Eurasia Group's Ian Bremmer and David Gordon cite top geo-pol risks for 2011

David Gordon is an old friend, who, as the National Intelligence Officer for economics and globalization in the National Intelligence Council, came to most of my wargames at the Naval War College and World Trade Center in NYC.  He later became Vice Chair of the NIC and then head of policy and planning at State in the final Bush years (when diplomacy made quite the comeback).  One of the smartest guys I know and just a great guy all around.  After Bush ended, he left government and went to direct research at Ian Bremmer's Eurasia Group, which specializes in political risk consulting.

Ian, you know from his books ("J Curve," "Fat Tail," "End of the Free Market"), all of which have made it into my own books or columns.  Ian and I did a back-and-forth on his "The Call" blog at Foreign Policy regarding the last one.  Ian is deservedly recognized as THE political risk guru out there (he often writes with Nouriel Roubini) and he's done an amazing job of building up Eurasia Group from nothing in just over a dozen years.  Having worked with Steve DeAngelis is building up Enterra Solutions over the past 6 years, I truly appreciate what that takes.  

I've been working for Dave and Ian since January as a consultant on a project for the government that's been a lot of fun and there are others in the hopper, so this is turning out to be a nice working relationship in addition to my other affiliations.  I've missed working for the USG these past few years, so it's been great to get back to that sort of analysis.

The top ten risks cited will also sound familiar enough to readers of this blog.  Here's the opening, plus the list as links to the report:

The risks that exercise us most usually center on a country, an issue, an event. We worry over political chaos before or after an election, a coup in a fragile regime, or military conflict with a rogue nation. But for the first time since we've been writing, the political risk environment is much broader this year. It's the change in the world order itself that gives us most cause for concern.

Two years after the financial crisis, there's a strong argument to be made for optimism. The American economy is poised for (at least modest) growth and emerging markets are still churning ahead. By that logic, it's high time for governments, captains of industry, banks, and citizens to get back to business. Time to leave behind record gold prices and put the trillions of dollars sitting on the sidelines back to work.

But that conclusion implies a level of confidence, if not quite comfort, with where the world is headed. Whatever your expected shape of economic recovery—a U-curve, V-curve, L-curve, or something else—we're entering an entirely new world order. That means new ways for states to relate with one another both politically and economically. It means new areas of conflict. 2011 looks to be the year that our understanding of how the world works becomes out of date.

This is scary not because it's incomprehensible but because the scale of change is so great that it becomes difficult to manage. Few of us have experienced a transition of this scope. Following the collapse of the Soviet Union two decades ago, it was fashionable, briefly, to herald a new world order. The pronouncements were premature. Soviet collapse remade the global security balance, but its economic impact was considerably more modest. The advanced industrialized economies had ruled the global economic system; the end of the cold war meant a move from the G7 to the "G7 plus one." Globalization sped up a bit, the West had new countries to invest in (at least for a while), and some of the old ones (Germany) got stronger. "Plus one" didn't imply a new world order.

That's not true today. After the financial crisis, the G7 was replaced by the G20. This change brought no challenge to America's global military supremacy. But the rules of the economic road are a different story and the new geopolitical order is shaped not by a military balance but by an economic one. This new world order marks the end of a decades-long agreement on how the global economy should function. This is world-changing indeed, because the dominant economic trend of the last half century, globalization, now faces a direct challenge from geopolitics.

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The rise of this new order will have a profound impact on nearly all of the world's big-picture, long-term trends. A lack of coordinated governance on key economic issues will become entrenched and give rise to lasting international conflict. States and corporations will become more closely aligned in both developed and developing states. Most significantly, we'll see a shift in the highest levels of global conflict to the region where globalization and geopolitics collide with greatest force: for the past twenty years, the sharpest geopolitical tensions were to be found in the Middle East; we'll now see a decisive and long-term shift of those tensions to Asia.

All the risks we're looking at in 2011—conflict from the North Korean succession process, the unwillingness of China to budge under international pressure, the lack of political and economic coordination in Europe, currency controls intensifying global economic misalignment, the geopolitics of cybersecurity—are intensified by this transition to a new world order. The red herrings on our list avoid risk in spite of it.

Surprisingly, and despite all the anxiety these changes have created, there's no name for this new era. We propose the G-Zero. This is the lens through which we'll understand global events in the coming years. It's our top risk for 2011.

THE RISKS

1	The G-Zero
2	Europe
3	Cybersecurity and geopolitics
4	China
5	North Korea
6	Capital controls
7	US gridlock
8	Pakistan
9	Mexico
10	Emerging markets
*Red herrings

Being Mr. Counterintuitive, I like the "red herrings" the best. They are Iran, Turkey, Sudan and Nigeria. I like the optimism on each.

America's renewal: the consensus path

Review of cluster of books about America's renewal (a buzz topic) in FT:

• "The Next American Economy," by William Holstein
• "The Comeback," by Gary Shapiro
• "Make It In America," by Andrew Liveris, and 
• "Advantage," by Adam Segal.

Ed Crooks, the reviewer, boils them down to the following consensus:

• Improve public education,
• Develop alternatives to oil,
• Simplify the tax system,
• Strengthen broadband connections,
• Rebuild infrastructure, and
• Keep immigration open.

Not rocket science.  Besides the new bit on oil (which makes sense environmentally but does not for all the usual let's-avoid-wars-nonsense), all are very "American System"-like, meaning they're tricks we've used throughout our history - going all the way back to Hamilton and Clay.  Always the focus on widespread education, keeping government from becoming too onerous, infrastructure and comms to unite a growing continental economy, and let newcomers in.

This is basically who we are and have been.  Getting good again is just becoming ourselves again.

WPR piece on Indian strategist's take on China-US "term sheet" effort

Piece by Saurav Jha in World Politics Review on piece K. Subhramanyam wrote on the term sheet just before he died.

I excerpt the parts that included by rebuttals, which I gave Saurav via emails.

With Indian newspapers still carrying obituaries of the country's strategic doyen, K. Subhramanyam, who passed away in February after almost a half-century at the forefront of New Delhi's strategic debates, it is worth considering the object of Subhramanyam's concern during his final days: the implications for India of a proposed U.S.-China grand strategy agreement hammered out by a group of policy experts in Washington and Beijing. The document proposed a series of strategic compromises between China and the U.S., including a massive Chinese investment in the U.S. economy in return for an informal nonaggression pact, particularly with regard to the U.S. military's posture toward China in Taiwan. Indian analysts led by the late Subhramanyam, however, saw the proposal as a ploy by the Chinese to "use the U.S. to attain hegemonic power in Asia."

In the proposal, Subhramanyam heard echoes of the Nixon-Deng compact, born out of the expediency of the Cold War. That agreement saw the United States push huge sums of commercial technology investment into China, ultimately followed by the outsourcing of mass manufacturing. Now, by contrast, it is high technology that would be transferred to China in return for the $1 trillion that Beijing would invest in the U.S. private sector. Over time, these transfers would enable China to leverage its demographic advantages to become the world's dominant economy.

However, Thomas P.M. Barnett, one of the proposal's architects, rejected the significance of China's advantage in absolute demographic numbers. "The volume of bodies no longer determines strength in this world, especially when hundreds of millions of [those bodies] are impoverished, as they are today and will remain for decades in China," said Barnett. "It is much smarter to consider age." As Barnett explained, both China and the United States currently have a median age of 36. But with China aging four times as quickly as the U.S., its median age will hit 48 in 2050, while the U.S. will only have reached 39 . . . 

Subhramanyam highlighted the fact that, despite spelling out agreements on Taiwan and Iran, the strategic proposal is completely silent on Pakistan and its nuclear and missile-technology relationship with China. He questioned whether that amounted to conceding Pakistan and South Asia to the Chinese sphere of influence. Barnett disputes that interpretation. "The proposal wasn't meant to be universally inclusive," he says, "but to reference only those issues that created deep strategic mistrust between the U.S. and China. [For the U.S.], Pakistan doesn't qualify, for obvious reasons" . . . 

The timing of the strategic proposal was also suspect in Subhramanyam's eyes, who felt that its release just after Obama's visit to India was an attempt by Beijing to tempt Washington away from New Delhi with the offer of a major U.S economic bailout. His prescription was for India to move more quickly on forging closer ties with the U.S. and for proponents of nonalignment in India to reconsider their stand. 

Clearly, despite the world's shift toward multipolarity, the remaining superpower is still highly sought after by the most dynamic new poles, located on either side of the Himalayas. And the fact that an unofficial backchannel proposal attracted the attention of such a heavyweight as Subhramanyam reflects the stakes involved.

The China-India rivalry throughout Asia is obviously operative and growing, with Pakistan a key potential flashpoint.

One scenario that lightens this:  once US out of Afghanistan, US attention will shift to containing Pakistan and its many instabilities.  This may become the common goal around which new understandings are possible among Washington, Beijing and New Delhi.

Resource war ahead! China "tightening its grip" on rare earths!

Chart found here.  It all looks so suspiciously similar huh?  Like production magically rises to meet global demand.  Pretty strange, that.  Like some invisible hand guides the process . . .

