U.S.-China Relations and the Art of the Deal

by Beatrice Camp

Although relations between the U.S. and China have never proceeded along a straight path, we’re now in roller coaster mode as talks of tariffs, a trade war, and Taiwan realignment shout from the headlines.

The many challenges in the relationship are exacerbated as the ways in which both countries approach the world are undergoing major shifts. We need each other, and have done a pretty good job of coexisting for the last 40 years, but what deals are we willing to make to accommodate each other’s interests in the years ahead?

In 1983, when my husband and I first set foot in the People’s Republic of China, we were initially afraid to mention that we had spent the previous year in Taiwan. With no direct flights between Taiwan and the mainland, we had to transit through Hong Kong, swapping our civilian passports for diplomatic ones.

As it turned out, the Beijingers we met in our first days in the capital were delighted to learn that our blue ten-speed bikes, which stood out in the flood of black one-speeds on our commute, were made in Taiwan. To them this meant “Made in China!”.

And, of course, we understood this sentiment. In 1972, after many years supporting the Republic of China on Taiwan and refusing to recognize the People’s Republic of China in Beijing, the U.S. signed the Shanghai Communiqué: “the United States acknowledges that Chinese on either side of the Taiwan Strait maintain there is but one China and that Taiwan is a part of China. The United States does not challenge that position.”

This was the deal we made in 1972, a constructive ambiguity that allowed us to engage with the People’s Republic of China, a country we had refused to recognize for over two decades.

Jumping ahead to my time in Shanghai 25 years later, I witnessed the beginning of direct flights between the mainland and Taiwan. Today travelers go easily in both directions, a major advance from earlier decades. But the one-China policy retained its scriptural standing. The status of self-ruled Taiwan remains possibly the most sensitive issue between Washington and Beijing.

Or so I thought until president-elect Trump took a congratulatory phone call from Taiwan president Tsai Ing-wen. Earlier that December day I had attended a panel at the Atlantic Council exploring future foreign policy directions in the upcoming Trump administration. One questioner asked whether Trump’s approach to China would be “ideological” or “transactional”, the first time I heard “transactional” in this context.

Hours after that discussion, Trump’s conversation with Taiwan president Tsai hit the wires. This was startling news, the first contact between a leader of Taiwan and an incumbent or incoming U.S. president in nearly four decades. By accepting the call, Trump cast doubt on Washington’s longstanding policy of acknowledging Beijing’s assertion that Taiwan is a part of China.

The call angered Beijing. The Global Times, an influential Chinese Communist Party-backed tabloid, called Tsai’s government “a naughty child” that would “pay the price” for stepping out of line. The Obama administration, still with six weeks to run, stated that the U.S. would uphold the one-China policy. President-elect Trump countered that the U.S. did not have to follow it. One of the foreign policy pillars I had been taught to guard with my diplomatic life was suddenly shaking.

As we know, of course, Trump soon changed his mind. Two months later Trump agreed to honor the one-China policy, an indispensable step before hosting Chinese president Xi Jinping at his Florida resort.

A professor at Shanghai’s Fudan University said Trump had “learned his lesson” and “would not provoke China again.” Indeed, in April 2017, Trump told Reuters that he would not speak directly with Taiwan’s president without first checking with Chinese President Xi Jinping. In the Reuters interview, Trump spoke warmly about the Chinese president and acknowledged the need not to make things “difficult” for him. “Look, my problem is I have established a very good personal relationship with President Xi. I really feel that he is doing everything in his power to help us with a big situation,” he said. “I wouldn’t want to do anything that comes in the way of that”.

As it turns out, this was not the end of the issue after all; in March 2018 Trump signed the “Taiwan Travel Act”, which encourages visits between U.S. and Taiwanese officials at all levels and paves the way for more official exchanges. The PRC quickly protested and warned of a possible setback in bilateral relations.

I lead with this one-China issue as an example of how confounding it can be these days to provide a clear statement of U.S. policy, so subject to the whims of a president who related how the head of China explained the history of China and Korea to him. “After listening for 10 minutes, I realized it’s not so easy,” Trump famously acknowledged in a Wall Street Journal interview last April.

