Does Osama speak Mandarin? The Great Game, 21st Century style

(Today's planned post has been bumped to Monday.) The other day Baron Bodissey at Gates of Vienna published a piece titled The Middle Kingdom and the Crescent, which examines the murky question of whether the ETIM (East Turkestan Islamic Movement) has terrorist ties -- hey! Where are you going? Didn't you read Kipling when you were a child? Resign yourself to learning about peoples and places that are quaint only from a far distance. Where was I?

East Turkestan does not exist as far as China's government is concerned, but it's located in Xinjiang, China's largest province. East Turkestan, as it used to be called before Mao's troops overran it, is peopled mostly by the Muslim Uygur (pronounced 'weegur') people. The Uygurs want their own country back, and they have a pretty good case.

The question the Baron examines is whether ETIM, a violent separatist group, has ties with al Qaeda.

It's an interesting piece because it examines intel from different angles, including the US reasons after 9/11 for going along with China's designation of ETIM as a terrorist organization.

All I will add to the story is that one has to keep The Great Game in mind. It so happens that the Uygurs are sitting on top of large oil and gas reserves in Xinjiang. That's all we really need to know, isn't it, to see how the chips are falling.

Of course Beijing will slap the terrorist label even onto a Uygur knitting bee. And no matter how much the US government frowns on ETIM, unofficially Washington is giving a cordial welcome to Uygur activists.

But to return to the Baron's question, what about the Uygur connection to al Qaeda? Well, put yourself in the place of a Uygur: Help from bin Laden, help from the US Congress, help from bin Laden, help from the US --

Now put yourself in Osama's place: Should I take refuge in China while at the same time angering Beijing?

There have been too many Osama sightings in China -- in Xinjiang, no less -- to dismiss the stories. Then there is the history:

[...] It should be recalled that representatives of China’s Peoples’ Liberation Army (PLA) had met and struck a deal with Osama. Osama was to restrain an [Uygur] uprising in [Xinjiang]. In return, PLA had agreed to build the communication network in Afghanistan which was then ruled by the pro-Osama Taliban. The Memorandum of Understanding was signed on the 9/11 day itself. Nothing has happened subsequently to suggest a weakening of ties between Osama, Taliban and PLA. [...](1)

So, whatever ties ETIM had with al Qaeda years back, I doubt that Osama has many friends in ETIM at this time because the safest place for him right now is in China. And China's secret police are everywhere in Xinjiang. You can't take a pee in Xinjiang without this being noted by undercover agents and ratters.

Even if I am right, that says nothing about ETIM ties with other Muslims in other parts of the world sympathetic to the Uygur cause. And it says nothing about ETIM ties to other terrorist organizations, which they very definitely have. They really don't need to depend on help from al Qaeda.

But it all boils down to this: oil talks, nobody walks. Thus, the outline of today's Great Game.

1) Who's Hu in South Asia: Decoding India-Pakistan-China relations by Rajinder Puri, September 2006.

Bye-bye Venezuela: Shall we blame this on Negroponte or sunspots?

(If you missed yesterday's post, it's because I didn't publish it until after 3:00 EST.Technical glitches.)

"Mr Chavez also announced he would nationalise key businesses, declared himself a Trotskyist and cited the ideas of Marx and Lenin.[...] problems facing key Chavez allies - Bolivia, Ecuador's president-elect and Iran - may make him want to establish this phase of the [socialist] revolution before the 2014 deadline he has set.

Hugo Chavez denies that he wants to follow the Cuban model of government; I think he's telling the truth. It's early days, but it looks to Pundita as if he's working toward the Libyan model. That wouldn't exactly make Chavez a communist. It would make him a king. As long as the price of oil stays high, he might just get away with his revolution.

I am telling you with a straight face that some observers claim that Hugo Chavez's leap to the extreme left happened when he learned that John Negroponte was taking the number two job at the US Department of State -- such is his hatred of Negroponte, so the gossip goes.

Mr Chavez needed no encouragement to show his true colors once he was reelected. And, sad to say, Negroponte will not have the Latin American account when he arrives at State. He'll be responsible for Iraq and Northeast Asia -- including China and North Korea, freeing up Condoleezza Rice to concentrate on the Israel-Palestine issue and Iran. But one can assume that Negroponte's vast experience with commies such as Chavez will be useful to State's initiative in the Latin American region, if State can locate Latin America on a map.