China, which controls 90 percent of production of rare earths globally right now, is believed to be stockpiling a strategic reserve (always suspicious when somebody else does it, but entirely sensible when the US does).  The US, for example, still has defense-tended stockpiles of strategic commodities from WWII!  China, as in all things, simply catches up, like creating a strategic petroleum reserve like ours.

WSJ gets it right:

Many rare-earth minerals aren't actually rare, and China doesn't have a monopoly on deposits of any particular rare-earth elements.

China has half the world reserve total, then the FSU has just under one-fifth, then the US with about 1/10th, and the rest of the world owns the remainder one-fifth.

Naturally, there are calls for the US to start similarly stockpiling rare-earths, rather than rely on potential enemy China.

Not a big trick.  Somebody's just got to spend the money to make the US mines profitable.

But it's interesting:  the more China connects to the world, the more nervous we get--and plan to protect ourselves with these various dreams of autarky.  Quite the reversal from the Cold War, huh?

Chart of the day: EU public sector debt as % of GDP

First, here's the slide I use in the brief for the U.S.:

So you get the sense of the US coming out of WWII basically 100% in debt and then spending three decades to whittle it down to just over 30%.  Then Reagan-Bush jack it up to almost 70%, then Clinton brings it back down to almost half, then W. send its back up to 70% and Obama sends it even higher.  On the current course, we're back up in the 100% range within years.

Scary stuff.

Here's a similar chart, but laid out as a map of the European Union:

So what do you take from this:  when you get in the range that we're heading for, you run the risk of sovereign default--unless, of course, you're the world's leading reserve currency (used to be 70%, now closer to 60% and dropping).  

You look at France at 84% and you realize why Sarkozy is taking on the public unions (Economist cover last week).  But you also look at Germany and you have to wonder about it's tough love vis-a-vis a Spain, yes?

Point being, almost nobody in the West is doing well on this score.  Lotsa glass houses to go around.

Brzezinski: redefining the US-PRC relationship

Zbigniew Brezinski, who helped broker Jimmy Carter's normalization of relations with China in 1979, says in the NYT (HT, Robert Jordan) that the upcoming Hu-Obama meeting "should ... yield more than the usual boilerplate professions of mutual esteem" by aiming to redefine the relationship, something "that does justice to the global promise of constructive cooperation between them."

Hmmm.  Great minds think alike.

Why the effort?

The worst outcome for Asia’s long-term stability as well as for the American-Chinese relationship would be a drift into escalating reciprocal demonization. What’s more, the temptations to follow such a course are likely to grow as both countries face difficulties at home.

So show some ambition he says:

For the visit to be more than symbolic, Presidents Obama and Hu should make a serious effort to codify in a joint declaration the historic potential of productive American-Chinese cooperation. They should outline the principles that should guide it. They should declare their commitment to the concept that the American-Chinese partnership should have a wider mission than national self-interest. That partnership should be guided by the moral imperatives of the 21st century’s unprecedented global interdependence. The declaration should set in motion a process for defining common political, economic and social goals. It should acknowledge frankly the reality of some disagreements as well as register a shared determination to seek ways of narrowing the ranges of such disagreements. 

The instinct for the "grand strategy term sheet" is not idealistic--just timely.

Why so hard for the White House to open up its minds on the subject?  See my response to Zenpundit's musings here.

The final version of the Sino-American grand strategy "term sheet"

Downloadable PDF

U.S.-P.R.C. Presidential Executive Agreement 

For Peaceful Coexistence & Economically Balanced Relationship 

Prepared by John Milligan-Whyte, Dai Min and Thomas P.M. Barnett 

Dec. 14th, 2010 

Presidents of U.S. and P.R.C. sign an executive agreement containing each nation’s pledge that: 

1. U.S. and P.R.C will never go to war with the other; 
2. Each will respect the other’s sovereignty and distinct political and economic systems; 
3. U.S. pledge to eschew regime change in P.R.C. and of non-interference in its internal affairs; 
4. P.R.C pledges to continue its economic, social, and political reforms. 

Taiwan 

Pledged demilitarization of Taiwan situation, to include: 

• Informal U.S. moratorium on arms transfers to Taiwan; 
• U.S. President’s adherence to defense requirements of Taiwan Relations Act of1979 is achieved through the following alternative means; 
• P.R.C. reduction of strike forces arrayed against Island; 
• U.S. reduction of strike forces arrayed against P.R.C. Mainland; and 
• Negotiation and promulgation of confidence building measures between U.S. and P.R.C. militaries. 

North Korea 

Pledged de-escalation of strategic uncertainty surrounding North Korea nuclear program, to include: 

• U.S. eschews regime change in North Korea; 
• P.R.C. encourages North Korea to adopt economic reform policies to be implemented on terms appropriate to North Korea’s own situation; 
• North Korea agrees to terminate nuclear program and resume economic cooperation with South Korea; and 
• U.S. and P.R.C. support peaceful reunification of North and South Korea on terms and timetable determined by North and South Korea. 

Iran 

Pledged management of relations with Iran to include: 

• U.S. eschews regime change in Iran; 
• P.R.C to support Iran’s peaceful development of its nuclear energy program; 
• Iran to willingly submit to regular international inspections of its nuclear energy program; and 
• U.S. to eliminate trade restrictions and promote trade with Iran. 

South China Sea & East China Sea 

Pledged management of sovereignty disputes to be solved peacefully and bilaterally, to include: 

• P.R.C. sets up multilateral South China Sea Regional Joint Development Corporation with neighboring claimant states; and 
• P.R.C. pledges to negotiate resolution of all such disputes on the basis of the P.R.C.-ASEAN agreement entitled, “The 2002 Declaration on the Conduct of Parties in the South China Sea.” 

ASEAN Economic and Peacekeeping Collaboration 

U.S. and P.R.C pledge: 

• Harmonization and coordination of their respective roles in regional economic and security forums; 
• Pursuit of peaceful coexistence in their bilateral relations with other Asian nations; and 
• Promotion of economic stability and growth of ASEAN nations in their multilateral relations within ASEAN, APEC, etc. 

Military-to-Military Ties 

U.S and P.R.C. pledge to cooperate on international and non-traditional security issues, to include: 

• Lifting of U.S. embargo on military sales to China; 
• Regular scheduling of joint naval exercises in Asian waters, with standing invitations to other regional navies; 
• Permanent expansion of officer-exchange program; 
• Creation of joint peacekeeping force/command in conjunction with other countries within the UN Security Council framework; 
• Expansion of U.S.-P.R.C Maritime and Military Security Agreement to include frequency of U.S. close-in reconnaissance; and 
• Establlishment of joint commission collaborating annually on U.S. and P.R.C. technology sharing and transparency of budget expenditures. 

Existing and Future International Institutions and Issues 

U.S. and P.R.C. pledge to support continued reform of existing institutions (e.g., UN, IMF, World Bank, WTO, G20) to better reflect the evolving global economy and international issues, to include climate change, Doha Agreement, etc. 

Strategic and Economic Dialogue (SED) 

To implement the new collaborations: 

• SED becomes permanently sitting commission for continuous senior-level communications and collaboration on economic and security issues; and 
• SED reviews all existing tariffs, WTO complaints, and other trade and economic disputes and issues. 

P.R.C. Investment into U.S. Economy 

P.R.C. pledges to invest up to 1 trillion USD directly into U.S. companies at direction of U.S. President in exchange for: 

• U.S. removes trade restrictions and high-technology export bans with P.R.C.; 
• P.R.C. commits to purchase sufficient amount of U.S. goods/services to balance bilateral trade on annual basis; 
• P.R.C. companies’ access to U.S. market made equal to that of U.S. companies access to P.R.C. market; 
• Ownership limit for new P.R.C. investments in U.S.-owned or controlled corporations limited to 45 percent of shares, with additional 10 percent reserved for preferred equity/pension funds on a case-by-case basis and final 45 percent remaining with non-P.R.C. ownership; 
• Ownership limit for new U.S. companies’ investments in P.R.C. limited to 45 percent with additional 10 percent reserved for preferred equity/pension funds on a case-by-case basis and final 45 percent remaining with P.R.C. ownership; 
• U.S. and P.R.C. to facilitate global joint ventures between U.S. and P.R.C. companies, with initial example to involve major U.S. firm, possibly General Motors; and 
• U.S. and P.R.C. to collaborate in SED on goal of full employment throughout each economy, targeting in particular areas suffering inordinate unemployment or needing special economic growth arrangements. 

Other Areas of Bilateral and Multilateral Cooperation 

P.R.C. and U.S. to collaborate: 

• Implementing principles in the Preamble, Article 1 of the UN Charter; 
• Rehabilitation of failing and failed states seeking assistance; 
• Combining U.S. and P.R.C. markets, technology and financing to ensure affordable costs for all nations of effective pollution remediation and sustainable energy and financing of globally needed technology; and 
• Joint space exploration with other UN member states. 

