Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2: Hello and welcome to another episode of the Odd Lots podcast.
Speaker 3: I'm Joe Wisenthal and I'm Tracy Alloway.
Speaker 2: Tracy, we recently did that episode with Andrew Bishop of
Speaker 2: Signum from Geopolitical Forecasting, et cetera. And I don't know
Speaker 2: if you remember, but the last question we asked him
Speaker 2: like sort of sent a shiver down my spine a
Speaker 2: little bit.
Speaker 3: Yeah, he was a pretty pessimistic about the outlook for
Speaker 3: an actual conflict between China and Taiwan, one that would
Speaker 3: presumably maybe draw in other world powers, including the US.
Speaker 4: Yeah.
Speaker 2: I think what actually really chilled me about that was,
Speaker 2: you know, I asked him, I said, you know, what
Speaker 2: are the prospects for some sort of Chinese invasion of time?
Speaker 2: I won with the next five years. What chilled me
Speaker 2: was how quickly he answered yes, right, or It was
Speaker 2: not the fact that he considered it to be a
Speaker 2: high probability. Is that he considered it to be a
Speaker 2: high probability without sort of humming and hawing about it.
Speaker 2: And I found that to be very disturbing.
Speaker 3: That doesn't surprise me that much. I think I told
Speaker 3: the story about I wrote a dissertation in college about
Speaker 3: I thought China would invade Taiwan before the two thousand
Speaker 3: and eight Olympics. So that turned out to be wrong.
Speaker 3: But I think, you know, lots of people have been
Speaker 3: kind of predicting this for a long time, and it
Speaker 3: brings up the question of, like, what exactly is the
Speaker 3: catalyst for these tensions between the Republic of China and
Speaker 3: the PRC to actually morph into physical conflict.
Speaker 2: And then I guess the question of like how wars
Speaker 2: come about in general, how they come about in theory,
Speaker 2: the connection between trade wars and hot wars. Of course,
Speaker 2: there was that book several years ago trade wars or
Speaker 2: class wars, but trade wars can all.
Speaker 3: Bears are also actual wars.
Speaker 2: Trade wars, Yeah, exactly right. Several years ago we did
Speaker 2: an episode with Christian Parente about Alexander Hamilton, and one
Speaker 2: of his points was that while the popular history of
Speaker 2: the Revolution the War for Independence, people say, oh, you know,
Speaker 2: it's about taxes or we didn't want to be taxed
Speaker 2: on tea or whatever, but that in his argument, it
Speaker 2: was really about British constraints on the US's inability to
Speaker 2: turn cane sugar into rum. Move up the value chain,
Speaker 2: et cetera. And when you think about countries constraining other
Speaker 2: countries from moving up the technological value chain, once again,
Speaker 2: hard not to think about the tensions right now between
Speaker 2: the US and China with chip export controls and other
Speaker 2: such restrictions.
Speaker 3: In general, it does seem true that a lot of
Speaker 3: history tends to well, it kind of leaves out a
Speaker 3: lot of economics sometimes, like there's so much you could
Speaker 3: write about international trade and the impact on foreign policy
Speaker 3: capital flows. I know you're a big fan of Adam
Speaker 3: Twos's Wages of Destruction, which is.
Speaker 2: Basically mentioned that before.
Speaker 3: I know, I'm sure you're going to bring it up
Speaker 3: in this conversation, but I really think it deserves more attention,
Speaker 3: and it probably doesn't get that much attention because I
Speaker 3: guess historians maybe they like to talk about, you know,
Speaker 3: sexy military history and things like that. But it definitely
Speaker 3: has relevance, and I guess the question is how much relevance.
Speaker 2: Totally Well, I'm really excited to say we're going to
Speaker 2: explore these topics further, and we do have the perfect guest.
Speaker 2: We're going to be speaking with Dale Copeland, Professor of
Speaker 2: International Politics, at the University of Virginia. He's also the
Speaker 2: author of a recent book, A World Safe for Commerce,
Speaker 2: American foreign policy from the Revolution to the Rise of China. So,
Speaker 2: Professor Copeland joining us, now, thank you so much for
Speaker 2: coming on, great to be here. Why don't you just
Speaker 2: give us the sort of concise version of how you
Speaker 2: think about this link between trade wars and hot wars.
Speaker 4: Yes, so let me start by saying that we under
Speaker 4: estimate how much impact trade has on the geopolitical military
Speaker 4: stability of any system. I've explored really two thousand years
Speaker 4: of history, but in the last two books, both on
Speaker 4: the question of trade and conflict, I found that at
Speaker 4: least seventy five percent of the big conflicts between great
Speaker 4: powers over the last two hundred and fifty years have
Speaker 4: been directly related to the role of trade and commerce.
Speaker 4: But here's what's interesting. We have two big perspectives out there.
Speaker 4: The liberals believe trade always leads to peace, because hey,
Speaker 4: if US and China are trading extensively, why wouldn't they
Speaker 4: want to keep the peace going? And the realist school
Speaker 4: believes it's the opposite, that trade leads to high dependency
Speaker 4: and worries about the future, I'm going to be cut
Speaker 4: off and therefore trade should lead to conflict. And you
Speaker 4: see this divide in lots of debates Merscheimer versus some
Speaker 4: of the liberals, for example. But my position is an
Speaker 4: intermediate one, and it says, under certain circums stances, trade
Speaker 4: can be very good for peace. If states have positive
Speaker 4: expectations about the future trade environment, they expect to get
Speaker 4: the trade that helps them grow economically and militarily, then
Speaker 4: they want to keep the peace going. Think of China
Speaker 4: since nineteen ninety. It wants the peace, it wants the trade,
Speaker 4: and it wants to keep growing through that trade, and
Speaker 4: it's been great for China. The other aspect of this, though,
Speaker 4: in history, is if expectations of future trade start to
Speaker 4: fall or become negative, then the realist kind of logic
Speaker 4: kicks in and you have states that become pessimistic about
Speaker 4: the future. Think of Japan nineteen forty one, and they
Speaker 4: decide that they need to go to war to protect
Speaker 4: and to get access to the raw materials and markets
Speaker 4: that they need for basic domestic stability and economic success.
Speaker 4: So it could go each way. And what of course
Speaker 4: that means is that diplomacy matters a lot Us and China,
Speaker 4: for example, could be very peaceful over the next two
Speaker 4: decades if the expectations of future trade are positive on
Speaker 4: both sides. But if tariffs or economic sanctions kick in
Speaker 4: and both sides or one side start to believe that
Speaker 4: they're doomed to not have access to the world markets
Speaker 4: they need, then the nineteen forty one scenario of Japan
Speaker 4: might kick in, and it might lead to China, for example,
Speaker 4: going after Southeast Asia you mentioned Taiwan, or might mean
Speaker 4: the US decides it needs to be more aggressive to
Speaker 4: keep access to raw materials from Africa or from Latin
Speaker 4: America South America. So you can see that the basic
Speaker 4: point here is that trade can go either way. For
Speaker 4: my argument and my case studies almost always show this,
Speaker 4: and I can talk about a lot of them, but
Speaker 4: the most recent book, in fact, starts with the one
Speaker 4: you mentioned, which is The American Revolution, and I would
Speaker 4: say a much more complex view, but it's rooted in
Speaker 4: commerce and how the Americans felt that they were being
Speaker 4: kept down by the British from growing and becoming the
Speaker 4: fullest kind of power they could be, and they had
Speaker 4: to fight a war to break those economic sanctions or
Speaker 4: at least the trade restrictions and the restrictions that were
Speaker 4: built into the tax code that the British imposed. And ironically,
Speaker 4: and I say that the best case for thinking about
Speaker 4: US China today, or at least the one to avoid,
Speaker 4: is it seventeen fifty to seventeen seventy six case, where
Speaker 4: in this case the rising state is China, and it
Speaker 4: was back then the British North Americans and the declining
Speaker 4: state of Britain back then in the US now is
Speaker 4: a good lesson for us If we avoid what the
Speaker 4: British did, which is the extensive trade restrictions on the
Speaker 4: rising state, we can avoid of an intense cold war
Speaker 4: and in fact, of course avoid an actual hot war.