Chavez accelerates on path to socialism
By Nathalie Malinarich
BBC News
Venezuelan President Hugo Chavez had always said that with his new term in office, beginning on 10 January, the socialist revolution would start in earnest. And, after his resounding victory on 3 December, he has wasted no time.

Before even being sworn in for the third time, Mr Chavez has said that he wants to merge all his coalition partners into a single party, warned he will not renew an opposition TV channel's licence and announced he will nationalise key businesses. He has also called on the National Assembly to give him the power to rule by decree and replaced his Vice-President, Jose Vicente Rangel, seen as a key figure in his previous administration. While some of the announcements themselves have not come as a complete surprise, for many, the intensity and pace of the change has.

'Surprises'
Exactly what the so-called deepening of the Bolivarian Revolution - named in honour of the 19th Century independence hero - would entail was not made clear during the presidential campaign.

Whatever its shape, the notion of the socialist days to come fills Mr Chavez's supporters with hope and his opponents with dread. With each speech, Mr Chavez gives more details of what he plans to do. Swearing in his cabinet two days before his own inauguration, Mr Chavez explained that the new era would be backed by "five engines", which would:

> allow him to rule by decree
> lead to socialist constitutional reforms
> reinforce popular education
> change the geometry of power (a point which he has yet to explain)
lead to the "explosion of communal councils"

In the same address, Mr Chavez also announced he would nationalise key businesses, declared himself a Trotskyist and cited the ideas of Marx and Lenin. Chavez backers, or Chavistas, say the revolution will lead to social equality - his critics argue it will turn him into a Castro-like autocrat.

Political analyst Alberto Garrido says Venezuelans are likely to hear many more radical policy announcements in the coming days, months and years. "In this 'permanent revolution' we are in for endless surprises," he says.

Mr Garrido says the revolution that is being established in Venezuela is unique and does not follow the Cuban model, as many of the government's critics say. One of the innovations announced by Mr Chavez is his Cabinet, he adds. Its members are now "ministers of popular power" - they have a direct link to the people and are expected to operate more like a team than a classical Cabinet. The ministers - who are mostly younger than their predecessors - will be expected to spread the revolution from the streets.

Battles ahead
Another sign of the changing times, observers say, is Mr Chavez's decision to replace Mr Rangel as vice-president.

Mr Rangel was an important figure in the "transition period" that ended with the December elections - he was seen as someone who could reach out to other groups. His replacement, Jorge Rodriguez, is described as a radical who does not tolerate dissent. But Mr Chavez is not carrying out his revolution in isolation. Mr Garrido says international affairs may be playing a part in what he says is Mr Chavez's decision to go faster down the path of his "21st Century socialism". He says that problems facing key Chavez allies - Bolivia, Ecuador's president-elect and Iran - may make him want to establish this phase of the revolution before the 2014 deadline he has set.

Another possible factor behind Mr Chavez's recent announcements may have been the nomination to the US state department of John Negroponte - known to be very critical of the Venezuelan president - Mr Garrido says.

On the international front, Mr Chavez will also be keen to continue spreading his own brand of socialism abroad, which once again will set him on a collision course with the US and other Western nations. That will not be the only battle on his hands. Mr Chavez's recent announcement that he will not renew the licence of the country's most viewed terrestrial channel, RCTV - which he accuses of having backed a failed coup against him in 2002 - is likely to lead to a wider confrontation with the media.

Whatever happens, it looks likely that the world will be hearing a lot more about President Chavez's revolution.

Millennium Challenge Account: America's first truly modern foreign policy initiative shoots itself in the foot

In yesterday's post we saw that while traditional types of US foreign aid and development assistance for the poorest countries continue, the Millennium Challenge Account (MCA) represents an experiment in basing foreign aid (in this case, financial grants) on an objective set of criteria. Before we turn to a discussion of the criteria we need to ask, "Objective, according to what standard?" The standard is US defense.

The post 9/11 era of asymmetrical warfare, whether covertly mounted by governments or carried out by decentralized cells, inverts the Cold War pyramid of war. During the Cold War neither superpower feared a catastrophic attack from a client state in the poorest world regions. Today, even a relatively poor developing nation with a small military that is not technologically advanced can fund a series of guerilla-style attacks to bring down a major government.