No Creation or Operation of “G2” Arrangement 

Nothing in this Executive Agreement constitutes, is intended to, nor permits the creation or operation of a “G2”, and instead this Agreement: 

• Establishes an improved framework of collaboration among the U.S., P.R.C. and other UN member states; 
• Neither seeks nor infers any formal alliance between the U.S. and P.R.C.; and 
• Creates a new U.S. and P.R.C. partnership commitment to the Principles of Peaceful Coexistence in the UN Charter. 

Mutually agreed on the _______day of_________ 2011. 

____________________________________            ______________________________________ 

President of the United States Barack Obama           People’s Republic of China President Hu Jintao 

China Daily coverage of interview

Think tank offers plan for US-China relations

By Ma Liyao (chinadaily.com.cn)
Updated: 2010-12-08 14:23

BEIJING - The United States and China are at a point to establish a new collaborative relationship to deal with the possible conflicts emerging between the two big economies, which happen to be the world’s two big militaries, said analysts from a US think tank.

"The basic idea is that we need to clear out some of the strategic mistrust …that has at its roots an imbalanced economic relationship that we seek to radically rebalance in a direct way by encouraging investment from China directly into the US economy," Thomas P.M. Barnett said on Monday in an exclusive interview with China Daily.

Barnett, chief analyst at Wikistrat, an Israeli startup company that offers strategy consulting, is in Beijing to promote the “Whyte-Barnett Solution,” a new China-US grand strategy proposal he proposed together with his partner, John Milligan-Whyte and Dai Min, heads of the Center for America-China Partnership, one of the first think tanks to combine US and Chinese perspectives.

The four-page proposal suggests specifically on the investment floor to encourage large Chinese direct investment into the US market.

"I think the key thing is… to suggest to the American public the win-win opportunity here that … Chinese companies going global doesn’t result in a zero-sum outcome for the West," Barnett explained, adding that “it represents a very positive and potentially a very tremendous large-scale infusion of capital into distressed companies in the US and elsewhere.”

He said that he believed China will be interested in that kind of rebalance, getting the “less useful path” of discussion on the value of RMB off the table.

Talking about the recent military tension in northeast Asia, Barnett said that the key and crucial aspect is to increase transparency between the two militaries as much as possible, especially when there has been a lot of concern about China’s military building.

The US held a meeting in Washington on Monday with Japan and the Republic of Korea to discuss the current security situation in the region, without China, Russia and the Democratic People’s Republic of Korea’s attendance, after rejecting China’s proposal of a meeting among the six.

Barnett said that he didn’t see anything wrong with trying to reassure its long-time allies as long as it quickly progresses into Six-Party Talks, but “you have to include China every step of the way.”

"Because if not, you are not increasing the transparency."

Milligan-Whyte, the co-presenter of the strategy proposal, said that the global financial crisis is actually a good opportunity for China and the US to collaborate on a new strategy.

Between 2000, when China enter the WTO, and 2008, when the financial crisis hit the world, the US dollar appreciated about 40 percent. Between 2005 and 2008, Chinese yuan appreciated about 21 percent. But it did not help the trade deficit, which is around $260 billion to $300 billion a year now, said Milligan-Whyte.

"The trade deficit is caused principally because … the United States doesn’t want to sell high technology to China, which China therefore buys from Europe and … elsewhere," he said.

Milligan-Whyte said that he believed the financial crisis is still in its early stages and anytime in the next two years, the market will just freeze up. And the only thing that can prevent that is “this type of breakthrough in US-China relations.”

"You will see the financial crisis will be very hard for 23% of the American homeowners. It’s going to be 50%. Unemployment will be 25% in some places, and over 10% in others. It’s going to be a really terrible situation. That is going to trigger a new deal between China and the US."

Chinese Premier Wen Jiabao said on Sep 23 in New York while meeting US President Barack Obama that China is willing to push a healthy economic cooperation with the US, in hopes that the US would loosen its export restraints on China.

Chinese President Hu Jintao expressed a similar will months later in November while meeting with Obama in Seoul, urging the US to lift its export restraints and give Chinese companies a fair competition environment in the US market.

The Whyte-Barnett Solution is designed as a presidential strategy agreement.

Hu is scheduled to visit the US next year.

Additional repostings of this article:

• NationalPublicRadio (US)
• USAToday
• IndiaTimes (which thereupon also reposted this very post!)
• IndiaVision
• DailyIndia
• NewsTrackIndia
• OneIndiaNews
• Asian News International
• South Asia News
• SifyNews

Op-ed in China Daily: "China, US as strategic collaborators"

China, US as strategic collaborators

by Thomas P.M. Barnett

The word "war" has been appearing increasingly in American debates about China, with the range of potential venues expanding with each new "intractable" issue that arises. Pile enough of these wooden scenarios atop one another, and eventually someone will strike the match. There will always be self-interested parties eager for confrontation, even though the two countries' peoples seek nothing but peaceful coexistence.

Today we share a world more prosperous and more at peace than at any time in human history, so why are we on this undesirable path? Besides the Cold War and the legacy issues retained to this day (Taiwan, the Democratic People's Republic of Korea), there is no historical enmity between our peoples. Since neither situation logically triggers direct military conflict, all of our potential conflicts must be recognized as wars of choice.

An objective examination of globalization's current state and future evolution reveals far more complimentary interests than conflicting ones. As the global financial crisis revealed, China and the United States face shared dangers that must be eliminated - whether we welcome this joint responsibility or not. Neither side's political system presents an ideological threat to the other. Each country's internal structural challenges are its own business or choice, and each will force evolution at a pace its society can handle or demands. Despite these current rumblings, let me tell you why strategic collaboration between China and the US is essential.

In the business world, companies seek partnerships when the proposed relationship is:

• Critical to a core goal of the enterprise;
• To exploit a core competency;
• To effectively counter a competitive threat;
• To provide flexibility regarding future choices; and
• To reduce a significant risk.

The US' grand strategy for the past seven decades has been to create the globalization we know today. Our firm belief being that the world is a better and more prosperous place when everybody has an "open door" on trade and investment. This is how the United States of America truly united.

Starting with Deng Xiaoping's historic reform, China integrated its economy with that of the rest of the world, marking the tipping point between an international liberal trade order built on the West and finding completion with the "rest".

But China's participation comes at the cost of a dangerous resource dependency far greater than the US has known. Over time, China's economy will depend ever more on energy and minerals. For now, the US essentially covers that security risk through its global policing role, but that effort is unsustainable. For China to succeed in its core goal of creating a well-off society, globalization must be simultaneously advanced and stabilized.

Sino-US strategic collaboration plays to each nation's current core competencies. China does not have a military with global reach, but the US has one now and it is deeply experienced. Yet the US forces struggle with nation building, while Chinese multinationals clearly excel at creating infrastructure, markets and opportunities for income growth in developing economies. China is also a major contributor of peacekeeping troops to the United Nations.

Today, as the primary face of globalization, the US is targeted by virtually every threat mounted by the enemies of global integration and economic modernization. China has already surpassed the US as globalization's primary integrating force - and inevitably its face too. Irrespective of China's intent, it will become the main target of violent extremists bent on keeping globalization at bay. Today the "long war" belongs to the US; tomorrow it will burden China.

For years I have written of Washington's need to "lock in China at today's prices", meaning the cost of China's cooperation would rise with time. Back then I believed that, without such cooperation, the US' strategic choices would narrow considerably.

That day has arrived, meaning the choice is now China's: lock in US cooperation in safeguarding China's vital global export and supply lines or watch your own strategic choices narrow. Imagine a Middle East regional war years from now that the US chooses not to manage because it's primarily China's energy that's at risk. That burden will be devastating for China.

Thus, Sino-US collaboration on stabilizing less-developed regions mitigates significant strategic risk to both nations. Globalization, buttressed by Sino-US strategic cooperation, cannot possibly fail. But globalization, when divided in spheres of influence, dissolves into zero-sum contests where humanity is the ultimate loser.

About such danger, our collective past speaks clearly to our shared future.

The author is the chief analyst of Wikistrat, an Israeli startup company that offers strategy consulting, and has several books, including Great Powers: America and the World After Bush, to his credit. 

Find the original 12/9 post at China Daily.

COMMENT:  I love the cartoon and will probably have it framed.  I am also getting used to having the word "Israeli" follow my name, which . . . is different.  Actually, I like it in that "I'm Spartacus!" kind of way.  I mean, who doesn't want to be part of an Israeli start-up?

WHERE IT HAS ALREADY BEEN PICKED UP (these being ones my contacts at China Daily found significant):

• Xinhuanet
• People's Forum (of People's Daily Online)
• Chinataiwan.org
• Indiatimes
• U.S. edition of China Daily
• European edition of China Daily
• China.org.cn
• The Press Enterprise

China Daily interview video re: grand strategy term sheet

12-13 minutes long.  Find it here.

Indian Express on the Sino-American grand-strategy term sheet

Piece by K. Subrahmanyan, a name you might recognize from his frequent publications.

