is that China poses the most significant grand strategic challenge to the United States. This is reflected not just in our foreign policy concerns, but also, in our domestic politics because of the economic impact of China's integration into the global economy. There are debates among economists about the impact of the integration of China to the global economy. But I think it's fair to say that, while there clearly were aggregate gains to the US economy, those gains have not been distributed in an equitable way. Most of the significant gains have gone to the top echelons, including to businesses outsourcing to China, even if there were some moderate cost advantages to consumers in the form of lower prices.

But in terms of jobs lost, manufacturing displaced, and lower wages, I think for many Americans the idea that they're paying less for certain items at Walmart is not adequate compensation. Especially if you consider the revolution in economics, such as the new focus on “place-based” economics, which is that when you lose a manufacturing facility and jobs in a geographically concentrated region, people don't just move on to the next place. They're rooted in their communities for a variety of reasons. Those impacts end up rippling out, having significant social effects. 

I think it is not correct to say globalization cannot be reversed. I think it can be reversed.

That’s why China is such a potent issue in the campaign. It is why President Trump really focused on China in the 2016 election, especially when he was campaigning in the Midwest and in de-industrialized regions. I think it  has also struck a chord with a lot of his more affluent constituents that are running small- to medium-sized businesses, who have had consistent experience both losing intellectual property to China and trying to get the US government to do something about their plight. 

Layered on top of all of that, obviously, are the more traditional foreign policy and national security challenges that Washington has been talking about for a long time, whether it’s China's military modernization, human rights issues, trade practices, or so on. 

We don't want to make mistakes that were made during the Cold War, competing everywhere all the time and overextending ourselves. On the other hand, sometimes, in our desire not to overextend, which is, again, very understandable, we can minimize the ideological underpinnings of our competition with China, which I think are really significant and are baked into the way that we interact with the world, and the way that China interacts with the world. 

An example I like to cite is what the New York Times does when it's exposing Chinese corruption at the highest levels of the Chinese Communist Party. Their criticism is not an instrument of US foreign policy. It’s simply who we are. We're not about to curtail the First Amendment and tell the New York Times not do that, and we should not. But our free speech can be an existential threat to the Chinese Communist Party, whether they believe that the US government is involved in that or not.

I think this comes down to when you think about whether you're going to bring a country into the World Trade Organization, what is a reasonable expectation of whether they will largely comply with the rules and norms that are really integral to the regime?

Similarly, in the way that China exercises its power abroad, there is a strong Leninist approach to foreign policy when it comes to bullying countries like Canada or Norway or Japan or the many others that have found themselves on the wrong side of the Taiwan question, or a domestic elected legislator in Germany criticizing China's human rights record and being threatened for it. I think that we're better off being very clear about what those ideological differences are, accepting that we are not going to change the political character of our polity, and they’re not likely to do so any time soon, and we need to think about what competition's going to look like on that basis.

VI: This globalization of manufacturing and the supply chain is not new.  Textile mills moved out of New England to places like South Carolina, then migrated from there to Mexico, and on to Asia. Is what we see today basically just Chinese opportunism to become part of this dynamic - the globalization of the world economy - or do you see a more sinister type of engagement that China is involved in?

Tarun Chhabra: There was a trope, and President Obama used this, too, that "globalization is not going anywhere". I think there's an important strain of thought in the current Democratic primaries, which is really underscoring that globalization's a choice. That globalization has happened as a consequence of policy choices, the people who made them, and the ideologies that shaped their worldviews.  

You now have emerging voices, you have scholars like Mark Wu at Harvard Law School who make, I think, a pretty compelling case that the WTO was not built to withstand the China challenge.

I think it is not correct to say globalization cannot be reversed. I think it can be reversed, including in very unproductive ways that could hurt lots of American workers and American farmers, and so on. We're seeing some of that now in the tariff war. I think the challenge with the way that China has gone about this, is obviously the way in which the state is deeply enmeshed in the Chinese economy and the ways in which China can decide to make big investments in certain sectors, with state subsidies that really remove competitors from the market. Similarly, the Chinese state can use theft of intellectual property to assist its own businesses.