From that viewpoint, modern US defense policy and its foreign policy adjunct give high priority to defusing situations that lead a developing nation to launch armed aggression against the United States.

A very weak government tends to establish an oppressive regime; such governments are the prime generators of social conditions that are fertile ground for internal unrest, aggression against neighboring states, and the designation of the Bogey Man. The Bogey Man in this context is a nation or group (e. g, America, the Jews) that a government blames for its shortcomings.

While oppressive government can arise from several causes and conditions, as a general rule it's seen today largely as a failure of a national government to address overwhelming internal problems in the social or economic spheres and/or external problems in the defense sphere. In other words, weak governments with bad policies and/or inadequate administration are seen as the prime candidate for takeover by factions that would seek to make war on the United States.

That reasoning is the foundation for devising a US foreign aid/development assistance program that aims to help a cooperative government create or strengthen national programs that defuse internal social unrest and reduce external conflicts. In short, the idea is to use financial assistance in a way that helps a developing nation crank out good government.

Just what constitutes good government? From many sources, including the World Bank and International Monetary Fund -- which have extensive experience dealing with truly atrocious governments -- and from the historical record, today we have a pretty good idea of the criteria.

So let's take a look at the MCA criteria; while you read, see if you notice something very odd about one item on the list:

The funds in the Millennium Challenge Account will be distributed to developing countries that demonstrate a strong commitment toward:

Good governance. Rooting out corruption, upholding human rights, and adherence to the rule of law are essential conditions for successful development.

The health and education of their people. Investment in education, health care, and immunization provide for healthy and educated citizens who become agents of development.

Sound economic policies that foster enterprise and entrepreneurship. More open markets, sustainable budget policies, and strong support for individual entrepreneurship unleash the enterprise and creativity for lasting growth and prosperity. (1)

Stumped? Okay; I''ll give some hints. (Regarding the second quote, ignore the sour grapes about President Bush's motives for tripling US aid to Africa; see the entire article for that discussion):

"The idea to revive state-owned industries [in Iraq] has come full circle. Iraq's economy under Saddam Hussein was state-controlled. When the first U.S. team arrived, its members looked to reenergize the industries as a key element in jump-starting the economy. But the subsequent Coalition Provisional Authority, run by L. Paul Bremer, opted to scrap the effort and emphasize a free-market economy, even though Iraq was ill equipped to make a dramatic conversion. The failure of a free market and the lack of both local and foreign investment has led the Defense Department to launch a massive reassessment."(2)

"[President Bush] has tripled direct humanitarian and development aid to the world's most impoverished continent since taking office and recently vowed to double that increased amount by 2010 -- to nearly $9 billion. [...] Some advocates suspect that the Bush administration's interest in Africa is motivated more by business ambitions than altruism. Grants made by the Millennium Challenge Corp., a foreign aid program developed by Bush with the aim of rewarding poor countries that practice good governance, are also partially predicated on whether countries have open markets that allow widespread foreign investment."(3)

"[Russia] has come to a point where further economic development will, to a large degree, be determined by the state of its political and judicial institutions. To achieve an economic breakthrough, it is no longer sufficient to have good labor and land legislation, laws on banks and bankruptcy, taxes and budgets. All these laws and regulations have to be implemented in practice, which requires an efficient state machine, just courts, and a good law enforcement system. In other words, Russia needs its basic state institutions to function efficiently."(4)

Still stumped? Okay, one more clue; again, ignore the sour grapes part:

"I know a lot of activist groups who believe that the president's stated commitment to Africa is, at best, a play on words," said Nii Akuetteh, executive director of Africa Action, a Washington-based advocacy organization.

"First of all, much of the aid is emergency food or medical aid, rather than true development assistance. Then there are conditions that are attached where the emphasis is more on countries that open up their markets so American companies can go in and privatize things like water and electrical service or have access to certain resources."(3)

Akutteh is not talking about the MCA disbursements, which are outright grants. But consider the observation about a privatization condition in the context of Bremer's confounding decision, noted above. Imagine a nation where the key industries and services are bombed to rubble or in ruins for decades, where the only government administrative efficiency is repressing dissent, where the rule of law is absent, where the judicial system is a mockery -- and along comes Paul Bremer and says, 'What this country needs straight off the bat is a free market economy.' Try to imagine, then apply the MCA "open markets" condition.

