Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2: Hello and welcome to another episode of the Odd Thoughts Podcast.
Speaker 2: I'm Tracy Alloway.
Speaker 3: And I'm Joe Wisenthal.
Speaker 1: Joe.
Speaker 2: Up until recently, very recently, I would say there are
Speaker 2: or were two hypothetical blockades that kind of loomed large
Speaker 2: in the minds of geopolitical strategists everywhere. And the first was,
Speaker 2: of course, Iran blockading the Strait of War moves. That's
Speaker 2: clearly not a hypothetical on anymore. It's actually happened. It's reality,
Speaker 2: and we've been doing a lot of episodes about it.
Speaker 2: And so the big hypothetical blockade that we're left with
Speaker 2: to ponder is China potentially doing something with Taiwan.
Speaker 3: Definitely, and you know, the only thing I would actually
Speaker 3: flip them in the sense that I would say the
Speaker 3: vast majority of discourse has been about the letter China
Speaker 3: potentially blockading.
Speaker 4: Taiwan in some way.
Speaker 3: That was the thing that everyone has been talking about
Speaker 3: for years and years with growing intensity. And then, of course,
Speaker 3: as you mentioned now, the Hormuz situation, which sort of,
Speaker 3: I don't know, hit people by their blind spot because
Speaker 3: they didn't think it could ever really happen, or whatever
Speaker 3: really happened has happened. But when this resolves, If this resolves,
Speaker 3: et cetera, I believe the question of Taiwan will very
Speaker 3: quickly return to the fore.
Speaker 2: Oh absolutely, So, as you mentioned, it obviously hasn't happened yet,
Speaker 2: but people have been writing and thinking about it for
Speaker 2: years and years and years, and as you know, I
Speaker 2: consider myself an expert on this topic, having once written
Speaker 2: a paper in college saying that China was going to
Speaker 2: invade Taiwan before the two thousand and eight Beijing Olympics,
Speaker 2: and that obviously didn't happen.
Speaker 3: Well, being wrong has never gotten in the way of
Speaker 3: any pundit's career, that's right, so that I wouldn't worry
Speaker 3: about that. That has never been an issue as long
Speaker 3: it was as as well articulated and actually et cetera.
Speaker 3: That you're fine.
Speaker 2: It was written from a server closet while I was
Speaker 2: in Beijing, so it had that going for it. But anyway,
Speaker 2: my point is that this is something that's always sort
Speaker 2: of looming in the background, and you always see headlines
Speaker 2: kind of coming up that hint at China Taiwan tension.
Speaker 2: So we actually had one this morning. We're recording on
Speaker 2: April twenty. First, the headline is Taiwan's president canceled his
Speaker 2: visit to Swatini. Do you know where that is? It's
Speaker 2: a tiny, tiny place in Africa?
Speaker 3: Did they record?
Speaker 4: Did they like? You know?
Speaker 3: It is interesting because there's a few countries still help
Speaker 3: wholly out there that recognize that's right, Taipei is the
Speaker 3: unified capital of China. Most of like a lot most
Speaker 3: of switch. There's a few random ones out there that
Speaker 3: are still like they don't recognize the mainland, et cetera.
Speaker 3: So I'm always, you know, all little factoids here and there.
Speaker 2: I didn't know that, But so Taiwan's president offices citing
Speaker 2: air root issues. I'm doing air quotes for those who
Speaker 2: can't see this video, and China pressure. So yeah, you
Speaker 2: do get those kind of headlines every once in a while.
Speaker 2: And then the one other thing I would say is like, okay,
Speaker 2: the straight of horror moves the blockade. There clearly an
Speaker 2: oil story, and oil is something that powers the entire
Speaker 2: global economy. But as we've kind of learned over the
Speaker 2: past six or seven weeks, oil might not actually be
Speaker 2: the thing that like powers markets. Right if you think
Speaker 2: about the true, true, the thing that matters for markets,
Speaker 2: it might be something much closer to AI and semiconductor
Speaker 2: evaluation is.
Speaker 3: Cut right, Yes, totally. I mean, evidently the world could
Speaker 3: go a few weeks and not grind to a halt
Speaker 3: if the straight of horm moves is closed for a
Speaker 3: few weeks, I believe the reaction in markets would be
Speaker 3: and just all around the world, and really can everything
Speaker 3: would be orders of magnitude differently off someone's like no chips,
Speaker 3: no chips coming out. That would be such a bigger deal.
Speaker 3: And of course you know the question of you know,
Speaker 3: Taiwan's role in the world, that would already have been
Speaker 3: a very big security question even prior to the now
Speaker 3: constant drum beat obsession with AI chips, et cetera. But
Speaker 3: it only magnifies why this is such a live issue.
Speaker 2: Right, So apparently we can kind of survive a few
Speaker 2: weeks without oil. Can we survive a few weeks without
Speaker 2: we can survive a few months.
Speaker 3: We can survive a few weeks without a fraction of
Speaker 3: a certain fraction the didy whereas if we you know,
Speaker 3: the chip flow were to be disrupted on that level
Speaker 3: would just be Yes, much bigger deal.
Speaker 2: All right, Well, we do, in fact have the perfect
Speaker 2: guests to talk about all of this, someone who has
Speaker 2: just written a book on exactly this topic called Defending Taiwan,
Speaker 2: a Strategy to Prevent War with China. We're going to
Speaker 2: be speaking with Ike Freiman. He is also a Hoover
Speaker 2: Fellow at Stanford. So, Ike, thank you so much for
Speaker 2: coming on.
Speaker 4: All thoughts, thanks for having me on.
Speaker 2: Here's my first ques. And you've spent a lot of
Speaker 2: time in China, including researching this book. Are you going
Speaker 2: to be able to go back?
Speaker 5: I think I could go back. The question is whether
Speaker 5: I could leave. I'm joking. I'm joking. They gave me
Speaker 5: a hard time at immigration on the way out last time.
Speaker 2: Oh interesting.
Speaker 5: And I can't do useful research there anymore. It's not
Speaker 5: like there's archives I can access, interviews.
Speaker 4: I can do.
Speaker 5: So the value of it for research is going down
Speaker 5: for me, but also the risk of my person and
Speaker 5: the risk.
Speaker 4: Of my devices is going up.
Speaker 5: I do try to engage as much as I can,
Speaker 5: but I think it's better to engage in the third countries.
Speaker 3: What do you tell us the genesis of this book
Speaker 3: or the origin of it or how you got interested
Speaker 3: in this particular topic.
Speaker 5: Well, my background is as a China scholar looking at
Speaker 5: the China's global investment campaign. My first book was about
Speaker 5: the Belton Road and I looked at a bunch of
Speaker 5: Chinese language sources that show how it works under the
Speaker 5: hood as a campaign to mobilize the party state behind
Speaker 5: Seson Ping, and then I went on the trail of
Speaker 5: it to Sri Lanka, to Tanzania, Greece, Greenland. Actually I
Speaker 5: did my PhD about China in Greenland trying to understand
Speaker 5: how China leverages.
Speaker 3: You did our PhD about China and Greenland. Yeah, oh
Speaker 3: that is timely, and I keep going.
Speaker 4: That'll be another book.
Speaker 3: Yeah.
Speaker 5: But what I learned in the process of doing this
Speaker 5: book is that China has this formidable toolkit for blending
Speaker 5: economic power with its geopolitical objectives. And Taiwan was clearly
Speaker 5: emerging during COVID as the ai story was heating up
Speaker 5: as this monumental issue in the structure of the world economy,
Speaker 5: not just for the old reasons that we care about Taiwan,
Speaker 5: which is largely about geography. So it seemed to me
Speaker 5: reading about this, China had more ships, more planes, more missiles,
Speaker 5: more drones. What was I missing? Why is the United
Speaker 5: States not completely outmatched? So I started this project with
Speaker 5: a friend of mine named Harry Halem, who's a superstar
Speaker 5: naval historian, and I asked him, what's the book I
Speaker 5: should read to underst what a US China war over
Speaker 5: Taiwan would be, like, what it would take to win,
Speaker 5: and then what of those things the US can do
Speaker 5: or can't do? And he said, well, the book doesn't exist.