Speaker 4: So we can talk about this in a more general sense.
Speaker 4: But that's the bottom line, that's the over you about
Speaker 4: how trade leads to conflict or to peace.
Speaker 3: So I always thought of realism as a school of
Speaker 3: thought that emphasizes relative gains. So you know, two sides
Speaker 3: can be trading partners, but if one of the trading
Speaker 3: partners is getting a huge advantage or growing enormously more
Speaker 3: than the other side, then that kind of leads to tensions.
Speaker 3: Whereas in the neoliberal framework. It's all about absolute gains, right.
Speaker 3: If everyone is benefiting, even if they're unequal gains, then
Speaker 3: everyone is happy. So I'm curious, maybe help us understand
Speaker 3: your framework. I think you call it dynamic realism. Can
Speaker 3: you give us an example and sort of walk us
Speaker 3: through exactly how it works and how it differs from
Speaker 3: traditional interpretations of neoliberalism or just liberalism versus realism.
Speaker 4: Sure, Tracy, you captured one aspect, mostly the so called
Speaker 4: offensive realist perspective John Meerscheimer and so forth, which is
Speaker 4: that states in that view are always anxious and worried
Speaker 4: about the future, so they don't they never want to
Speaker 4: let a inferior state grow through trade. That relative game
Speaker 4: you talked about, and John Meiershemer for thirty five years
Speaker 4: is said, don't trade with China, it's going to grow,
Speaker 4: And of course China did grow through trade, and he
Speaker 4: finds that very upsetting. He was one of my professors
Speaker 4: at my PhD level. And that's one aspect. But my
Speaker 4: argument is that smart great powers actually balance or try
Speaker 4: to grapple with the trade offs in foreign policy. Yes,
Speaker 4: on the one hand, if you're really obsessed with the future,
Speaker 4: you don't want to let a Hitler grow, for example,
Speaker 4: so trading with Germany after nineteen thirty or nineteen thirty
Speaker 4: three was a wrong headed thing. You want to constrain
Speaker 4: that state from growing. On the other hand, most states
Speaker 4: in history, including China, are not that bad. They may
Speaker 4: have some aggressive intentions, but they are not necessarily going
Speaker 4: to destroy you. And when you're faced with that kind
Speaker 4: of state, you want to balance off the desire to
Speaker 4: keep the other down from the willingness or the desire
Speaker 4: to let's just say, constrain that other state through trade benefits.
Speaker 4: And you want to give China, for example, through the
Speaker 4: nineteen nineties and after, the ability to grow and be
Speaker 4: relatively peaceful in that growth and have incentives to not
Speaker 4: go after the system and China we can talk about this,
Speaker 4: but China is quite a unique power. It wants trade,
Speaker 4: it needs trade for domestic stability, and it has good
Speaker 4: reasons not to want to take over the world, so
Speaker 4: to speak, because of its domestic situation. So helping that
Speaker 4: state grow and build up its power is actually not
Speaker 4: necessarily a good thing, but it's relative to the alternatives, namely,
Speaker 4: cutting it off is actually a lesser of two evils,
Speaker 4: and that's where we bring in this other school of
Speaker 4: thought we call defense of realism, and in my chain
Speaker 4: after two of my new book, A World's Safe for Commerce,
Speaker 4: I do talk about that about the willingness of states
Speaker 4: making trade offs to accept a relative loss, that is,
Speaker 4: letting China grow through trade for the benefit of making
Speaker 4: the overall system more stable, and to convince the other
Speaker 4: that it does have positive trade expectations and therefore doesn't
Speaker 4: have to go on the warpath, doesn't have to even
Speaker 4: go after Taiwan. And this, if we want to get
Speaker 4: to my bottom line is the thing about Taiwan is
Speaker 4: Taiwan will not is very unlikely to be attacked in
Speaker 4: my view, because of these economic constraints, and it's very
Speaker 4: important to realize that China knows this and doesn't want
Speaker 4: to upset the apple cart by doing something perhaps as
Speaker 4: foolish as taking over Taiwan and having huge economic sanctions
Speaker 4: and disruptions to global value chains and global supply chains
Speaker 4: kick in, and that would cause a declining situation for
Speaker 4: China that it does not want.
Speaker 3: So is the argument for dynamic realism is that basically
Speaker 3: that countries can kind of shift between offensive versus defensive
Speaker 3: realism depending on the situation, and I guess their future
Speaker 3: expectations for the economy and respective growth and things like that.
Speaker 3: And if so, can you maybe give us an example,
Speaker 3: an actual historical example of like where that happened.
Speaker 4: Sure, I'd love to come back to the Japan one,
Speaker 4: since people do know about it. In my second book
Speaker 4: called Economic Interdependence in War, I study through two chapters
Speaker 4: three chapters, really Japan's growth from eighteen eighty onwards and
Speaker 4: the number of conflicts it did get into with Russia
Speaker 4: for example nineteen oh four, and of course with the
Speaker 4: US in nineteen forty one, but also the long periods
Speaker 4: of peace that Japan had, and why was Japan oscillating
Speaker 4: between relative peace and then all out major conflict while
Speaker 4: it has obviously a lot to do with commerce and
Speaker 4: its expectations of the future. So I wouldn't say that
Speaker 4: the great powers are oscillating themselves between offensive and defensive realism.
Speaker 4: What I actually try to do is blend the two
Speaker 4: into one single argument, so that what this means is
Speaker 4: that states are constantly grappling every moment really with this
Speaker 4: trade off between trying to expand their power sphere, economic power, sphere,
Speaker 4: their economic connections, so they can grow their own power base,
Speaker 4: their long term power based through trade and avoiding kicking
Speaker 4: in or propelling a cycle of mistrust and hostility with
Speaker 4: another state that might lead to a war that neither
Speaker 4: side wants. So think of the Japan case. Japan, initially
Speaker 4: from eighteen eighty to really nineteen hundred was relatively moderate.
Speaker 4: Relatively moderate, had a small war with China, but it
Speaker 4: tried to avoid big wars with big powers. And yet
Speaker 4: it got itself in to a Russo Japanese war in
Speaker 4: nineteen oh four, but that was largely because of Russia's
Speaker 4: bad behavior you might say in Manchuria and its threat
Speaker 4: to Japan's willingness and effort to trade more extensively with
Speaker 4: China itself. So it's quite clear from the documents that
Speaker 4: Japan reluctantly, after trying diplomacy, got into a war with
Speaker 4: Russia that it started. Japan started the war, but it
Speaker 4: did so only reluctantly after diplomacy had failed. In other words,
Speaker 4: it's negative expectations kicked it into a more aggressive mode.
