Yale Law School Fellow Stephen Roach, discusses his just-released book, Accidental Conflict. Roach explores how much of the adversarial nationalist rhetoric in both China and the USA is dangerously misguided and more a reflection of each nation’s fears and vulnerabilities than a credible assessment of the risks they face.
Transcript
Rob Johnson:
Welcome to economics and beyond. I’m Rob Johnson, president of the Institute for New Economic Thinking.
I’m here today with Stephen Roach. He’s a senior fellow at the Paul Tsai China Center of Yale Law School and he’s the former chairman of Morgan Stanley in Asia. I must add, he is someone whose insights and works I followed very closely when I was in the investment world, particularly working in the realm of non Japan Asia. He’s written many things. Most recently I read something from Project Syndicate and Fortune Magazine. He’s been in the Financial Times and is respected throughout the media. We’re here today because on November 29th, his new book, Accidental Conflict: America, China in the Clash of False Narratives, will be released by Yale University Press. I had a chance to look at the book and I’m very excited to have this conversation with you. Steve, thanks for joining me.
Stephen Roach:
Thank you, Rob.
Rob Johnson:
Let’s start with the inspiration. You’re watching the world. Obviously there are a lot of ominous things related to US, China, Ukraine, et cetera. What got under your skin? What inspired the book that you’ve created that I’ve had the good fortune to look at?
Stephen Roach:
Well, it’s a long story, but I’ll try to be as short as I can. I actually make note of that in the acknowledgements that are buried at the end of the book, which very few people ever read. The book is basically an outgrowth of a 13 year journey I’ve had since I joined the faculty of Yale in 2010. When I came to Yale after a long career on Wall Street, tried to figure out what I was really most passionate about. Half my Wall Street career, I’d been the head economist for Morgan Stanley focused on the US, and the second half I was the chief global economist and I got hooked on China in the late 1990s in the depths of the Asian financial crisis. I thought about what I wanted to do when I became a professor and I said, these two pieces of my career have something really important in common, and that is they tell a story of the relationship between the US and China.
There are plenty of people who know more about China than I do. There are plenty of people, well I hesitate to say this, who know more about the US economy than I do, but let’s just say that’s true. I thought my strength was really in the overlap, the interplay between them. I started working on that and teaching about it. I set up a popular course at Yale called The Next China, which was a large lecture class for a number of years until COVID. I found that resonated a lot with the students and with my own research interests.
I wrote my first book on the relationship in 2014 when I took a stab at characterizing the relationship as a codependent relationship, where the US depends on China, China depends on the US. I ended that book in late 2014 with a warning saying, look, codependent relationships don’t work out well unless both partners pay a lot of attention to themselves, and there’s a real risk that this is going to end in conflict. As the conflict broke out in the open almost immediately after that book was published in 2014, then I just focused a lot on the dynamics of the conflict, why it was intensifying, where it might go in the end and how could we get out of it without a catastrophic ending for the US, China and the rest of the world? That’s sort of the not so short but the intro to why I wrote the book.
Rob Johnson:
Well, I’m grinning as I listen to you because I’m reminded of my good friend Orville Schell, wrote a book with John Delury called Wealth and Power. When I looked at your work preparing for this, there were many echoes in that. He turned me onto something, which was a website called China Heritage. There was a man named Jeremy Barney that set up something in 2021 and it was like a special episode called Spectres and Souls. It resonated with a famous quote about a German man, Romain Rolland, who had dealt with the tensions and the disintegration of allegiance within Europe during the 1920s and ’30s.
His biographer, Stefan Zweig, coined a term called the Invisible Republic of the Spirit. He said, “The invisible republic of the spirit, the universal of fatherhood has been established among races among nations. Its frontiers are open to all who wish to dwell therein. Its only law is that a brotherhood.” Today we could also put sisterhood in there. “Its only enemies are hatred and arrogance between nations. Whoever makes his home within the invisible realm becomes a citizen of the world. He is the heir not of one people, but of all peoples. Henceforth, he is an in dweller in all tongues in all countries in the universal past and the universal future.”