Speaker 5: I can give you hundreds of articles, hundreds of people
Speaker 5: to follow on Twitter, but no one thing to read.
Speaker 5: And so began this collaboration between two historians, one focused
Speaker 5: on the economics, one focused on the military, to.
Speaker 4: Put the pieces together.
Speaker 5: And as I did so, I began to discover there's
Speaker 5: huge gaps in our knowledge of this problem. This is
Speaker 5: the most complex, multidisciplinary, multifunctional foreign policy problem that American
Speaker 5: statecraft is ever faced. Because it's a military problem, it's
Speaker 5: also an industrial problem, it's a technology policy problem, it's
Speaker 5: a diplomatic problem, a real one, complex one for how
Speaker 5: we do with China, with Taiwan and with the rest
Speaker 5: of the world. And then finally it's an economic problem.
Speaker 5: It's a question of global economic order, because if Taiwan
Speaker 5: falls by force or coercion and China seizes the FABS,
Speaker 5: the semiconductor FABS, or the FABS are disabled or destroyed,
Speaker 5: that is a hard reset of the entire global economic
Speaker 5: system that we have had since nineteen eighty nine and
Speaker 5: arguably back to nineteen forty five. So what comes next?
Speaker 5: And while we have a lot of good thinking about
Speaker 5: certain aspects of this scenario, like the wargaming of what
Speaker 5: an amphibious campaign would look like and how we stop it,
Speaker 5: there's other aspects, like the economic planning, that we just
Speaker 5: haven't done.
Speaker 4: So that was the idea for the book.
Speaker 5: Pull together the best of existing knowledge, fill in the
Speaker 5: gaps where we can, based on interviews, based on historical work,
Speaker 5: Chinese language materials, and try to be the person to
Speaker 5: put the pieces together.
Speaker 2: I want to back way up for a second and
Speaker 2: ask a very obvious question, which is why does China
Speaker 2: actually care so much about Taiwan? And then is it
Speaker 2: even accurate to say, like why does China care about Taiwan?
Speaker 2: Should I be asking why does she himping care about Taiwan?
Speaker 5: Those are the two right questions to ask, and it's
Speaker 5: where we start with the book. The first thing to
Speaker 5: understand is that it's not about the chips.
Speaker 4: For China.
Speaker 5: The chips are a co benefit. But China cared about
Speaker 5: time I won long before they made hips, and they
Speaker 5: would care about them if they didn't make chips. Taiwan
Speaker 5: is the unfinished business of China's Civil War. In nineteen
Speaker 5: forty nine, as the gwoman Dang Chang Kai Shek's government
Speaker 5: was losing control of northern China, they began to evacuate
Speaker 5: their forces alongside all the treasures of the Imperial Palace,
Speaker 5: to Taipei, and they set up a government there, essentially
Speaker 5: took over the island by force, and became, over the
Speaker 5: course of the Korean War essentially a US ally. In
Speaker 5: nineteen fifty five, Eisenhower went to Taipei. They became a
Speaker 5: critical node in the US Alliance architecture. Mao obviously wanted
Speaker 5: to take this island. He wanted to wipe out the
Speaker 5: remnants of his enemy, and for him, the fact that
Speaker 5: there was this other China right across the strait, which
Speaker 5: at the time enjoyed the Chinese seat in the UN
Speaker 5: Security Council, was recognized by most of the world as
Speaker 5: the one true China. This was a fundamental question of
Speaker 5: the legitimacy of the Chinese Communist Party, and so it
Speaker 5: became this tootemic propaganda point. We will liberate Taiwan from
Speaker 5: the imperialists, and in the process we will make China whole.
Speaker 5: We will fix this historical wrong that we were separated
Speaker 5: under this century of humiliation, and therefore for us to
Speaker 5: be fully rejuvenated as a civilization, Taiwan has to be
Speaker 5: brought to heal and the world must accept it's not
Speaker 5: just about control over Taiwan. It's about political legitimacy. The
Speaker 5: United Nations must accept. The United States must accept that
Speaker 5: Taiwan is part of China, and there's only one China
Speaker 5: in the world, and the Communist Party is the only
Speaker 5: legitimate government. So this is why it's sensitive. It's not
Speaker 5: just about the status of Taiwan. It's about what China means,
Speaker 5: and that has always been bound up in competition with
Speaker 5: the United States.
Speaker 3: Prior to the KMT having fled the mainland of the
Speaker 3: civil war and all that, what was understood to be
Speaker 3: the status of that geography called Taiwan, and to what
Speaker 3: degree going back even prior to the Civil War, etc.
Speaker 3: What was its relationship to mainland China.
Speaker 5: It depends how far back you want to go. Back
Speaker 5: in the seventeenth century, the Dutch had a presence there
Speaker 5: as the Ming Empire was falling apart. You had generals
Speaker 5: who came from the mainland. They're claimed by both sides now.
Speaker 5: A couple of them became gods actually, and there's temples
Speaker 5: to them in Taiwan. And essentially during the Qing Dynasty,
Speaker 5: China's final dynasty, they were a region of the province
Speaker 5: across the strait on the mainland, but the Qing dynasty's.
Speaker 4: Writ didn't really run there.
Speaker 5: They were settled by people from the mainland, but it
Speaker 5: was swampy and pestilential, and there were indigenous people, and
Speaker 5: it wasn't really actively administered by the center. The Qing
Speaker 5: pretty quickly lost control over the fringes of their empire,
Speaker 5: and then the Japanese took it in the Sino Japanese
Speaker 5: War in eighteen ninety five, and the Japanese developed it.
Speaker 5: The Japanese industrialized, they left a mark on it, and
Speaker 5: unlike other places that the Japanese colonized were like Korea,
Speaker 5: where their colonization was brutal in Taiwan, they left relatively
Speaker 5: good feelings. So all through the first half of the
Speaker 5: twentieth century, when the communists and the nationalists were fighting
Speaker 5: on the mainland, Taiwan was under Japanese control. And then
Speaker 5: the question is after Japan surrendered in nineteen forty five,
Speaker 5: who did they surrender it to? And was the status
Speaker 5: of Taiwan decided after Japan's surrender, And the US position is,
Speaker 5: legally it remains unresolved. It remains unresolved who Japan surrendered
Speaker 5: it to. So the US position is we don't actually
Speaker 5: take a view on what the true status of Taiwan is.
Speaker 5: This is something for Taipei and Beijing to work out
Speaker 5: between themselves, and we are open to any outcome, but
Speaker 5: it has to be done peacefully, so no force and
Speaker 5: no coercion. And since Taiwan's become a democracy, it has
Speaker 5: to be democratically acceptable to the people of Taiwan. And
Speaker 5: that's a principled position which is really about the stability
Speaker 5: of the broader region because it recognizes that this region
Speaker 5: has held together through trade routes that go through international waters,
Speaker 5: international airspace. It's been stable since nineteen forty five. And
Speaker 5: if the United States starts allowing borders to be changed
Speaker 5: by force, trade routes to be changed by force, very quickly,
Speaker 5: the whole regional order in.
Speaker 4: This part of the world will collapse.
Speaker 5: And this is a grave economic danger for the United
Speaker 5: States as a geopolitical danger.
Speaker 4: So that's the view.
Speaker 5: And unfortunately, what China is doing is they're trying to
Speaker 5: revise that situation by pushing in the gray zone, pushing
Speaker 5: through coercion, and there's obviously always the risk they could
Speaker 5: escalate to war.