From his Wikipedia entry:

K. Subrahmanyam (Tamil:கிருஷ்ணசுவாமி சுப்பிரமணியம், born 1929) is a prominent international strategic affairs analyst, journalist and former Indian civil servant. Considered a proponent of Realpolitik, Subrahmanyam has long been an influential voice in Indian security affairs. He is most often referred to as the doyen of India's strategic affairs community, and, more contentiously, as the premier ideological champion of India's nuclear deterrent.

Somewhat unsurprisingly, Subrahmanyam takes the "G2" approach, assuming the zero-sum outcome for India and the rest of the world.  Nothing could be further from the truth, but one must expect this sort of response.

The Sino-American relationship is central to globalization's success or failure--hard to deny that.  That relationship is not in good shape right now, for a lot of reasons.  Trying to address that cluster of macro-imbalances is a worthy goal, but such effort does not--on the face of it--automatically insinuate the creation of G2, and when that charge is so reflexively slung, you have to say that it tells us more about the provider of the feedback (as in, this is how this proposal makes me feel!) than the effort itself.

It is certainly in some people's best interests to keep the U.S. and China at odds, but I honestly don't believe that to be the case for India, when the facts and trends are viewed objectively.

From his piece ("The return of G-2"), I limit the exerpts more to his commentary than his recitation of the proposal, which--of course--is a work in progress and is already significantly altered as we receive significant feedback here in Beijing.  Suffice it to say, nobody here in Beijing is interested in "G2," even as they are highly interested in a more productive relationship with the U.S. 

Even as President Obama and Prime Minister Manmohan Singh talked of a 21st century world order based on their shared values as leaders of the world’s two largest democracies, a newspaper run by the Chinese Communist Party published a plan for an alternative world order, based on a mutuality of interests between China and the US. It asserted, though, that the article, in the November 22 edition of People’s Daily Online, represented only the views of the authors — who include John Milligan-Whyte and Dai Min, authors of China and America’s Leadership in Peaceful Coexistence, and Thomas P.M. Barnett, the author of The Pentagon’s New Map, and leading Chinese policy experts.

The article describes the benefits of the grand strategy they propose: “[it] will promote US economic recovery, increase US exports to China, create 12 million US jobs, balance China-US trade as well as reduce US government deficits and debt. Furthermore, it will stabilise the US dollar, global currency and bond markets. It will also enable reform of international institutions, cooperative climate change remediation, international trade, global security breakthroughs . . . 

There is no doubt that while this is not a formal proposal from Chinese official circles; this is kite-flying, to test public reaction in the US. It is possible that the idea is to suggest that the US and China can accommodate each other to mutual benefit — and China shares the US view that a war between two such powers in the 21st century would not make sense. It also holds out certain assurances that China will accommodate the US’s concerns on Southeast Asia as well as on North Korean and Iranian proliferation, provided the US reciprocates on Taiwan, Tibet, Xinjiang, and human rights. The US must also forget down its desire for regime change in North Korea and Iran. And, in return for the US lifting its high-technology trade ban, China will invest $1 trillion in the US, presumably in new technologies, as well as help in balancing trade and enabling the US to manage debt reduction.

But the glaring gap in the proposals is that there is no mention of Pakistani proliferation and Pakistani sponsorship of terrorism. While all the other issues listed by China are important to the US, casualties are being incurred by the US on the Pakistan front, and the US homeland is under threat from Pakistani terrorist organisations that are fielded by the Pakistan army behind the nuclear-missile deterrence shield that China provides to Islamabad. This may have one of two implications: either Pakistan, unlike North Korea and Iran, is not under Chinese influence; or Pakistan, in Chinese strategic interests, is a non-negotiable factor.

There is also no mention of US interests in India — even after the development of the Indo-US strategic partnership. Does this mean that China hopes to wean the US away from its strategic partnership with India, as part of the price for the deal? Or do they hope to frighten India into a non-aligned submission to China’s hegemony over the mainland of Asia (less Asean)?

China’s, and the authors’, value systems are evident from their advocacy that such a Sino-US deal should be outside the purview of the US Congress purview: they say it should be “agreed upon by the presidents of both nations through an ‘executive agreement’ not subject to US Senate ratification.” Surely, now that these ideas have been publicised, the present US president — with two years to go before seeking re-election — will find it difficult to move in this direction, as there will be accusations of his selling out to China.

It is also clear that there are sections in China who are of the view that, just as the US helped China’s rise to second position in the world so that its resources and cheap labour could benefit US multinationals and US consumers — both by way of cheap consumer goods and credit expansion in the US — now the US will help China by releasing high technology, and thereby help themselves, benefiting through job creation and debt reduction. And once China has access to US high-tech, its demographic advantage over the US will ensure it will become the superior knowledge power this century.

A significant number of people in this country imagine that there is an adversarial equation and a conflict of interest between China and the US, and thus, it will benefit India to be non-aligned. This article — published, significantly, on the eve of Prime Minister Wen Jiabao’s visit to India and Pakistan — holds out the possibility that China thinks it is possible to use the US to attain hegemonic power. Let us wake up to reality!

What to say?

First, the non-inclusion of the Pakistan-India dyad hardly amounts to signaling any desire to leverage this relationship to their collective or singular advantage or disadvantage.  It simply reflects the reality that when people on both sides of the Sino-American dialogue speak to its ups and downs, those issues aren't considered central. Important? Sure.  But not central.  No one is saying that Pakistan and/or India constitute the core of what's wrong or going wrong with the Sino-American relationship right now.  Reflective of it, perhaps, but not among its primary causes.

Noting the suggestion that the proposal be done as an executive agreement (longstanding practice of U.S. presidents for such matters) hardly suggests something extra-constitutional or politically devious.  Just the opposite!  It says we see no purpose in suggesting something on the level of a treaty requiring Senate ratification.  None of this is intended as "law of the land"-caliber stuff:  we simply come to certain understandings that allow an economic rebalancing to proceed.  That is classic, within-the-president's-foreign-policy-purview stuff.  Suggesting otherwise is sheer ignorance of how our political system works and has worked for decades. The economic rebalancing itself would need some political direction from above, but it would be overwhelmingly a private-sector-driven affair.  If you're a U.S. business and don't want any investment from Chinese companies, then don't ask for any and none could ever be forced upon you. From the Chinese side, they simply will not enter into alliances or treaties implying any such commitment, so no sense in supposing such grandiose mechanisms are useful here.  

It's as simple as that.  

Yes, you will get some of this, "the Chinese will own America" fear-factor, but if majority ownership is out of the question (and we don't suggest that--just the opposite), then the question becomes, Should Chinese money flowing into America be used to facilitate even more public debt and welfare payments or should it be put to use putting Americans to work?

I honestly believe that it's much easier to argue that China does a great job of destroying America's competitiveness by enabling our addiction to federal debt right now than it does by being stubborn on the renminbi's value. History (especially past history with Japan) tells us that revaluing the RMB will not solve our trade deficit with China.  We also screw ourselves by restricting high-tech exports to China due to military concerns, because they simply turn around and buy the same from the EU (like most such sanction efforts, we only hurt ourselves in this globalized economy, achieving nothing on the security side).  But somehow we've let ourselves be convinced that China's potential military threat outweighs all such considerations--as if Mutual Assured Destruction somehow gets invalidated in the process!  To me, that's just nuts, or--put more prosaically--bad leadership in Washington.

Again, the proposal is driven by a simple logic:  There is a profound imbalance of easily-accessible investment capital in the world system right now.  China's got a ton and America (and Europe) are somewhat starved by comparison and wracking up unsustainable public-sector debt that is already causing default crises in the EU, soon to be followed by some variant at lower levels of US government (cities, states).  You can judge that dynamic from a lot of angles, but just to say, "Ahah!  Now China has the West in its grips!" is rather silly. China presses its temporary advantage too much in the short term and all those trillions can end up being worth nothing.  Business is about parties and counterparties--as in, you need two to tango.  

Judged objectively, China has let in a lot of foreign direct investment over the past two decades, to the point where majority portions of its exports in certain sectors are actually controlled by foreign firms!  Imagine the U.S. putting up with that?

On the other hand, it's clear that the U.S. has shouldered the bulk of the global policing role over the past two decades.

So in both instances, we need something more balanced, more reasonable, and more sustainable.

This proposal simply begs the question:  if such rebalancing is necessary, what would the nature of such transactions look like if they weren't simply conducted according to America's preferred outcomes but actually reflected a compromise between the U.S. way and world vision and the Chinese way and world vision?

I know, I know. This is kowtowing to those communist Chinese! But more seriously, didn't we just try a long stretch of my-way-or-the-highway BS with Bush-Cheney?  And how well did that work?

How anybody can feel threatened by such dialogue is beyond me, given the seriousness of the current imbalances in the world system and how their solution is in everybody's best interest. Again, let's get our inner FDR on and have some faith in who we are and stop being such wimps on dealmaking.  Our inability to motivate ourselves beyond sopho-moronic internal arguments is our greatest weakness right now.  Oooh wee! The GOP just nailed Obama on tax cuts!  So now we get to extend unemployment benefits while refusing to pay for it.  What a fab signal to send the world!