Speaker 4: I wouldn't call that offensive realism. I would call it
Speaker 4: my dynamic realist approach, which says, if you believe you're
Speaker 4: declining because of trade cutoffs or expectations of trade cutoffs,
Speaker 4: you're going to become aggressive, and you have to be
Speaker 4: aggressive to protect your long term trade position. Now, guess
Speaker 4: what after World War One in the nineteen twenties, Japan
Speaker 4: was very moderate. We call it Shitahara diplomacy after the
Speaker 4: Foreign Minister Shitdahara. But Japan worked with the US. It
Speaker 4: had arms controlled agreements with the US. It increased quite
Speaker 4: extensively it's trade with the United States and with all
Speaker 4: great powers. And guess what nineteen thirty comes along and
Speaker 4: with the Great Depression. This is contemporary importance. US kicks
Speaker 4: in these very high tariffs. These high tariffs called the
Speaker 4: Smooth Holly Tariffs of nineteen thirty completely devastated Japan. Japan
Speaker 4: lost two thirds of its trade in one and a
Speaker 4: half years because of the Smooth Holly tariffs, and that
Speaker 4: changed everything. Japan, even with Shiitdahara still in the government,
Speaker 4: decided to as everyone knows, invade Manchuria and take over
Speaker 4: a huge part of China, take it over and control
Speaker 4: it militarily. That was September nineteen thirty one. And then
Speaker 4: with China at least, things just got went from bad
Speaker 4: to worse, and by nineteen thirty eight thirty nine it
Speaker 4: was fighting wars with the Soviet Union on the Manchurian border,
Speaker 4: and that led the US to further restrictions on oil,
Speaker 4: in particular by nineteen forty one, and those oil restrictions
Speaker 4: that were coordinated with Britain and the Dutch led to
Speaker 4: Japan declining by my estimation about twenty percent per year,
Speaker 4: and that led to Pearl Harbor. Now there's a lot
Speaker 4: of details there, Japan trying to get the oil back
Speaker 4: through diplomacy, the US almost making agreements and then cutting
Speaker 4: those diplomatic agreements off and leading to the pessimism, the
Speaker 4: negative expectations of future trade that led to a massive
Speaker 4: war we call the Pacific War. But that's a parallel,
Speaker 4: a very powerful one. And the Chinese understand that they
Speaker 4: understand that they do not want to get into a
Speaker 4: tariff spiral tit for tat a decoupling of the two
Speaker 4: economies that could make China start to decline in relative
Speaker 4: power and make it turn to the ultimate weapon, which
Speaker 4: is this preventive war to restore trade, especially in Southeast Asia,
Speaker 4: which did not go well for Japan, and everyone knows that,
Speaker 4: so China wants to avoid that.
Speaker 2: I don't want to, like skip to the final chapter
Speaker 2: of the book here, the proverbial book. But smooth, Holly,
Speaker 2: these various trade restrictions, like it does not sound good.
Speaker 2: It sounds like if someone was listening to you about
Speaker 2: what is the optimal way to avoid war. It sounds
Speaker 2: like we're on the exact opposite trajectory as of right now.
Speaker 4: Well, here's the thing, and Joe, you in some ways
Speaker 4: embedded this in your point. If we, at least in
Speaker 4: my view, if we understand history, if we understand and
Speaker 4: good theory as well, and have a more dynamic realist
Speaker 4: approach which shows these rational actors making trade offs in
Speaker 4: policy between two or three different forms of realism, if
Speaker 4: you will, then we can avoid the mistakes we made
Speaker 4: in the past.
Speaker 2: We can. But I'm just saying, at least in terms
Speaker 2: of the policy choices that we've seen lately, it does
Speaker 2: not sound like we are making the choices that reduce
Speaker 2: the temperature.
Speaker 4: Ah, but this is so interesting. Let's just go back
Speaker 4: in time here. Think of early April and Trump initially,
Speaker 4: if when he held up his big sign had thirty
Speaker 4: three percent or thirty four percent tariffs on China and
Speaker 4: much higher tariffs on other states, you know, Thailand and
Speaker 4: so forth. And that sign was a sign that Trump
Speaker 4: was going to go all out with tariffs on everyone,
Speaker 4: on every product. Most economists and myself included, I have
Speaker 4: a background in economics, would say this was a foolish policy.
Speaker 4: But guess what happened. Within a week or so, he
Speaker 4: backed away from the massive tariffs on all the allies.
Speaker 4: But because I think he had to at least show
Speaker 4: that he was still tough, he went to one hundred
Speaker 4: and forty five percent tariffs on China, and China of
Speaker 4: course retaliated. That's what you do in bargaining. You you
Speaker 4: show your resolve and you stick to your guns, and
Speaker 4: you show that you can hurt the other. And once
Speaker 4: China kicked in high tariffs or the prospect of it,
Speaker 4: and especially after it said to the US, we will
Speaker 4: not send you rare earth and critical minerals. We will
Speaker 4: not give you the kind of minerals you need to
Speaker 4: be a high tech economy. Guess what happened May twelfth,
Speaker 4: There was an agreement, and the agreement basically said, oh well,
Speaker 4: let's hold off on any big tariffs for you know,
Speaker 4: ninety days, and we went back down to I think
Speaker 4: for the US thirty percent and China ten percent. Was
Speaker 4: it a victory? Not really? But what did it show.
Speaker 4: It showed that the learning curve I was very steep
Speaker 4: within an administration that is not known for having a
Speaker 4: huge knowledge of history. Let's be honest, but there were
Speaker 4: enough smart people in the Treasury Department, in the Commerce Department,
Speaker 4: I think, in the Defense Department. It said, if we
Speaker 4: keep this up, we could get the smooth Holly effect.
Speaker 4: We could get the nineteen thirties all over again. We
Speaker 4: could get a decoupling of the two economies, which, from
Speaker 4: China's point of view, and Bloomberg itself a year ago
Speaker 4: kind of confirmed this, which from China's point of view,
Speaker 4: could cause a fifteen to seventeen percent decline in China's
Speaker 4: economy should a full decoupling and trade sanctions kick in.
Speaker 4: So I'm not pessimistic, to be honest, I'm actually optimistic
Speaker 4: that there's enough learning already going on to make sure
Speaker 4: that we will get an agreement. I believe with China
Speaker 4: on tariffs they won't be super high. Maybe I don't know,
Speaker 4: thirty five percent or something, but they're not going to
Speaker 4: be the kinds of embargo type of tariffs that we
Speaker 4: saw in nineteen forty one. That they weren't even tariffs,
Speaker 4: they were just Japan you will not get any oil
Speaker 4: from us, the US or from our allies, and that
Speaker 4: was what was causing such distress within the Japanese leadership.
Speaker 4: So you can see again that I have a bit
Speaker 4: of an agenda here. My agenda is to get this
Speaker 4: history out there so that people can understand what mistakes
Speaker 4: were made, why states were not fully rational even if
Speaker 4: they were thinking largely in my terms, and what kinds
Speaker 4: of adjustments we can make now to avoid even a
Speaker 4: cold war, let alone a hot war.
Speaker 3: The example of rare Earth just then actually reminded me
Speaker 3: of something I wanted to ask, which is, in your
Speaker 3: analysis or your framework, does it matter whether the trade
Speaker 3: between two respective sides or maybe multiple respective sides is
Speaker 3: driven by exports or imports or capital flows. Is there
Speaker 3: a qualitative difference in how people are thinking about foreign
Speaker 3: policy depending on where the trade tension is actually coming in,
Speaker 3: like if it's oil or like if it's rare Earth's
Speaker 3: something that people deem crucial to their technological development.
Speaker 4: Well, tracy is a great question and very much understudied
Speaker 4: within the field of international relations. I should mention my background.