Speaker 2: I want to talk more about that, but just on
Speaker 2: the topic of I guess US policy towards China, and
Speaker 2: you already touched on the one China policy. But what
Speaker 2: exactly is strategic ambiguity? Because whenever I hear that term,
Speaker 2: I always think it's like, that's what I would do
Speaker 2: if I was trying to get out of a social
Speaker 2: commitment later that evening, or something like, oh maybe I'll
Speaker 2: come maybe you know, we'll see, we'll see what happens.
Speaker 2: What is exactly does that mean? And isn't it weird
Speaker 2: that people recognize that as an actual policy strategic ambiguity?
Speaker 2: What does it mean?
Speaker 5: So the whole policy is sort of strange because it
Speaker 5: was never put forward by one person. It emerged through accretion.
Speaker 5: So it's like seeing one hundred bottles of beer on
Speaker 5: the wall, like you keep adding a new lyric every
Speaker 5: time there's a new administration. So what is the components
Speaker 5: of the One China policy. Well, there's three communicates, three
Speaker 5: agreements that the United States signed with China between the
Speaker 5: seventies and the eighties, and those are the political foundation
Speaker 5: of our relationship with the PRC. And the language is vague,
Speaker 5: and there's some key phrases that are translated differently in
Speaker 5: English and Chinese, so we get to claim that the
Speaker 5: other side said things that the other side says it
Speaker 5: doesn't say. There's a whole lot of that, But basically
Speaker 5: the United States position is we will have a relationship
Speaker 5: with the PRC.
Speaker 4: We will treat.
Speaker 5: Beijing as the sole legitimate government of China, but we
Speaker 5: will maintain for all practical purposes an informal relationship with
Speaker 5: Taiwan as if it were a country, just not technically
Speaker 5: not de jury. And this has been reaffirmed by Congress,
Speaker 5: which in nineteen seventy nine past the Taiwan Relations Act
Speaker 5: that makes very clear that it's the sense of Congress.
Speaker 4: So we should treat Taiwan as a.
Speaker 5: State in basically every respect except for some of these formal,
Speaker 5: very high end political and military interactions. And then in
Speaker 5: the Reagan administration we made some extra commitments to Taiwan
Speaker 5: called the Six Assurances, and they basically reduced to we
Speaker 5: will not force you to the negotiating table, we will
Speaker 5: not trade you away. In other words, you will never
Speaker 5: face pressure from us to take a bad deal. And
Speaker 5: what this policy adds up to has been called by
Speaker 5: political scientists dual deterrence. We want to deter Taiwan from
Speaker 5: declaring independence or doing something provocative that might trigger a crisis,
Speaker 5: and we want to persuade Beijing that if it intervenes,
Speaker 5: it might face the devastating real but that they don't
Speaker 5: have to worry because Taiwan has also deterred, so they
Speaker 5: can take their time, and hopefully if we deter both
Speaker 5: sides from doing something extreme, we can encourage them to
Speaker 5: resolve their differences peacefully. So that strategic ambiguity is the
Speaker 5: not saying exactly what we would do or under what circumstances.
Speaker 5: The tricky thing is that was a great policy when
Speaker 5: we had overwhelming economic, technological, and military advantages.
Speaker 4: That is no longer the case.
Speaker 5: We probably could defeat China in a high end conventional war,
Speaker 5: and we can go into why if we put sanctions
Speaker 5: on China, we could probably cause a greater GDP hit
Speaker 5: in China, And we can get into why. But the
Speaker 5: cost to us and the risk to us as Americans
Speaker 5: is just going up up up as the relative balance shifts,
Speaker 5: and so now it increasingly seems like it's a get
Speaker 5: out of jail free card, even if it isn't.
Speaker 3: Quick question, I know basically nothing about taiwanis domestic politics.
Speaker 4: Am I wrong?
Speaker 1: Though?
Speaker 3: I feel like I read somewhere it's like the KMT
Speaker 3: the success they and they were the revolutionaries, aren't they
Speaker 3: the more dubbish of the parties and relations with Beijing?
Speaker 3: And don't aren't they the party that seems to be
Speaker 3: a little bit softening of the stances of the future
Speaker 3: and maybe, you know, uniting the two sides a little bit?
Speaker 4: Am I wrong about? That's? How is that possible? It's
Speaker 4: how nerdy do you want to get?
Speaker 1: So?
Speaker 4: Here's the thing I mentioned.
Speaker 5: That the dispute is largely about what China means. Now
Speaker 5: that question continues. The Gwomandong, the KMT, which is the
Speaker 5: successor of Chang Kai Shek's party, they believe that there
Speaker 5: are still the legitimate representatives.
Speaker 4: Of the true China.
Speaker 3: The entire thing.
Speaker 5: Well, they recognize that there is a free China and
Speaker 5: an un free China. And I think they've long since
Speaker 5: given up their aspirations of raising an army and going
Speaker 5: back across the straight and taken over the mainland. But
Speaker 5: I think they have an aspiration that one day this
Speaker 5: divided China can be unified, either in some kind of
Speaker 5: confederation structure or who knows, maybe with the KMT on top.
Speaker 5: And they identify culturally, historically, civilizationally as Chinese. They say,
Speaker 5: we're Chinese, we just happen to live on Taiwan. But
Speaker 5: we're one civilization, one nation. And the KMT's point of
Speaker 5: view is that we one China, respective interpretations, and on
Speaker 5: that basis, Beijing is willing to talk to them because
Speaker 5: they disagree about one China means what one China means.
Speaker 5: But they both believe in principle that there is only
Speaker 5: one China and the world and Taiwan's part of it.
Speaker 5: But the current ruling party in Taiwan, the Democratic Progressive
Speaker 5: Party of the DPP. They have a different perspective. They say,
Speaker 5: we are a country called Taiwan. We're one of the
Speaker 5: most technologically advanced places in the world. We are thriving
Speaker 5: to democracy. The world needs our chips, you know. We
Speaker 5: are at the center of this security architecture.
Speaker 3: They themselves is a distinct nation.
Speaker 5: We are a distinct nation and we should be recognized
Speaker 5: by the world as such. And they're not suicidal, they're
Speaker 5: not crazy. They recognize that if they declare independence that
Speaker 5: this could bring the hammer down on them.
Speaker 4: But their points of.
Speaker 5: View is we will never declare independence because we already are.
Speaker 5: And Americans, I think will are about to have to
Speaker 5: learn this lesson because Taiwan is going into a presidential
Speaker 5: campaign and it is far from clear where the wind
Speaker 5: is blowing, and the United States will have to work
Speaker 5: with whoever wins, because that's what it means to have
Speaker 5: a partner that's a democracy.
Speaker 4: But these two parties have very different.
Speaker 5: Points of view, and one of the points I make
Speaker 5: in the book is we need to learn to handle
Speaker 5: Taiwan's domestic politics. We are two democracies that respond to
Speaker 5: one another. For example, I think the KMT, if they
Speaker 5: come back to power, will be much less interested in
Speaker 5: helping America reshore chip production, and they're also probably much
Speaker 5: less interested in doing military cooperation with the United States
Speaker 5: if that's going to inflame China. I think, basically you
Speaker 5: can think about it this way. The DPP believes that
Speaker 5: the relationship with the United States is the most important thing,
Speaker 5: that we matter to them just as they matter to us,
Speaker 5: and that if Taiwan gets in trouble, America will come.
Speaker 5: And the KMT views are diverse, but they tend to
Speaker 5: have the view the cavalry might not be coming. The
Speaker 5: Americans might be using us as upon in a bigger
Speaker 5: geopolitical game, but can we really trust them? And we
Speaker 5: don't want to become Ukraine, So maybe the best approach
Speaker 5: is to negotiate. And these are two very different points
Speaker 5: of view. They're both plausible interpretations of the facts, and
Speaker 5: the United States has to learn to deal with both sides.
Speaker 2: I want to ask you more about reshoring, but since
Speaker 2: we're on the topic of domestic Taiwanese politics, one thing
Speaker 2: I've always wondered, and I'm curious if you maybe got
Speaker 2: some color on this in the cour of your research.