Honestly, the immaturity factor in Washington right now is almost unbearable to witness.  It's just so embarrassing to endure when you travel abroad--especially in China.  How can we be taken seriously when we act this way?  We are just kidding ourselves if we think no one takes note.

India cannot want a U.S. and P.R.C. turning on each other and destroying globalization in coming years, because India cannot possibly prosper in that environment.  You can say, such a bad thing would never happen, but to me, this is a head-in-the-sand sort of optimism.

The Global Financial Crisis does not disappear simply because of the somewhat successful (less in West, more in East) public-sector stimulus push in the initial phase.  Much of the crisis's underlying causes are simply transmuted into the current/looming sovereign debt crises that worry so many leaders and--quite frankly--a decent chunk of the American middle class as captured in the Tea Party anger (which you can ridicule at your own risk, because history says that, when the U.S. middle class ain't happy, ain't nobody gets to be happy in our political system).

You can also say, China is right to lecture America now on its bad economic behavior.  But such lecturing gets both sides--and the world--nowhere.  For China to expect all the adjustment to happen now solely on America's side is unreasonable, just as unreasonable as the U.S. expecting somehow that all the adjustments should be on China's side.

But the dialogue, as it current stands, consists of both sides talking past each other and hoping that--somehow--this all balances out on its own over time.  I think such a mindset it truly naive.  Both sides have plenty of incentives and reasons not to budge, leaving both with increasingly unpleasant tools/weapons for seeking redress.  I think that pathway is a bad one, and so I got together with the Center for America-China Partnership to change the conversation.

Such an attempt can be criticized from numerous angles, and the Indian Express piece offers one such angle. But we've got to get over the fear of exploring real solutions with real compromises and real adjustments on both sides--simply because it will make others around the world nervous.  That would be the opposite of global leadership, which both countries owe the world right now.

Personally, I will always be warned not to get involved in this sort of manner, because it will cost me my credibility as a strategic thinker.  My response to that logic is, What is the use of being a credible strategic thinker if all you do is sit on the sidelines at such moments?  I hope to leave behind six kids who'll need a strong America and stable world to live and work and prosper within.  I see no reason to amass a reputation (such as it is!) that can suffer no risks.  Geez, anybody who knows me knows how much I like being an unreasonable troublemaker!

I have no fear of altering my positions and vision to fit reality as it unfolds.  I marry myself to as few core interest propositions as possible, because the more you accumulate, the more dead your thinking becomes.  I want America at all times to succeed to the best of its ability in prospering and continuing to shape this world for the better.  I think we do that better than anybody, but I also think our approaches have to change when success/failure stare us in the face (usually at the same time, as we now face the great success of our globalization process AND the addiction to cheap money created by the dollar's standing as reserve currency).  I cannot, for example, logically argue for regime-change in NorKo right now like I did in 2004-05.  The system wouldn't handle it well right now, the Sino-American relationship couldn't handle it right now, and there's just bigger fish to fry.  

You see such vaunted and highly-respected figures like Krugman, Tom Friedman, Niall Ferguson and Zakaria expressing extreme alarm on all these same issues, so this is exactly the sort of nexus where strategic thinking that posits win-win scenarios has to be employed.  Just this week on Zakaria's GPS, Ferguson raised the issue of the EU possibly needing a huge flow of Chinese capital down the road.  So this proposal is in the right zip code even as we hammer out its weaknesses with a steady stream of sit-downs with Chinese experts this week in Beijing.

As for personal risks, you've got to get over that stuff (and yourself, quite frankly).  I don't get 50 lives to test out various pathways for useful application of my ideas.  I get this one, and this one has this big issue staring it right in the face right now, and so I participate with likeminded people in China--none of them perfect and all with their biases, but likewise all with their hearts in the right place. I'm still unduly Catholic:  I prefer to sin first and seek forgiveness later.  

I believe in having your own foreign policy and have said so many times on this blog.  This is the point of being in the field in the first place. If I were good at following the command chain, I wouldn't have gotten fired from the Naval War College and I'd probably being living some quiet existence as a CIA analyst (the organization correctly turned me down in 1990 for having the "wrong personality type"!).  

Frankly, this sort of bold scenario work is exactly why I linked up with Wikistrat.  I want nothing better than to undermine conventional thinking at this point in history, because I believe it to be America's worst enemy in these tumultuous, system-shaping times (the second biggest danger being the lack of competent strategic-thinking counterparties around the world because we've so long been the only country blessed with the strategic means to encourage such strategic thought--a situation changing rapidly before our eyes).  

Personally, I think this is the best time to be in this business--the best time since WWII.

A deep discrediting of the political process in Washington

Economist story on party affiliation and op-ed from the NYT comparing now to the Gilded Age--a favorite theme of mine.

As I've long argued, the Boomers have been a terrible generation of political leaders.  As in the case of most revolutionary generations in history, once the initial stab at change in their youth fell to the wayside, the real talent went into business and technology and changed the world--dramatically--for the better. The dregs went into politics and, in the process, have managed to thoroughly discredit it as a career and force for good in our society.

Last time it was this bad in America was those latter decades of the 19th century.  The "revolution" then was the U.S. Civil War, and the crew that came out of that crucible was dramatically altered in character and vision and--most importantly--in personal connections.  The bonds forged by war led to a lot of follow-on business development during a great and lengthy boom time.  But it was an era much like today:  frontier integration thanks to a rapidly expanding continental economy, the knitting together of a sectional economy into world-class "rising China" of its age, huge flows of people and FDI into the country--a miniature version of today's globalization.  

And during that age of booms and busts and the early populism that accompanied it, politics became a very dirty profession, so much so that when progressive icon TR decided to step into the fray, his wealthy NYC family begged him not to do so--it was considered such a huge step down from respectable obscurity. Few of us came name any politicians from that era (distant relation Grant being my favorite), but we all remember the industrial-financial titans, whose very names equal wealth: Rockefeller, Carnegie, Morgan, etc.

We live in very much the same age now, poised to move into a progressive era.  I know that word is a favorite target of Glen Beck with his whacked-out history lessons, but it's clear to me we need a cleaning-up period much like back then.  Politics needs to be re-credentialized, but it can't happen so long as the current cast of small minds (I'm with Michael Bloomberg on this one) are on the stage.  The downshifting in talent and vision over the past three decades has been supremely depressing.  I grew up with WWII-era giants in politics, and I miss the class and the intelligence and professionalism and--most of all--the ability to forge deals.  Now we suffer such unbearable fools.

And so we get "change" after "change" election, a good corollary to the Gilded Age.  I think we'll need a few more before the next generation of leadership starts making itself known.  Obama was an avatar of this movement; he just turned out to be too much like Jimmy Carter when he got into office.

The Economist piece demonstrates the popular disaffection with politics: we are more and more a one-third, one-third, one-third electorate--as in, one-third Dem, one-third GOP and one-third Independent.  I would count myself in the Independent crowd, as I have a hard time imagining myself in either party.

When does the big change come?  A peer-to-peer generation is already remaking a good chunk of our society/economy. Eventually the Millennials move into the political realm and have their impact.  

Like so much of what I track, then, this is another thing that registers more in the 2020s/2030s, signifying the 2010s as a transition decade to be finessed--and survived.  

We navigate an age where we should setting up the big deals that shape our future, like transitioning from old alliances to new.

Two I've been waiting on: UAVs poised to explode across civilian sector and China's preference for boys eroding

WSJ story up first.  Dovetails very nicely with the "Six Degrees of Integration" entry we had in the sample Wikistrat "CoreGap Bulletin."

The first prediction was an easy one for anybody who's worked for the military as long as I have:  UAVs will become a part of everyday life, just like the Internet and GPS before them.  When you work with the military, you simply come to accept these fantastic advances as routine, especially when you have years to get used to them mentally before they're unleashed upon the public.  I didn't come along early enough to catch arpanet (DARPA's original Internet; DARPA being the Defense Advanced Research Projects Agency), but I had years of exposure to GPS prior to its release into the wild, and it wasn't hard to imagine that it would change things--always being able to track exactly where you are. 

So with the UAVs getting smaller and smaller, the difference between them and what model plane enthusiasts have long toyed with gets less and less, meaning the latter enter the game. Already, as the piece points out, there's this gray area of regulation known as "recreational use of drones."  As one former CIA counterterror guy who now works for a drone company puts it, "The only thing you're bounded by is your imagination--and the FAA in the United States."

I used to predict that UAVs would be all over by now, because I could see the trajectory unfolding a decade ago, like with GPS, but then 9/11 kind of chilled that feeling, because all of a sudden, everybody was scanning the skies for dangerous objects. But with the Long War providing such a strong and persistent requirement, things got quickly back up to speed. 

And when you think about it, helicopters are actually pretty hard things to fly and so they come with plenty of crashes, so unless carrying bodies is a requirement, why not switch over to drones everything else.  Think of all the traffic and weather copter work. Then there's the paparazzi stalkings of celebrities or using helos to scout disaster zones.  None of that requires a body in the vehicle--just the video feed.

