U.S.–China Week: Trump threatens China over NK trade, FON schedule, Google’s AI hiring in Beijing (2017.09.05)

Welcome to Issue 111 of U.S.–China Week, coming to you on Tuesday this week due to the U.S. Labor Day holiday.

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NORTH KOREA
U.S. threatens trade with China, reportedly urges oil embargo after North Korea tests strongest nuclear weapon yet

North Korea conducted its 6th and most powerful nuclear test, and reports said it may be preparing for an intercontinental ballistic missile test. Following the nuclear test, President Donald Trump said on Twitter that the United States is considering “stopping all trade with any country doing business with North Korea.” A Foreign Ministry spokesperson called the tweet “unacceptable,” a comment apparently missing from published transcripts. Ambassador to the United Nations Nikki Haley said “the time has come to exhaust all of our diplomatic means, before it’s too late” and rejected China’s “freeze-for-freeze” proposal (reiterated after the test) as “insulting.” NYT reported that Trump and President Xi Jinping would likely speak about a U.S. proposal to cutoff of oil to North Korea on a call the U.S. government sought to arrange. / Lyle Goldstein offers a summary of recent Chinese scholarly opinion on the Korean Peninsula dilemma. / In non-Korea nuclear cooperationnews, Science Magazine reported on U.S.–China technical cooperation on removing highly enriched uranium from a reactor in Ghana.

ANALYSIS: At first glance, it would seem North Korea’s nuclear test changes no fundamentals given the ossified positions of the key players here, except to increase the intensity on several friction points. This is true to some extent, but the Trump factor means U.S. disagreements with China and alliances with South Korea and Japan are not actually so stable. Indeed, Trump and his administration’s erratic behavior and inconsistent statements threaten to push those ossified positions to a breaking point where war is far less unlikely. If the U.S. government wishes to pressure China to behave more harshly toward Kim Jong-un’s regime, it undermines itself by threatening to halt all trade while meanwhile floating a more specific oil embargo. If the U.S. government wishes to demonstrate international resolve to eventually eliminate North Korea’s nuclear weapons capability, it undermines itself with reports that Trump is preparing to pull out of the U.S.–Korea Free Trade Agreement.

SOUTH CHINA SEA
U.S. said to establish schedule for ‘freedom of navigation’ operations in South China Sea

WSJ reported: “The Pentagon for the first time has set a schedule of naval patrols in the South China Sea … The U.S. Pacific Command has developed a plan to conduct so-called freedom-of-navigation operations two to three times over the next few months, according to several U.S. officials. … [Setting a schedule] may help blunt Beijing’s argument that the patrols amount to a destabilizing provocation each time they occur, U.S. officials said. … In keeping with policies against announcing military operations before they occur, officials declined to disclose where and when they would occur.” Meanwhile…

  • Tuan Pham, a U.S. Navy officer writing in his own name, has a good two-part series (12) at The Diplomat arguing in part: “America has had several setbacks, but has not lost the SCS yet. The SCS is a fluid environment that makes any recalibrations transitory. The strategic shift in China’s favor – change in Philippine foreign policy, Manila and Washington’s failure to capitalize on the arbitral tribunal ruling, ASEAN under Manila’s chairmanship, warming relations between Beijing and Bangkok, closer Chinese ties with Laos and Cambodia, Trans-Pacific Partnership withdrawal, inclusion of the RMB in the International Monetary Fund’s Special Drawing Rights basket, and rise of the Chinese economy to second largest in the world – is not permanent.” Part two examines “ways and means the United States can regain the strategic initiative, recover the high ground of regional influence, and stave off losing in the SCS.”

ANALYSIS: Establishing a schedule for U.S. military demonstrations of U.S. opinions regarding international maritime law in the South China Sea does little to change the situation there. The implied (though not fully reported and not certain) difference would be to remove the National Security Council and the interagency process from decisions about moving forward with one or another operation. The upside of this is to emphasize that the Freedom of Navigation Program is separate from other diplomatic or political tides; the downside is that unless the Department of Defense includes political sensitivities in its scheduling, an operation could occur at a time when it might undermine other priorities. Regardless, FON operations do little or nothing to alter the evolving power balance in the South China Sea, and they are arguably targeted at maintaining a “status quo” that has long since passed into history.

