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World Opinion: America's Gang of Four has spoken, but it doesn't understand US-China reality

20:20  04 august  2020
20:20  04 august  2020 Source:   cnn.com

America must stand up to China

  America must stand up to China President Trump, on behalf of the American people, has taken a stand against China on multiple fronts.I remember that, as a student in junior high school, there was always a bully who preyed on the smaller, weaker kids and stole their lunch money - until, one day, the other kids had enough and ambushed the bully, and he was stopped. China today is a global bully.

The Gang of Four has now spoken. Over the past month or so, in a virulent polemic against communism reminiscent of the Red-baiting of the 1950s, four top officials of the Trump administration have delivered a series of well-orchestrated tirades against China.

Mike Pompeo wearing a suit and tie: US Secretary of State Mike Pompeo speaks at the Richard Nixon Presidential Library, July 23, 2020, in Yorba Linda, California. (Photo by Ashley Landis / POOL / AFP) (Photo by ASHLEY LANDIS/POOL/AFP via Getty Images) © Ashley Landis/AFP/Pool/Getty Images US Secretary of State Mike Pompeo speaks at the Richard Nixon Presidential Library, July 23, 2020, in Yorba Linda, California. (Photo by Ashley Landis / POOL / AFP) (Photo by ASHLEY LANDIS/POOL/AFP via Getty Images)

National security adviser Robert O'Brien initially focused on China as an ideological threat. FBI Director Christopher Wray next addressed espionage. Attorney General William Barr did the economics piece. And then Secretary of State Mike Pompeo batted cleanup and pulled it all together in a full frontal attack delivered on July 23 at the Nixon Library in California -- providing an uncomfortable bookend to the opening up of US-China relations that President Richard Nixon initiated with his historic visit to China in 1972.

Special meeting of the finance committee on Wirecard started

 Special meeting of the finance committee on Wirecard started © Markus Schreiber In the Wirecard scandal, the finance committee of the Bundestag met in Berlin for a special session. Finance Minister Scholz and Economy Minister Altmaier are interviewed. In the Wirecard scandal, the finance committee of the Bundestag met in Berlin for a special meeting.

In a climate where US public opinion of China is at a record low, a confident Gang of Four swung for the fences. Unfortunately, their arguments as a whole are largely specious -- laced with conspiracy theories and devoid of fact-based analytics. This came through in three key areas: economics, the Covid-19 blame game, and the character of the US-China relationship.

As an economist, I have long stressed the role that foreign trade plays in shaping the US economy. These four officials, all schooled and trained as lawyers, have neither the necessary background nor the experience to speak from this perspective. But, heck, this is politics, where anything goes. Even so, the disconnect in this case is staggering.

Samsung looks forward to quantum dot TVs, new game systems and phones

  Samsung looks forward to quantum dot TVs, new game systems and phones Samsung released its earnings results for between April and June and despite the pandemic, the company’s operating profit jumped 23 percent from the same time last year, reaching $6.81 billion even as its revenue dropped. As more people shifted to working and studying from home, data centers bought more servers that use its memory chips and drove up prices. It also cited a “one-off gain” in the display business that analysts have linked to Apple. Samsung supplies Apple with screens for iPhones and is guaranteed payment even if shipments are smaller than expected, which happened earlier this year as Apple closed factories and stores.

The US suffers from a serious deficiency of nationwide saving. In the first quarter of 2020, the net domestic saving rate -- the combined saving of individuals, businesses, and the government sector (all adjusted for the depreciation of worn-out capital) -- stood at just 2.9% of national income. This was less than half the longer-term historical average of 7% recorded over the 45-year period from 1960 to 2005. And that was before the pandemic hit the US.

In the Covid-19 era, exploding federal budget deficits are overwhelming a temporary surge in household saving driven by one-off relief checks and expanded unemployment insurance. As a result, saving is headed into record negative territory. That implies a partial liquidation of the seed of future economic growth that saving provides. Lacking in saving and wanting to grow, the US imports surplus saving from abroad -- bringing overseas investment to its shores -- and as a result runs massive trade deficits to attract foreign capital.