I know, I know.  Politicians looking for photo ops will suffer, but so will celebrities seeking to avoid them.

Great line from the piece from a divorce attorney:  "If the Israelis can use them to find terrorists, certainly a husband is going to be able to track a wife who goes out at 11 o'clock at night and follow her."

Safety issues galore.  Wait until the first murder happens in a civilian context.  Privacy issues too, of course. Bullying will follow, as will scams.  It'll be a new way to sneak into ball games or to virtually attend exclusive events ("Look, there's the President!"). And, of course, terrorists will use them successfully.

And many journalists will write "Pandora box" pieces, but life will go on, becoming that much more interesting/complex/weird and ultimately routine enough on this score.

Second one I've been waiting on and it's apropos of my Chinese daughter's birthday this week:  FT story on how property bubble is latest bit to erode Chinese preference for sons.  

The one-child policy came faster than urbanization could change age-old norms, so we soon got the dearth-of-females issue that a few demographers have beat to death as a cause for future wars ("Horny guys of the Middle Kingdom--unite and let's conquer . . . oh hell, let's just hop a plane to Vietnam and get a bride this weekend  I'm buying the first round!").  But when we were there adopting Vonne Mei, I remember all these young women seeing me hold her:  they'd bring over their boyfriends, point at me, and then punch them in the shoulder, spewing a few sharp lines.  Guy would look stunned and embarrassed, rub his shoulder while staring at me, shake his head a bit, and then meekly follow the young woman away.  You could just imagine what she said. 

But the vibe was really two fold:  "See!  Americans like girl babies!" and "See, that's how a Western man helps his wife by taking care of the child!"

You could see both norms beginning to take hold in the minds of young women who were getting better educations, were no longer trapped in the village, and were looking at urban careers in their future.  All these things combine to delay pregnancy, but they also shift the preference from boys to girls.  You need boys if working the fields is the big thing, but if you're going to age in urban settings, it's the girl who's far more likely to take care of you in your old age in an interpersonal sense (the Chinese adage of "A daughter is a warm jacket for a mother"), and if she's going to have a career now, then the difference between her and the moneymaking son erodes further, especially since the daughter doesn't cost as much as the son when it comes to marrying them off.  Custom in China has it that parents must buy the son a flat before he can marry.  

The FT piece points out that the tide has already turned in major metros like Beijing, going back almost 15 years.  China went majority urban a few years back and will urbanize at a stunning rate going forward.  Hence, the big sex imbalance fear, like most demographic issues, is already finding solution by the time we discover its outlines.  Doesn't mean there won't be a single generation significantly impacted; just means the problem is a lot more temporally bounded than realized.

And when you talk about that one generation being impacted, remember that a lot of these guys, if unable to find wives at home, will either travel for them or emigrate on that basis.  My favorite historical example of such willful flexibility:  Chinese male "coolies" come to America in the 1800s and end up building big chunks of the frontier West as manual laborers--like the RRs. They can't bring their women along and many are never able to return.  So who are one of their prime targets for inter-racial marriages? Irish Catholic widows, showing that where there's a will, there's a way.

In the end, China's "unique" problem goes away like it does everywhere else, because modernization tends to erase such "unique" values (that weren't really unique in the first place but simply represented a people trapped in time). Now, you could say Chinese couples are "time traveling"--a concept I want to explore in the Wikistrat globalization model: when change comes so quickly that it makes people feel like time is being compressed and thus they're rocketing forward in time in some domain. Think about it here:  thousands of years of custom altered in roughly one generation. That, my friends, is real time travel.  And it's social revolution.  China's rise has this impact at home--and abroad.

WPR's The New Rules: A Zero-Sum Future Doesn't Add Up

Writing recently in the Financial Times, long-time economic journalist Gideon Rachman lamented the passing of a post-Cold War "golden age," in which "countries shared a belief in globalization and Western democratic values." In Rachman's calculation, that consensus has been battered by the global financial crisis, which ushered in a "new, less-predictable era."

Rachman, whose book entitled "Zero-Sum Future" comes out next February, is clearly prepping the literary battlefield by positioning himself as an "anti-Robert Wright." The latter's book, "Non-Zero: The Logic of Human Destiny," argued that human progress has been characterized by -- and thus depends on -- our increasing appreciation for and adoption of cooperative behaviors. So when Rachman predicts more unpredictability, he's really predicting less cooperation and more conflict -- today's currency wars translated into tomorrow's shooting wars.

Read the entire column at World Politics Review.

Taiwan Relations Act: The Brer Rabbit defense

My friend Galrahn dutifully--and correctly--takes me to task for not specifying, in last week's post, that the Defense Department is obligated by law to both provide for Taiwan's defense against China (sell them arms) and maintain a US military capacity to resist Chinese force.  He says that my critiquing the Pentagon on this is unfair.

While Galrahn's points are technically correct, it's also certainly true that the Defense Deparment has a lot of leeway on how they can interpret meeting that requirement.  After all, what stops us from simply noting that we've got a lot of nukes and they can be enough to deter China from invading Taiwan.  Nothing in the Taiwan Relations Act of 1979 specifies conventional capabilities versus nuclear.  It just says "to maintain the capacity of the United States to resist any resort to force or other forms of coercion that would jeopardize the security, or the social or economic system, of the people on Taiwan." Give Taiwan enough defensive firepower, promise a nuclear back-up and call it a day.  But we choose, or rather, our Defense Department now chooses, to build an entire big-war warfighting concept around this scenario (no, no, nothing provocative there).  Nothing in the law demands that level of strategic focus or conventional effort.  So no, Galrahn, my rant wasn't misdirected. Pointing the Pentagon's finger at Congress and saying, "I'm just following orders" doesn't cut it here.

We've made a series of choices inside the Pentagon to elevate the meaning of Taiwan going back a decade and a half.  No outside power forced these choices; the military made this call on its own. The Taiwan scenario has become the calling-card scenario for the big-war force, much sturdier than the pathetic North Korean scenarios of collapse, or the bomb-heavy vignettes for Iran (unless you think we want to occupy that place too any time soon).  Simply put, until the Taiwan Strait crises in 1995-96 got the DoD turned-on to China as the near-peer competitor, you simply never heard about the Act as a baseline justification for force structure.  It merely explained arms sales to the island.  I know this, because I worked force structure issues for the Navy at the Center for Naval Analyses in the early 1990s (it was, like, bullet 4-a on slide 53, and when you saw it, you'd turn to the guy next to you, and intone knowingly, "Of course, the Taiwan Relations Act of 1979," and then you'd be back to business).  The Act was a completely backburner issue until the Sov residual threat got so low in those early post-Cold War years (after it became likewise apparent that the "rising sun" wasn't going to fulfill anybody's fantasies except Michael Crichton's--yes, I actually had senior military officers tell me in great seriousness to read the book to understand the future looming Japanese threat), that the Act sort of surfaced like a bureaucratic bedrock at low tide.

The Taiwan Strait crises also birthed many of the original network-centric warfare concepts.  It really was a seminal series of events--the proverbial wake-up call.  But then 9/11 comes and we don't hear about it all that much anymore--save for those pesky arms sales and the usual huffing and puffing from Beijing on the subject. 

The difference today is that the AirSea Battle Concept--basically a navalized, mini-me version of the AirLand Battle concept vis-a-vis the Sovs in Europe during the 1980s--is clearly based on this scenario, with a paltry assist from Iran (not a great country you want to lump in, image-wise, when you seek China's help on Iranian nuke developments, but a sale is a sale).  And I gotta tell you, that's some chutzpah, basing a new high-end combat ordering principle on the same nation you're seeking all this cooperation from--like salvaging your economy right now.

Seriously, anybody has to admit that making an entire air-sea, big-war battle concept out of the Taiwan Relations Act is going above and beyond the call of duty.  In my opinion, it goes beyond defense policy to a good share of foreign policy as well, cementing in something for the long haul that may not serve our overall purposes in our evolving bilateral relationship with China.  

Is this a step we debate as Americans?  No.  Is this something our president explains to us, or our Secretary of State?  Not really. It's just an inside-the-Beltway affair led by a think tank that results in some language here and there in various planning docs and ultimately finds its expression in the budget.  Would the Navy or Air Force protest?  Above their pay grade, as they say, although plenty of retired flags from both services will tell you openly they think this is an odd path to be on, given the larger picture.  But most, if not all, will readily admit, as I do in an upcoming China Security piece, that, once you accept the deterrence logic on Taiwan, America needs to make the AirSea Battle Concept happen as merely the next-step ante to stay in this poker game.  And frankly, given the shopping list ginned up, any protest would sound very much in the Brer Rabbit mode.  After all, these are tight budgetary times, and quite frankly, Gates' logic begins with the need to find synergistic savings.  So why target the best thing going (enshrined in law!)?  I mean, the Chinese do the same, do they not?

My point is this:  is this the best we can do at this point in history?  China doesn't need any help triggering a balancing response across Asia, as I've noted here many times; they do it brilliantly on their own.  Frankly, we don't need much of a hedging strategy as a result; the containment policy writes itself--again, thanks to Chinese heavy-handedness.  