TRADE + INVESTMENT
Trump ‘rejected’ Ross-supported deal on steel capacity before economic meet; USTR investigation could feed ‘tariff’ craving

FT reported that Trump dismissed a Chinese offer to lower steel output: “One week after the July G20 summit in Hamburg, at which Mr Trump criticised China for flooding the world market with cheap steel, Beijing proposed cutting steel overcapacity by 150m tonnes by 2022. But Mr Trump twice rejected the deal, according to several people familiar with the internal debate. The offer came the week before US and Chinese officials held a high-level economic dialogue that had been set up by Mr Trump and Chinese president Xi Jinping in April. Wilbur Ross, US commerce secretary, endorsed the deal and brought it to Mr Trump, but the president rejected the proposal.” Trump’s veto reportedly came amidst his hopes to impose tariffs, paralleling last issue‘s opening rumors, and left Ross to return to Vice Premier Wang Yang with a no-go. This reportedly contributed to the lack of a press conference or joint outcomes from the Comprehensive Economic Dialogue.

ANALYSIS: Steel appears to be on the back-burner for the U.S. government in its efforts to develop China trade policy. For now, those advocating for showy new measures against China may be looking to the U.S. Trade Representative’s investigation into Chinese trade and investment practices in tech and intellectual property. That investigation may conclude as soon as this fall. (The last round of comments listed in the original hearing schedule were to be due Oct. 22, and a decision could be made soon thereafter.) If USTR, as expected, finds China’s practices in violation, the U.S. government turns to “remedies,” which could range widely—potentially satiating those calling for “tariffs.” But that would still leave the steel and aluminum interests waiting. One question to ask about the reported Chinese offer to cut steel overcapacity is whether such cuts do anything above what China already has plans to do for domestic reasons.

TECHNOLOGY
Google hiring for AI positions in Beijing; Apple begins accepting WeChat Pay

  • FT reported that Google is hiring for artificial intelligence and machine learning positions in Beijing: “Google hinted in May, at an AI summit near Shanghai, that it was looking to set up its first China-based AI research team.” Bloomberg noted that Google’s careers site listed several different types of positions, including AI/ML jobs. / ANALYSIS: I don’t believe it’s entirely new for Google to be hiring engineering talent in China despite many of its products being blocked, but the Chinese government’s emphasis on in-country R&D teams among requirements for certain foreign company involvement in China makes the AI/ML listings notable. The State Council’s “Next Generation Artificial Intelligence Development Plan” (which we translated here) also seeks to: “Encourage foreign AI enterprises and research institutes to establish research and development centers in China.”
  • Apple now accepts WeChat Pay, Tencent’s mobile payment platform, for transactions on its App Store and Apple Music. Apple already supported Alibaba’s Alipay beginning in November 2016, Technode reported. / Above Avalon has an in-depth analysis of Apple’s market position in China, including a section probing the narrative that WeChat is Apple’s main rival there.

#USChinaWeek1967
‘Soviet Says Steps by China Help U.S.: Peking Policies Blamed for American Gains in Asia’

“MOSCOW, Aug. 30[, 1967] — The Soviet Government newspaper Izvestia accused the Chinese Communist leadership today of making possible a number of American advances in Southeast Asia. This view, expressed in a long article by an authoritative commentator, Vikenty Matveyev, may indicate a significant shift in emphasis in the mounting Soviet propaganda attacks against Peking. … ‘For nearly 10 years after the Geneva conference, the United States refrained from large-scale armed intervention in Vietnam,’ Mr. Matveyev wrote. ‘It began only when the group of Mao Tse-tung announced for all to hear that it flatly rejected the proposals of the Communist Party of the Soviet Union and other Communist parties for unity of action in the struggle against imperialist aggression and started following its own narrowly nationalist, great-power, anti-Soviet course.’ … Among other American advances charged to China’s responsibility, the Soviet Government organ cited a strengthening of American positions in India and Japan, Indonesia’s take-over by right-wing military men, and the recent formation of a grouping linking Indonesia, the Philippines, Thailand, Malaysia and Singapore.”

(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, and he is based in Oakland, California.

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

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