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Not only is Barr clueless about how trade deficits fit into the US economy's saving puzzle, he misses the most important point of all when it comes to China: America's $346 billion bilateral merchandise trade deficit with China in 2019, while the largest portion of our overall $853 billion deficit in the trade of goods, is but one piece of a multilateral US trade imbalance with 102 countries.

Consequently, limiting trade with China without addressing a domestic saving problem that is now going from bad to worse is like rearranging the deckchairs on the Titanic. America's other trading partners will simply provide higher-cost imports, thereby effectively taxing American consumers. The Gang of Four may know something about the law, but they would get a failing grade in most introductory economics courses.

Secondly, conspiracy theories have long been the calling card of the Trump administration, and Pompeo has led the charge in deploying these tactics when it comes to China. Earlier this year, Pompeo had been front and center in the Trump administration's effort to cast blame on China for Covid-19, touting the theory that it had spilled from a lab and accusing the Chinese government of a cover-up (allegations Beijing described as a "smear"). Similarly, in the early days of the pandemic, Pompeo was unflinching in the racist depiction of Covid-19 as the "Wuhan" or "Chinese virus."

Olympics 2022: Human Rights Watch criticizes IOC for the Winter Games in China

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Pompeo seems to grasp the value of truth-tellers: one needs only look at his public embrace of Li Wenliang, the Wuhan ophthalmologist who voiced concern about the virus before the Chinese government was willing to let the public hear that truth. It is an act of extraordinary hypocrisy, then, that Pompeo attempted to undermine the US whistleblowers who spoke out against his boss.

Finally, the Gang of Four paints a picture of a one-sided relationship, maintaining that China needs the United States far more than we need them. From an economic point of view, nothing could be farther from the truth. Income-constrained American consumers certainly need low-cost goods from China to make ends meet; the US Treasury will continue to need China as the largest foreign buyer of our exploding federal debt; and US companies, facing growth problems at home, need China as America's third-largest export market. In short, it is a two-way relationship of codependency, whose demise could have a very destabilizing impact on the US economy.

In their rush to demonize China, the Gang of Four has pursued a line of argument that is more about crass domestic politics than the articulation of a coherent grand strategy on a geopolitical chessboard. A similar approach was recommended in a document that, according to Politico, was distributed to Republican Senate candidates in April, called the "Corona Big Book."

Family of detained Chinese activist calls for his release

  Family of detained Chinese activist calls for his release Ding Jiaxi had been on a collision course with the Chinese government perhaps ever since 1989 when he was a college junior in Beijing. He spent three days and nights in Tiananmen Square as student protesters faced off against troops. But at the university, he also met his wife, Sophie Luo.“I think of the story that she used to tell us, like, it was love at first sight. My dad walked into the room and she was like, ‘Oh, that's the one,’” Caroline Ding said.They married and had two kids. Ding Jiaxi put his activism aside and became a successful business lawyer in Beijing.

The basic premise was simple: As the ravages of Covid-19 were mounting in the United States, the memo counseled, "don't defend Trump ... attack China." As Covid-19-stricken America has neared the abyss, and as that defense of Trump has crumbled, the Gang of Four has taken the lead in executing a similar strategy.

History offers an ironic precedent. After the death of Mao Zedong in 1976, China's notorious Gang of Four -- radical leaders of the Cultural Revolution -- perpetuated a tumultuous period of chaos and political instability. Fixated on China, the American gang may do the same thing, if these four officials divert attention from Trump's failures to pin the blame for America's chaos on China.

In the end, China's Gang of Four was arrested and put on public trial. In the United States, we have a different approach -- elections.

Stephen S. Roach wearing glasses and looking at the camera: Stephen Roach © courtesy of Stephen Roach Stephen Roach

Opinion at noon: USA and China: On the way to the IT war .
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