Speaker 2: But one of the reasons, it's not the only reason,
Speaker 2: but a big one. One of the reasons Taiwan is
Speaker 2: strategically important is because of the semiconductor business and the
Speaker 2: presence of TSMC and companies like that. What role does
Speaker 2: a TMC play in Taiwanese domestic politics? Like, are there
Speaker 2: actual instances of like semiconductor companies having a seat at
Speaker 2: the table when it comes to formulating national security policy
Speaker 2: or indirect influence or anything like that. Have you seen examples?
Speaker 4: It's hugely, hugely important.
Speaker 5: It's only a couple of percent the semiconductor industry depending
Speaker 5: on how you define it with related services industries, it's
Speaker 5: something like five percent of employments in Taiwan, but it's
Speaker 5: an outside share of Taiwan's exports. And right now, just
Speaker 5: if you look at the macro data, Taiwan's exports are
Speaker 5: booming because no one can get enough of their chips.
Speaker 5: There is an entire ecosystem of universities, vocational training centers,
Speaker 5: companies that supply to TSMC. This is a national champion
Speaker 5: in so many ways, and they get tax benefits and
Speaker 5: subsidized land and Taiwan's political economy is organized around making
Speaker 5: them a success, just as South Korea's has been organized
Speaker 5: around making Samsung and others a success. TSMC is smart
Speaker 5: enough to know that it has to deal with administrations
Speaker 5: of both parties. But TSMC is also caught in a
Speaker 5: US China at tension too, and TSMC doesn't share the
Speaker 5: United States political objectives here. TSMC is happy to sell
Speaker 5: to China. They don't have a problem with China buys
Speaker 5: lots of their chips, but they have to work with
Speaker 5: the United States because ultimately they are fabricating chips at
Speaker 5: the high end that are made with US designs, So
Speaker 5: the US does have the ability to export control where
Speaker 5: there's final products go.
Speaker 3: This is really interesting and important and I hadn't thought
Speaker 3: about this dynamic. I mean, I guess it sort of
Speaker 3: makes sense to me that, like if I were like
Speaker 3: the leadership in Taiwan, I don't know if I would
Speaker 3: be like that thrilled about our main company opening up
Speaker 3: FABS and Arizona, et cetera. But I guess it sort
Speaker 3: of makes sense, Like, Okay, you know, the US is
Speaker 3: a pretty important partner. But what I'm wondering, you know,
Speaker 3: like in a future scenario. So going back to Reagan,
Speaker 3: and it's like, we're this doctrine, We're never gonna put
Speaker 3: pressure on you to like accept a bad deal. What if,
Speaker 3: over time, organically a new generation of sort of more
Speaker 3: sympathetic like mainland voters, like they grow up, they look
Speaker 3: at the world, they see maybe the US sort of
Speaker 3: looks like a belligerent power sometimes, et cetera. They look
Speaker 3: at China and it seems it looks like they're doing
Speaker 3: a lot better. They're not as poor as they used
Speaker 3: to be, they look pretty stable, et cetera. Like, could
Speaker 3: Taiwan just sort of migrate closer to the Chinese sphere
Speaker 3: or perhaps even merge back into China organically?
Speaker 4: Yes? And that and.
Speaker 3: Is that is that something that like US policy like
Speaker 3: feel like, do we feel.
Speaker 4: That we have to prevent that?
Speaker 3: If that's sort of where the democratic action in Taiwan goes, well.
Speaker 5: Our long standing policy is that it's the right of
Speaker 5: the people of Taiwan, yeah, to decide their own future.
Speaker 5: And that's a principled position that we hold for a
Speaker 5: reason that is also self interested, which is, if Taiwan
Speaker 5: decides that they want to submit or they want to
Speaker 5: take a deal, and they want to unify with the mainland.
Speaker 5: By the way the mainland uses this term reunification, that's
Speaker 5: a weasel word. Taiwan has never been subject to the
Speaker 5: People's Republic of China in its history. But if Taiwan
Speaker 5: becomes unified as part of China, what's the United States.
Speaker 4: Going to go in? We're going to go in and
Speaker 4: topple the governments.
Speaker 5: We're going to tell them no, that they should have
Speaker 5: self determination to decide. And that is one reason why
Speaker 5: it's a no brainer to start to build a semiconductor
Speaker 5: manufacturing base in the United States and Japan and other
Speaker 5: allied countries, because there's any number of reasons to doubt
Speaker 5: whether we have assured access in the long term to
Speaker 5: Taiwan's chip supply. And if this is the most essential
Speaker 5: bottleneck the develop meant of frontier ai then we cannot
Speaker 5: put all of our eggs in that basket.
Speaker 3: Do we know like younger Taiwan is there a reason
Speaker 3: to think that? Like, I don't know. I have again,
Speaker 3: I haven't looked at polling of like how the younger
Speaker 3: what do we know about them?
Speaker 5: So the younger Taiwanese tend to lean more towards the DPP. Historically,
Speaker 5: they tend to in polls, they tend to identify as
Speaker 5: I'm Taiwanese only. Rather very few of them will say
Speaker 5: I'm Chinese only. More of them will an increasing number
Speaker 5: will say that I'm Taiwanese only, although many will say
Speaker 5: I'm both Taiwanese and Chinese. Chinese in the sense of
Speaker 5: culturally civilization of Chinese, not Chinese in the sense of
Speaker 5: People's Republic of China Chinese. And I think these dynamics
Speaker 5: are affected by what the mainland does.
Speaker 4: China is.
Speaker 5: I think perfectly happier season Ping will be perfectly happy
Speaker 5: if Taiwan would sign a piece of paper that says
Speaker 5: I accept one country, two systems Taiwan, which is to say,
Speaker 5: I accept your principle that there's only one China and
Speaker 5: we're part of it, and you're the legitimate leaders, and
Speaker 5: we will get a Hong Kong style arrangement where we
Speaker 5: get to keep our laws, our institutions, our democracy, we
Speaker 5: get some freedom of expression, freedom to organize, We get
Speaker 5: our fancy passports that have visa free access to all
Speaker 5: these countries, all these perks, and maybe Beijing will give
Speaker 5: them free energies.
Speaker 4: Other subsidies, other perks.
Speaker 5: That is the offer that's on the table for Taiwan,
Speaker 5: but it's become a whole lot less attractive now that
Speaker 5: Taiwan has watched what happened to Hong Kong.
Speaker 4: Because Hong Kong took that.
Speaker 5: Deal and it was all right until people in Hong
Speaker 5: Kong started to object to the CCP's encroachment on their
Speaker 5: institutions and their freedom to organize and speak out.
Speaker 4: And when it ended up happening.
Speaker 5: Is season ping sent in masked thugs that brutalized people,
Speaker 5: rounded them up, disappeared people in the night, terrorized the population,
Speaker 5: and crushed them into submission. So I think Taiwan has
Speaker 5: understood twenty nineteen that if they take one country, two systems,
Speaker 5: it's the slow beginning of the end of their democratic
Speaker 5: institutions and their freedom. It is not a it's not
Speaker 5: a deal that they would take, I think willingly. But
Speaker 5: if they feel that the United States and the rest
Speaker 5: of the world isn't backing them up, and they're offered,
Speaker 5: Beijing essentially says, you want to do this the easy
Speaker 5: way or the hard way. I can imagine a world
Speaker 5: in which they choose the easy way and This matters
Speaker 5: because we're not just talking at peace time. We're also
Speaker 5: talking about crisis scenarios. There's all kinds of things that
Speaker 5: China can do to dial up the pressure. They can
Speaker 5: mobilize their forces in the Taiwan Strait for a potential invasion.
Speaker 4: Oh, it's just an exercise. It's just an exercise until
Speaker 4: it's not.