But the larger effort isn't particularly being made:  we are not building a better, bigger positive relationship with China, especially in mil-mil relations, to supersede the legacy negative one.  You can tell me that the Pentagon is just doing its job--following Congressional orders, as it were.  I just want something more imaginative at this point in history, you know, something that preps the diplomatic "battlefield" a bit--something the navy does well throughout history.  

And I just don't see it happening.  Our offers of cooperation with China typically involve asking them to join our party on our terms, whatever the situation in question.  Will you do what we want you to do in Iran/Sudan/Myanmar/North Korea/South China Sea/etc.?  You know, show us you're responsible by giving us what we want.  [Then there's the awkward but oddly workable--if entirely unfair in burden sharing--"limited liability partnership," as I call it, in Iraq and Afghanistan, where our blood pays for Chinese treasure.]  

And big surprise, rising powers don't negotiate well on those terms.  America rarely did during its decades of rising. That sort of trajectory makes you arrogant and full of yourself, and China is definitely in that mode.  

And yes, while that sort of thing needs to be subtly resisted, we need to be preparing for the leaner years--as in, our leaner years and China post-some crash or inevitable slowdown.  We need to building something--again--positive, and mil-mil relations can be spectacularly positive in that way.

I don't think we've thought through, in any comprehensive sense, what our devotion to this blue law from from the Cold War is costing us--opportunity-wise, or the signals that it sends, or what we risk with it in a strategic sense.  I think it's simply on the books, so the bureaucracy grinds its answer, and when sanctuary from a scary budgetary climate is sought, that "requirement" is not just an oldie but a very goodie.

It's just not where we're going as a power or where this system is going.  We are steering by our wake, because it feels comfortable and good, and--damn it--it's the law!

And I don't see a lot of strategy in that.  I see people, like Galrahn, patting the Obama administration on the back for simply having foolish behavior fall into their laps and doing the right thing by it--again, because it feels good and it makes us seem more important than--quite frankly--we really are.  Our "cooperative strategy," as he calls it, is pretty much what it's always been in the Pacific:  make us the most important bilateral partner with as many states there as possible.  Again, with the Chinese playing the fools (i.e., old Soviet role) on this one, that's not a hard strategy to pursue, but it's one that retards the Asian integration process to a certain extent, in the name of hedging against, and somewhat containing, China.  

And if we were set to play global policeman with budgetary ease for the next couple of decades, I would be the first to say, fine and dandy.  Wait on these guys to grow up, and democratize, and a whole bunch of other requirements.  But I don't think our finances or globalization will wait on those evolutions, so I think we need to start thinking about making do with the landscape--and players therein--as they're presented to us.  Because keeping China in this retarded state of "pol-mil" development (and I use that term of art purposefully) isn't wise, in my opinion.  I think we need to do more--faster--than just keep them in their place until they demonstrate the preferred type of global following skills (I mean, leadership).  I think that attitude retards our own, much needed pol-mil development (yes, we actually have some things still to learn about this globalization of our making).

Unless you think U.S. military power is what makes us who we are. I've always thought it enables us to display leadership, but that it's not a substitute for it.  

And that worries me--this unstated, barely articulated strategic course we seem to be on.

I got accused a lot--and rightfully--of granting Bush-Cheney better rationales for their policies than they themselves had. I think Galrahn does the same here with Obama and Clinton.  I think Hillary is the shining star simply by default, because I see no great accomplishments, just well-worn reactions to a perceived rival's foolish behavior.  Remember, these guys came in with Jim Steinburg's "strategic reassurance," when "nice" China was having a good year (2008-09) and we were grateful for their saving the global economy (and let's admit it, no China, and things get a whole lot worse).  Now China is having a bad year, as Galrahn rightfully notes, and now we're all about overstating our interest in the South China Sea so as to match China's absurd claim of sovereignty.  If that's isn't chasing events or trends, than what is?

This is Schadenfreude masquerading as grand strategy--too much of it, actually, on both sides.  Mirror-imaging in this regard ("Look how popular we are in Asia right now!  Vietnam loves us! Take that, China!") isn't all that imaginative.  China's "charm offensive" got offensive, so now we've fallen into one by default.

And you know, hoping Brett self-destructs isn't the same as getting the Packers into the Super Bowl.

There are other paths and there are other voices.  If we want to get this future right, we should invent it ourselves.

Deng: Develop the place, then decide the sovereignty

Another John Milligan-Whyte & Dain Min piece, this time in China Daily.com.  They argue that China needs to stop standing on the sidelines fuming about joint US naval ops/exercises with locals and simply join them, which I think is brilliant.  If China wants to assert the normality of their naval ops in their local waters, then they need to exercise with everybody at every opportunity.  They need to make their presence a welcome, stabilizing thing, because right now, their own operations in their own waters ARE destabilizing, because they are perceived to be about establishing/claiming sovereignty in a way that trumps the diplomatic process.

The underlying logic of the piece is even smarter--right out of Deng's mouth:

What can China do about having jurisdictional disputes with its neighboring countries which have now been complicated by China and America asserting conflicting "vital national interests" in the South China Sea? How can China put jurisdictional disputes back into their normal peaceful mode? China and the nations that it has jurisdictional disputes with can form a joint development corporation called "South China Sea Joint Development Corporation" to economically develop the disputed areas peacefully. It is easier to negotiate the size of each participating nation's investments, responsibilities and share of the profits of such a corporation with multinational win-win policies. The joint development corporation approach avoids the zero sum game ownership disputes during which no nation can safely develop the economic benefits nor safe guard its national pride and interests in the disputed areas.

On February 22, 1984 Deng Xiaoping discussed what now for decades have been China's successful solutions to the Taiwan and Hong Kong sovereignty issues with the Center for Strategic and International Studies. He said, "I have also considered the possibility of resolving certain territorial disputes by having the countries concerned jointly develop the disputed areas before discussing the question of sovereignty. New approaches should be sought to solve such problems according to realities."

Smart stuff.

Make the development happen first, and then calmly divide the spoils, rather than get all huffy up front and suggest the only acceptable answer is that somebody wins and somebody must lose.  In the end, China will end up winning most of the time, NOT because of the supply of its military power, which will consistently backfire in its application, but because of the power of its domestic demand, which everyone will want to satisfy because there is good money to be made in doing so.

Another mention in People's Daily.com

Once again it is John Milligan-Whyte and his partner Dai Min, who write a weekly column for both People's Daily and China Daily.  If you recall, they mentioned my stuff once before, sent me a copy of one of their books, and I wrote a WPR column about it.  As I said in the WPR article, their stuff is clearly biased toward the Chinese case, much as mine is biased toward the U.S. case (they make no bones about it and neither do I), but it's the best, most straightforward counterparty example I have come across on the Chinese side for Sino-American alliance in this century, so you have to take it seriously if you take that goal seriously.

To remind from their byline:

John Milligan-Whyte has been called the "new Edgar Snow" and "21st century Kissinger" and is the winner of Social Responsibility Award from the 2010 Summit of China Business Leaders. John Milligan-Whyte and Dai Min are co-hosts of the Collaboration of Civilizations television series, founders of the Center for America-China Partnership, which has been recognized as "the first American think tank to combine and integrate American and Chinese perspectives providing a complete answer for the success of America and China's success in the 21st century," and the authors of the America-China Partnership Book Series that created a "New School of America-China Relations." 

I recently had a long Skype call with the two, because I wanted to check them out and get some sense of where they're coming from.  John has a long legal background as a lawyer in Bermuda for several decades.  He connects with Dai Min a few years back and makes the permanent leap to Beijing, sensing an historic opportunity for business dealmaking, especially as China's second-tier cities take off.  But what really drives these two is their unwavering commitment to fostering a better relationship between China and the U.S., which is what drew them to my stuff. 

I get asked a lot:  does anybody push for Sino-American strategic alliance in the US like you do?  And I always say, in terms of the strategic thinking community, no.  Some, like Niall Ferguson, speak about the symbiotic nature that already exists, but more as a symptom than as a basis for larger cooperation.  The reason why I push on this is that, like I argued in China Security (see just below) back in 2008, my logic of global integration and globalization's advance says this relationship must be or globalization essentially goes backward, something I don't think the planet could handle in many ways, because the sheer numbers involved in an emerging global middle class mean we've reached that all-sink-or-all-swim-together moment--resource- and cooperation-wise.  Knowing my timeline on the inevitability of political pluralism in China (I target a late 2020s/early 2030s as the rough half-century mark after Deng's initial revolutionary reforms), I then see the next two decades as perhaps the most crucial in human history--as in, get the big pieces right and all works out, but set the two biggest pieces against one another, and this can all go very badly--and backwards.

So I'm comfortable being perceived as too out-there and a bit naive on this subject, because I know I'll see the day when this logic comes to pass, and I'll be on the right side of history--betting on improvements and compromise and cooperation over degradation and ultimatums and conflict.