Speaker 4: I was originally born in Canada, but my background up
Speaker 4: in Canada was in business and economics, and I worked
Speaker 4: as a finance and marketing executive in Toronto for a
Speaker 4: couple of years before I saw the light and studied
Speaker 4: international Truly the perfect gust. Well, there you go, and
Speaker 4: we can talk corporate policies as well. But what I
Speaker 4: learned from that time period of my life, but also
Speaker 4: from my knowledge and study of history, is that specific
Speaker 4: products matter a lot. The qualitative nature of the product matters.
Speaker 4: I'm going to give you an example I always give
Speaker 4: my students, which is if you have a car. You
Speaker 4: might say that the gas in the car is one
Speaker 4: percent of the weight of the car and maybe less
Speaker 4: on that in terms of its value, But you can't
Speaker 4: drive the car without guests, and so that people say, oh,
Speaker 4: rarers are only you know, one percent of our imports. Well,
Speaker 4: if you can't have rarers, you can't build the computers
Speaker 4: that we're talking through right now. You can't be at
Speaker 4: least at the technological edge and China will then overtake
Speaker 4: you technologically. And ironically, China knows this and is using
Speaker 4: this to say to the US, you want to stay
Speaker 4: you know, equal with us or ahead of us in
Speaker 4: let's say the highest of high tech products like semiconductors
Speaker 4: and so forth. Well, you're going to need our rarers,
Speaker 4: and we want to be coupled with you economically because
Speaker 4: that means our domestic stability at home will be strong.
Speaker 4: So let's play this game together and keep our trade
Speaker 4: levels high. That's the Chinese position, and we can talk
Speaker 4: about China's domestic constraints later if you want. That's my
Speaker 4: new book project. And I'm writing an article right now
Speaker 4: on rarer with a student of mine. And the bottom
Speaker 4: line here is that China has for thirty years had
Speaker 4: a very calculated strategy. America, we forget, actually produced about
Speaker 4: thirty percent of rarers about thirty five years ago. Now
Speaker 4: it produces almost none. And China has either it produces
Speaker 4: all the rarers at home, or more importantly, it creates
Speaker 4: connections with Congo and Indonesia and other places so that
Speaker 4: it can process the rarers within China. That gives China complete,
Speaker 4: almost monopoly control over most of the rarers that go
Speaker 4: into computers and AI systems and so forth. So it's
Speaker 4: a smart strategy because China is very vulnerable on food,
Speaker 4: on energy supplies, on other imports. But it has this
Speaker 4: one thing that they it knows the US needs and wants,
Speaker 4: and that's its leverage point for bargaining, and it used it.
Speaker 4: It played that ace of spades in April and it worked.
Speaker 4: Within two weeks there was a deal. Oh wow, how
Speaker 4: did that happen? Well, China knows that the Americans have
Speaker 4: enough smart people at the top to say to the president, A,
Speaker 4: mister President, you want to grow and develop a very
Speaker 4: high tech economy, you want to bring manufacturing at the
Speaker 4: highest level back to the US intel and so forth. Well,
Speaker 4: I'm sorry, sir, we can't do that without the Chinese rarers.
Speaker 4: So let's keep that going, and I'll just say very
Speaker 4: quickly and we can talk about it. But China also
Speaker 4: has another levered lever and that, of course, is China
Speaker 4: has been buying treasury bills from the US for some
Speaker 4: three decades and China still controls oh about a trillion
Speaker 4: a little less than a trillion dollars worth of US
Speaker 4: treasury bills. It could dump those and destroy the dollar's power,
Speaker 4: at least it's relative strength. And it doesn't want to
Speaker 4: do that because hey, it wants to keep the economy
Speaker 4: economic relationship going. But it can threaten that, and that's
Speaker 4: another very vulnerable point. We know that part of the
Speaker 4: reason Trump backed away from the initial tariffs, as everyone knows,
Speaker 4: is not because of the stock market, but it was
Speaker 4: because people were fleeing from the US dollar in that
Speaker 4: first weeks of April. And the real long term implications
Speaker 4: for US growth we're devastating because we have a huge
Speaker 4: deficit and a large debt. We have to get more
Speaker 4: money coming in from abroad to pay for it. And
Speaker 4: if the US dollar makes the treasury bill yields the
Speaker 4: interest rate go up, then that costs the American government
Speaker 4: a huge amount of money. So keeping interest rates low
Speaker 4: and treasury bill yields low was vital to all of this.
Speaker 4: So you can see, again from a learning perspective, I
Speaker 4: think the Americans have already had cold water splashed in
Speaker 4: their face and they said, yeah, it's cold. We don't
Speaker 4: want to go down that road. So am I pessimistic
Speaker 4: about Brazil? Okay, maybe Brazil in Canada.
Speaker 2: Actually, I'm glad you said Brazil, because I was going
Speaker 2: to ask about this. If so much of these questions
Speaker 2: hinge on expectations, Yes, it seems like very hard right now.
Speaker 2: I would imagine for other countries around the world to
Speaker 2: calibrate expectations when President Trump announces that there's going to
Speaker 2: be fifty percent tariffs on Brazil and that a major
Speaker 2: reason for the tariffs is the treatment of former President Bolsonaro,
Speaker 2: which is, like, you know, seems like it comes out
Speaker 2: of nowhere. It's not really an economic you know, How
Speaker 2: do countries, other countries even begin to form expectations at
Speaker 2: a time when trade policy to the United States is
Speaker 2: so volatile, the policy itself is volatile, and the sort
Speaker 2: of rationale for the policy is seemingly quite unpredictable.
Speaker 4: Well, it's a great question because it goes to the
Speaker 4: heart of how do I, in my technological language, operationalize
Speaker 4: this idea of expectations? Yes, how in political science terms
Speaker 4: do I measure this? And how do I understand how
Speaker 4: others see the US or the USC's others. Now, part
Speaker 4: of the way to do this historically is just look
Speaker 4: at the documents. If you think of it as a
Speaker 4: spectrum from one hundred percent, I'm assured that we're going
Speaker 4: to keep trade going with one hundred percent certainty. That's great.
Speaker 4: You know that was the US Canada relationship up until
Speaker 4: the last six months. Well, great, that's that's certainty at
Speaker 4: one end. There's also certainty at the other end, where
Speaker 4: I'm absolutely certain you're going to keep cutting me off.
Speaker 4: You are cutting me off, and it's nothing I can
Speaker 4: do diplomatically to get the trade back. That was Japan
Speaker 4: by November of nineteen forty one. I've looked at the
Speaker 4: documents that Japanese tried everything to get the trade back,
Speaker 4: including offers of major concessions, and for a very interesting reason,
Speaker 4: Fdr Franklin Roosevelt could not do that. And he almost
Speaker 4: made the three times, and he cut them off each time.
Speaker 4: And I'll give you a quick, small hint at what
Speaker 4: the real reason is. He had to save the Soviet
Speaker 4: Union from a two front war between Germany on one
Speaker 4: end and Japan on the other. So by drawing the
Speaker 4: Japanese South, not against peer Harvey didn't know about that,
Speaker 4: but drawing the Japanese South, he prevented the Soviets from
Speaker 4: having to fight a two Front War that saved basically
Speaker 4: the world from Nazi Germany taking over Eurasia as a sideline.
Speaker 4: I don't want to get into it. It's the second book.