I think this comes down to when you think about whether you're going to bring a country into the World Trade Organization, what is a reasonable expectation of whether they will largely comply with the rules and norms that are really integral to the regime? You now have emerging voices, you have scholars like Mark Wu at Harvard Law School who make, I think, a pretty compelling case that the WTO was not built to withstand the China challenge. It may have been fair to believe that you would see liberalization and some accommodation to WTO rules over time. However, despite whatever reforms we have seen, I think arguments like Mark's are pretty compelling and we're not likely to see the kind of economic reform in the near term that some expected in the '90s and into the 2000s.

One could argue that if the United States could resurrect some version of what we used to call industrial policy--but which largely became a bad word for a long time--then we could find ways to better adjust and accommodate.

VI: Is one of the real issues with the Chinese model their bullying tactics? You speak of the Chinese weaponizing interdependence. China is so integrated into contemporary supply chains that it is hard to imagine any area that the Chinese are not somehow involved in. How do you develop strategies to counter the control the Chinese state has?

Tarun Chhabra: I think it's important to understand that this is really about a big asymmetry. It's about the heavy role of the Chinese state and the Chinese economy, that is juxtaposed against a hyper laissez-faire approach that has predominated in the relationship between the government and the economy of the United States since the dawn of the Reagan Era. It's that asymmetry that has created this huge problem for us. One could argue that if the United States could resurrect some version of what we used to call industrial policy--but which largely became a bad word for a long time--then we could find ways to better adjust and accommodate.

This goes back to the basic bargain that theorists like John Ruggie, and before him, Karl Polanyi, described, arguing that you get openness when you make a compact to provide a social safety net, to ensure that those left behind find new opportunities and are compensated in some way. We just utterly failed to do that. Again, it's really the asymmetry and I think if you believe that China is not likely anytime soon to alter the fundamental structure of its economy, that the answer is really about the kinds of investments that we're going to make at home to inoculate ourselves from some of the impacts.

You see references to China Made in 2025 and policy initiatives emanating from that. You even see some Republicans talking about industrial policy, people like Senator Marco Rubio, who in a Senate Small Business & Entrepreneurship Committee report really focuses on China Made 2025.This is a really healthy conversation to be had across the political spectrum.

That's, I think, a healthy part of the campaign conversation that you're seeing now. You see references to China Made in 2025 and policy initiatives emanating from that. You even see some Republicans talking about industrial policy, people like Senator Marco Rubio, who in a Senate Small Business & Entrepreneurship Committee report really focuses on China Made 2025.This is a really healthy conversation to be had across the political spectrum.

VI:  In the United States today some of the largest companies are in the technology sector. They operate globally and they're very entwined with the Chinese. How do you design an industrial policy in this environment?

Tarun Chhabra: There are lots of flavors of industrial policy. I don't think anyone is arguing that the United States should have a Chinese-style industrial policy. Some would argue that big components of our defense budget operate like an industrial policy. There are lots of ways to do this. I think one challenge that we have now is that a lot of companies are as concerned about the uncertainty associated with some of the actions that the Trump Administration has taken, as they are with the long-term impacts. The point about weaponized interdependence is that interdependence requires a certain degree of trust and common strategic interests.

If you outstrip that trust, if you develop a certain level of mistrust and a certain character of competition, then you make yourselves potentially more vulnerable by having a high degree of interdependence. I think the recipe for more stability would be both on the United States and also, the Chinese side to lessen some of that interdependence, so that we, to some degree, are inoculating ourselves against actions like what we've seen China do to Canada, or we are doing to Huawei or ZTE.

I think one challenge that we have now is that a lot of companies are as concerned about the uncertainty associated with some of the actions that the Trump Administration has taken, as they are with the long-term impacts. The point about weaponized interdependence is that interdependence requires a certain degree of trust and common strategic interests.

The real question is, what are the sectors of the economy where we need to have some disentangling or “decoupling,” and how can we do it in a much more orderly and sensible way than the way that it's being down right now? Telecommunications is obviously a very sensitive sector; the Chinese have always treated it that way themselves. They say the same of finance, by the way. It's interesting, Beijing recently threatened sanctions against India if they choose to exclude Huawei from their 5G networks but China, on the other hand, has never wanted any other country operating in their telecom networks because they've always believed that it's a strategic industry.

