U.S.–China Week: Cui speech, THAAD deployed, CFIUS trajectories, 100 days (2017.05.01)

Welcome to Issue 98 of U.S.–China Week. Chinese Ambassador to the United States Cui Tiankai gave a speech last week in New York that, while characteristically careful, revealed a few important details about U.S.–China relations during the Trump administration’s first 100 days. In the speech, Cui discussed China’s priorities for bilateral ties primarily in the economic area, mentioning the otherwise ever-present Korean nuclear issue only in passing. He described the new replacement for the Strategic and Economic Dialogue (S&ED) that was agreed when President Donald Trump and President Xi Jinping met in Florida. In doing so, he did not use the U.S. framing of a “U.S.–China Comprehensive Dialogue” with four pillars under it, but instead framed each pillar as an independent track.

  1. In the “Diplomatic and Security” area, he emphasized “respect of each other’s core interest[s] and major concerns” (an import from the now mostly defunct “new model” rhetoric) but mentioned no specific security issues.
  2. In the economic area, he reaffirmed that the present “100-day plan” for U.S.–China trade and economic talks was China’s proposal (as the acting top U.S. Asia diplomat had also said), emphasizing an “early harvest” of relatively easy deals and advocating for delaying tougher issues until later. He gave vague and familiar promises of a “level playing field” for investment in China while also expressing the hope that the United States would roll back high-tech export restrictions, eliminate “excessive security reviews” for Chinese investments in the United States, and conclude a bilateral investment treaty.
  3. In the combined “Law Enforcement and Cyber Security” area, Cui listed several types of potential law enforcement cooperation but framed cybersecurity as almost an afterthought.
  4. The “Social and People-to-People” element sounds nice but is framed basically as a joint effort to convince people on both sides that the bilateral relationship is and should be positive. (Recently, the “people-to-people” meeting alongside S&ED has been led on the Chinese side by Vice Premier Liu Yandong, who among other things sits atop the bureaucracy that runs the Hanban and the Confucius Institutes, which have come in for renewed controversy following a conservative nonprofit’s report and a thoughtful discussion in the New York Review of Books by Richard Bernstein.)

Trump has explicitly said China may get a “better deal” on economic issues if it plays along on the Korean Peninsula. Cui’s speech provides insight into what China’s desired “better deal” might look like, and it suggests the high degree to which the formal, public agenda for bilateral ties is being mapped out by China’s diplomats—though not necessarily in the high-pressure and rapidly changing area of the Korean Peninsula. The U.S. side could perhaps seek to reset the table that seems to have been set during a period of disarray in the U.S. government, but with Trump explicitly linking China’s cooperation on Korea to other matters, Chinese officials are invited to explicitly hold Korea cooperation hostage to a long menu of what Trump has indicated are lesser priorities.In other regional diplomatic news, Trump seemingly surprised to his foreign policy staff when he invited Philippine President Rodrigo Duterte to visit the White House despite Duterte’s no-apologies campaign of extrajudicial killings and violence in the name of a war on drugs. At about the same time, the chairman’s statement from a Philippine-hosted ASEAN meeting went easy on China (as documented by Lyle Morris) regarding South China Sea issues. Trump is to attend regional meetings in the Philippines in November.

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KOREAN PENINSULA
Trump projects optimism about Xi’s cooperation on Korean nuclear issue; THAAD deployed after Trump questions the bill

In a Sunday TV interview that followed another North Korean missile launch, Trump expressed respect for Xi and cautious optimism that Xi will be “able to effect change” regarding the North Korean weapons program. (In the same interview, Trump inaccurately claimed that China’s government stopped manipulating its currency after he was elected.) Trump also made the most explicit comments yet confirming that his present strategy is to link trade negotiations with efforts to seek Chinese pressure on North Korea. “I think that, frankly, North Korea is maybe more important than trade,” Trump said. As part of a series of incomplete sentences, Trump further suggested thinking in terms of leverage: “if I can use trade as a method to get China…” Also this week Trump summoned all 100 U.S. Senators to a White House meeting on North Korea, after which he received mixed reviews. U.S. Pacific Command chief Adm. Harry Harris, speaking to Congress, was cautiously optimistic about a change in China’s level of effort on Korean Peninsula matters: “From a month ago forward we’re seeing some positive behavior from China, and I’m encouraged by that, so I think we should let this thing play out a little bit.” / Complicating the Korean Peninsula picture, Trump said the U.S.–South Korea free trade deal was “horrible” and threatened to kill or renegotiate it, meanwhile saying he “informed South Korea it would be appropriate if they paid” for THAAD missile defense deployment. Only a few days before a South Korean election on May 9, THAAD is already a campaign topic. National Security Adviser H.R. McMaster apparently sought to reassure South Korea’s government that a prior agreement by which the United States would pay for THAAD deployment was still on, but reportedly left open the possibility of renegotiation of that deal. Ankit Panda reports that THAAD is now operational, beating the possibility that it would be stopped after a win by the anti-THAAD frontrunner in next week’s election. / Separately, Taiwanese President Tsai Ing-wen told journalists “we don’t exclude the opportunity to call [on the phone] President Trump himself.” Trump then raised North Korea cooperation as a reason why he “would certainly want to speak to [Xi] first” before speaking directly with Tsai. / In big-think, Brookings has an in-depth discussion among several experts on “averting catastrophe” and a new paper by National People’s Congress Foreign Affairs Committee Chair Fu Ying, both on the North Korean nuclear issue.