Speaker 4: But what is important here is the japan leadership had
Speaker 4: relatively intermediate expectations in April of forty one. Oh, you're
Speaker 4: cutting us off from some kinds of oil or gas
Speaker 4: and iron ore. So well, let's work on that. So
Speaker 4: what I'm saying is if you think of it as
Speaker 4: a spectrum, Joe, and you can then calculate out how
Speaker 4: do others deal with your policies and vice? So what
Speaker 4: does Brazil do? Brazil says, my gosh, this came out
Speaker 4: of nowhere. I was, you know, relatively confident, let's say,
Speaker 4: seventy percent confident we were going to get some kind
Speaker 4: of deal. Now things are off the table. But knowing
Speaker 4: what Trump does, which is throw things out and then
Speaker 4: you know, retreat from them, you'd have to say. What
Speaker 4: you're going to do is say, well, it's fifty to fifty.
Speaker 4: I don't know where he's going to go with this.
Speaker 4: It could be fifty percent. Tariffs could easily be something
Speaker 4: he pulls away from in another six weeks. Let's hedge,
Speaker 4: let's wait, let's do the weight and see policy. And
Speaker 4: of course that's just classic logic that we all know
Speaker 4: and love in our daily lives, which is when you're
Speaker 4: not kind of certain about things, you try not to overreact,
Speaker 4: but you also try not to do nothing. You try
Speaker 4: to hedge your bets, as they say, and you make
Speaker 4: sure you can deal with either scenario in the best way,
Speaker 4: and then you wait. And that's what we would call
Speaker 4: an expectations research, a kind of middle ground where I
Speaker 4: can't decide one way or the other. So for sake
Speaker 4: of argument, I'm going to say it's fifty to fifty
Speaker 4: that he'll go one way or the other. Therefore, let's
Speaker 4: wait and see and hedge through other policies aligning with
Speaker 4: the other bricks, for example the China's and Indias of
Speaker 4: the world. Diversifying is a great term that from all worlds,
Speaker 4: especially the business world. In situations like that, you diversify
Speaker 4: away from the big risk and you go towards lower
Speaker 4: risk items like trade with the Europeans, and then you
Speaker 4: use that is leverage in the bargaining, because after all,
Speaker 4: the core thesis here is that it's not just that
Speaker 4: traditional realist view of deterministic wars that are caused by
Speaker 4: these things that you can't do anything about, and that's
Speaker 4: the traditional view that Meersheimer and others often promote. My
Speaker 4: view is a much more subtle one, which says, these
Speaker 4: factors matter, but you have control control over those expectations
Speaker 4: by your own policies, and therefore you can use diplomacy
Speaker 4: and leveraging through bargaining to affect the other's expectations and
Speaker 4: avoid the kind of conflicts that have so pock marked history.
Speaker 3: So, speaking of different policies, I mean, one of the
Speaker 3: things that has happened in recent years are the technological
Speaker 3: limitations imposed on China by the US. So we've seen
Speaker 3: those carried on from the first Trump administration into the
Speaker 3: Biden administration and now into the second administration as well.
Speaker 3: And some people would argue that there's a sense that
Speaker 3: maybe those restrictions have led to China ramping up its
Speaker 3: technological progress or certainly feeling a sense of urgency that
Speaker 3: perhaps it didn't feel as much before. And so I'm
Speaker 3: curious to what extent can this sort of fear of
Speaker 3: external limitations on commerce or trade, how much of that
Speaker 3: could be solved domestically instead of through you know, outward
Speaker 3: facing aggressive expansion or maybe even non aggressive expansion and
Speaker 3: partnerships with friendlier countries.
Speaker 4: Oh, that is a fantastic question, Tracy, and I like
Speaker 4: the way you phrased it because it allows me to
Speaker 4: talk historically about countries who have seen or expect to
Speaker 4: see restrictions on certain products and therefore try to adjust.
Speaker 4: Let's talk about Japan and Germany in the nineteen thirties.
Speaker 4: You know, many years before the wars actually occurred. Both
Speaker 4: sides were trying to synthesize at home oil and gas,
Speaker 4: and they were trying to do so because they either
Speaker 4: expected or were already being cut off from certain kinds
Speaker 4: of energy sources, especially the Middle East oil. And so
Speaker 4: Japan did not succeed. Germany was able to use coal
Speaker 4: and other things to synthesize quite a high percentage of
Speaker 4: its oil and gas that it needed during World War Two.
Speaker 4: Quite surprising in a way. But here's the thing. States
Speaker 4: undergo those kinds of things reluctantly, and there's almost always
Speaker 4: great inefficiencies in doing so. As you can imagine, you
Speaker 4: have to make trade offs once again, and you trade
Speaker 4: away from other things that could build your power more
Speaker 4: efficiently because you are reluctant to spend your money trying
Speaker 4: to do what you're talking about. And now China has
Speaker 4: been trying to build let's not kid ourselves. They've been
Speaker 4: trying to build a very strong technological base for thirty years,
Speaker 4: and especially when sieging Pinkat into Power, he announced it
Speaker 4: right away that by twenty twenty five, that that was
Speaker 4: his date, China would be largely self sufficient in semiconductor production. Well, hey,
Speaker 4: as the figure I saw that is right now, China
Speaker 4: still requires seventy to seventy five percent of its semiconductors
Speaker 4: from abroad, at least the high tech ones, and almost
Speaker 4: all of those come from ironically Taiwan, but also Japan
Speaker 4: and South Korea, and of course Navidia and other US
Speaker 4: companies are very important in all of this as well,
Speaker 4: because it's not just about the production, it's about the
Speaker 4: design of these semiconductors and the AI that goes with them.
Speaker 4: So let's just put ourselves in the shoes of China.
Speaker 4: Would they have ramped it up a bit, as you say,
Speaker 4: because of these restrictions that started in twenty seventeen, Sure
Speaker 4: they ramped it up, but were they trying to do
Speaker 4: it anyways, Yes, that's what Cijenping announced in twenty twelve,
Speaker 4: So they were already trying to do these kinds of things.
Speaker 4: So have they been slowed by the restrictions, Yes, I
Speaker 4: would argue it's quite obvious they have been. What is
Speaker 4: the alternative, Well, the alternative is to allow the free
Speaker 4: flow of all of our highest of high tech into
Speaker 4: China and allow Taiwan, in South Korea and Japan and
Speaker 4: our other allies to allow them to produce whatever they
Speaker 4: want with the highest of high tech that comes from us.
Speaker 4: And this includes, by the way, the Dutch machines, the
Speaker 4: ASML machines that make the chips in Taiwan. Taiwan doesn't
Speaker 4: make the machines, it makes the chips, right, And those
Speaker 4: machines come from from a little state called the Netherlands.
Speaker 4: And those machines two hundred million dollars or so, they're
Speaker 4: broken into four or five parts and shipped on four
Speaker 4: five separate seven forty seven's to get to Taiwan. Well,
Speaker 4: those machines are not allowed into China. They're not the
Speaker 4: highest of high tech ones. The lower level machines, Yeah, okay,
Speaker 4: those can go in so, China still has a problem.
Speaker 4: It can't make the so called under seven nanometer chips
Speaker 4: very efficiently. It has to jimmy rig it with old technology,
Speaker 4: and it's done an amazing job of jimmy rigging it
Speaker 4: and paying the efficiency costs to do so. But does
Speaker 4: that mean China will be able to be the high
Speaker 4: tech producer of the highest tech chips and then export
Speaker 4: those Now? Can it do it to make it so
Speaker 4: that it can supply its own Huawei and let's say
Speaker 4: Apple iPhone manufacturing within China, Maybe, but at a higher cost.
