Welcome to this week’s edition of Trade War, the 59th. Given the obvious growing importance of Taiwan, from global technology supply chains to crucial semiconductor production to as a US-China flashpoint, I have decided in this issue to break out a section on the island (or as Blinken referred to it, the ‘country.’) See that below. Now for the news.
The U.S. and China plan their first face-to-face meeting under the Biden administration but don’t expect it to be jovial one. More detail on plans to expand the role of the Quad has come out following its first ever top leader summit.
Biden Secretary of State Antony Blinken has referred to Taiwan as a “country” a no-no for Beijing, and says talks on a U.S.-Taiwan free trade agreement should be held.
Meanwhile, China now looks set to try to unwind its bulging debt expansion. And flight logs show Alibaba’s Jack Ma is flying a lot less but still has access to his Gulfstream jet.
US, China face ‘difficult’ meeting in Anchorage
The first face-to-face meeting between the U.S. and China under the Biden administration is happening next week.
Secretary of State Antony Blinken and White House national security adviser Jake Sullivan will meet China foreign policy official Yang Jiechi and State Councillor Wang Yi Thursday in Anchorage; the four are likely to discuss tough topics including Beijing’s treatment of the Uighurs in Xinjiang, as well as Hong Kong and Taiwan, the South China Morning Post reports.
It is expected to be a “difficult” conversation, according to State Department spokesman Ned Price. “We’ll be frank, and explain how Beijing’s actions and behavior challenge the security, the prosperity, the values of not only the United States, but also our partners and allies,” Price told reporters.
So it’ll be a Strategic Dialogue? Maybe not..
Washington and Beijing are jostling over whether the upcoming meeting should be called a “strategic dialogue" or not - China favors “strategic dialogue” likely because it is suggestive of a healthy, equal relationship; the U.S. does not. Bloomberg’s Peter Martin has an illuminating tweet thread on this sticking point.
“On one level, it’s simple: Biden needs to show domestic audiences that he’s maintaining much of Trump’s tough approach to Beijing,” writes Martin, and that means not talking up the meeting. Meanwhile, Xi wants to show “he’s no pushover – especially because the meeting will take place on U.S. soil.”
“On another level, many China hands argue that the PRC likes to ensnare the U.S. in convoluted dialogues to bog down American negotiators while China modernizes its economy and military Hence, perhaps, Biden’s call for “practical, results-oriented engagements” when he spoke to Xi,” writes Martin.
Meeting halfway shows ‘mutual respect’
And why Anchorage, Alaska as the place to meet? “Some Chinese observers on #US affairs told us this morning that geographically, the distance of Alaska-Washington DC [is] about 5000 {km], and the distance of Alaska-Beijing [is] about 3,000 [km]; choosing a mid-point shows mutual respect,” tweets Global Times reporter Qingqing Chen.
Quad covers covid vaccines, climate change & critical tech supply chains
The first ever meeting of the the top leaders of the Quad grouping, comprising the U.S., India, Japan and Australia, was held virtually on Friday. The four nations pledged to expand production of Covid-19 vaccines, focusing on manufacturing the vaccine in India, work together on climate change and disaster relief, and promote security in the Indo-Pacific, reports Bloomberg.
At the meeting the leaders also announced plans to regularly meet to discuss “critical technology supply chains,” according to the fact sheet released by the U.S. White House. “Quad leaders recognize that a free, open, inclusive, and resilient Indo-Pacific requires that critical and emerging technology is governed and operates according to shared interests and values.”
While not directly mentioned, the strengthened Quad clearly aims to rein in China’s growing power. “Asked about the meeting, Chinese Foreign Ministry spokesman Zhao Lijian called on countries to refrain from creating blocs,” reports Bloomberg. “Exchanges between governments should create understanding and avoid targeting third parties, [Zhao] said.”
Shared suspicion of rising power China
The Quad should move beyond its present focus on containing China and broaden its mandate, write Carnegie Endowment for International Peace experts Evan Feigenbaum and James Schwemlein.