Ladies and Gentleman of the Millennium Challenge Corporation:

What planet do you reside on, if you think that the criteria of a 'free market economy' and 'opening a country's markets to foreign investment' are top priority for a weak government? In a nation that doesn't even have a rule of law or the judicial system to enforce the rule?

What are you smoking, if you think you can dam the tide of repression by demanding that a nation struggling toward a semblance of modern government strengthen itself by allowing foreign investors to take over key industries in the country? When the nations don't even have the courts system, the banking system, the law enforcement, the -- the everything that Russia had to build from scratch after the Soviet Union dissolved?

The reasoning behind the government approval for MCA is supposed to be strategic -- you know, that concept having to do with national defense? On my knees, Ladies and Gentleman of the MCC, if you want a strategy to strengthen weak government in poverty-stricken nations that have only a few trappings of modernity, you need a reasonable set of priorities before establishing a reasonable set of criteria. Helping US corporations buy up the country is not seen as a high priority by the target population and recipient government. And in fact, not seen as priority by anyone who can chew and walk.

On my knees, Ladies and Gentleman of the MCC, globalized trading principles do not equate to freedom and the rule of law. Just look at China, if you don't believe me. Wake up! Then set up a list of priorities for how a government should go about meeting criteria for sound government, and apply the list before analyzing qualification factors.(5)

Then splash water on your face and ask whether the experience of Western Europe in the post WW2 period should be the model for hauling a nation out of ruins. Ask yourselves, "What national government experience would make the best model in this era?" For the answer watch carefully; don't blink:

"I don't know that the Iraqi government has ever demonstrated ability to lead the country, and we shouldn't be surprised," said retired Army Lt. Gen. Jay M. Garner, who was the first U.S. official in charge of post-war Baghdad.

"You'll never find, in my lifetime, one man that all the Iraqis will coalesce around." Iraqis are too divided among sectarian, ethnic and tribal loyalties, he said, and their loyalties are regional, not national.(2)

Now, what other country could Garner be describing? Well, several in this era. But what country started out with the same set of basic problems and has made great progress within less than a decade toward solving them? Why that would be Russia, wouldn't it?

So to accomplish the goals of the Millennium Challenge Account, Ladies and Gentleman of the MCC, swallow your pride and ask Russia's government for advice on how they would go about bringing in good government in Iraq. You don't have to follow every advice but at least ponder it all, and try to apply general principles that correct the flaws in the MCA criteria.

Keep in mind -- or finally confront -- that Western Europe is an inadequate development model for today's poorest developing nations because they are not under the protection of NATO. Much of the government's revenue in the poorest countries goes to defense because they cannot be guaranteed that the United States and its NATO partners will come rushing to their aid in case of an invasion. Russia shared this problem in the wake of the Soviet Union's dissolution. So again, Russia makes a valuable model when sorting out priorities for where to put funds that support good government.

The Millennium Challenge Account is a very important initiative that deserves far more attention than it's received in the US media. And it deserves more attention from Congress. Although the MCA is underfunded for it's objectives, it needs the kinks worked out before pouring on the megabucks. Greater public awareness of the initiative can help in the fine-tuning process.

1) From the USAID fact sheet on MCA

2) The Washington Post, January 7, 2007.

3) Bush has quietly tripled aid to Africa.

4) The risks and traps of the new reform stage in Russia by Vladimir Mau for Rossiyskaya Gazeta and RIA Novosti, December 2006.

5) From The Heritage Foundation paper on the MCA:

To qualify for the MCA, a country must score above the median[26] for half of the indicators in each policy area—that is, it must be above the median in at least three of the six performance indicators that measure good governance, two of the four that measure investment in people, and three of the six that measure economic freedom. It must also be within specified income levels.[27] The Bush Administration also has determined that countries must pass the “control of corruption” indicator to qualify.[28]

Foreign aid, development assistance, and the war on terror

For more than a decade in the runup to 9/11 Israel warned about the funneling of foreign aid to terrorists, but the West was not ready to concede the point until the post-9/11 era. The war on terror has clearly established the close relationship of foreign aid and development issues to today's type of warfare:

Whether a government is simply very weak and thus, a target for takeover by terrorists (or criminal syndicates in league with terrorists), or whether the government is sympathetic to a terrorist cause, Western foreign aid and cheap development loans make easy pickings for transnational terror armies.