Speaker 4: And at the end of the day, those chips may
Speaker 4: not be the highest of high equality, and every year
Speaker 4: China knows it's falling behind or at least, let's just
Speaker 4: say Taiwan and the others including now the US and
Speaker 4: Intel are still at the cutting edge of the under
Speaker 4: five nanimeter chips now under four nanimeter chips, and those
Speaker 4: are what are essential to ai So am i in
Speaker 4: favor of continued restrictions? Yes? Am I aware that there
Speaker 4: are ways to get around it.
Speaker 2: Yes, this sort of goes back to something you were
Speaker 2: talking about the types of countries that you want to
Speaker 2: trade with, and there are disagreements about how we should
Speaker 2: perceive China's ambitions. I'm sure there are scores of books
Speaker 2: out there and the book jacket is like bright Red
Speaker 2: or something like that, and they sort of portray China
Speaker 2: is this very aggressive power with global ambitions. So they
Speaker 2: talk about all the artificial islands they're building and the
Speaker 2: various exercises that they're doing with their navy, and disputed
Speaker 2: territories and all kinds of things like that. On the
Speaker 2: other hand, you know, like I read Henry Kissinger's book
Speaker 2: about China a couple of years ago, and the way
Speaker 2: he depicts it is that from its earliest history, China
Speaker 2: has never had much i would say interest in some
Speaker 2: sense outside of trade, much interest in the goings on
Speaker 2: of the rest of the world. It's just not that
Speaker 2: excited about that. Unlike the Soviet Union, it didn't have
Speaker 2: a come Intern trying to foment communism in other countries, etc.
Speaker 2: That it, you know, besides trade, it did not have
Speaker 2: particularly expansionist visions. Talk to us about like where you
Speaker 2: land sounds like you land more on the latter, But
Speaker 2: how we should just think about China's own ambitions visit
Speaker 2: VI the rest of the world.
Speaker 4: Well in the way, Joe, this is the ultimate question.
Speaker 4: Because we know that China may or may not overtake
Speaker 4: the US and total GDP, that's an the air question.
Speaker 4: But whether China, if it does overtake the US, or
Speaker 4: even if it doesn't, has ambitions to control more of
Speaker 4: the world, or control Southeast Asia or militarily dominate Africa.
Speaker 4: Those are the kinds of questions that keep people up
Speaker 4: at night. And my argument, as always, is a nuanced one.
Speaker 4: I'm not a dove or a hawk. I'm a It
Speaker 4: depends kind of person, and here's where it depends. What
Speaker 4: is important is to understand both what I would call
Speaker 4: the propelling factors of history and the constraining factors. The
Speaker 4: propelling factors, indeed, are realist ones. All great powers when
Speaker 4: they rised Germany and Japan after in eighteen seventy, the
Speaker 4: US after eighteen ninety, all those rising powers do want
Speaker 4: to expand what I call their economic power spheres. They
Speaker 4: want to build navies to protect those spheres. They have
Speaker 4: a Mahanian Alfred Tayer Mahan kind of logic that says, hey,
Speaker 4: we need more trade to grow, but if we're going
Speaker 4: to protect that trade, we need a navy, and we
Speaker 4: need to build a navy now. So China has done that,
Speaker 4: and that's just classic. That's a strategy that all great
Speaker 4: powers have done, and it scares the declining state. Let's
Speaker 4: be honest. Britain got scared of Germany and Japan, other
Speaker 4: states got scared of the Soviet Union when it built
Speaker 4: a bluewater navy. But especially with China because of its
Speaker 4: high trade, this is very scary because now China is
Speaker 4: the dominant economic trading partner for more than one hundred
Speaker 4: countries Southeast Asia especially, and let's be straightforward, they have
Speaker 4: built a navy that's almost second to none, certainly in
Speaker 4: the Southeast Asian area, and is starting to challenge the
Speaker 4: US for global positioning posturing. You might say, in the
Speaker 4: naval realm, that is worrisome. It's very worrisome as well
Speaker 4: because with a more realist hat on again, you have
Speaker 4: to say, you never quite know or about the other's
Speaker 4: future intentions. You may even like them now, as Truman
Speaker 4: likes Stalin in nineteen forty five, but you may be
Speaker 4: uncertain about what the other will be like in ten
Speaker 4: or fifteen years time. That's a classic more offensive realist position.
Speaker 4: To say, oh, the future intentions of China are uncertain,
Speaker 4: so we have to prepare now. We have to at
Speaker 4: least assume that they're going to be bad later, So
Speaker 4: let's contain them. Now. That's the sort of logic that
Speaker 4: gets hawks going at night. But if you understand this
Speaker 4: more dynamic, balanced view of realism, you would say, hey,
Speaker 4: it's one thing to contain, but it's also another thing
Speaker 4: to push the other through containment into a hardline stance.
Speaker 4: And you push them into a position they might not
Speaker 4: otherwise have wanted to be, which is namely an aggressive
Speaker 4: or expansionistic power. So you have to balance that off.
Speaker 4: How do you do this? How do you read the
Speaker 4: tea leaves of Chinese intentions even now, but especially in
Speaker 4: ten or fifteen years time. Well, you know, this is
Speaker 4: where Kissinger is right but also wrong. He's right that
Speaker 4: the history this is my new book, The History of China,
Speaker 4: suggests that Chinese leaders do not like going abroad with
Speaker 4: their troops. They don't like taking over areas outside of
Speaker 4: China because whenever they've done so, they've had major problems
Speaker 4: at home. And I've looked at the last two thousand
Speaker 4: years of history and I can identify at least five
Speaker 4: times when dynasties have fallen because they've gone abroad or
Speaker 4: have gotten too involved in overseas issues. We can talk
Speaker 4: about those as if you want, but the Chinese leaders
Speaker 4: know their history and they know that going abroad can
Speaker 4: lead to domestic instability, and that's a constraint. Where Kissinger's
Speaker 4: wrong is that he ignores the new and quite unusual
Speaker 4: economic dimension of China's posturing towards the world. China, for really,
Speaker 4: you know, most of its history has not been that
Speaker 4: economically involved in the world, at least beyond its immediate neighbors.
Speaker 4: And this is what's new. China now has thirty eight
Speaker 4: percent of its GDP tied up in exports and imports.
Speaker 4: That's an incredible figure. It's the highest I've seen since
Speaker 4: nineteen oh five, and that was Britain, and Britain had
Speaker 4: most of its trade with colonies, and China's trade is
Speaker 4: with countries it doesn't control. So that's a very concerning
Speaker 4: thing for China. But it needs that. It needs that
Speaker 4: to grow the economy, to be technologically superior, and of
Speaker 4: course to keep domestic stability. Now that's that's the kicker.
Speaker 4: Guess what If China needs the trade to keep domestic
Speaker 4: stability because it needs to grow the economy and people
Speaker 4: need to feel that the Chinese Communist Party is legitimate, well,
Speaker 4: then it has to keep riding that tiger by having
Speaker 4: more trade. And if it's going to have more trade
Speaker 4: around the world, it needs to protect that with military
Speaker 4: or at least naval power. But that can also excite
Speaker 4: or create this spiral of misunderstanding with the very states
Speaker 4: that are on top. The US is declining relatively speaking,
Speaker 4: and it worries about that rising power. So where's my
Speaker 4: bottom line here? If we bring in the Kissinger insight,
Speaker 4: which Chinese history shows that China doesn't like to go
Speaker 4: abroad because of domestic concerns, but then add in the
Speaker 4: economic dimension, which is China has to go abroad economically
Speaker 4: to keep the peace at home, then you see that
Speaker 4: you might be able to keep China peaceful by ensuring
Speaker 4: they have positive expectations about the future trading system. If
Speaker 4: China does believe that the US is not decoupling, and
Speaker 4: Biden made sure of that in twenty twenty three when
Speaker 4: there was some talk of it. He said, oh, we're
Speaker 4: de risking, mister c Jingping we're not decoupling. Oh good,
Speaker 4: that was great. Trump almost implied that they were going
Speaker 4: to fully decouple in April, then he backed away from
Speaker 4: that by early May. I don't think he will decouple.