As I was going through your book, I wanted to nominate you for a cast in the invisible republic of the spirit. I think you’re onto some very powerful themes. You talk about false narratives. Let’s go to both sides. You pick who goes first, but what’s the false narrative that China is resonating with? What’s the false narrative the United States has resonated with at this juncture?
Stephen Roach:
Well, before I answer that, which I definitely will answer because the bulk of the book, some eight chapters, is all about the details of these false narratives. You might wonder, what is it about the false narrative that attracts both the US and China? The answer to that, in my opinion, is that both nations, as strong as they are, the number one and number two economies in the world and probably the same now in terms of military capabilities, are surprisingly vulnerable because of issues that I’ll get into when I describe the false narratives. Rather than face up that vulnerability and take care of their own economies or sort of deal with the insecurities that they face, it is politically expedient for both nations to blame somebody else for their shortcomings and for their vulnerabilities.
We have focused on China, just as we focused on, I might add, Japan some 30 years ago, and China has focused on us for a whole series of reasons that I will get into. When you’re a vulnerable nation, a vulnerable economy, and you don’t have the strength of character, strength of leadership, whatever you want to call it, to face up to your own shortcomings, it’s much easier to blame the other guy than get on with the heavy lifting of addressing your own problems.
If you want an example of that, think about Jimmy Carter in the depths of an energy crisis in the late seventies when he said in his gray cardigan sweater on public national television, “We have a problem in America.” He was trounced in the polls by Ronald Reagan because he had the audacity to say that we had a problem. anyway, I just wanted to get that out of the way.
Rob Johnson:
I have a friend who’s a scholar of Europe and he calls that the Bismark model. When you can’t align everybody internally, you’ll find an outward enemy or counterpart and focus all realignments on meeting the challenge of that external enemy.
Stephen Roach:
Well let me start with the US, Rob, because case in point, you look at the polling of sentiment toward China, and I use the Pew research centers as the longest and most accurate of those polls. The negative sentiment on China with respect to the American public is at an all time high in the history of this survey and it’s bipartisan. It’s literally the only thing, one of the few things, I should say, that Republicans and Democrats actually agree on. It’s true of all age cohorts, young and old, college educated, uneducated, male, female, you name it. China is the enemy and the intensity of that feeling is higher than it’s ever been.
What are some of the false narratives that the US has with respect to China? My favorite one, and I spend a lot of time on this in the book, is blaming China for our trade deficit. We have a big trade deficit in the United States. We’ve had a big trade deficit really now for 40 years. The economics that I practice says that trade deficits do not come out of a vacuum. They reflect the lack of domestic savings that an economy has or doesn’t have, as in the case of China.
Countries that are short of savings and want to grow, and we certainly want to grow in the US, we are forced to borrow savings from overseas and we run these big balance of payments deficits to attract the capital. The balance of payments deficit gives rise to a massive trade deficit not with one country, as the China bashers would lead you to believe, but with many countries. Last year, 2021, we ran trade deficits with 106 countries. China was the largest, although the share has come down due to the tariffs that we’ve imposed on China, but by no means is the only large one. If we don’t address our savings problem, and we have not done that with our massive budget deficits, then we can fix the Chinese piece of the trade problem but it simply would go to other trading partners. In many cases those with higher cost structures, and that ends up penalizing American companies and American consumers.
The false narrative is that there is a China fix, a bilateral fix to a multilateral problem. It makes no sense theoretically and it’s not what’s actually happened. As we’ve squeezed China through these tariffs, large tariffs that the Trump administration imposed on China and that the Biden administration has unfortunately perpetuated, the Chinese piece goes down, but other pieces go up. Trade deficits with Vietnam, Mexico, Canada, Malaysia, and across the board and the multilateral trade deficit, which is really the thing that should concern American companies and American families, has gotten worse, not better. This is an example of a false narrative that has completely backfired because we’ve chosen to prosecute it in our zeal to blame China for our domestic savings problem. That’s one example on the US side. There are many more that I go into in the book, but I’ve probably droned on a little bit too much about that.
