U.S.–China Week: U.S. strategy calls China ‘revisionist power’ and ‘competitor’; drumbeat of China-focused trade moves (2017.12.18)

Welcome to Issue 121 of U.S.–China Week. I’m back in Oakland after a busy trip to Beijing, Shanghai, and Wuzhen, Zhejiang, where I had the chance to attend the Chinese government’s World Internet Conference. This edition covers the new National Security Strategy and a gathering tide of trade and investment action by the U.S. government, but first:

  • Before the Wuzhen show, the New America DigiChina team and our CSIS colleague Samm Sacks published “China’s Cybersecurity Law One Year On: An Evolving and Interlocking Framework“—our effort to summarize what has already emerged and what’s still a work in progress a year after the law’s text was released and six months after it officially took effect.
  • After the Wuzhen show, we observed that a (to us) crucial speech by new Politburo Standing Committee Member Wang Huning at the conference had not been published in full. Based on audio, we transcribed and translated the speech, which goes into some detail on cyberspace policy, including cross-border data flows. This New America post by Rogier Creemers, Paul Triolo, Jennifer Meng, and myself.
  • Happy news: U.S.–China Week was listed in “SupChina Sources 2017,” which provides a great compilation of resources on China and the world from the folks who bring us SupChina and the Sinica podcast. Congrats to the many colleagues and subscribers out there who were also recognized.

After today, U.S.–China Week is going on winter vacation, both to take time off for the holidays and to plan for this project’s future. I commit to being back with you by February 9, the third anniversary of the first “beta” edition. Thanks for reading, writing, and arguing—and see you in 2018!As always: Please encourage friends and colleagues to subscribe to U.S.–China Week. Here is the web version of this issue, ideal for sharing on social media, and you can follow me on Twitter at @gwbstr. Please send your comments, quibbles, and suggestions to [email protected].

SIGNALS
Trump ‘National Security Strategy’ positions China, Russia as ‘revisionist powers’; Official won’t say Trump has read it

The White House today released a new National Security Strategy, Trump’s first and the first since Obama’s last document in 2015. Here at Transpacifica, I excerpted the main sections having to do with U.S.–China relations and made some comments. I’ll mention a few here, but the most important thing to keep in mind is that this document may not reflect the behavior of the president. Indeed, a spokesperson for the National Security Council told CNN: “I can’t say that [Trump] has read every line and every word” of the big-splash new document. This fact is of a kind with broader Trump administration policymaking: Bureaucrats working with a variety of agendas and at varying levels of professionalism may produce visions, but execution at the presidential level is subject to Trump’s own erratic style. Professional bureaucratic counterparts in other capitals, and certainly in Beijing, are left without reliable signals except to say that a remarkably less friendly framing of U.S.–China relations made it past final approvals to be introduced by a Trump speech.

The strategy, whatever its strategic weight, signals attention to intellectual property and the U.S. “National Security Innovation Base (NSIB),” introduced in this document in a paragraph that begins, “Every year, Competitors such as China steal U.S. intellectual property valued at hundreds of billions of dollars.” This plays into the trade and investment developments below—and it reflects the rather Beijing-compatible Trump administration argument that “economic security is national security”—a phrase highlighted in today’s strategy.

At the most basic level, China is highlighted as one of “three main sets of challengers—the revisionist powers of China and Russia, the rogue states of Iran and North Korea, and transnational threat organizations, particularly jihadist terrorist groups.”

Perhaps the broadest statement of explicit separation from past China policy is this: “For decades, U.S. policy was rooted in the belief that support for China’s rise and for its integration into the post-war international order would liberalize China. Contrary to our hopes, China expanded its power at the expense of the sovereignty of others. China gathers and exploits data on an unrivaled scale and spreads features of its authoritarian system, including corruption and the use of surveillance. It is building the most capable and well-funded military in the world, after our own. Its nuclear arsenal is growing and diversifying. Part of China’s military modernization and economic expansion is due to its access to the U.S. innovation economy, including America’s world-class universities.”

Paired with the observation that “great power competition has returned,” it’s hard to conclude that the drafters envision substantial cooperation with China. Add to that the apparently imminent U.S. actions against China on trade issues, and U.S.–China relations appear to be in for much more friction. The grand caveat is at the top of the U.S. government; I’m not going to make confident predictions of where the Trump administration or the president’s own inclinations will go—especially when I’m stepping away from the newsletter for several weeks.

