The Strategic Challenge


The book under review is Peter Navarro’s third work that concentrates on the strategic challenge the People’s Republic of China poses to the security and prosperity of the United States; the other two being Death by China: Confronting the Dragon – a Global Call to Action (2011) and The Coming China Wars (2006). His 2010 book Seeds of Destruction (written with Glenn Hubbard) also touched on trade with China among other economic policy failures of both the George W. Bush and Barack Obama administrations. Though Crouching TIGER came out in 2015, it deserves a second look because Navarro, a professor of economics and public policy at the University of California-Irvine, has been appointed to head the new National Trade Council in the Donald Trump White House.

The most important thing to note about Navarro’s approach to trade policy is that he has embedded it in the larger context of international geopolitical relations in all of its competitive dimensions. This holistic approach sets him outside the mainstream view among economists and others who have tried, since the end of the Cold War, to treat trade as an independent factor outside or even above the realm of world politics. There has even been an attempt to replace the term “international relations” with the term “globalism” to imply an integrated economy as the foundation of a cooperative world where borders and local allegiances would no longer control attitudes and policies. The 2016 presidential election (along with the Brexit vote in the United Kingdom) has been widely described as a “nationalist” revolt against the globalist vision. As Navarro lays out in detail, China has never bought into the “end of history” sophistry that owed its influence in Washington to a mixture of liberal hope and corporate greed.

Navarro demolishes the myth presented by the Beijing regime of its “peaceful rise.” Since the Communists won the Chinese civil war in 1949, they have fought wars with India, Vietnam and the U.S. (both directly when Washington was leading a large coalition under the United Nations in Korea, and indirectly with its active support of the Vietnamese communists). Its rivalry with the Soviet Union during the Cold War almost saw skirmishes escalate into a major conflict along their border. And today, there remains the brutal occupation of Tibet, the Chinese claim to sovereignty over the South China Sea; its territorial disputes with Japan; and its claim that Taiwan is part of “one China” even though the Taiwanese do not think so. The PRC is an expansionist power willing to use military force to impose its will.

The largest part of Crouching TIGER is a look at China’s military buildup that runs the spectrum from conventional forces (particularly air and naval) to nuclear weapons to cyber hacking and the use of outer space. Navarro gives fair consideration to Beijing’s legitimate concerns about the protection of its industrialized coastal regions and the trade routes that bring energy and raw materials to China from distant sources. The “first island chain” that runs from Japan through Taiwan and the Philippines to Singapore and Indonesia form a barrier that can contain Chinese shipping and as a base for the projection of American power. Navarro concludes, however, based on Chinese behavior, ideology and history, that its leaders are not acting merely in a defensive manner. They are acting aggressively and are threatening the vital interests of their neighbors. Its construction of new islands in the South China Sea to serve as military bases to enforce its illegal claims has taken the matter to a new level; with Beijing’s state run media claiming that the regime is willing to wage “large-scale war” to protect them.

Navarro wishes to avoid a military conflict, though fears that may not be possible given China’s military buildup and the reductions in U.S. force levels and readiness due to tight defense budgets. He presents an interesting discussion of whether to retaliate with attacks on the Chinese mainland or merely blockade trade should a confrontation turn violent. In either case, the war would be very long and costly and carries the risk of escalation to the nuclear level. He doubts that the supposed economic interdependence of the U.S. and China will deter a conflict since the destruction of war would dwarf the losses from disrupted trade, but might still be paid if the stakes were high enough. Navarro reminds readers that the apostles of classical liberalism had believed right up until the outbreak of World War I in 1914 that such a major conflict was impossible because of trade ties between the great powers.

Because the tensions with China are over real issues, the U.S. must prepare for a period of antagonism akin to a new Cold War. To prevent such a confrontation turning “hot” he argues for what amounts to a return to the economic strategy used by President Ronald Reagan to bring down the Soviet Union; what Navarro calls “peace through economic strength.” The central tenet of such a policy, which in his position in the Trump administration would be to pursue a “rebalance” of U.S.-Chinese trade. Its current imbalance showed an American deficit in goods of $367 billion in 2015 and has sent Beijing over $2 trillion in the last ten years. By rebalance, he means reduce imports.

Navarro argues, “to rebalance the China trade relationship would slow China’s economy and thereby its rapid military buildup. Such trade rebalancing would also provide America and its allies with both the strong growth and manufacturing base these countries need to build their own comprehensive national power.” He calls for “the imposition of countervailing tariffs to offset China’s unfair trade practices.” The shift of wealth-producing industry to China must be reversed, with assets coming home or moving to other, more friendly nations. “We as consumers are helping to finance a Chinese military buildup that may well mean to do us and our country harm.” The foreign economic policy should be reinforced by domestic reforms in taxes, infrastructure and education to rebuild American capabilities; plus a military buildup to deter Chinese escalation. And the transfer of technology to China, by commerce or espionage (including hacking) would have to be blocked. The goal is to widen the power gap between the U.S. and China, which Beijing has been working to narrow.

The main impediment to adopting such a strategy is domestic, not foreign. There are powerful interest groups who think they can profit from helping China rise and who do not want security considerations to interfere with “free trade” with an adversary. Transnational corporations have placed a large bet on China since President Bill Clinton formalized the globalist vision with the creation of the World Trade Organization which Beijing was allowed to join. Navarro believes

Perhaps no American president has been more wrong about so much with such devastating economic consequences. In the wake of China’s joining the World Trade Organization, Clinton’s corporate backers would begin a massive offshoring exodus to China that would help lead to the closing of over seventy thousand American factories; the number of unemployed and underemployed workers would eventually swell to well over twenty-five million.

This was an unprecedented transfer of wealth and power across the Pacific. But despite the fact that the results of that shift are seen daily in the growth of Chinese capabilities and hostile intentions, Big Business is still lobbying for Beijing; and still has a stranglehold on the Republican Establishment through its campaign contributions.

Last April, the U.S. Chamber of Commerce held its 7th China Business Conference in Washington under the banner that the trading relationship was “too big to fail.” Concern was even expressed about China’s slowing growth and the need to attract Chinese capital to buy up American assets under the rubric of “investment.” This, of course, is how debtors pay off their creditors, buy selling their property. It is the path to economic decline. But to the globalists how the balance of wealth and power shift between nations is of no interest; it is not even a legitimate concern next to collecting private profits. One of the major sponsors of the Chamber program was Bloomberg, whom Navarro criticizes in his book for its self-censorship of news in China to placate a communist regime it wants to do business with. Truth is no match for greed.

It was the reaction to this perverse and stunted system of values that broke the “blue wall” and gave Donald Trump his margin of victory. And which has now put Peter Navarro into a position to help “make America great again” by restoring the nation’s economic strength, the foundation of U.S. security and influence in a contentious world. It will be interesting to see how much of Navarro’s agenda can be implemented in the current political environment.

William R. Hawkins, a former economics professor and Congressional staffer, is a consultant specializing in international economics and national security issues. He is a contributor to SFPPR News & Analysis of the conservative-online-journalism center at the Selous Foundation for Public Policy Research.