Rob Johnson:
Well, I think there’s a very important element of this too, it’s the notion that trade theorists have of comparative advantage. We were bringing China into a system with what we might call a division of labor, a lot of foreign direct investment in labor intensive activity and so forth. As they became interested in the realm of technology, and when I recall a report they put out called the China 2025 plan, Americans became very anxious.
In one case, the sector where you and I have each worked, they didn’t feel they were going to make the exchange rate convertible and open the markets for foreign entities to handle financial management for people within China. Number two, the interaction with Silicon Valley as underscored by the Huawei polarities and the idea which you might call the Chinese were inspiring foreign direct investment in order to steal the technology from the original plant and then expand and block the success of the foreign investors.
The China 2025 plan I remember inspired some reports by the authors like Blackwill and Campbell at the Council on Foreign Relations, even before Donald Trump. This was something that was spiraling out of control. It wasn’t caused by a Trumpian, it was maybe exacerbated there, but there seems to have been a sense in which America expected China to just fall into place in the division of labor that we chose for them. I’m sensing that they had a different medium or long term ambition that we hadn’t realized.
Stephen Roach:
Well, I would completely agree with that, Rob. I think it’s not just the technology piece of the implicit agreement that we had with China. When President Clinton pushed for China to be admitted to the World Trade Organization, he did that with the presumption that if China plays by our rules, they would become more like us in, not just in the technology area but in the political and social evolution of their system. A lot of big thinkers in Washington, and I would single out the Democrat, Kurt Campbell, as a leading proponent of this view, have really taken great affront to the fact that China has not conformed to the Western value proposition as we believe it should be adhered to if they want to be a member of our system, trade with us and get our dollars in exchange for the goods they provide us.
It’s a very sort of self-serving proposition that did not really allow for consideration of what China’s objectives were in terms of its economic growth and development. That’s not to say that China’s the good guy in all of this. China’s done a lot of things that have really pushed the edge and gone over the edge in some areas that they need to be held accountable for. That’s why we have dispute mechanisms set up to adjudicate those issues. This whole proposition of, we want China to come into our system and play by our rules and if we don’t, we’re going to close them down, seems patently one sided and laced with hypocrisy.
Rob Johnson:
Do you sense that as China was developing, which you might call the difference between wages there and the United States started to narrow, and there was pressure within China as around the world to start to address climate issues. I guess what I’m asking is, were the companies from the United States with foreign direct investments in China experiencing a profit compression not only from imitation, because I talked about that in my previous comment, but also from a rising wages and rising environmental protection, which might say their enthusiasm could have waned in that process. People like Nike and Walmart and others, did they continue to defend working out a collaboration with China, or did they become demoralized as well?
Stephen Roach:
Well, I don’t think they became demoralized because China was the ultimate sort of offshore efficiency solution for high cost multinationals operating in more expensive markets like the United States. To the extent that China developed and went further up the pay scale, then those efficiency considerations were certainly worth questioning. In no way whatsoever did it change the mind of retailers like Walmart to continue to source heavily from low cost, increasingly high quality Chinese goods.
The environmental issues that you allude to. I mean, china quickly has become the world’s leader in greenhouse emissions and there’s been a growing awareness of that around the world and also inside of China. Did US companies stand up and say, “We don’t want to source in China because of the emissions that they are spewing out into the atmosphere that are affecting all of us?” I don’t know of too many companies that have defended the planet by rethinking their outsourcing to China, and maybe that’s an issue that needs to be further explored.
Rob Johnson:
I was looking at it in a slightly different vantage point, which is they may have been, we might call less enthusiastic about being in China because China was reacting to climate and those new conditions might have compressed their profit, and therefore they’d spend less time resisting the people in America who were feeling displaced by, or how would I say, unable to compete with China or preserve their own technological property rights.