If policy pronouncements can no longer be relied on, what about national interests? A 2014 Rand study claimed that both the U.S. and China share common global interests—stability, unimpeded trade, the maintenance and even strengthening of some multilateral institutions, avoidance of extremism, energy security, and control of nuclear weapons. However, taking into account the administration’s recent moves, even this basic list doesn’t stand up to the currents of 2018. “Unimpeded trade” no longer looks like a shared common interest.

In reaction to the administration’s tariff threats, China was quick to proclaim its commitment to defending its “national interests”. Meanwhile, on the U.S. side, our global interests seem best expressed as “America First.” The most definitive statement came in the National Security Strategy issued in December. According to the strategy’s account of US-China relations, we are no longer partners but “strategic rivals”.

Rethinking Our Approach to China
Interestingly, this kind of talk—more focused on conflict than engagement—is not coming only from the administration. The March/April issue of Foreign Affairs trumpeted “How Washington Got China Wrong”. Surprisingly, the critique of our previous foreign policy direction is led by two Obama-era officials—Kurt Campbell and Ely Ratner.

Arguing that “reality warrants a clear-eyed rethinking of the United States’ approach to China”, they say we have erred in our past strategy (which they ran for 8 years). “Neither carrots nor sticks have swayed China as predicted. Diplomatic and commercial engagement have not brought political and economic openness. Neither U.S. military power nor regional balancing has stopped Beijing from seeking to displace core components of the U.S.-led system. And the liberal international order has failed to lure or bind China as powerfully as expected. China has instead pursued its own course, belying a range of American expectations in the process.”

I am not alone in thinking this critique is overblown—a number of highly credentialed China hands have questioned the article’s assertion that our policy was predicated on our ability to mold China to our liking. Nevertheless, whether or not you accept this critique of past policy, many agree that we are at a turning point in the U.S.-China relationship. Rather than “engagement”, there is now talk of “managed disengagement”.

Before we throw the baby out with the bathwater, let me assert there is no question in my mind that engagement has changed China dramatically. When I compare my first assignment in China—1984-85 at the U.S. Embassy in Beijing—to my 2008-2011 term as Consul General in Shanghai, I can rely on my own experience as evidence of the positive impact. Clearly living conditions in China had improved enormously, with U.S. engagement playing a major role.

The U.S. contributed to capacity building in China by bringing in U.S. experts and technology and providing training for Chinese in a large range of fields. We’ve seen significant changes in Chinese laws and behavior. U.S. companies have flocked to China. A number of major U.S. universities have campuses or joint programs in China, while hundreds of thousands of Chinese are studying in the US.

Starting with Nixon’s visit to China in 1972, we’ve negotiated any number of deals with China, ranging from the three communiques to the U.S.-China Cultural Agreement signed by Deng Xiaoping in 1979, to consular conventions, and trade deals. We supported China’s membership in the World Trade Organization (WTO), and exchanged generations of students, scholars, writers, musicians, political scientists, economists. Every president since Reagan has visited China and hosted Chinese leaders here.

China has increasingly contributed to the international order, taking a role in issues ranging from North Korea to climate change, joining international and regional organizations, and dealing with humanitarian and peacekeeping operations. And, despite all the attention to the imbalances in U.S.-China trade, it’s important to note that China has expanded profits for leading U.S. companies.

None of this was accomplished without a lot of hard diplomatic work and none will be sustained without persistent engagement.

Reconsidering What We Do and How We Do It
However, whether or not you agree that U.S. policy has relied on mistaken confidence in our ability to mold China to our liking, the call for examining how China’s actions have diverged from U.S. expectations has many supporters.

This debate over how we should define our relationship with China, along with the National Security Strategy characterization of China as a “rival”, has led to a reconsideration of what we do and why we do it. And by “we”, I mean not just the U.S. government, but Apple, Hollywood, U.S. universities, and even the Vatican, which recently reversed itself by concluding a deal with the Chinese government about the appointment of bishops.