At the same time China's "peaceful rising" has translated to anti-democratic, anti-American policies administered through foreign aid and cheap development loans to despotic regimes in energy-rich countries and weak democracies in developing countries.

The recent Pundita "Frankenstein" posts on China's relations with African and Latin American countries document the trend. The posts underscore that just as the West is attempting measures to insure that foreign aid and development loans don't fall into the wrong hands, China is writing checks to any repressive regime that opposes US policy and not asking questions about what happens with the money.

I won't carry the analogy far, but in one sentence China is playing Sparta to America's Athens. To every argument the US makes in favor of democracy, China points to the success of their nation's military dictatorship. That China has depended on the democratic nations for their success is not something a poverty-stricken, isolated dictatorship wants to hear when China dangles aid in front of them.

And it so happens that Africa has become an important front in the war on terror -- and also China's prime aid target, as the nation attempts to sew up energy concessions on the African continent.

Meanwhile, William Easterly and other economists, in time with a mountain of data, have shredded the notion that traditional foreign aid and development assistance can meet their stated goals in the poorest regions.

The evidence is now overwhelming that the Cold War's cynical use of foreign aid and development loans to support governments sympathetic to one side or another of the struggle reaped weak governments and despotic regimes. The governments took the aid and low-cost loans and spent them in ways that only entrenched the causes of poverty and oppression. Yet it is now patently obvious that the unaddressed causes of poverty and oppression played into the hands of the transnational terrorists and governments that fund them.

The US has ignored the mountain of data to the extent that we are throwing aid at any government, no matter how repressive, which claims to eat terrorists for breakfast and makes at least a pass at fighting terrorism. But there is nothing like the point of a gun to encourage clear thinking. So governments of the wealthy nations under threat from the terrorists -- and they are all under threat -- have pored over the mountain of data and asked, "Is there any kind of aid policy we can devise that actually works to reduce poverty in the poorest nations?"

To which William Easterly replies: No, you idiots; read the data again. (Forgive his tone; he worked for the World Bank.)

Is Easterly right? Yes, but this being wartime, the most compelling argument will not dissuade the Western nations from trying to use aid to help win the war on terror. Also, you can't really argue against noblesse oblige; if the rich want to give to the poor, that's a good thing provided the largesse doesn't hold the rich hostage and renders more help than harm.

Yet it's just the specter of doing harm that prompts Easterly's most cutting diatribes -- and Pundita's. This blog has pounded home the point that while it's one thing to do no good, to pile serious harm on top of ineptness is what all reasonable people should try to prevent in the 21st century.

Is there a way for the US to have their cake and eat it, too? Use aid as a tool of war and also encourage developing nations to make sound governance policy; the latter on the theory that sound government removes underlying causes of poverty?

Enter the Millennium Challenge Account. I'll tell you straight off the bat that I don't think Easterly is a fan of MCA, if one follows the logic of his basic argument:

"...it is a fallacy to think that overall poverty can be ended by a comprehensive package of “things,” like malaria medicines and clean water. The complex poverty of low-income societies will slowly give way to prosperity the same way it happened in rich countries, through the gradual homegrown rise of political and economic freedom. This is NOT an easy quick fix—“democracy” and “free markets” evolve from below with a lot of supporting social norms and institutions, they cannot be imposed from the top by the IMF [International Monetary Fund], World Bank, or U.S. Army."(1)

But one can make out an argument that if you use aid to support "social norms and institutions," you can help a government that is trying hard to move toward democracy and free markets, and which simply needs money to bring about certain reforms, such as shoring up their judicial system.

From that view, you can devise an objective set of criteria about what makes for good government and allocate grants on a scale of how well a developing country meets, or tries to meet, the criteria.