Stephen Roach:
Well, multinationals don’t exist in a political vacuum. They can see the handwriting on the wall. They’re aware of the escalation of conflict between the two nations. I mean, in five years we’ve gone from a trade war to a tech war to arguably the new stages of a Cold War, and that makes multinationals uncomfortable with their operating decisions. I mean, look at Apple for example. The quintessential multinational production platform that it produces or assembles, I should say, the bulk of their most powerful revenue generator, the iPhone, in Guangdong province. They’ve started shifting some of that production to India. A small portion of it, but they recognize the need to begin to hedge their exposure to China.
Now with the disruptions that are going on because of this patently impractical and absurd zero COVID policy that Xi Jinping insists on defending that has really taken a huge bite out of production in the Foxconn plant in Zhengzhou, Apple is certainly, I would imagine, thinking long and hard about its Chinese production and assembly exposure.
Rob Johnson:
We’ve been talking about this, not surprisingly, from the vantage point of the Americans. In your book, you talk also about the false storylines that the Chinese have about the United States. Could you share with us some of what you see as the misunderstanding or false constructions that emanate from their side?
Stephen Roach:
Well yeah, I think one of the most important ones, Rob, is that China recognized 15 years ago that it had to rebalance its economy, become more of a consumer, less of an export and investment economy. More services, less manufacturing. In part because of the environmental issues that you just alluded to, but also less of a surplus saver and more willing to invest its saving in expanding the social safety net that its families need to become secure and confident consumers. It made some progress, but basically the rebalancing is, charitably speaking, incomplete. Others might say it’s failed. I would not go that far, but it remains incomplete in large part because I think there’s been an unwillingness and inability to build out the social safety net that can address some of these long term consumer confidence issues.
China’s been reluctant to admit this, but when they do admit it, they blame it on America in its efforts to contain the rise of China. This whole notion of American containment of China, while it’s grounded in some of the concerns that we alluded to earlier in talking about our disappointment with China not playing by our rules, China has taken this containment complex to an extreme and blamed America for its own failure to rebalance the structure of its economy. If China did a better job in attending to its own economy, it wouldn’t have the American containment excuse to rely on.
Rob Johnson:
When I was reading your book, I heard echoes of earlier readings. Michael Pillsbury’s book on the idea that the period from the Opium War to the Japanese invasion, the century of humiliation. Was going to lead to almost like a nationalistic Chinese dream. I remember myself around 2014 going to the National Museum, which you’ve written about, and seeing the intensity of that presentation. My Chinese friends in Beijing at that time were quite anxious that I went to see it. There was also in your book a man named, I think it was James Truslow Adams who created an American dream.
How are the Chinese dream and the American dream different or incompatible at this point? I can see the Chinese dream had more like getting our seat back at the head table, the 100 year marathon going forward, as Pillsbury called it, was about China in his mind he was quite skeptical of collaboration, China taking over. Orville Schell and John Delury were a little softer. They wanted to be back at the head table as partners in their writing from around that time. How are you seeing that Chinese dream? Especially when you’re talking about false narratives on both sides. We’re talking about psychology, we’re not talking about facts. We’re talking about interpretation of things. I’m curious how you’re seeing these two dreams catching fire at home and how we’ll move on to how reconcile so that we can collaborate in the future.
Stephen Roach:
Well, I have a long take in the book, Rob, about the contrast between the two dreams. Because so much of my approach is to recognize, as you just put it very well, that there is a psychological aspect to the fantasies that go into the construction of dreams. How this interplay between two dreams plays out is I think it adds an interesting amount of local color to the themes I try to address in the book.
Xi Jinping grasped the concept of the dream within hours of his appointment as general secretary of the Chinese Communist Party in, well 10 years ago this month. He used the exhibit which you saw, which I saw, at the National Museum of China on Tiananmen Square as a staging ground for expressing his aspirational views for China’s future. Saying that this century of humiliation is a lesson of for where we must go in the future. Never again should we as a nation be humiliated at the hands of foreigners. We have every right as a nation to reclaim our former stature as the world’s leading nation, as he claimed China was arguably prior to the opium wars. It was a nationalistic vision that he offered. It became very popular. He marketed it heavily and used it very effectively to instill a growing sense of a nationalistic, patriotic feelings about the rise of China. Not where China had come, but where it was headed.