Speaker 4: I will almost put one hundred bucks on it, if
Speaker 4: you want, all right to say that. And that's important
Speaker 4: because that means peace can be kept through this mechanism
Speaker 4: of expectations.
Speaker 3: All we need is Trump to go to Beijing for
Speaker 3: a few big banquets.
Speaker 4: Sounds there, you go, that's important.
Speaker 3: I just have one more question, and it follows on
Speaker 3: naturally from one of your previous points about I guess
Speaker 3: the dangers of foreign entanglements and China's history, you know,
Speaker 3: trying to control and defend its very, very massive empire
Speaker 3: and also feed its massive empire. But you've talked about
Speaker 3: the Belton Road initiative, and in the context of countries
Speaker 3: caring a lot about future commerce, you know, striking all
Speaker 3: these deals and making all these investments in alternative allies
Speaker 3: or other countries makes a lot of sense. But in
Speaker 3: recent years we've seen China sort of scale down some
Speaker 3: of those ambitions, some of the Belton Road projects, which
Speaker 3: just curious how that action fits into your framework and
Speaker 3: how you would interpret that.
Speaker 4: Yeah, it's a good point. And although scaling down is
Speaker 4: an interesting point. If you're growing at ten percent in
Speaker 4: terms of your sending money abroad and you go to
Speaker 4: seven percent, you're scaling back, but you're still growing. So
Speaker 4: the way I read Belton Road is they realized that
Speaker 4: the initial efforts were not as successful for China as
Speaker 4: they wanted them to be, and a lot of countries
Speaker 4: were not able to pay back their loans. After all,
Speaker 4: most of it is loans, and so that restricted China's benefits.
Speaker 4: But the Belton Road is still the critical element in
Speaker 4: their larger global called them ambitions, which is to have
Speaker 4: connections economically with pretty well every country and area of
Speaker 4: the world, including our backyard of South America. So Belton
Speaker 4: Road is still i would say, going strong, but it's
Speaker 4: being retooled and recalibrated to make it more effective for China.
Speaker 4: Is important to realize is where that came from. Now
Speaker 4: here's the thing that we forget. We think of this
Speaker 4: as twenty twelve and Siejingping announcing the Initially it was
Speaker 4: called one Belt, one Road, Ye die e Lou, And
Speaker 4: you know, it was an interesting idea and he really
Speaker 4: went with it, and he created a banking system to
Speaker 4: support it. Well, that was really back to the nineteen
Speaker 4: nineties in this so called going abroad strategy. Can't remember
Speaker 4: the Mandarin for that, but the going of broad strategy
Speaker 4: was very similar. It was basically the idea that if
Speaker 4: we don't start to create major investments abroad and tie
Speaker 4: those two imports of raw materials, we will start to decline.
Speaker 4: We might not get even seven percent growth, let alone
Speaker 4: ten percent growth. And so they saw what we call
Speaker 4: the sort of downside of the growth curve, the s curve,
Speaker 4: and they didn't want to have that happen, so they
Speaker 4: went abroad. That's a classic strategy. The US has done
Speaker 4: it too, and the Belt and Road is a formalization
Speaker 4: of this. There's a great book by Minheu on this
Speaker 4: that traces this back to the nineteen nineties. And why
Speaker 4: why this is a strategy that they need growth through
Speaker 4: trade and trade requires us to invest and not just
Speaker 4: to form trade partners. And if we can develop their infrastructure,
Speaker 4: especially African countries or Asian countries that need the infrastructure
Speaker 4: to export the materials, then we will benefit. We will
Speaker 4: benefit strongly from that. So it's going to keep going,
Speaker 4: it's going to be retooled, it's going to be very strong,
Speaker 4: and it's a scary thing for the US, which is
Speaker 4: almost always controlled most of those global South states in
Speaker 4: terms of where that trade goes, and the US dollar
Speaker 4: of course being very much a part of that. So
Speaker 4: what I foresee is that China will keep that going,
Speaker 4: supported with the Mahanian naval strategy. The US will continue
Speaker 4: to see that as somewhat scary. But as long as
Speaker 4: at least in South America, as long as that does
Speaker 4: and go along with military installments in South America Caribbean,
Speaker 4: like the Cuban missile crisis, we will probably let it
Speaker 4: happen because we don't want to have the spiral of
Speaker 4: hostility backfire on us. So again, two rational actors, if
Speaker 4: they're rational, will balance off and trade off this desire
Speaker 4: for more power and economic connection with the fear that
Speaker 4: they might cause a spiral of misunderstanding that leads to war.
Speaker 4: And they'll play it right I if I'm correct, or
Speaker 4: at least I hope they'll read it. Yes.
Speaker 2: Likewise, I have one last question. I've asked a few
Speaker 2: different people this Shijinping. You mentioned Okay, he introduced the
Speaker 2: one Belt, one Road project. How much is he a continuation,
Speaker 2: how much is there a consistent red strain, red ribbon
Speaker 2: throughout all of the post MAO leaders versus how much
Speaker 2: is he a pivot from the direction of you know,
Speaker 2: say Hu Jintao and his predecessors.
Speaker 4: Well, I think this one also has to say that
Speaker 4: when you deal with understanding the other's intentions in any
Speaker 4: school of realism or internatural relations, you have to deal
Speaker 4: with three different levels. You have to start at the
Speaker 4: personal level, and is sieging Ping himself different? You have
Speaker 4: to start at the domestic level and say is he
Speaker 4: under certain domestic constraints or pressures that the others didn't have,
Speaker 4: or is he dealing with a different systemic environment, namely
Speaker 4: China's place in the world and what it needs to accomplish.
Speaker 4: And there's a tendency of almost everybody to go after
Speaker 4: Siejingping's personal side and say, well, he's a dictator, he
Speaker 4: wants more powers, he wants his place in history. He
Speaker 4: might attack Taiwan because of his desire for a place
Speaker 4: in history. To be honest, I think Putin is very
Speaker 4: much in that realm. He's driven by his personal aspects,
Speaker 4: not from rational calculations of geopolitics, but if you go
Speaker 4: to the domestic and the more systemic level, I think
Speaker 4: you can see sieging Ping as being very much in
Speaker 4: line with what dungshall Ping laid down in the early
Speaker 4: nineteen nineties, which initially was a so called strategy of
Speaker 4: hide and buy, to hide your power and grow your power,
Speaker 4: grow your economic strengths through trade, and bide your time
Speaker 4: for long term growth. And that, of course was thus
Speaker 4: strategy until Siegingping, and a lot of people say, oh, well,
Speaker 4: sie Jingping threw over Dungshallping, not really think about twenty
Speaker 4: twenty three. He then, once he was becoming very much
Speaker 4: aware that wolf warrior diplomacy and hardline tactics were backfiring
Speaker 4: and causing the spiral of misunderstanding, he made concessions on that.