That is the reasoning behind the MCA grant criteria, which are not really new. Membership in the European Union is predicated on a set of criteria that reflect key elements of good government. So today the members of the EU, who represent half a billion of the world's people, live in freedom and relative prosperity and exhibit reasonably sound government practices. That is an astonishing, inspiring accomplishment -- yet it's predicated on meeting membership requirements, rather than development requirements. The question is whether the idea behind the EU criteria work as well when applied to countries that do not seek membership in a bloc. We'll dip into the question tomorrow.

1) William Easterly

India-Pakistan-China: Siachen glacier and Pakistan-India peace negotiations

Today's essay will be posted at noon. In the meantime you can get a crash course on the history of India's appeasement of Pakistan and analysis of where things stand now from Baron Bodissey's The peace process in Kashmir at Gates of Vienna.

My only quibble is with Sarla Handoo's observation that Pakistan's president is "not bothered by terrorism." He's bothered by it, but he's more bothered by China's arm twisting. Negotiations on the Siachen glacier need to be seen in that light.

Bottom line: The United States of America has a history of being a fickle friend to Pakistan, but China is always there. You can bet that Pakistan's government is watching very closely the US discussion about whether the US should withdraw soon from Iraq. Their reasoning is that if the US leaves Iraq in the lurch, Pakistan is next up.

I can't quibble with these observations by the Baron:

Exchange “Israel” for “India” and “Egypt-Jordan-Syria” for “Pakistan”, and you have the Palestinian problem in a nutshell:

> Mujahideen irregulars are employed as proxies to fight on behalf of an outside Islamic country.

> A militarily superior foe is pressured by the Great Powers to relinquish strategically important territory to a weaker enemy after attaining a clear military victory.

> A moral equivalence is established between the aggressor and the defender, so that “both sides” are continually urged into a “peace process” which notably disadvantages the defender, but fails to attain an actual peace.

> The conflict is never resolved. It continues year after year, decade after decade, with the implication that only more concessions by the original defender to the original aggressor can ever bring it to a close.

Frankenstein, Japan and Taiwan

China watchers note that in recent weeks Edward Cody, of The Washington Post's Foreign Service, has been filing one highly informative report after another on China and the Post has been publishing them.

China is somewhat loosening their controls on foreign journalists in the year running up to the 2008 Olympics ("somewhat" is the operative word). But it could be that the articles reflect a shift, however slight, in the US State Department view of China now that Robert Zoellick is gone from Foggy Bottom.

The Post editorial view of US foreign policy reflects State's view. So if the newspaper is highlighting a somewhat more realistic view of China (the operative word is "somewhat"), this is a hint of at least a slight shift in State's policy. State continues their tussle with DoD about a tougher US approach to China, but Pundita grasps for any straw in the matter.

In Blueprint for Action, Thomas P. M. Barnett advises that the US "lock in China at today's prices;" i.e., make China a full partner in global strategy by the "Core" nations (chiefly, the NATO countries). The advice, as with State's policy on China, is out of synch with China's "peaceful rising" policy and military buildup. The advice speaks to the situation in the 1990s, not today's.

While Taiwan remains a big issue for China, which is methodically buying off Latin American and African countries that recognize the island nation, China's generals are greatly concerned about Japan's rapid military buildup. The buildup is greatly due to North Korea's nuclear belligerence policy.

It is almost funny that China does public hand wringing about the NK nuclear buildup, given their part in it. It's just that China's generals didn't expect that Japan could turn on a dime.

Edward Cody's December 30 report for TheWashington Post, China Offers Glimpse of Rationale Behind Its Military Policies.

BEIJING, Dec. 29 -- China warned Friday that the military landscape in northeast Asia is getting "more complicated and serious" because of North Korea's nuclear weapons program and tighter defense cooperation between Japan and the United States.

The Chinese views on regional security, articulated in a government white paper on national defense, provided a rare glimpse into the strategic assessments that underlie decisions and priorities of the secretive Chinese military and the Communist Party's policymaking Central Military Commission.

In part, the paper was designed as a response to repeated complaints from the Bush administration that China has not explained the rationale behind its long-term military improvement program. China's announced military budget has risen about 10 percent a year recently, reaching $35.4 billion in 2006, and Pentagon specialists estimate that also counting equipment expenditures would more than double it.