He went on to then articulate a clear goal such that by the year 2049, which would’ve been some I guess 37 years after he was first sworn in as the party secretary, that China would be at the table as a great power, a great socialist nation on a par with any other great power in the world today. That was the goal, the aspirational goal, which translated into a economic and military goal for the sustained rise in China. Then he went on to articulate this in strident and sometimes very belligerent terms, notably at the 100th anniversary of the founding of the party in July of 2021, to say basically anybody who messes with us in attempting to achieve the aspirational goals of the Chinese dream will have to face the consequences, to use Xi’s own words, of a great wall of steel forged by 1.4 billion Chinese nations. It was an aspirational message with a very tough undertone.
You contrast this with the American dream, which was not articulated by a politician but by a historian and an author, James Truslow Adams, that was first written about in a book called I guess The Epic of America in the depths of the Great Depression in the early thirties when America was in the grips of a deep despair that coincided with the worst, most catastrophic economic failure in our history. With an unemployment rate of 25%, with breadlines, with no social safety net. Adams wrote of an American system that is the strongest value proposition the world has ever created that ultimately can produce growth and prosperity in accordance with the contribution that each of us make fairly and equitably to our own society and economy.
I would imagine, not being alive then, that dream rang hollow in the depths of the Great Depression, but over time many American politicians, notably Ronald Reagan going forward, have grasped onto this aspirational image of the American dream. It’s become an important aspect of our societal values and some of our political sloganeering. I would certainly say that the American dream does not compare with the more strident and nationalistic and military aspirations of Xi Jinping.
Rob Johnson:
Let me ask you on that very theme. My sense is that China felt, and you talk about not taking responsibility at the time of the Industrial Revolution for staying at the head table, but my sense is that China felt at least in the two world wars as if there were foreign intrusions into their country that stopped them and that they want to refute that. I remember watching a film. Wherever I was an investor, I would read novels and poems and watch the films. I remember being alerted by a friend of mine who’s very into the arts about a film called Wolf Warrior 2, about China. It was really about somebody going to go out there and go to a colonial country, I believe it was in Africa, and while there was an injury because the man’s wife had been murdered, he was kind of starting out on revenge, but he wasn’t really about revenge. He was about stopping oppressors from bothering those people.
Now why do I bring this up? Because the box office explosion and attraction to that movie, and I believe the closing credits came with an oration that comes out of the text of a Chinese passport that was talking about what you might call global brotherhood. It seemed to invigorate when all of my Chinese friends loved that film. There was something that I think relates to feeling like they’re getting out from under foreign oppression, not just rebuilding themselves that’s in this mix and may contribute to the false ideologies relative to what might be achievable.
Stephen Roach:
Well, I think you’re onto something and I allude to it in the book. I mean, just like we use China as a scapegoat to mask our own inability to save, and blame China for the trade deficits that arise out of that, the Chinese need scapegoat too. Who was responsible for China’s failure to maintain its absolutely dominant position as the world’s leader in technology and innovation? China chose to stay closed and to look inward during this period where the Industrial Revolution created the greatest increase of national income in the West that any economic system had ever experienced. China chose not to participate in the Industrial Revolution and they want to blame the invasion of by their territory on Japan or on Europe, on the opium wars, the eventual occupation of Manchuria by the Soviet Union. They want to blame others for their own failure to stay on the edge as the world’s leader in technology and innovation. That’s a pretty convenient excuse and again, an example of many of the false narratives that I end up focusing on in this new book.
Rob Johnson:
You see the state of these two false narratives and then you see the introduction of the Ukraine and Xi Jinping not just staying out of the fray, not just wishing it would be reconciled, but actually joining one team as it’s presented. First of all, is that accurate? Secondly, why would he do that? I know a lot of Chinese people that are criticizing the damage that it could to do to China in the world system in the medium term by siding with Vladimir Putin.