I think there are sectors like that and then, the flip side is that there are products like, for example, the Android operating system, that we benefit from having out in the world, including operating in China, where we should not necessarily restrict exports because we're basically able to be the platform and set the standard. The same could be said of TensorFlow, the open source machine learning platform developed by Google Brain that, by the way, some Chinese data scientists are worried they’re too dependent on now. That's the kind of conversation that's not happening right now but that should be.

VI: You mentioned China’s interaction with the rest of the world, their involvement with India and other countries. Are the Chinese trying to be a global economic hegemon? The Chinese are involved with external investments in Latin America, in Africa, in South Asia, in various sectors with large investments in infrastructure, extractive industries, and assisting governments with surveillance programs. Beyond the United States, how is China performing as a global actor?

Tarun Chhabra: This is a question that’s motivating a big project that I and some colleagues at Brookings are coordinating called Global China. The point of the project is really to ask specialists of different countries and regions, functional areas, what is China doing in your neck of the woods and what’s the trendline? What's likely to happen if they keep going and succeeding? We hope that by the end of the project, we'll be able to offer the picture of what the world might look like if the Chinese activities, as we see them unfolding now, continue.

I think the recipe for more stability would be both on the United States and also, the Chinese side to lessen some of that interdependence, so that we, to some degree, are inoculating ourselves against actions like what we've seen China do to Canada, or we are doing to Huawei or ZTE.

I think that's important because there is a debate that will probably continue to be a debate for a long time about whether China is looking to replace the United States as a hegemon, whether in economics or security or both. I'm of the view that, certainly in East Asia, China is keen on replacing the United States as the predominant security actor.

I think there's a strong case to be made that China would like to do so globally, as well, although I think there's some open debate there. But even while you engage in debate about China's grand strategic ambitions globally, you can still look around and say, "Even if we continue to debate that, de facto, where are we headed?" We see a kind of analogous debate when it comes to whether China is trying to export its authoritarian model.

My argument is that, to some degree, that kind of intentionality is beside the point. What China is doing right now is to shift the global balance to favorauthoritarianism over democracy. By offering money not tied to transparency or accountability, by offering surveillance technology useful to authoritarian regimes or wavering democracies, China is creating a compatible environment for their global ambitions.

I'm of the view that, certainly in East Asia, China is keen on replacing the United States as the predominant security actor.

VI: In other words, when people start talking about a new Cold War with the Chinese, there are qualitative differences between what went on with the United States and the Soviet Union because that was an ideological battle. With the Communist Chinese Party, you talked about their modus operandi model of co-opt and capture - so it’s questionable whether that is really an effective strategy for China in the long run?

Tarun Chhabra: I guess my view on this is that, in some ways, what China's doing is potentially more of a threat to democracy globally than the Soviet Union was, precisely because they're not necessarily trying to promote their system by gunpoint. It's because their economic model is more sustainable and because they—and others—are developing technologies that, I truly believe, are allowing or will allow for something like the perfection of dictatorship.

Also because of the ways in which  China has learned to weaponize interdependence, there is, to some degree, a sense of inevitability among many countries, particularly Southeast Asia, about the need to accommodate China. As an empirical matter, the balance of regime type in the world does correlate with the type of regime that you have in the pre-eminent power of the system. I think we should expect that at a minimum, we're going to face really significant headwinds for democracies going forward. “Strategy” in this sense matters much more because we have to be able to do more with less. How we work with our allies, and how we organize our resources is going to matter much more than it has in the last thirty years.

At a minimum, we're going to face really significant headwinds for democracies going forward. “Strategy” in this sense matters much more because we have to be able to do more with less. How we work with our allies, and how we organize our resources is going to matter much more than it has in the last thirty years.

VI: Rather than trying to export a Chinese model of communism, the Chinese Communist Party is supporting authoritarian regimes around the world which they find more friendly. Is this what creates significant threats to democracy and liberal values?