One of the past policy decisions now under renewed scrutiny is China’s membership in the World Trade Organization (WTO). Seventeen years ago we supported China’s joining the WTO, after lengthy negotiations that required China to make changes in tariff policies, open markets, and industrial policies. Now we are opposing WTO granting market economy status, arguing that 16 years of membership has failed to end China’s market-distorting state practices.

Another area of growing concern stems from the 100+ Confucius Institutes at U.S. universities. While many see these institutes as benign additions to Chinese language and cultural programs on campus, others express concerns about Chinese government influence on teaching and textbooks, as well as more subtle effects on academic freedom.

The FBI Director told the Senate Intelligence Committee that China is taking advantage of the open research and development environment on U.S. campuses and that the FBI is monitoring the institutes. New Jersey Rep. Chris Smith was blunter: “They are nests of influence, reconnaissance,” he said. “They keep tabs on Chinese students, and those who attend their classes are getting a Pollyannaish take on what China is about today. Proposed legislation would require the institutes to register under the Foreign Agents Registration Act.

The University of Chicago and Penn State University ended their partnerships with the Confucius Institutes while the University of Texas at Austin made news by rejecting a proposal to accept money from the China United States Exchange Foundation (CUSEF), a Hong Kong-based organization that is funded by a high-ranking Chinese official with close ties to the Communist Party’s united front.

By some accounts, universities that decide to withdraw from the Confucius Institute program face retribution, including the threat of losing the lucrative Chinese student influx that helps pay the bills on campus.

Tension about Chinese control is also playing out at U.S. universities that run programs in the PRC, such as New York University and Johns Hopkins. These two universities, as well as others, are facing increasing pressure over their use of materials that are not approved by the government.

Push back comes with consequences. The New York Times and the Economist are banned in China after refusing to agree to create censored Chinese versions.

Academics are not the only ones facing these issues; they are front and center as well for Hollywood, Apple, and even Disneyland.

With China an increasingly valuable market for Hollywood films, you’re not likely to see movies about issues that China considers “sensitive”—especially the three “Ts” of Tibet, Taiwan, Tiananmen.  I’m told that no Hollywood movie has cast China in a negative light since 1997. That was the year China condemned the movie “Seven Years in Tibet” for its positive portrayal of the Dalai Lama and retaliated for “Kundun” by banning Disney films and pulling Disney television cartoons. Disney, which was already in negotiations to build a theme park in Shanghai, later apologized for releasing the film.

The point is not that American viewers are suffering from being deprived of Chinese villains, but that a foreign government can determine the content of movies made in the U.S.

As for Shanghai Disneyland, which opened in 2016 after two decades of planning, reports say that 300 of the park’s 11,000 full-time employees are active members of the Communist Party, who attend lectures and study “Xi Jinping Thought.” What would anti-Communist Walt Disney think?

Meanwhile, Apple is moving iCloud accounts registered in mainland China to state-run Chinese servers; Amazon and Microsoft have also struck partnerships with Chinese companies to operate their cloud services in the country.

Belt and Road Initiative
China’s Belt and Road Initiative (BRI) is another project that, while not directly involving the U.S., is generating concern about the wisdom of doing deals with China.

This much-talked-about initiative is aimed at increasing Chinese influence through lending for infrastructure development and trade from the Pacific to the Baltic. Some estimates put Chinese investment up to $150 billion over the next five years, with possibly more than $1 trillion over the life of the initiative.

Although sometimes compared to our post-WWII Marshall Plan, BRI investments are supposed to earn a return for their financial backers; under the Marshall Plan, over 90% of the money was a handout from the U.S. government. And while the Marshall Plan is cited for encouraging market-friendly policies by European recipients, the BRI has no such goal. Beijing is using BRI investments as a means of stabilizing border regions, securing energy supply routes, and cultivating stronger diplomatic and economic influence with partner nations.