Stephen Roach:
Yeah, I have to confess that the book was complete and had been through multiple rounds of editing. We were a few months away from sending it off to the proverbial printing press when Putin invades Ukraine. He invaded Ukraine three weeks after he had signed this unlimited partnership agreement with Vladimir Putin and the Russian Federation. I had to go back and rework a significant amount of the book to bring this into the development of my themes. Why was this important is what you’re asking.
It goes again back to the false narratives of the Chinese dream. I think that Xi Jinping had figured out that China needed a partner to become a great power. It really could not do it on its own. The original sort of model that he proposed for partnership was a special relationship with the United States that he rolled out at the Sunnylands Summit to Barack Obama in, I want to say 2000. I’m sort of blanking on that. Maybe somewhere in the 2008, 2010 period when they met at Sunnylands. It was called the new model of great power or major power relationships. Xi Jinping had the audacity to say at that point to Barack Obama that China should be already at the table with the US with this new model of major country relations, and that would allow him to of jumpstart his aspirational goals to be at the table with the US.
Obama unfortunately did not just tell him, “Hey, this is a really dumb idea.” He played along with it and so it got a lot of traction in sort of the global power community. Then ultimately, as we went into conflict with China, China dropped the idea but not the notion that it needed a partner to be great again. Russia is Xi Jinping’s second attempt to find the partner that would allow him to sit at the table as a great partner compatible with his aspirational goals for 2049, when China is sort of deserving of that title.
It was, I think quite honestly, Rob, it could end up being Xi Jinping’s most serious strategic blunder. Because number one, he has to have underestimated where this war was going and what it meant for the West to unify encountering this horrific and tragic conflict. Secondly, it raised a distinct possibility that if China were to support its new unlimited partner in any way whatsoever, whether it was through direct military assistance or financial assistance or technical advice, then it too would be judged guilty of the same types of war crimes that the West is accusing the Russian Federation of committing. China would be judged guilty by association with the world’s pariah state, the Russian Federation.
I’ve urged in things that I’ve written that Xi Jinping just say, “Wait a second. This is the wrong deal. It’s over.” I think this would actually play over the long run to his advantage in an extraordinary way. Vladimir Putin would obviously be irritated to say the least, but Xi Jinping would be admired as a global statesman, which is precisely what he’s seeking to do as part of his aspirational objectives of the leader of an ascending great power. Who knows? If he were to force Putin to end this war in Ukraine, there’s good reason to think that he might even be nominated for a Nobel Peace Prize. I’m putting the cart before the horse there, but this is a devastating war and China has no moral grounds for standing together with its new partner who is prosecuting this war in such a horrific manner.
Rob Johnson:
It’s interesting because the echoes in what you’re saying, say for instance Xi Jinping gave speeches a couple of times at the World Economic Forum, the Davos meeting, and he did speak in a very what you might call aspirational, global partnership way. It wasn’t nationalistic bellicosity or what have you. I noticed at time some people, particularly European friends, said to me they thought that he was more on track, particularly as it related to climate, technological platforms, global governance than was Donald Trump. The wind has gone out of those sails in light of this recent episode for sure.
Stephen Roach:
Well, in a couple of weeks, in January of 2017, Xi Jinping addressed the Global Economic Forum in Davos truly with a stirring defense of leading and committing to globalization. Literally in that same month Donald Trump was sworn in as our 45th president with a strident support of protectionism that was very much aligned with his anti-China view in damaging American companies and workers. The contrast couldn’t have been sharper, but the question you’re raising is that Xi Jinping squandered that capital, that commitment to globalization by his new partnership with Russia. I think there’s a big risk of that if he stays wedded to the Russian Federation and the war that it is continuing to conduct to this very day.
Rob Johnson:
In 2019, I ran a conference with Justin Lin at Beijing University about China and the development of Africa. What I’m saying is relative to the hopefulness at that time, the polarity between the US and China, the Ukraine, energy prices, the slow down in growth, the despondency about global leadership in the global South now, as though all of these things are happening and we’re suffering and we don’t think anybody’s paying attention. It’s very demoralizing in all of the conversations I have in those regions of the world. I don’t know it means, it doesn’t mean they pick a side. They’re saying, “When are you guys going to get over this arm wrestle and get back to work on what really needs to be done?”