Much more to digest in my fuller jottings on China-relevant passages.

TRADE TIDES

  • U.S. charges three Chinese for hacking U.S. firms, and reports link their cybersecurity firm to the Chinese government
    Three Chinese hackers working for a company known as Boyusec were charged for hacking three companies and taking “trade secrets,” “proprietary commercial data,” and “proprietary and confidential economic analyses, findings and opinions” from three separate firms.

    The U.S. government announcement included the phrase “commercial advantage” in its headline, and the indictment noted that one of the alleged victims’ geographic positioning technologies “had no military applications”—both clear call-outs to the Obama-Xi statements of Sept. 2015 that, as Obama put it, neither government would “conduct or knowingly support cyber-enabled theft of intellectual property, including trade secrets or other confidential business information for commercial advantage.”

    Though the U.S. releases did not tie the hackers or Boyusec to the Chinese government, security researchers had previously identified Boyusec as the entity behind a hacking group known as APT3 and linked Boyusec to China’s Ministry of State Security. Josh Chin of WSJ reported that Boyusec dissolved in the weeks before the announcement and that U.S. officials got “no meaningful response” when they reached out to the Chinese government on this case before going public.

    My Yale colleague Rob Williams and Harvard’s Jack Goldsmith argued that the indictment “suggests that China is either violating the 2015 deal or exploiting its ambiguities and thus exposing the norm against commercial cybertheft as weak.” If Boyusec was indeed acting on behalf of the MSS, that much seems clear.

  • U.S. formally opposes granting China market economy status at WTO
    Reuters reported: “The United States has formally told the World Trade Organization (WTO) that it opposes granting China market economy status, a position that if upheld would allow Washington to maintain high anti-dumping duties on Chinese goods. The statement of opposition, made public on [Nov. 30], was submitted as a third-party brief in support of the European Union in a dispute with China that could have major repercussions for the trade body’s future. The U.S. and EU argue that the state’s pervasive role in the Chinese economy, including rampant granting of subsidies, mean that domestic prices are deeply distorted and not market-determined.” A Xinhua commentary said the U.S. position was “in reckless disregard of the relevant WTO rules.”
  • U.S. probe into Chinese aluminum marks first ‘self-initiated’ action against major partner in decades
    FT reported: “The move to ‘self-initiate’ an anti-dumping investigation into imports of aluminium sheeting from China marks the first time since 1985 that the US Commerce Department has launched its own investigation without a formal request from industry. The last case was brought by the Reagan administration against Japanese semiconductor imports and came at a time of high trade tensions. A parallel investigation launched on Tuesday into illegal subsidies given to the Chinese sheet industry marks the first time since a 1991 Canadian lumber case that the Commerce Department has self-initiated a probe into subsidies.” China’s Ministry of Commerce reportedly expressed “strong dissatisfaction.”
  • USTR’s 301 investigation report circulating
    Politico reported: “Two sources told Morning Trade that USTR has completed a draft report that is now being shared with the interagency committee overseeing the investigation. A USTR spokeswoman wouldn’t comment on the report’s status, but said it has not gone to the White House and declined to provide any update on when it would be released.”
  • Treasury official: New ‘Comprehensive Economic Dialogue’ is ‘stalled’; Branstad: No U.S. decision on future of BIT talks
    FT reported that David Malpass, under secretary of treasury for international affairs, said the new Comprehensive Economic Dialogue was at least temporarily defunkt. “China is not moving in a market-oriented direction so for now the CED is stalled,” FT quoted him as saying. “There is not a dialogue on restarting the CED.” / U.S. Ambassador to China Terry Branstand said that, on earlier talks for a U.S.–China bilateral investment treaty that had been progressing quietly through the end of the Obama administration, “the administration has not made the decision whether to go forward.”

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 fellow at the Paul Tsai China Center at Yale Law School, where he specializes in U.S.–China relations and technology, and a fellow at New America, where he is developing the DigiChina project on China’s digital policies. 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).

Free Subscription to U.S.–China Week by clicking here or e-mailing me is open to all, and an archive of past editions appears at my long-running website on East Asia and the United States, Transpacifica.

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