Some of the areas for mutual cooperation include the “coronavirus pandemic, climate change, and other challenges, such as countering disinformation, advancing counterterrorism, assuring maritime security, and restoring democracy to Myanmar,” the authors write. (the pandemic, climate change, and security were all raised in the recent Quad meeting.)
Ever since it was founded to deal with the 2004 Indian Ocean earthquake and tsunami, the Quad has “groped for purpose: instead of a quadrilateral that responds jointly to specific functional challenges, the four are today united largely by their shared suspicion of the rise of Chinese power,” the authors write. That’s not good.“
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Taiwan a country, says Blinken
At the end of a House Foreign Affairs Committee hearing on the Biden foreign policy agenda, Antony Blinken referred to Taiwan as a “country,” a no-no in China’s book.
"Taiwan is a strong democracy" and "a very strong technological power," Blinken told the hearing. He went on to say that Taiwan is "a country that can contribute to the world, not just its own people. COVID is a very good example of that," reports the Taiwan News.
“Blinken's use of the term "country" could mark a new stage in Taiwan-US relations. Since the U.S. severed diplomatic relations with Taiwan under the Carter administration in 1979, the State Department self-imposed increasing layers of restrictions on official interactions with Taiwan for fear of agitating China.”
Finally a free trade agreement?
In the same House Committee meeting, Blinken has expressed support for talks towards an effort to sign a long-sought free trade agreement with Taiwan, it’s tenth-largest merchandise trading partner.
“Blinken on Wednesday said he is committed to pushing the administration of President Joe Biden to begin talks on free trade agreement negotiations with Taiwan, and for the latter to be invited to the Summit for Democracy, which the U.S. will likely host later this year,” reports CNA. (The Summit for Democracy was proposed earlier by Biden, to "renew the spirit and shared purpose of the nations of the Free World.")
Progress on U.S.-Taiwan trade relations has picked up since last August when President Tsai Ing-wen “announced measures to open the Taiwan market to certain previously banned U.S. pork and beef imports,” wrote Lotta Danielsson, Vice President of the US-Taiwan Business Council in December.
Since then, “expanded economic engagement has included a visit to Taiwan by Keith Krach, the undersecretary for economic growth, energy, and the environment at the U.S. Department of State, along with the September signing of the Framework to Strengthen Infrastructure Finance and Market Building Cooperation. It has also included a visit to Washington, D.C., by a Taiwan government delegation for the inaugural U.S.-Taiwan Economic Prosperity Partnership Dialogue (EPPD) held in late November.”
Referendums reach across strait
Taiwan is considering controversial referendums that will be voted on in August that have implications for its relationship with China and the U.S., write Lev Nachman and Brian Hioe for The Diplomat.
They include building an environmentally controversial terminal for liquified natural gas (LNG) off the northwest coast of Taiwan, that proponents in the DPP argue would not only lessen reliance on nuclear power, a worrisome source given Taiwan’s high level of seismic activity, but also “improve energy security, to ensure that Taiwan has adequate LNG stores in the event of a Chinese invasion or blockade.”
A second controversial referendum would lift limits on U.S. pork imports, as president Tsai proposed last August, despite concerns about ractopamine, “an additive promoting leanness in animals that is banned by 160 countries worldwide, is sometimes found in U.S. meat.” That move is seen as a prerequisite to an eventual bilateral trade agreement with the U.S. but is being opposed by the KMT.
“The KMT has capitalized on the moment to make U.S. pork a major political issue… “Racto-pork” has made international headlines due to the political theatrics the KMT has used to rally voters to their side, including mass protests and throwing actual pig guts and innards at DPP politicians inside Taiwan’s Legislative Yuan.”
Chinese helicopter base and ‘desperate desire’
New satellite imagery suggests that China is building a helicopter base in Fujian province that could be used in any hostilities with Taiwan, reports the Taiwan News.