Tarun: Exactly. That with the confluence, I think, of technologies that are enabling mass surveillance, and potentially also the use of social credit systems, which have a long way to go, but their trajectory, I think, is pretty clear. Sometimes, it sounds science fiction-ish. But a colleague of mine at Georgetown is working on China's ambitions to master the human brain-machine interface. 

It's very hard to look at what China's doing in places like Xinjiang, the surveillance systems that they're setting up and exporting, and not believe that that kind of technology will be used to crush and preempt dissent at scale. So the confluence of this technology with China's rise economically and militarily can't be overstated.

We have to be sober about what China's ambitions are, in space, in AI, and in other fields of science and technology, which is to ensure that China is a technological superpower.

VI: Can the Chinese government, when putting major resources into AI and other advanced technologies, be seen as not just an attempt to get a competitive advantage but as a threat? I recently asked a military strategist what are the most important things he thought that the candidates should focus on in terms of national security threats. In addition to flashpoints around the world, he mentioned theft of intellectual property. This is a major focus of the Trump administration and integral to the trade war with China. Is Chinese infiltration and hacking into American and other international companies’ intellectual property a form of cyber warfare?

Tarun Chhabra: We have to be sober about what China's ambitions are, in space, in AI, and in other fields of science and technology, which is to ensure that China is a technological superpower. There's interesting work that's been done about how technology thinking in the United States informed the Chinese Communist Party in the 1980s and why technological primacy became so important to them. We have taken for granted what America’s technological primacy has bought us for decades. 

We really have to be focusing on what our strengths are, which at the top of it, is really about talent and making sure that we continue to have the best science and technology workforce world.

To your question about AI, I do think that this is an area where in addition to really being able to map China's AI capabilities using open-source data, we do need to be talking to them about AI safety and security. But we really have to be focusing on what our strengths are, which at the top of it, is really about talent and making sure that we continue to have the best science and technology workforce world. That means being able to recruit and retain the best talent, and the current immigration atmosphere is really making that difficult. It means boosting our investments in basic science, where we still have a considerable lead over China. 

One interesting wrinkle here is that it's not simply a matter of losing that talent to China. Actually, in many cases, that's not where the best talent wants to go. It's losing it to our allies. This is something we see not just among researchers but also, in the corporate sector. To secure our industrial base, we really need to have our allies on our side, so that we're not allowing China to divide us.

Our record in handling cases involving investigations of Chinese-American scientists is unfortunately not good--in many cases, raising charges, creating enormous personal hardship for Chinese-Americans, and then dropping those charges afterward. The message that I really wish that we would send but haven't yet----is that Chinese Americans are Americans, and we need to protect Chinese-Americans from the kind of predatory tactics that Beijing has shown it is happy to engage in, making certain demands, lest their family suffer.

Another example of this is the semiconductor space, which the Trump administration has been quite focused on. There may be very good reasons to try to protect our fabrication, or semiconductor manufacturing equipment and capabilities, but we have to make sure that we are not creating a system in which talented manufacturing capability bleeds to our allies and we lose those jobs, we lose those manufacturing capabilities and they, then, in turn, sell to China. I think we need to be moving to a place where, not only should we be thinking about some form of industrial policy that suits our values, but also, to think about working with allies as well, too. This is not totally new, by the way. We had lots of debates about export controls with our allies during the Cold War, but we will have to have hard conversations like that again.

On intellectual property,  it's not just explicit theft that we have to be concerned about. There is a catalog of Chinese technology transfer strategies, many of which are totally legal at the moment, and they become a national problem when you aggregate them. And they are very sensitive, especially  in some cases, as when we are worried about the exploitation of educational exchange.

we've not done a good job in competing with China's full-spectrum statecraft, which covers not just the military but also the educational domain, political influence, technology, competitive industrial policies, so on and so forth.