Speaker 5: They can start to curtail the flow of goods and
Speaker 5: planes coming to and from Taiwan. They can start to
Speaker 5: ask for manifests. Who's on the plane? Oh so sorry,
Speaker 5: Ike is on the plane? Could you make a pit
Speaker 5: stup in Shanghai? We want to ask them some questions.
Speaker 5: There's so many ways that Bijin can turn up the pressure.
Speaker 5: They probably have Special Forces United Front people on the
Speaker 5: ground in Taiwan. They can do cyber attacks against someone
Speaker 5: critical infrastructure. They can blank the country with propaganda, the
Speaker 5: island rather with propaganda. There's so much things that China
Speaker 5: can do to put the pressure on and try to
Speaker 5: drive wedges between Taiwan, the United States and Japan. And
Speaker 5: in those moments, what is the US political strategy? Yeah,
Speaker 5: we have a military strategy if they turn to an invasion,
Speaker 5: But what is the political strategy, if the markets start
Speaker 5: to panic, if we think we may need to get
Speaker 5: our American citizens out, And these are the scenarios I
Speaker 5: argue in the book that we haven't yet fully thought through.
Speaker 2: In your framework. What's been the big constraint on Hihinping
Speaker 2: so far historically, Like, why hasn't he done something on
Speaker 2: Taiwan yet?
Speaker 4: Well, we don't know. We have to speculate.
Speaker 5: One reason is that the People's Liberation Army, the PLA,
Speaker 5: I think it's fair to say, up until recently and
Speaker 5: probably still now, lacks the ability to take and hold
Speaker 5: Taiwan by force. Back in nineteen forty nine, after Mao
Speaker 5: took over the mainland, the first thing he did was
Speaker 5: he told his generals, now give me the plan to
Speaker 5: take Taiwan. And they studied it and they concluded, Sir,
Speaker 5: it can't be done. This is one of the hardest
Speaker 5: waterways in the world. There's crazy tides, there's enormous waves,
Speaker 5: there's fifty mile an hour winds, there's typhoons, there's fog,
Speaker 5: and there's only a few landing beaches that are plausible.
Speaker 5: And Taiwan knows what those are. And now they have
Speaker 5: spent the better part of a century fortifying them. So
Speaker 5: if you want to get all of your men across
Speaker 5: the strait, you have to deliver them by sea or
Speaker 5: by air, and air is difficult, as Ukraine has shown.
Speaker 5: It's easy to shoot down helicopters and planes, and so
Speaker 5: you need to take them in these amphibious ships, which
Speaker 5: can be sunk by mines or cheap drones or artillery.
Speaker 5: And then you have to get them into the shores,
Speaker 5: and then you potentially have to sustain them for a
Speaker 5: long period of time. You need to give them vehicles
Speaker 5: and AMMO and fuel and food and medicine. And happens
Speaker 5: if you successfully deliver fifteen thousand troops to the shores,
Speaker 5: and then.
Speaker 4: Your logistics tail gets cut because.
Speaker 5: A number of your amphibious ships end up on the
Speaker 5: bottom of the Tai one straight, and then your men
Speaker 5: are massacred on the beaches. So many things have to
Speaker 5: go right in a highly synchronized way for an amphibious
Speaker 5: invasion to work, such that d Day, which is the
Speaker 5: great example in history where we had all these advantages
Speaker 5: that China wouldn't have today, Very very almost it came
Speaker 5: very very close to going completely off the rails, as
Speaker 5: I discussed in the book. So season paying is systematically
Speaker 5: building the capabilities he would need. He's building out this
Speaker 5: amphibious fleet. He's building better anti submarine warfare to force
Speaker 5: us back. He's building longer range ballistic missiles that can
Speaker 5: target ships to force our aircraft carriers to stay further
Speaker 5: back from the conflict zone. He's building out his air
Speaker 5: force and drones, cyber tools, all these things to coerce Taiwan.
Speaker 5: But if you roll the dice on an invasion today,
Speaker 5: I think, at least if you look at the public wargames,
Speaker 5: it is possible that he would suffer a pretty catastrophic defeat.
Speaker 5: So that's one reason for patients. But as his preparations proceed,
Speaker 5: I think he's getting more confident.
Speaker 2: So one of the things you used to hear a
Speaker 2: lot more, and I don't think you hear it nearly
Speaker 2: as much nowadays, but this idea of economic pain, Right,
Speaker 2: if China invaded Taiwan, there would be some sort of retaliation,
Speaker 2: maybe sanctions, something like that. And because the CCP had
Speaker 2: built its legitimacy on the social compact with its population,
Speaker 2: which was basically, you know, we're in power and in exchange,
Speaker 2: you all hopefully get rich. That was just untenable for
Speaker 2: Shishimping and other policy makers. You don't hear that that
Speaker 2: much anymore. And I wonder, I wonder why that is.
Speaker 2: Is it just because like people feel that China has
Speaker 2: reached the level of economic development, where like okay, the
Speaker 2: legitimacy has been established in terms of the social compact.
Speaker 2: Or is it because we had an example of Russia
Speaker 2: invading Ukraine and very obviously being willing to trade off
Speaker 2: that military action even though it generated an enormous amount
Speaker 2: of economic pain for the country.
Speaker 5: It's a whole bunch of factors at once. Season Ping
Speaker 5: has overseen a transformation in the social contract in China
Speaker 5: from development to ideology and national security. From the anti
Speaker 5: corruption campaign to his ideological rectification campaigns, to rewriting the
Speaker 5: history textbooks to taking Communist party cadres to historical sites
Speaker 5: to study points of hardship and party history. Season Ping
Speaker 5: uses this term struggle to describe what the party should do,
Speaker 5: and he has told young people that can't find work
Speaker 5: that they should eat bitterness, the idea being you should
Speaker 5: tough it out. We are in nations striving for national rejuvenation,
Speaker 5: national rejuvenation means rising to the height of human achievement
Speaker 5: in every human endeavor. And to do that, we're going
Speaker 5: to work hard, and we're going to make some sacrifices.
Speaker 5: And he has tightened surveillance, he has tightened discipline that
Speaker 5: allows him to run this regime according to a very
Speaker 5: different set of rules through coercion. And that means we
Speaker 5: have to assume that China's tolerance for economic pain has increased.
Speaker 5: Now at some point there's a limit if the financial
Speaker 5: system were just to implode under the threat under the
Speaker 5: threat of sanctions, or because there's just mass capital flight
Speaker 5: because no investor wants to be stuck in ill liquid
Speaker 5: assets in China. If the US and China are headed
Speaker 5: to war, Yes, there's possible that China could suffer a
Speaker 5: sudden black Swan collapse, but I think that's not base case.
Speaker 5: And I have a work that I describe in a
Speaker 5: lot of detail in the book about how over the
Speaker 5: last ten years China has been systematically building shock absorbers
Speaker 5: into its financial system to make it more likely to
Speaker 5: survive the gut punch of the imposition of sanctions and
Speaker 5: the fact that Rush's financial system, which had met it
Speaker 5: lacked many of these advantages, was able to steady itself
Speaker 5: after the imposition of sanctions. Is I think an encouraging sign,
Speaker 5: just a couple of numbers to bring us home. At
Speaker 5: the beginning of the Russia Ukraine War, Russia was blindsided
Speaker 5: that the Europeans joined all the sanctions. They had moved
Speaker 5: a lot of their central bank assets from dollars into euros,
Speaker 5: and then the Europeans froze those assets, which meant suddenly
Speaker 5: half of their foreign exchange reserves were just inaccessible to them.
Speaker 4: That was a huge boo boo for the Russians.
Speaker 5: And then the sanctions regime targeted SpareBank and other major
Speaker 5: banks in ways it had not been expected. So the
Speaker 5: ruble lost something like half its value in a couple
Speaker 5: of weeks, and there was a real risk of Russian collapse.
