Strategic Confrontation With China

US-Treasury-Secretary-Steven-Mnuchin- Chinese-Liu-He-trade-negotiations -Washington
US Trade Representative Robert Lighthizer (R) and US Treasury Secretary Steven Mnuchin (L) await the arrival of Chinese Vice Premier Liu He at the Office of the US Trade Representative for trade negotiations in Washington, DC, May 10, 2019. SAUL LOEB/AFP/Getty Images

By Brad Johnson


In the last few days, President Donald Trump has indeed moved forward with raising tariffs on $200 billion of Chinese products as was threatened in a recent presidential tweet. The tariffs were increased from 10 percent to 25 percent.

Most recently during the negotiation process, the Chinese officials tried to implement changes to the agreement to maintain the status quo as much as possible. We can all understand why; just the value of the intellectual property alone that the Chinese are able to steal on an annual basis is astounding.

Estimates vary, but the number is in the order of half a trillion dollars each year. The Commission on the Theft of American Intellectual Property estimated the “annual cost to the U.S. economy continues to exceed $225 billion in counterfeit goods, pirated software, and theft of trade secrets and could be as high as $600 billion,” most of that caused by China. We can all agree that these sorts of numbers add up pretty quickly and represent a serious negative impact on the U.S. economy.

The president recognizes that the Chinese have taken advantage of trade with us to steal serious amounts of intellectual property to prop up their own economy, and of course they do not want to give up this windfall of wealth. Who would want to give up hundreds of billions of dollars in what amounts to free money?

The Chinese are fighting hard to hang on to what they are stealing, and while they have agreed to make some changes, they don’t want to write them into an agreement that would clearly force them onto a level playing field.

The Chinese have bet that the U.S. administration would become so eager to come to an agreement that they would accept unfavorable terms, and this is what has led to the latest impasse. As the increase of tariffs have proven, President Trump has held firm to his word that he would not sign any agreement that is not good for the United States and that doesn’t resolve the trade disputes.

Critics of the president most often fan fears of a trade war between China and the United States, which are the world’s two largest economies, and the impact it would have on global economic growth.

While there is likely some truth to this, it will always be a much larger problem for China than anyone else. We have repeatedly seen that when negotiations break down it does have an impact on the global stock market, but nowhere worse than in China itself. Critics of the president are correct that a trade war and these trade disputes are inconvenient for the United States, but they completely gloss over the fact that they are devastating for the Chinese, who just do not hold enough cards to keep the status quo.

However, there’s more here than is being discussed publicly by the president or the critics. On an overall strategic level, there is a much larger conflict taking place, and the trade negotiations are only a small part of the whole. Our strategic long-term national security goals are under attack.

Greater Strategy

Most of us have not considered it in these terms, but 5G is an important part of the strategic threat from China. As do most of the socialist governments, China makes a “five-year plan,” which is the central government planning for their economy and is one of the reasons that socialist economies never function all that well. Nevertheless, in what the Chinese officials call their 13th five-year plan, they themselves openly describe 5G as “strategic” and they lay out their plans to globally dominate manufacturing of 5G equipment.

They’re also setting aside certain radio frequencies that work with the 5G equipment that are particularly efficient. Look at it this way: Some frequencies transmit data over long distances with very little signal loss in a fast, efficient manner, others not so much. Efficient transmission means far fewer cell towers need to be built and better service. Here in the United States, the efficient frequencies are controlled by the government and have not be released for public use, which means a more expensive and less-efficient system is being built.

This puts the Chinese in a stronger position to sell and install the systems used by the rest of the world, because they will be selling a better product, and that puts them in the driver’s seat for control of worldwide communications.

Bitcoin is another similar manifestation of Chinese strategic efforts. Not to get into the technicalities of how bitcoin is produced, but broken down to the simplest terms, it’s produced by computational power, i.e. good, big, fast computers and electricity to run those computers. The Chinese have invested millions in bitcoin “mining” and have large computer complexes set up near electrical generation plants. They appear to be the world leader in bitcoin production, although this is something difficult to measure in precise numbers.

Interestingly, they do not necessarily hold on to the bitcoin but pump it out into the world economy. Please understand just how important this is at the strategic level. The U.S. dollar is the world’s currency and almost always used for international transactions. These transactions are not done in cash; they’re done electronically through U.S.-controlled electronic clearing houses. This gives the U.S. control over imposing sanctions on other countries. Bitcoin is an alternative monetary system that is completely outside U.S. control.

Common in news reporting outside the United States is that China is building two new silk roads, not the website where anything can be purchased, but actual trade routes between the countries of the world where high levels of trade flow. The two silk roads are to connect Asia to Africa and greater Europe.

Much has been written about the Chinese military expansion in the South China Sea, but that expansion gives China substantial control over trade going in and out of Asia. Africa and Europe are also the areas where China has made extensive inroads in the 5G communications arena.

Let’s not forget the intelligence arena, where it seems the CIA’s entire spy ring in China was arrested and executed, and the aggressive Chinese collection program against us.

If you don’t see a pattern, you’re not looking.

Brad Johnson is a retired CIA senior operations officer and a former chief of station. He is president of Americans for Intelligence Reform.

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.

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