Along with Taiwan's pursuit of independence, the government pointed out as particular security challenges North Korea's missile tests last summer and its maiden nuclear test in October, which undermined Chinese-led diplomatic efforts to create a nuclear-free Korean Peninsula. The most recent round of nuclear negotiations took place last week and ended in stalemate, creating doubts about the utility of continuing the three-year-old six-nation talks.

In listing Chinese concerns, the white paper also cited a U.S.-Japanese effort to build a regional missile defense shield based on U.S. ships equipped with the Aegis radar system and a U.S.-Japanese missile now being developed. The joint defense system, portrayed as protection against a North Korean attack, has been criticized by Chinese officials and commentators because it also could blunt China's missile threat in the event of U.S.-Chinese hostilities over Taiwan.

Chinese officials have expressed concern that Taiwan could eventually be integrated into the U.S.-Japanese system, providing a counterweight to China's increasing missile threat against the self-ruled island. That fear was not explicitly conveyed in the white paper, but Japan's growing willingness to assert itself militarily was cited as a strategic concern for military planners in Beijing."

America and Japan are strengthening their military alliance in pursuit of operational integration, and Japan seeks to modify its peace constitution and exercise collective self-defense," the paper said. "North Korea launched missiles and had a nuclear test. The situation in the Korean Peninsula and northeast Asia is getting more and more complicated and serious."

The paper said China's military improvements are part of the country's overall modernization and economic expansion. The effort will continue apace, it added, seeking to "lay a solid foundation" by 2010, make "major progress" by 2020 and "reach the strategic goal of building informationized armed forces and being capable of winning informationized wars by the mid-21st century."

Moving from infantry to high-tech naval and aerial warfare has been a major goal of China's military modernization. It has entailed the shedding of thousands of untrained foot soldiers and a concerted effort to replace them with trained technicians able to function in the world of computerized weaponry.

The white paper said, for instance, that the army's relative strength in the Chinese military has dropped by 1.5 percent, while that of the navy, air force and Second Artillery Force -- China's missile and nuclear corps -- rose by 3.8 percent. Overall military strength has fallen by 1.7 million troops since 1985 and is estimated to stand at 2.3 million, still the world's largest force.

The People's Liberation Army "has made new progress toward the goal of being proper in size, optimal in structure, streamlined in organization, swift and flexible in command and powerful in fighting capacity," the paper boasted.

But it provided no details on the new ships, warplanes, missiles, submarines and computer systems that, according to U.S. officials, have increased China's lethal power in the region and made any confrontation over Taiwan a riskier proposition for the United States than it would have been a decade ago.

As it has before, the government warned that any step by Taiwan's President Chen Shui-bian to move toward formal independence by changing the territory's constitution would be a "grave threat" to peace and stability across the Taiwan Strait, suggesting it could trigger military intervention. President Hu Jintao, who as head of the Central Military Commission is commander in chief of the armed forces, has told visitors he has no plans to attack Taiwan but would have to act if the island took a decisive step toward formal independence.

John Negroponte to State, at last!

If you have been wondering why President Bush sacrificed John Bolton, now you know. There will still be a Senate fight over John Negroponte's confirmation as second in command at the US Department of State, and the Left is having conniptions about Bush's choice. But that's the price the Eurocentrics in Congress will have to pay for keeping Sri Bolton out of the United Nations.

And with the ascension of a law and order guy to the top post at the UN, Bolton's presence is not so critical there, whereas State can't make headway until someone like Negroponte takes over the number 2 post there.

Negroponte is no Robert Zoellick; he is not confused about where America's national security interests lie, and he doesn't believe that unrestricted trade will save the world. Thank God. Everybody with half a brain knows that a judicious mixture of carrot-and-stick keeps the world on keel, and Negroponte knows how to wield both.

Also, Negroponte's vast experience in Latin America -- you know, that place to the south of the US -- is a huge bonus for American foreign policy. And by the way, he speaks Spanish.

No handwringing about his leaving the post as Director of National Intelligence after being there a scant two years. Before Bush could nominate a truly good fit for the post, he needed a clear idea of how US intel agencies were working with each other and where the bottlenecks were.

Negroponte's real job as the director was to wrest order out of the chaos of reports about interagency infighting and pass on the information to Bush. Negroponte's nomination to the post said more about the thinness of suitable candidates than his credentials to manage intelligence agencies.