Speaker 5: But with only three hundred billion dollars at foreign exchange available,
Speaker 5: they were able to write the ship because they they
Speaker 5: imposed capital control regime. They limited outflows from banks, They
Speaker 5: raised interest rates to twenty percent, They demanded that state
Speaker 5: enterprises payments in rubles, all of these things to increase
Speaker 5: demand for rubles and keep the bank solvent. And then
Speaker 5: foreign hedge funds that had profited on the ruble short
Speaker 5: took a look at the situation and they said, well,
Speaker 5: are there are more sanctions coming? Well, if the answer
Speaker 5: is no, then it's all priced in and the ruble
Speaker 5: looks pretty cheap because actually Russia's imports have just collapsed
Speaker 5: and their exports are booming because the oil price is up.
Speaker 5: And then in April of twenty twenty two, the ruble
Speaker 5: was the best performing currency in the world, and then
Speaker 5: the ship was setting, and then the economic war became
Speaker 5: an attritional contest that we have not won yet. And
Speaker 5: I think there is a similar dynamic with China. There's
Speaker 5: some possibility that their financial system could implode, but China,
Speaker 5: if you count their shadow reserves, has between ten and
Speaker 5: twenty times.
Speaker 4: The EFX that was available to Russia.
Speaker 5: They have an existing capital control regime, all the banks
Speaker 5: are run by the state, and if they survived that
Speaker 5: gut punch, they have the stockpiles to live on their
Speaker 5: own supply for men many many months if they're entirely
Speaker 5: cut off from imports. So the question is, if we
Speaker 5: can't defeat them economically slowly, how do we think about
Speaker 5: the long term contest of economic pain such that it
Speaker 5: is something that we as a coalition of democracies can
Speaker 5: possibly win. And the answer I come to in the
Speaker 5: book is we have to stop thinking about it as punishment.
Speaker 5: Stop thinking about is how we could hurt China in
Speaker 5: a way that hurt us too. We need to think
Speaker 5: about what are the things that we would want to
Speaker 5: do in our own best interests in a crisis to
Speaker 5: secure our own economic interests that would just happen to
Speaker 5: hurt China as a byproduct.
Speaker 3: Just real quickly on cutting off imports? Are they good
Speaker 3: on oil?
Speaker 4: For like this is?
Speaker 3: We know they have this big oil stockpile. War would
Speaker 3: be extremely oil intensive process. You know, they d a
Speaker 3: lot of cars. I doubt they're military as nearly is.
Speaker 4: I think they're good. I think they're good on oil.
Speaker 5: You think so? They in peacetime they consume what is it,
Speaker 5: thirteen fourteen million barrels a day, of which around four
Speaker 5: are produced domestically. If they became cost and sensitive, which
Speaker 5: they would be in a crisis, they could probably squeeze
Speaker 5: that up a bit. They also can import overland. They import,
Speaker 5: you know, a couple of million barrels a day over land.
Speaker 5: And if they had to, they could import more by land.
Speaker 5: It wouldn't be comfortable, it wouldn't be cheap, but if
Speaker 5: they would have willingness to pay, they have plenty of
Speaker 5: foreign exchange. They could also do as the Nazis did,
Speaker 5: which is turned coal into fuel oil fisher trobes has
Speaker 5: been done in the past. The Nazis declared were on
Speaker 5: all their oil suppliers, and they still managed to fight
Speaker 5: through nineteen forty five pretty effectively.
Speaker 4: But there's more to this.
Speaker 5: They've got They declare, what is it, one point three
Speaker 5: billion barrels in their spr they probably have something more
Speaker 5: like two, and then they can make the civilian economy.
Speaker 5: The PLA would use something like five hundred thousand barrels
Speaker 5: a day. So if you run the math and I
Speaker 5: just do the back of the envelope in the book,
Speaker 5: what matters is not that they would run out of
Speaker 5: oil eventually at some point they would feel the squeeze,
Speaker 5: but our allies Japan, South Korea.
Speaker 4: Taiwan would feel the squeeze much faster.
Speaker 5: So our coalition as currently set up doesn't have the
Speaker 5: advantage in a long term contest of extreme economic war.
Speaker 5: And it's not just about oil. It's about everything else.
Speaker 5: They have stockpiles of cotton, they have stockpiles of chips,
Speaker 5: they have stockpiles of everything plausible that they might need.
Speaker 5: Taiwan doesn't have that, Japan doesn't have that. So this
Speaker 5: is the risk that they take us up to the brink.
Speaker 5: We are forced to contemplate what the long term economic.
Speaker 4: War looks like.
Speaker 5: We realize that if they can last for twelve months
Speaker 5: and we can last for three, that's not a game
Speaker 5: we want to play, and we fold. And then if
Speaker 5: that is established, they can coerce us. And this is
Speaker 5: not just about Taiwan. This goes far, far, far beyond Taiwan.
Speaker 5: This is about our entire alliance architecture in the region,
Speaker 5: and frankly, this is about our hemisphere too.
Speaker 2: One of the arguments you make in the book is
Speaker 2: this idea that a US policy response can't just be
Speaker 2: about military power, it has to be about economic power
Speaker 2: as well. And you talk about this idea of avalanche decoupling,
Speaker 2: so sort of forming a grand alliance with other democracies
Speaker 2: to try to isolate China from the global economy. And
Speaker 2: when I hear a term like avalanche decoupling, I kind
Speaker 2: of think like, well, in some respects. The US and
Speaker 2: maybe some other parts of the world have been trying
Speaker 2: to decouple from China for a long time, with varied
Speaker 2: degrees of success. What convinces you that something like that
Speaker 2: would be possible in a crisis moment, especially when we're
Speaker 2: talking about again grand alliances with democracies that maybe under
Speaker 2: the Trump administration we don't seem to have the best
Speaker 2: of relations with at the moment.
Speaker 5: It's a really important question, So let's take the heart
Speaker 5: facts head on. In the last couple of years, we
Speaker 5: have learned some very important things about what is and
Speaker 5: is not possible when it comes to breaking our critical
Speaker 5: dependencies on China. Everyone knows that we have these critical
Speaker 5: dependencies which strike at the very heart of our lives
Speaker 5: and livelihoods. We depend on China for the active pharmaceutical
Speaker 5: ingredients that save lives every day in hospitals. We depend
Speaker 5: China on the supply chain to build any drone in
Speaker 5: the United States. We depend on China for legacy chips,
Speaker 5: without which we can't make cars. There is no Ford,
Speaker 5: there is no Stilantis. I think that's crazy. I think
Speaker 5: it's crazy. I think it opens up the United States
Speaker 5: to black economic blackmail, and frankly, the fact that our
Speaker 5: allies have the same dependencies opens them up to black
Speaker 5: mil too. So it's a no brainer that we should
Speaker 5: start to break these dependencies on China in the same
Speaker 5: way that China is trying to break its dependencies on
Speaker 5: us because they don't want to be blackmailed. So what
Speaker 5: is dangerous is that China would be able to de
Speaker 5: risk their economy largely from ours. But we couldn't do
Speaker 5: that in a symmetrical way. But if a crisis happens
Speaker 5: over Taiwan, whether that's tomorrow or eighteen months from now
Speaker 5: or five years from now, it will be an oh shoot,
Speaker 5: I guess we should have done all of that five
Speaker 5: years ago, But that will be yesterday's problem. And the
Speaker 5: question for today's problem is how do we deal with
Speaker 5: the situation we face. And it's very possible that situation
Speaker 5: would be in the context of a crushing recession and
Speaker 5: stock market correction, because, as we mentioned at the beginning
Speaker 5: of this conversation, the whole equity market is being held
Speaker 5: up by an ai trade. We're seven tech companies that
Speaker 5: are priced for perfection make up forty percent of the
Speaker 5: S and P, and if you take away the supply
Speaker 5: of chips, they fall to earth. Six hundred billion dollars.