Speaker 4: He backed way from the more aggressive, call it foreign
Speaker 4: policies that he had come to be known for propagating. Well, hey,
Speaker 4: that is still there under the surface. He still likes
Speaker 4: to sort of bully other states, that's true, but China's
Speaker 4: longer strategy is still to grow as a rye power
Speaker 4: and to use trade for that purpose. And so he's
Speaker 4: showing a lot more signs of being a moderate leader
Speaker 4: than he ever has before, because he needs those trade
Speaker 4: ties and he's using actually the Trump tariff chaos to
Speaker 4: create more trade ties with Europe and the bricks in
Speaker 4: South America and so forth. So I suspect that it's
Speaker 4: not as much his personality as much as his realization
Speaker 4: of what is rational for China over the long term. Now,
Speaker 4: the final thing I'll say on this regard is Cjping
Speaker 4: of course was a more minor official through those earlier
Speaker 4: periods in the nineties and two thousands, but all of
Speaker 4: the Chinese leaders understood that basic point, which is that
Speaker 4: we need to grow over the long term. We need
Speaker 4: trade to do so, but we also need to avoid
Speaker 4: having ourselves cut off from that trade by being overly
Speaker 4: assertive or aggressive on the world stage. What do we
Speaker 4: do We balance? We sometimes strategize so that we, you know,
Speaker 4: use a little bit of a lever, a lever over
Speaker 4: a state, like trying to tell Japan in twenty ten,
Speaker 4: we won't accept your policy over these islands, and we're
Speaker 4: going to cut you off from rarers. So the RARST
Speaker 4: threat was first broached in twenty ten, and it worked
Speaker 4: and Japan and China still trade very heavily. That didn't
Speaker 4: mean China had a new aggressive strategy, and that was
Speaker 4: before Siegingping. It just used those as levers. So in
Speaker 4: the end, I see Cegingping as very I would call
Speaker 4: him machiavellian in the good sense of the word, of strategizing, rational,
Speaker 4: calculating the future, making sure he pushes out but pulls
Speaker 4: back when he's getting pushback from other states, and making
Speaker 4: sure most of all, because of China's economy and the
Speaker 4: importance of trade to it, of making sure that it
Speaker 4: builds those trade tides and does not cut China off
Speaker 4: from those trade ties. And that is why in the end,
Speaker 4: Chezingping keeps talking about Taiwan. As you implied, Tracy, you know,
Speaker 4: we could have thought of China being ready for war
Speaker 4: against Taiwan twenty years ago. Well, it's still being postponed,
Speaker 4: and it's being postponed for a very good reason. That
Speaker 4: is the seventeen percent decline that Bloomberg pronounced a year ago,
Speaker 4: that the decline in the Chinese economy if economic sanctions
Speaker 4: kicked in after an invasion of Taiwan. So if you
Speaker 4: bring it all the way back to your first points
Speaker 4: about Taiwan. I'm not optimistic or pessimistic. I just think
Speaker 4: for rational strategic reasons, the CCP, the Communist Party, and
Speaker 4: Teaching Ping have no immediate reason for wanting to invade Taiwan,
Speaker 4: and they know that the downside is so huge economically
Speaker 4: that whatever there are other reasons, Glory included, they are
Speaker 4: not going to do that if it means destroying everything
Speaker 4: they've worked for for forty years, their economic growth.
Speaker 2: Dale Copeland, very interesting conversation. Really appreciate you coming on.
Speaker 2: Thanks for coming on odlogs.
Speaker 4: Thanks so much, Shelle, great, thank you. Well.
Speaker 2: That made me feel a little bit better about to ask.
Speaker 4: Yeah, all right, well, I mean, what do I know.
Speaker 2: I don't have any view on this question, but I
Speaker 2: was freaked out after how confident Andrew Bishop was about
Speaker 2: the prospect for war, and I like the idea that
Speaker 2: there are compelling rational counter arguments for what some would
Speaker 2: see as just a matter of time or an inevitability.
Speaker 3: You know, you mentioned all those books with red covers
Speaker 3: where they talk about like the danger and the threat
Speaker 3: of China. It's funny because I remember reading I think
Speaker 3: it was reasonably well known, but there was a book
Speaker 3: that argued the exact opposite, so kind of to Dale's point,
Speaker 3: this idea that like, actually, China has a history of
Speaker 3: having to worry about, you know, it's domestic borders and
Speaker 3: things like that. And it was called the Great Wall
Speaker 3: and the Mpty Fortress, and it too had a red
Speaker 3: It's like both sides they're always red.
Speaker 2: It's so cliche if you go to you know, I
Speaker 2: sometimes stop at the Strand Bookstore on my way home.
Speaker 3: Because it's like, right now, I've loved that place.
Speaker 2: Yeah, and I, you know, walked to the China section regularly.
Speaker 2: It's just a wall of red. It's like publishers. Come on,
Speaker 2: I get it, they're communists. Their flag is red, but like,
Speaker 2: come on, you gotta get a little bit more creative
Speaker 2: than that.
Speaker 3: Yes, Indeed, one thing that I thought was really interesting,
Speaker 3: and I probably knew this already in the back of
Speaker 3: my mind, but I guess I hadn't really thought about it.
Speaker 3: But the length of time between the Smoot Hawley tarofts, yeah,
Speaker 3: and Japan invading Manchuria was basically a year, so I
Speaker 3: guess the tariffs were nineteen thirty and then Japan invaded
Speaker 3: Manchuria in nineteen thirty one. That's extraordinary.
Speaker 2: No, the connection to and that you know, I made
Speaker 2: it through the whole episode without bringing up wages of destruction.
Speaker 3: Now you're going to do it. Well it comes.
Speaker 2: There is a lot in there about Germany's turning coal
Speaker 2: into synthetic oil, a very detailed discussion of that, which
Speaker 2: Dale brought up. But then also just more importantly, the
Speaker 2: link between the Great Depression in the United States and
Speaker 2: then the collapse of economic opportunities for all these countries
Speaker 2: and how that forced them into this more aggressive posture,
Speaker 2: so to speak. So revisiting that history because you know,
Speaker 2: in my mind, like when I think about World War
Speaker 2: Two typically, you know, is sort of easy to forget.
Speaker 2: How like, you know, the nineteen twenty nine stock market
Speaker 2: crash and the sort of domestic economic crisis in the
Speaker 2: US and Western Europe, et cetera, how directly that led
Speaker 2: to a lot of the heightened conflict.
Speaker 3: We should start like a betting market or something to
Speaker 3: see if you can mention wages of destruction in every
Speaker 3: episode of all thoughts from now until the No, I.
Speaker 2: Know, we're not triggered me by even saying it at
Speaker 2: the beginning, which was sort of cheating. I might have
Speaker 2: gone the whole episode without saying it.
Speaker 3: Haen, I know, but I believe you could do it
Speaker 3: in a in a relatively relevant way.
Speaker 2: Yes, thank you, well, it's true. It was relevant in
Speaker 2: this particular discussion.
Speaker 3: All right, shall we leave it there.
Speaker 2: Let's leave it there.
Speaker 3: This has been another episode of the Odd Lots podcast.
Speaker 3: I'm Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 2: And I'm Joe Wisenthal. You can follow me at the Stalwart.
Speaker 2: Follow our guest Dale Copeland. He's at COPLA fourteen ninety two.
Speaker 2: Follow our producers Kerman Rodriguez at Carman Arman, dash Ol
Speaker 2: Bennett at dashbod and Cal Brooks at Keilbrooks. For more
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