Stephen Roach:
Yeah, I couldn’t agree more. I mean, we talk about deficits, whether they’re trade deficits or technology deficits, but suffice it to say we have a real global leadership deficit and we’re all suffering from that at this point in time. Again, I trace it back to the psychology of the false narratives. We’d rather blame others for our problems than work together and address our common issues.
Rob Johnson:
I think what I found, I guess as we’re turning the corner here, the diagnosis of the false consciousness in both places, which you might call the impetus for demonization, the critical failure perhaps in siding with Putin. I feel compelled to ask you, having read your book, how do we turn the corner? What do we build from here? What do we build in technology? What do we build in climate? What do we build in global governance that reinvigorates confidence in the world system and its potential for the future?
Stephen Roach:
Well, I end the book with a few chapters that lays out a plan for resolving this conflict. One of the first things I learned back in the old Wall Street days is that I was always good at identifying problems, but my clients who were smarter than me always said, “If you’re so smart, what’s your solution to the problem?” That stuck with me for basically all of my career on Wall Street and my efforts at spending all these years subsequent to that in academia. I start out with the idea that this is a dysfunctional relationship, it’s a relationship problem that requires a relationship solution to bring both nations together in solving this common problem. The book really stresses three legs to the stool in addressing this conflict. I’ll just tick them off for you as briefly as I can.
The first one is moving from distrust to trust. We’re not going to get anywhere if we continue to blame the other and question the commitment that the other has to a resolution of this conflict. There’s a lot of low hanging fruit that we can pick immediately. Reopening of consulates, relaxing visa restrictions, relaxing restrictions on the operation of NGOs. A number of small things that can be done with the stroke of the pen.
Then there are three tough issues that are all of them mutually beneficial for us to address that you were hinting at. Climate change, global health, especially in an era of pandemics, and cyber security. These are enormously important from a standpoint of the mutual interest of both nations, and we certainly need to address them for the future of our own systems as well as for the future of the planet.
I tick them off, I go through them in the book. We’ve made a little bit of progress on climate, but a lot more needs to be done. We’ve made no progress in global health because we’re fixated on the COVID-19 blame game, who’s responsible for it. We’ve made virtually no progress in addressing cyber security. We’ve got plenty of work to do to move from distrust to trust. I’d say again, the place to start is with picking some of the low hanging fruit.
The second leg to the stool is changing the perspective away from the zero sum bilateral trade conflict, which gets us nowhere because of the points we described earlier and the savings disparities between the world’s most serious deficit saver, America, and the world’s largest surplus saver, China. We need to move away from this zero sum bilateral framework to a positive sum, market opening growth framework. My favorite device to achieve that is to resurrect negotiations on a bilateral investment treaty, which were 95% of the way done before the election of Donald Trump in 2016. Bilateral investment treaties, or BITs, open markets, expand growth opportunities and can be written in a way that addresses many of the tough structural issues that divide the US and China, like innovation policy, forced technology transfer, subsidy sustainable enterprises, even some of the cyber issues. It gives us a pro-growth growth positive sum framework rather than a zero sum anti-growth framework that we are hooked on.
Then the final piece of the plan is what I call a new organization that brings together the US and China in dealing with our relationship on a full-time basis, rather than doing it episodically or serendipitously through summits like we had a few weeks ago in Bali between Xi Jinping and Biden, or earlier efforts that we used to call strategic and economic dialogues. I want a full-time organization that works 24/7 on all aspects of the US China relationship. I call it a US China secretariat. Staffed equally by large complements of professionals on both sides of the relationship with a broad remit focusing on economics and trade, human rights and health, cyber and innovation policy.
I detail it in the final chapter of the book that has a number of robust functions that focus on developing a new collaborative model for working together rather than on a scapegoating model that drives us apart. I think these three legs to the stool, some might have difficulty with them, but I welcome the chance to hear anyone’s alternative. The point is, Rob, the current approach has not worked, it will not work in the future. We’ve gone from one stage of conflict to another and we need to address this conflict before it is too late.