Speaker 5: Is that the number the hyperscalers are spending on data
Speaker 5: centers this year.
Speaker 3: It's close enough.
Speaker 4: You take that.
Speaker 5: Away, and the use economy is in recession. So imagine
Speaker 5: the context of a terrifying stock market correction and heading
Speaker 5: into recession. Let's assume that we China has taken some
Speaker 5: actions that reveal that we really need to expand this
Speaker 5: derisking or partial decoupling thing. But we've also learned that
Speaker 5: we can't decouple from China all at once, because we
Speaker 5: tried this on Liberation Day and we got cold feet
Speaker 5: within a week because the bond market blew up and
Speaker 5: all the captains of industry called up the president and said,
Speaker 5: you have to reverse this, mister President, or we're cooked. So,
Speaker 5: if you can't decouple from China all at once and quickly,
Speaker 5: the only way to do it is gradually looking at
Speaker 5: the critical stuff first and the non critical stuff later.
Speaker 5: If ever, so what I want to do is say
Speaker 5: what is the most critical things? If you have to
Speaker 5: stack rank our dependencies, what's ninety ninth percentile, what's ninetieth,
Speaker 5: what's seventieth, what's fiftieth, and then let's go down the
Speaker 5: list one at a time and figure out how do
Speaker 5: we break these dependencies. So in the event of a crisis,
Speaker 5: an invasion of Taiwan or a blockade of Taiwan or
Speaker 5: some gray zone ambiguous thing, if we decide we need
Speaker 5: to reset this relationship and we need to decouple from
Speaker 5: China five percent, ten percent, thirty percent, what does that
Speaker 5: actually entail?
Speaker 4: And I would submit that that's a much.
Speaker 5: Harder problem than we've realized, because even if we want
Speaker 5: to decouple just a little bit, we face a transhipment
Speaker 5: problem right now. As we've discovered, you have a tariff
Speaker 5: differential on China, the tariffun China is here, the tariff
Speaker 5: on Vietnam, Mexico, everyone else is here.
Speaker 4: So companies will export their.
Speaker 5: Stuff from China to Vietnam or Mexico, they'll write made
Speaker 5: in Vietnam or Mexico on.
Speaker 4: It, and though we send it to us. So if
Speaker 4: you don't develop a.
Speaker 5: Solution to this transhipment problem, there is no way that
Speaker 5: you can decouple from China even a little bit, even
Speaker 5: in a crisis. That to me is very scary and
Speaker 5: the process of working with other countries to address this. Essentially,
Speaker 5: this is rules of origin for trade. This is a
Speaker 5: big enterprise that is going to take years and years
Speaker 5: to do. It cannot be done right away. So what
Speaker 5: we're talking about with Avalanche de coupling is a process
Speaker 5: that it abandons the fiction that we can do this
Speaker 5: all at once and starts thinking about if we need
Speaker 5: to divorce China ten percent, thirty sixty percent, whatever it is,
Speaker 5: how do we go about building a new kind of
Speaker 5: economic order such that we can still have trading relations
Speaker 5: with the rest of the world. And that question has
Speaker 5: not been addressed until this book.
Speaker 3: I find this conversation to be like, very alarming, and
Speaker 3: you know, obviously and it should be very alarming. I
Speaker 3: guess the good news, if there is any, is that
Speaker 3: we have spent the last year several years deepening our
Speaker 3: friendships with the rest of the world and building up
Speaker 3: our allies and establishing that open non China trading block.
Speaker 3: At least we're oh wait, no, we're literally we're literally
Speaker 3: doing the opposite.
Speaker 2: Well, I was going to say, on the plus side,
Speaker 2: if one of the one of the elements of China
Speaker 2: deterrence is building a better custom system, where we can
Speaker 2: actually track transhipments, then maybe maybe some of that work
Speaker 2: has been done. It's better than like buildings.
Speaker 3: But like it does seem like we're kind of not
Speaker 3: doing any of this right, I mean not only not
Speaker 3: doing any of this correct, we are like rowing. I like,
Speaker 3: if the goal is let's do this avalanchey coupling around
Speaker 3: the world, to like, we're going in the opposite direction.
Speaker 4: Yeah, that's exactly that's exactly right.
Speaker 5: The only way you can get this stuff done is
Speaker 5: if you work with your partners.
Speaker 4: That's the only way.
Speaker 5: Yeah. And that's not about being moralistic, it's about practically speaking.
Speaker 5: There's stuff that we don't know how to make in
Speaker 5: this country anymore because we outsourced it two generations ago
Speaker 5: and there literally aren't any people left who know how
Speaker 5: it's done. And Japan or South Korea in particular, but
Speaker 5: many of our European partners too have this know how
Speaker 5: in advanced manufacturing, and not to partner with them I
Speaker 5: think is kind of crazy. Also, they face the same problems,
Speaker 5: the same risks of economic coercion by China, and they
Speaker 5: have even less leverage to put back push back against
Speaker 5: China because Chinese, relatively speaking, as much bigger than they are.
Speaker 5: So I think the Trump administration has a few correct
Speaker 5: ideas dealing with these rules of origin through these bilateral deals. Yeah,
Speaker 5: doing bilateral economic security packs like with Japan, but we
Speaker 5: need to be bringing larger groups of allies and partners together.
Speaker 4: To do this, just real quickly.
Speaker 3: I think you mentioned at the beginning that you actually
Speaker 3: think currently in a conventional war that the American military
Speaker 3: would have the upper hand. I don't, but like, you know,
Speaker 3: it looks like I don't know what's going to go
Speaker 3: on with the ron and I'm very susceptible water child,
Speaker 3: the Johnese propaganda. I watched the military prayers, like it
Speaker 3: looks really impressive, the robot dogs and all this stuff
Speaker 3: or the robot dogs. Yeah, like, give a short version
Speaker 3: of why as of April twenty first, twenty twenty six,
Speaker 3: you think the US military still is the upper hand.
Speaker 5: This is something I learned in the process of working
Speaker 5: on this book and the previous book. There's a companion
Speaker 5: book called The Arsenal of Democracy, which is all of
Speaker 5: the military US in volts that my editor is like,
Speaker 5: no way you're putting it. That's too nerdy. But here's
Speaker 5: what I discovered in researching that book. The wars that
Speaker 5: America has fought over the last eighty years have been
Speaker 5: land wars, and land war has a certain character and
Speaker 5: war at sea has a totally different character. And the
Speaker 5: basic reason is that war on land involves lots and
Speaker 5: lots and lots of units that are basically interchangeable, and
Speaker 5: so it's attritional. You're wearing each other down, you're fighting
Speaker 5: along a long line. You're applying pressure, and there's an
Speaker 5: equilibrium and a balance, and you're basically trying to hold
Speaker 5: up enough reserves with potential energy to punch through the
Speaker 5: enemy's line and then send in the cavalry and their
Speaker 5: line collapses and you write to victory. So if you
Speaker 5: look at the maps of World War One, for example,
Speaker 5: the line doesn't move, it doesn't move, it doesn't move,
Speaker 5: it doesn't move, and then it breaks.
Speaker 4: War at sea is different.
Speaker 5: You have a very small number or much smaller number
Speaker 5: of platforms, and they're much more specialized. And so if
Speaker 5: you can take out just one or two of the
Speaker 5: enemy's vessels, specialized aircraft, specialized ships, the whole structure starts
Speaker 5: to collapse and the rest become easier to kill and
Speaker 5: that means that there's no real incentive to hold back reserves.
Speaker 5: Once the engagement starts, it's incredibly intense, and it's often
Speaker 5: decided in the first hours todays. And one significant implication
Speaker 5: of that is your ability to see and communicate across
Speaker 5: the battle space is really really critical, And especially as
Speaker 5: the range of our missiles and our drones has increased,
Speaker 5: that means that US aircraft and ships and submarines that
Speaker 5: could potentially strike targets in or around China can be
Speaker 5: zooming around across literally millions of square miles of ocean.