And so I do find these two thinkers awfully interesting, because they're tilting at the same windmill, but on the other side, where, quite frankly, I think the receptivity is much better at this point in history (a faltering #1 is more scared and thus more inflexible than a rising #2).  Thus I see a future collaborative effort between my work and what these two are seeking to accomplish via their center and foundation.  Collectively, we're a bit rag-tag compared to the powers-that-be, but I enjoy living and working primarily on the basis of the power of my ideas, and John and Dai Min are very similar in this regard (John, arguing like a lawyer in court, and Dai Min, possessing the mind of a business-developer/marketer).  Like most visionary types, they come as awfully self-promoting (John's theatrical way of speaking makes you realize this guy is ALWAYS in court), but being one myself (and long being accused of the same--to include the "entertaining" delivery), I don't have a problem with that. I enjoy working with people who really want to change the world and aren't shy about it (working with Steve DeAngelis is very similar, as he too is always about not just a business but a revolution in doing business).  I have no desire to live a life that does anything less.

Anyway, here's snippets of the piece (the start and the finish--where I am mentioned again):

President Obama announced he was launching a new era of partnership when he was in the process of recruiting the team of veteran China policymakers and advisors. Nonetheless, the positive approach he instinctively favored disappeared. Conventional and then hostile policies and actions began defining his administration's relationship with China. 

His policymakers are implementing an increasingly hostile approach referred to as hardball in the US press. It could be deliberately seeking to cause China to not continue Deng Xiaoping's successful policies of opening up economically to U.S. companies and of peaceful coexistence with America and or other nations. It could be simply disastrous U.S. policymaking responding poorly to the U.S. economic and national security crises. In any case, the hardball approach makes collaborative and therefore successful U.S. and Chinese policies hard to imagine or implement.

A U.S. president launching a new era of partnership with China is unconventional. It goes against the US policymakers' views and widespread U.S. feelings that China is a threat to Americans. But leading the changing of the direction of U.S. policies toward China is a presidential prerogative whether it begins covertly at the height of the United States' unsuccessful Vietnam War or covertly and then when private agreement is reached, it is changed once more overtly during the current U.S. economic, employment and other crises. 

A U.S. president cannot effectively begin to successfully establish a new era of partnership or solve economic and national security problems until he finds advisors and experts with policies able to achieve his goals. To do so, President Nixon reached out to Professor Kissinger at Harvard because Kissinger shared his worldview and goals and others did not. President Obama is currently overseeing the changing of many advisors who were key players in the first two years of his administration. He is looking for but not yet finding breakthroughs or new policies providing solutions to U.S. economic and national security problems. 

Neither America nor China can fully meet the economic and national security needs of their nation without the sincere, coordinated and constant help of the other. It is not possible in this century for one of the two largest economies in the world to fail, and the other to succeed. Because his administration is not finding the effective policies toward China needed to solve the U.S. crises, President Obama is open-minded and decisive. If China presents him with and supports solutions, he will grasp why they are solutions and lead in explaining them to U.S. policymakers and in implementing them. But until he finds solutions and has China's support in implementing them, he cannot take on the fear of China and hardball thinking policymakers in the US. Let's be clear about this, he needs Chinese policymakers to reach out to him with solutions because neither he nor his advisors have them today. Second, he can only act when a set of solutions has been privately negotiated and agreed, Kissinger style, and he is absolutely sure China will support the solutions when he announces his support for them . . .

...

. . . President Obama has pledged that he will double U.S. exports to China in an effort to increase U.S. competitiveness and stimulate its economy. To increase exports to China, the United States will need to remove policies that restrict trade with China and propose policies that are mutually beneficial for both nations. 

Increasing U.S. exports to China also requires preventing a trade or currency war. Nonetheless, economic and trade policymakers in President Obama's administration have implemented tariffs on steel, tires and other goods made in China, introduced more than 23 anti-dumping, anti-subsidy and special protectionist tariffs, and launched at least six Section 337 investigations against China for alleged unfair practices in export trade. At least a 53 percent increase in the number of cases involved 7.6 billion U.S. dollars worth of Chinese exports, which is 800 percent more than in the previous year. The U.S. is seeking to increase its exports to China while setting up trade barriers for China's exports. China is the world's largest importer, and currently China and the U.S. are each other's second largest trading partners. There are threats of new tariffs if China does not agree to the United States' proposed carbon emissions cap and trade proposals and lately talk of a currency war and tariffs over cap and trade. This is occurring in addition to longstanding U.S. trade restrictions on what can be sold to China because U.S. military strategy is traditionally preparing for war with China. 

This is not the optimum path for American policymaking. Or is it? Americans are suffering from relentless and unsuccessful wars, unsustainable global trade deficits and government debt, high unemployment and the worst economic crisis in a hundred years. To many U.S. policymakers who learned their craft in the Cold War, hard ball seems to be the realistic approach to the United States' most important bilateral and multilateral relationship. It is obvious to them that China, with its second largest and fastest growing economy, is an increasingly dangerous threat to U.S. economic and national security. Their zero sum game view of how global economics and geopolitics work assumes and acts as if for America to be successful, China must be unsuccessful. They are wrong. They do not realize that or they do realize that and are trying to engineering or blundering into a showdown. 

The key point is that until President Obama and the American people are presented with a plan for how America and China can both be successful in the 21st century, we are on the slippery slope. Chinese policymakers' safe response is to provide President Obama with a new grand strategy introduced for discussion in a white paper for the Presidents of American and China. China's leaders and President Obama should also read and discuss Thomas Barnett's "The Pentagon's New Map and Blueprint for Action: A Future Worth Creating." The Sino-U.S. relationship must be made profoundly better soon. Therefore it must be fundamentally different soon. The 20th century is over.

Blast from my past: "The Inevitable Alliance" (2008)

Debating China's Future

with 

Li Cheng, Thomas P.M. Barnett, Harry Harding, Cui Liru, John J. Mearsheimer, Joseph S. Nye Jr., Rob Gifford, Mao Yushi, Bates Gill, Tang Shiping, Zhao Tingyang, Robert J. Barnett, David Shambaugh, June Teufel Dreyer, Pan Zhenqiang, Dan Blumenthal, Shi Yinhong, Robert S. Ross, Kenneth Lieberthal, Zha Daojiong, John Hamre and Xiang Lanxin

CHINA SECURITY, VOL. 4, NO. 2, SPRING 2008

Thomas P.M. Barnett

The Inevitable Alliance

China’s main strategic vulnerability right now is that it possesses economic and network connectivity with the outside world that is unmatched by its political-military capacity to defend. This forces Beijing to “free ride” on Washington’s provision of global security services, a situation that makes China’s leaders uncomfortable today – as it should. American blood for Chinese oil is an untenable strategic transaction.

The United States faced a similar situation in its “rise” in the late 1800s and set about “rebranding” its military force over a several-decade period that culminated with a successful entry into World War I. Since World War II, the United States has maintained a primarily expeditionary force that is able to access international crises, and since the end of the Cold War has done so with unprecedented frequency. This too is an untenable strategic burden.

America needs to encourage China’s effective re-branding as an accepted worldwide provider of stability operations. The problem today is two-fold: 1) major portions of America’s military require China to remain in the enemy image to justify existing and new weapons and platforms; and 2) the Chinese military is hopelessly fixated on “access denial” strategies surrounding Taiwan, meaning it buys the wrong military for the strategic tasks that inevitably lie ahead.

So long as both nations insist on such mirror-imaging, their respective militaries will continue to buy one military while operating (or, in China’s case, needing to operate) another force that remains under-developed. Such strategic myopia serves neither great power’s long-term interests, which are clearly complimentary throughout the developing world.

The good news is that both China and the United States are within a decade’s time of seeing new generations emerge among their respective political and military leaderships. These future leaders view the potential for Sino-American strategic alliance far differently than do the current leadership generation. If Washington and Beijing can navigate the next dozen or so years without damaging current ties, I fully expect to see a Sino-American strategic alliance emerge.

I do not present this as a theoretical possibility, but as my professional judgment based on years of extensive contacts through both nations’ national security establishments.

Grand strategy often involves getting leaders to understand certain future inevitabilities. The global primacy of the Sino-American strategic alliance in the 21st century is one such future inevitability.

Thomas P.M. Barnett is the senior managing director of Enterra Solutions, and author of The Pentagon's New Map: War and Peace in the Twenty-First Century (New York: G.P. Putnam’s Sons, 2004).

Quick! Spot the resource war!

I know it's in there somewhere, just waiting to break out!

WPR's The New Rules: Defusing the Global Currency War

After having cooperated to an unprecedented degree -- on stimulus spending and new bank rules, for instance -- to avoid a global meltdown these past two years, the world's major economies now appear ready to turn on one another with truly self-destructive vengeance. Poorly informed Americans are increasingly convinced that free trade pacts -- and not our uniquely high corporate tax rates -- are responsible for sending jobs overseas, and they want to see China punished with tariffs on its imports for its undervalued currency. With China's neighbors intervening heavily to keep their own currencies from rising too high in response, global chatter about the unfolding "currency war" has reached a fever pitch. Is this any way to manage a tenuous global economic recovery?

Read the entire column at World Politics Review.