Rob Johnson:
Yes. Well, I guess in coming down the stretch here, I want to express some appreciation. I walk around a lot and I often hear songs in my mind. I often recently have been hearing Barry McGuire’s song, The Eve of Destruction. As I started to read your book, I heard Diana Ross theme from Mahogany, do you know where you’re going to? As I finished the book, I heard U2’s song called One. We have to carry each other, we have to carry each other.
You are in a country as a very well known and successful individual at an elite university taking a stand. I spoke at the outset about the invisible republic of the spirit, and this man, Stefan Zweig, came up with that name in relation to Romain Rolland in his work in Europe during the inner war period. I thought, to quote something about him that reminds me of the journey that you’re on, he said, “This man of letters has preserved us from what would’ve been an imperishable shame had there been no one in our days to testify against the lunacy and the hatred. To him we owe it that even during the fiercest storm in history, the sacred fire brotherhood was never extinguished. The world of the spirit has no concern with the deceptive force of numbers. In that realm, one individual can outweigh a multitude. For an idea never glows so brightly as in the mind of the solitary thinker. And in the darkest hour we were able to draw consolation from the signal example of this poet. One great man who remains human can forever and for all men rescue our faith in humanity.”
I know that not only are you that poet, but you lead a tribe at an extraordinary university of young people. As we all know, those of us like you and I have taught later in life, sometimes the best way to learn is by teaching. I feel a sense of possibility and promise from what you’ve had the courage to build and say and from the tribe of brilliant young students that can join your secretariat and help us make our way to the future.
Stephen Roach:
Well, thank you Rob. Those are very kind and meaningful words. I resonate also with your reference to music, it’s something that’s always been important to me as well. I would be neglecting one thing if I just didn’t come back to the title of the book, Accidental Conflict. The point of writing a book about an accidental conflict was that the tensions have gotten so bad right now, driven by the high octane fuel of these politically convenient false narratives, that it doesn’t take much of a spark to ignite the fuel and take us into a realm that would be far more destructive than any aspect of the road we’ve traveled. Look no further than what happened in August of this year after Nancy Pelosi’s visit to Taiwan. You may say, “Well, she had every right to go there.” The Chinese marshaled a military response, the likes of which had never been seen in the modern history of Taiwan, and the possibility of a military accident with that type of power assembled is not something that we can or should take lightly.
That’s only one example, but in a realm of conflict escalation, the chances of an accident are growing, they are not receding. That was the warning that really told me that the crafting of this book was increasingly urgent. I pushed the publisher as hard as I could to get this book out as quickly as possible because I think our time is growing short. This relationship is not in a healthy place and that’s China’s fault, it’s our fault, but it’s the fault of the two of us in our unwillingness to work in a collaborative, cooperative way. I’ve laid out a model to restore cooperation and collaboration that may not be perfect, but it sure as heck beats the approach that we’re both on right now.
Rob Johnson:
Yes, and I’ve done a lot of reading as an undergraduate at MIT. I spent a lot of time studying arms control and disarmament issues. The notion of the cost of that kind of mistake, like you mentioned in Taiwan or could happen around the Ukraine, and the implications not just for those regions but for the upper atmosphere and life on earth. By the way, I would also offer, if somebody drops a nuclear bomb, the heightened fear from that episode is going to make it much harder for us to reestablish the collaboration. The armor that comes with fear is what we have to work to disassemble now. I think the urgency of what you’ve created is very important. Thank you for me, for my four children, for my three grandchildren. You’ve done a great service.
Stephen Roach:
Thank you, Rob. We can only do what we can do and then we have to throw these ideas out there and hope that they get some traction.
Rob Johnson:
Well, I want to help you with the traction, but thank you for the ideas. We’ll have to meet again and I want to urge everybody to take this book. It doesn’t feel like a Christmas parable, but it might be the best gift you could get or give in this holiday season. Thank you again, Steve.
Stephen Roach:
Thank you, Rob. Pleasure speaking with you.
Rob Johnson:
Pleasure speaking with you too.
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