Speaker 5: So to see these things, to target them, and then
Speaker 5: to deliver mass to a target to kill them is
Speaker 5: no easy feet And if the US can use cyber
Speaker 5: counter space capabilities and so on to disrupt China's ability
Speaker 5: to see and communicate in those critical early hours, then
Speaker 5: it could potentially win a lopsided victory or vice versa.
Speaker 5: And one of the implications of that is if you're
Speaker 5: just counting ships or counting planes or missiles, you will
Speaker 5: miss the parts of the balance that are most important,
Speaker 5: that are actually qualitative, many of which can be augmented
Speaker 5: with AI. And this is hard because it means when
Speaker 5: you're wargaming these things. If you don't have a clearance,
Speaker 5: you kind of have to make it up. With these capabilities,
Speaker 5: we don't know what the cutting edge of cyber is.
Speaker 5: For example, only a very small compartmented group of people
Speaker 5: within the national security establishment know all of the relevant capabilities.
Speaker 5: But I just think that if China believed that they
Speaker 5: could defeat the US in a high end war, they
Speaker 5: would be behaving more assertively. They would be operating not
Speaker 5: just in the time went straight, but all around the
Speaker 5: region in a way that they're not yet.
Speaker 2: We started this conversation talking about, you know, the famous
Speaker 2: hypothetical blockades in geopolitics and international relations classrooms around the world.
Speaker 2: What's your big take away from the Strait of Ormuz
Speaker 2: situation as it applies potentially to China and Taiwan.
Speaker 5: It's a good wrap up for the conversation. Really, it's
Speaker 5: the United States military has these godlike capabilities with special forces,
Speaker 5: with cyber electronic warfare in some senses the way our
Speaker 5: air defenses have performed, which is exceptionally exceptionally well. But
Speaker 5: while our military is very good at doing the operational
Speaker 5: military stuff, we are not succeeding at the strategic level,
Speaker 5: because ultimately, war is the continuation of politics by other means,
Speaker 5: and our politics is susceptible to economic pressure in a
Speaker 5: way that our adversaries is not. And if we don't,
Speaker 5: if we don't get the message, if we don't take
Speaker 5: the wake up call and start working on our economic
Speaker 5: resilience and our credible ability to bear economic pain and
Speaker 5: supply chain disruptions and the rest, we will be unprepared
Speaker 5: on exam day because China has so many more capabilities
Speaker 5: to impose economic pain on us and to micro calibrate
Speaker 5: the character of that economic pain than Iran does, and
Speaker 5: they have more ability to do it for a long
Speaker 5: period of time in multiple theaters.
Speaker 4: And parts of the world.
Speaker 5: And we can only deal with this problem if we
Speaker 5: treat it as it all of government, interdepartmental problem, not
Speaker 5: just a military problem, and if we work with allies,
Speaker 5: and if we try to make some kind of bipartisan
Speaker 5: consensus that national economic resilience matters, That to me is
Speaker 5: the lesson of performers.
Speaker 2: All right, on that cheerful note, Ike Friman, thank you
Speaker 2: so much for coming on all thoughts. And the book
Speaker 2: is defending Taiwan a strategy to prevent war with China.
Speaker 2: Really appreciate it.
Speaker 4: Thanks so much for having me on.
Speaker 3: Thanks so much.
Speaker 1: Ike.
Speaker 2: That was great, Joe, that was a fascinating conversation. And
Speaker 2: I haven't read the entire book, but I did flip
Speaker 2: through it and I do recommend it's super interesting. There's
Speaker 2: also like some really interesting appendices with speeches from various Taiwanese.
Speaker 3: Yeah, I'm gonna have to.
Speaker 2: Yeah, it's definitely worth reading. One of the things that
Speaker 2: stood out there was this, I mean towards the end
Speaker 2: of the conversation, when we were talking about the possibility
Speaker 2: of like how do you build up economic resilience that
Speaker 2: requires the participation of other economies at the same time
Speaker 2: that the Trump administration seems to be pushing a lot
Speaker 2: of those other economies and strategic alliances further away.
Speaker 3: You know. So we didn't get into this, but obviously, okay,
Speaker 3: like we don't like the stock market it falls a
Speaker 3: couple percent and suddenly we get cold fee. Okay, that's
Speaker 3: economic resilience. I think there's another issue which we didn't
Speaker 3: get into, which's political appetite for war. You know, especially
Speaker 3: after the Iraq war, it is diminished the current war
Speaker 3: and around is not popular pretty clearly, regardless of whether
Speaker 3: it's wise or regardless of how serious the economic toll is.
Speaker 3: And so I think, like another interesting and important dimension
Speaker 3: here is look around. And I'd be curious, like how
Speaker 3: many okay, we could sit here and make the argument, Look,
Speaker 3: we really need chips, or we need to defend this
Speaker 3: principle whatever, et cetera. Is there really the domestic political
Speaker 3: appetite for massive conflict, et cetera. I don't know even
Speaker 3: beyond even beyond the economic question, does the appetite exist?
Speaker 3: But I really enjoyed that conversation. It was certainly very interesting,
Speaker 3: you know, hearing him, for example, walk through the math
Speaker 3: of how much shell oil China has and how much
Speaker 3: you would be able to how long it would be
Speaker 3: able to go with its existing stockpiles. And it does
Speaker 3: seem right this question of whether there will ever be
Speaker 3: some sort of serious change to the China Taiwan relationship,
Speaker 3: et cetera. And it's it's a complicated one on many dimensions.
Speaker 3: As he said in the beginning, yes, almost almost one
Speaker 3: of the most complicated questions there is.
Speaker 1: Oh.
Speaker 2: Absolutely, there's also a fundamental tension between you know, the
Speaker 2: US building out it's chips resilience while deterring China from
Speaker 2: doing something in Taiwan, and that if the US actually
Speaker 2: manages to be successful in building domestic capacity chip's capacity,
Speaker 2: than that, like the silicone shield that's protected, Taiwan gets
Speaker 2: weaker and weaker.
Speaker 3: Right, we have to start paying attention to upcoming Taiwanese
Speaker 3: election and start wondering whether the government in Taiwan will
Speaker 3: continue to be enthusiastic about the idea of the US
Speaker 3: building a chip capacity. This is a new uh, this
Speaker 3: is a new dimension of international relations and so forth
Speaker 3: that we have to key in on.
Speaker 2: You just want to go to Taiwan, Well, you know what.
Speaker 3: The one thing I will say is I do want
Speaker 3: to go to Taiwan. But the one thing I will
Speaker 3: say is I always want to learn more about the
Speaker 3: domestic policy of other countries, because I do think it's
Speaker 3: very easy to look at the US and say, okay,
Speaker 3: here I know a fair amount about American domestic policy,
Speaker 3: and then you hear about like, and here's Taiwan's policy,
Speaker 3: here's Iron's policy, here's Israel's policy, right, and there's Corea's policy.
Speaker 3: Is if there is just one right polity or it
Speaker 3: is just there is just this one unified thing. And
Speaker 3: I think it's important to remember that all these countries
Speaker 3: have domestic politics just like the United States.
Speaker 2: And disagreements and nuances and all of that. Yep, absolutely,
Speaker 2: shall we leave it there.
Speaker 3: Let's leave it there.
Speaker 2: This has been another episode of the Authots podcast. I'm
Speaker 2: Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 3: And I'm Joe wisanth All. You could have followed me
Speaker 3: at the Stalwart Fellow. Our guest Ike Freman, He's at
Speaker 3: Eke Freman Fellow or producers Carmen Rodriguez at Carmen armand
Speaker 3: dash Ol Bennett at dashbod Kelbrooks at Kilbrooks and Kevin
Speaker 3: Lozano at Kevin Lloyd Lozano. And from a odd Laws content,
Speaker 3: go to Bloomberg dot com slash odd Lots. We're of
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