Concerns have been raised about predatory lending – the Sri Lankan government’s deal with China to build a port at Hambantota ended up with China taking control of the facility on a 99-year lease.

Rex Tillerson, on what ended up as his final fateful trip as secretary of state, warned African nations to be careful when accepting Chinese investment, admonishing them not to “forfeit any elements of your sovereignty as you enter into such arrangements with China”. All very well, but there has been no indication of any counter-offer from the US.  Whatever you think of the Belt and Road Initiative, it has drawn attention and fueled imagination around the world. What vision is the U.S. offering?

Cultural Exchange
Fortunately, the level of engagement through Fulbright, international visitor, and professional exchanges remains steady; the Bureau of Educational and Cultural Affairs, which oversees most of these programs, actually got a small boost in the omnibus spending bill.

As far as cultural programs go, however, we’re seeing regular obstruction by Chinese officials. This had already started when I was in Shanghai in 2010; I recall a number of occasions when we had made all the arrangements—for example plans for an American dance group to perform in Suzhou—when word would arrive that the time or location was “bu fangbian“, not convenient. Other consulates were reporting the same problem, prompting the embassy to start keeping a list of “bu fangbian” cases

The practice continues; last month the Straits Times reported that “the State Department documented over 150 examples of Chinese interference in American public diplomacy efforts between January 2016 and April 2017”, disrupting cultural initiatives such as salsa concerts and movie nights as well as visiting scholar programs.

The closure of a number of American Centers raises additional questions of reciprocity: how do we balance the 110 Confucius Centers in the U.S. with the fact that only 10 American centers in China that receive grants from the State Department remain open? The State Department’s Office of the Inspector General concluded in a December report that the difficulties may make it necessary to suspend new funding for the program.

Concern about China’s growing presence and aggressive move into areas where we were once dominant is becoming more and more prevalent. China’s coercive polices in the South China Sea, spectacular economic growth, and significantly upgraded military are increasing anxieties both in China’s neighbors and the U.S.
These concerns underlie the movement to a “post-engagement strategy”. And again, this shift is not simply a Trump administration phenomenon.

Back in 2015, a study by the Council on Foreign Relations stated that “China represents and will remain the most significant competitor to the United States for decades to come; the likelihood of a long-term strategic rivalry between Beijing and Washington is high.” This was two years before the National Security Strategy described China as a strategic rival.

We’re already seeing consequences of a shift away from engagement. For years we’ve had a series of strategic and economic dialogues with China, talk fests that bring high ranking officials from both sides to the table and conclude with mostly pre-cooked agreements. This is not meant to sound cynical – talking and finding areas of agreement is a core part of diplomacy; these dialogues had their role.

While President Trump followed long-standing practice by announcing four bilateral dialogues—military, economic, law-enforcement, and people-to-people—little is happening.  Meanwhile, dozens of other channels of engagement set up over the past decades are in hiatus. With fewer American officials visiting China, we are less equipped to manage a whole range of bilateral issues. It’s hard to make deals when you don’t trust each other and the opportunities for dialogue shrink.

Post-Reform Era
At the same time that the U.S. is reconsidering engagement, China is making its own turn away from reform. In his new book The End of an Era: How China’s Authoritarian Revival is Undermining Its Rise, Fordham Law Professor Carl Minzner divides modern Chinese history into a pre-reform era 1949-1978, reform era 1978-early 2000s, and now “post-reform”. China is closing up ideologically, he writes, and some of the norms of the “Reform and Opening” period are crumbling.While we’re clearly in a new era where both sides are reevaluating the relationship and reconsidering how we deal with each other, engagement remains important. Reciprocity is an appealing concept as a way to hit back, but a lot of Americans don’t feel comfortable with restricting Chinese journalists in the U.S. or closing Confucius centers in response to actions by the Chinese government targeted at U.S. media and educational organizations.