Our record in handling cases involving investigations of Chinese-American scientists is unfortunately not good--in many cases, raising charges, creating enormous personal hardship for Chinese-Americans, and then dropping those charges afterward. The message that I really wish that we would send but haven't yet----is that Chinese Americans are Americans, and we need to protect Chinese-Americans from the kind of predatory tactics that Beijing has shown it is happy to engage in, making certain demands, lest their family suffer. I remember the days after September 11th, when President Bush made a really strong statement saying that our most important partners in what he called "The War on Terror", were going to be Muslim-Americans. I have not heard any national leader really say that yet about Chinese-Americans and competition with China.

VI: Would not many of these things you're talking about now - AI safety and standards, an industrial policy that involves allies, the exchange of scholars, and protection of Chinese-Americans from predatory Chinese policies - have to be on the diplomatic level? Is there not a real deficit of diplomatic avenues that allows these conversations to take place within government agencies, with our allies or with the Chinese themselves?

Tarun Chhabra: Yes, we've not done a good job in competing with China's full-spectrum statecraft, which covers not just the military but also the educational domain, political influence, technology, competitive industrial policies, so on and so forth. I think one interesting example is the role that Huawei, together with complementary Chinese financing, played in pricing French telecom firm Alcatel and American telecom firm Lucent (which merged and subsequently were bought by Nokia) out of the market in developing countries.

As we see in the Belt and Road Initiative, Beijing is using industrial champions and complementary financing as a tool of statecraft, especially in strategically important sectors like telecommunications. When Alcatel and Lucent were being priced out of the market, though, I don't think that we, as a government, or as a society, or as allies, were really thinking in those terms. We certainly weren't prepared—not just resource-wise, but also from an ideological perspective--to come up with a way to challenge China’s bid to dominate the telecom market throughout the developing world. 

I think there's a nice convergence between a lot of the progressive policies that many of the candidates want to advance when it comes to, on the one hand, education, infrastructure, investment, research and development, and, on the other hand, what we need to do to compete effectively against China.

VI: To get back to the candidates and the 2020 campaign itself, what would be your major recommendations to the candidates as they develop their strategies and ideas for a government as they move forward, with regard to China?

Tarun Chhabra: I think there's a nice convergence between a lot of the progressive policies that many of the candidates want to advance when it comes to, on the one hand, education, infrastructure, investment, research and development, and, on the other hand, what we need to do to compete effectively against China. I think that embracing the China challenge is another reason—and a major reason--that we need to do all of those things. and it’s important that we do them. That is because, I think, the level of polarization that we have in our domestic politics is pretty hard to break when you're just talking about dug-in domestic policy positions. Whereas I think there is agreement across the political spectrum about many of the challenges that China poses.

At that point, it won’t be a controlled reaction. It may be something far worse. I would much rather see a controlled reaction that takes the challenge seriously, that helps us realign, Republican and Democrat, that gears up our own full-spectrum statecraft, and guards against engaging in the overreach that we saw during the Cold War.

I believe there's a possibility of realigning some of our politics by bringing in the China factor. Now, I know that makes some people uncomfortable and part of that is because, as you raised earlier, fears about a new Cold War. Part of it is due to worries about overreach, especially when it comes to Chinese-Americans. My view is that the greater danger may lie not in embracing the challenge but instead in ignoring the challenge. If we don’t embrace it, Beijing really will miscalculate in pushing us, not taking seriously certain red lines that we draw, underestimating our ability to come together and defend our security, values and economic interests.

At that point, it won’t be a controlled reaction. It may be something far worse. I would much rather see a controlled reaction that takes the challenge seriously, that helps us realign, Republican and Democrat, that gears up our own full-spectrum statecraft, and guards against engaging in the overreach that we saw during the Cold War.

VI: Would you like to see one of the future presidential debates centered on foreign policy issues, with China being center stage?

Tarun: From your lips to God’s ears.

 
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Tarun Chhabra is a fellow with the Project on International Order and Strategy at the Brookings Institution, and also with the Center for Security and Emerging Technology at Georgetown University. His current research focuses on U.S. grand strategy, U.S.-China relations, and U.S. alliances. Chhabra co-leads a Brookings Foreign Policy-wide initiative, Global China, focused on the implications of China’s growing global influence. Previously, Chhabra served on the White House National Security Council staff as director for strategic planning and director for human rights and national security issues.