ANALYSIS: I am starting to get used to the sensation of never having a solid idea of what the Trump administration will say or do next, nor of what recent statements amount to. It is possible that other governments’ have stronger assurances from parts of the U.S. government they find to be dependable. Allies and others have the choice of either discounting adverse signals while waiting for concrete action or actively hedging based on the idea that official U.S. statements are no longer good predictors of future behavior. If I were working in Zhongnanhai, I would advise my colleagues to be cautious about Trump’s signals about a better deal for China but exploit his apparent willingness to delay the tough economic conversations the U.S. political and economic communities have been clamoring for.

TECHNOLOGY + TRADE
Visions of CFIUS future as Washington tech policy group identifies holes in investment reviews

In a hearing before a House panel, Robert Atkinson, president of the D.C.-based Information Technology & Innovation Foundation (ITIF), framed potential changes to the Committee on Foreign Investment in the United States (CFIUS) inbound investment review process both as part of a more holistic view of technology in national security and as a way to achieve fairness and reciprocity in international competition. “We tend to look at [technology] as either military or it’s not military,” Atkinson said. “And so a lot of things get through the cracks in CFIUS that are, quote, not military. And yet when you connect the dots and you put the capabilities together, it ends up enabling their military capabilities.” Here, Atkinson is arguing that CFIUS does not currently capture actual national security concerns (which are its current purpose) because of an insufficiently holistic view of technology uses. Next, he said, “CFIUS needs much, much stronger abilities to just simply deny Chinese technology acquisitions, particularly ones that are backed by the Chinese government.” In his example, a government-supported Chinese company’s acquisition of the printer company Lexmark “shouldn’t have been approved because it wasn’t a market-based capitalist transaction; it was a government strategy to take that technology.” Here, Atkinson is arguing for a broader purpose for CFIUS—stopping transactions when government backing and industrial policy is involved, not strictly on the basis of national security. ITIF recently released a major report on “Stopping China’s Mercantilism” that in part details proposed changes to CFIUS. This week, ITIF also released a report comparing cross-border data regulations in a broad array of countries, including significant attention to China.

Meanwhile:

  • Huawei is the subject of a U.S. investigation concerning potential violations of U.S. trade controls with Cuba, Iran, Sudan, and Syria.
  • Rhodium Group released an updated version of its report on Chinese investment in the United States by Congressional district, finding the number of Americans employed by Chinese-affiliated companies to have risen 46% over the previous year to 140,000.
  • FireEye believes a Chinese hacker group that had targeted U.S. defense companies “has shifted its focus to critical infrastructure across Asia following a U.S.–China deal on electronic espionage,” FT reported.
  • The U.S. Trade Representative‘s office released its annual intellectual property reports, again placing China on the “Priority Watch List.”
  • And the U.S. Chamber released a “Win-Win Strategy for 100 Days” proposal, leading with China spending the implementation of its Cybersecurity Law, currently scheduled for June 1. The “win-win” proposal does not include any asks for the U.S. side.
  • Netflix reached a licensing deal with Chinese service iQiyi.com.

#USChinaWeek1967
‘U.S. Plane Down, China Says’

“TOKYO, April 30[, 1967]—Communist China said today that its air force shot down a pilotless American reconnaissance plane yesterday over the Kwangsi Chuang Autonomous Region in southern China. Hsinhua, the official press agency, said the plane was the third United States military aircraft shot down over the region.”

(Source: The New York TimesThis entry is part of an ongoing feature of U.S.–China Week that follows U.S.–China relations as they developed in another era of change and uncertainty, 50 years ago.)

ABOUT U.S.–CHINA WEEK

U.S.–China Week is a weekly news and analysis brief that covers important developments in U.S.–China relations and features especially insightful or influential new policy analysis.

Graham Webster is a senior research scholar, lecturer, and senior fellow of the Paul Tsai China Center at Yale Law School, where he specializes in U.S.–China diplomatic, security, and economic relations through research and Track II dialogues. He is also a fellow for China and East Asia with the EastWest Institute. His website is gwbstr.com.

Disclaimer: Opinions expressed here are my own (and I reserve the right to change my mind).

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Contact: Follow me on Twitter at @gwbstr. Send e-mail to [email protected].