That said, reciprocity on the business front is another kettle of fish. Atlantic Council senior fellow Robert Manning argues for reciprocity in business practices, suggesting that “If Alibaba wanted to invest in the United States, I’m sorry, you need to have an American partner and Alibaba needs to give us their source codes.” Chinese firms that have stolen U.S. intellectual property using such methods would be banned from investing in the United States and exports hit with tariffs, he argues.

The Indispensable Nation
While China’s increasing turn to authoritarianism is of great concern, we have weakened our own position by attacks on much of what made the U.S. such an attractive beacon in earlier years – rule of law, freedom of speech, freedom of the press, a welcome mat for international students and scholars. China is holding out the BRI as a vision for its economic, political and social model. And we’re not offering anything comparably compelling in return.

Our success since World War II, and our role as the “indispensable nation” was based on government programs that spurred investment in space, education, research and engineering across a broad range of technologies.  Our schools and immigration system drew brilliant minds from all over the world. A commitment to free trade boosted our economy.

While Trump’s election is not the only cause of a slowdown in most of these areas, it has created a whole new level of uncertainty and instability. A recent article in the Atlantic listed some of the ways Trump’s election has been a gift to the Chinese:

• By abandoning the Trans Pacific Partnership, Trump has driven allies to consider China-backed plans instead.
• Pulling out of the Paris climate agreement burnished China’s image as the responsible global power.
• Hostility to multilateral institutions such as the WTO and NATO has allowed China to step into the vacuum we’ve created;
• Our political upheaval has provided fodder for China to denigrate democracy and extol the one-party state.
• While previous administrations raised human rights issues with Chinese authorities, Trump has shown no interest in criticizing other countries’ corruption or failings regarding human rights and democracy.

“Instead, Trump is transactional,” the Atlantic article concluded. “Hoping for cooperation on North Korea, he gave Beijing a better deal on trade. When Beijing didn’t seem to be cooperating enough, he agreed to sell arms to Taiwan. This brand of pragmatic diplomacy, in which relationships hinge on calibrated, concrete bargains that can be altered as conditions change, mirrors Beijing’s way of operating.”

It also leaves us in a weak position when we seek something from China, as we regularly do.  The same week the Washington Post headlined Trump’s memorandum targeting up to $60 billion in Chinese goods with tariffs, the paper ran a much smaller story about the U.S. pleading with China not to implement a ban on imports of scrap materials. According to the U.S. Institute of Scrap Recycling Industries, the ban will devastate an industry that supported 155,000 jobs and exported scrap worth $5.6 billion to China in 2016. We’ve taken the issue to the WTO, where U.S. officials will have to argue why China should keep taking our garbage.

More attention has been given to the fears of U.S. agricultural producers about possible punitive retaliation. Despite an overall trade deficit with China, we have a surplus in agricultural products. China’s threat to impose retaliatory tariffs on 128 U.S. products puts at risk our billion-dollar pork exports to China, along with another $2 billion in other ag products.

Meanwhile, the State Department is having a hard time keeping up as our China policy has gone through changing interpretations. A “U.S. Bilateral Relations Fact Sheet” dated September 2017 on the State Department website almost could have been written in previous administrations, referencing climate change, human rights, and the four strategic dialogues. Although this is the first document that appears on the web page of the Bureau of East Asian and Pacific Affairs, an official there seemed unaware of it, shrugging off the language as platitudes. The National Security Strategy, issued December 8, is the prevailing text, with bellicose wording: China and Russia are to blame for America’s woes.

Others point the blame back at ourselves. In the words of Ambassador Chas Freeman, whose expertise covers both China and diplomacy: “Influence within the current international state system is proportional to the investment, effort, and input made by its members.” Those investments and inputs are coming now from China, as well as India and other rising powers. “Absent appropriate engagement, other values may well displace ours.”

With a richer, more powerful, more repressive China expanding its political influence around the world, we need a coherent strategy that does not simply rely on making deals. We need to institutionalize relationships between China, the U.S., and other countries that reinforce regional peace and stability. We need to work with our allies; we need to get back in the game.

Excerpted from remarks to the Santa Fe World Affairs Forum April 9-10.