Taiwanese military expert Ho Cheng-hui said the base should be seen as part of Xi Jinping's "desperate desire to resolve the Taiwan issue and expand the People's Liberation Army's (PLA) combat power."
“Ho suggested the base was yet another challenge to the existing international order and is intended to disrupt the United States' first island chain defenses and "even directly challenge the U.S. military." He said the site could accommodate many military aircraft.”
A strange, virus free bubble
Taiwan’s success combatting the pandemic - with only ten deaths and fewer than 1,000 Covid cases out of a population of 24 million - is drawing people to move back to the island and boosting the economy, report The New York Time’s Amy Qin and Amy Chang Chien.
“For a while, Taiwan felt a little empty. A lot of people moved abroad and only came back once in a while,” Justine Li, the head chef at Fleur de Sel, a Michelin-starred restaurant in the city of Taichung, which had been booked up for a month in advance since the fall, told the Times. “Now, some of those once-in-a-while guests have moved back.”
“About 270,000 more Taiwanese entered the island than left it in 2020, according to the immigration authorities — about four times the net inflow of the previous year,” which has spurred growth making Taiwan one of the fastest-expanding economies in the world, the Times writes.
Upcoming talk: Showdown Taiwan
"Showdown Taiwan: The United States And China Face A Crucial Confrontation Over The Democratically Governed Island" is the topic of a panel I will join next Thursday. More details in the link.
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‘Vaccine diplomacy’ may not be so diplomatic
As China practices “vaccine diplomacy,” it turns out it’s not all about statesmanship: Chinese vaccine maker Sinopharm is charging Hungary $36 per dose, twice what Pfizer does in the European Union, report the New York Times’ Sui-Lee Wee and Benjamin Novak. “That appears to make the Sinopharm shot among the most expensive in the world.”
“The company from which Hungary is buying the vaccine underwent a change in ownership two months before the transaction, was awarded the contract after the government exempted it from having to take part in an open public procurement process, said Miklos Ligeti, legal director for Transparency International Hungary, an anticorruption group.”
“Such arrangements raise red flags for anticorruption watchdogs, who warn that the involvement of third parties increases the risk of price gouging,” the Times writes.
Opening the debt spigot
In order to weather the Covid-19 epidemic, China’s government has “opened the debt spigot and put on the back burner its long-standing commitment to tackling the mountains of debt,” writes Caixin.
But with China’s economy expected to grow at least 6 percent this year, “dealing with record local government borrowing is firmly back in policymakers’ crosshairs,” writes Caixin.
“With safeguarding overall national security and maintaining sustainable economic and fiscal development as our objectives, we must make determined and persistent efforts to defuse risks from hidden local government debt,” the finance ministry said in its annual work report presented at the National People’s Congress on March 5.
Not so jet-setting Jack Ma
Flight logs show that embattled Alibaba founder Jack Ma still has access to his Gulfstream jet, but that he dramatically scaled back his travel, reports the Financial Times.
”Before October, Ma was traveling once every three days, on average. In January and February he was only traveling about once a week, mainly to Beijing and to the tropical island resort of Hainan, where Bloomberg has reported he was spotted playing golf.”
“The flight logs, compiled with data from Radarbox, a flight-tracking company, also dispel rumors that he has fled China to Singapore or been put under house arrest,” the paper notes.
Notable/In Depth
China’s National People’s Congress passed its controversial resolution on Hong Kong electoral reforms by 2895 votes with one abstention. And this while “actual details of the law” were still unannounced, points out AFP’s Laurie Chen.
“Loving the currently existing PRC under the leadership of the Chinese Communist Party” is how to determine whether a Hong Konger is a “patriot” a senior Chinese official explained, reports AFP.
Matt Pottinger on China and Great Power Competition
If you missed my discussion with former Deputy National Security Advisor Matt Pottinger on China, the U.S. and the Great Power Competition, watch it here.
One year since The Myth of Chinese Capitalism published
It’s been one year since my book The Myth of Chinese Capitalism was published and what a year it has been. If you haven’t read it yet you can get it here.