But making him the Deputy Secretary of State is a master stroke. If Negroponte makes it through the confirmation process, we have the beginnings of a truly US-centric foreign policy, and one that will give due importance to US relations in the western hemisphere.

Speaking of the western hemisphere, the editor of a blog that is dedicated to reporting on that region contacted me the other day, which is how I learned about the blog. I invite Pundita readers to bookmark the blog, which is sorely needed: Western Hemisphere Policy Watch.

All right; that's enough good news for one day. Time to knuckle down to today's Pundita post on China's moves in Vietnam. I'll grant it's a lot of reading, but good US foreign policy decisions depend on understanding just exactly what Beijing means by their policy of "peaceful rising;" thus, the Frankenstein series......

Frankenstein in Vietnam: China's factory owners find less picky pastures

"According to entrepreneurs in China who spoke on condition of anonymity for fear of angering government officials, leaders in coastal areas have been encouraging pollution-intensive industries such as plastics, steel and electronics to consider relocating to Southeast Asia."(1)

"Pundita! I asked for a summary of where US foreign policy stands now and I get a series of posts on China. Is all this leading somewhere?
Caesar in San Francisco"

Dear Caesar:
It's all about pattern recognition. Until we recognize the patterns, we don't know where we stand. If we don't know where we stand, how can we formulate rational foreign policy?

Now we turn to Vietnam because the country is a great case study for our purpose. I'm starting with a blurb on Vietnam's security issues with China because they illustrate one pattern. No matter how much trade China does with another country, if the country is anywhere near China they are vulnerable to China's territorial claims.

Although it doesn't publicly proclaim it, China -- as in the case of Taiwan -- historically has considered Vietnam a renegade southern province. They named it An Nam, or "the Pacified South."

China's killing of Vietnamese fishermen in the Vinh Bac Bo (Gulf of Tonkin) in January 2005, in fact, has added to a consistent pattern of Chinese southern expansionism: conquest of the Paracel Islands in 1974; invasion of the northern provinces of Vietnam in 1979 and subsequent annexation of 8,000 square kilometers of borderland; occupation of the Spratley archipelagoes the same year and acquisition of 12,000 square kilometers of territorial waters in the Vinh Bac Bo conceded by Hanoi under the 2000 Vinh Bac Bo Pact.

Not content with forcing territorial concessions from Hanoi, China is also building up its naval force and setting up a string of naval bases along the sea lanes in the Eastern Sea to protect oil shipments from the Middle East. The Washington Times recently revealed that a previously undisclosed internal report prepared for Defense Secretary Donald H. Rumsfeld noted that "many Pentagon analysts believe China's military buildup is taking place faster than earlier estimates, and that China will use its power to project force and undermine U.S. and regional security."(2)

Now we turn to China's business relations with Vietnam, which point to other patterns. Vietnam has one of the most corrupt governments in modern times; this is just the type of government that China prefers dealing with. Note also the conditions in China that drive factory owners to offshore in Vietnam. I am publishing the entire article because it's worth ten policy papers on China:

China Ventures Southward
In Search of Cheaper Labor, Firms Invest in Vietnam
by Peter S. Goodman
Washington Post Foreign Service
December 6, 2005
HANOI -- Before he left his native China two years ago, Li Shaoxing was losing money at his plastic-bag factory in the center of the country. Though his homeland had become synonymous with plentiful cheap labor and limitless manufacturing spoils, he was grappling with rising wages, energy shortages and flat prices for his goods.

So, much as capitalists have always done, Li went looking for an easier place to profit. He ventured south of the border, putting up a factory here in a new industrial park in northern Vietnam, where wages are roughly one-third cheaper than at home and where workplace safety and environmental standards are in scant evidence.

"The competition in China is intense, and the investment in Vietnam made sense," Li said, sitting in his air-conditioned, glass-fronted office, as 500 workers toiled in an adjacent factory bay amid the clatter of machinery and the smell of melting plastic. "In this area, workers have a hard time finding jobs. They are happy for any work, and they are willing to eat a lot of bitterness.

"Much as manufacturers in the United States have transferred jobs to Latin America and just as Western European factories now look to Poland and Hungary, China's modern-day capitalists are increasingly focused on wringing profit from Southeast Asia. They are tapping new markets for sales and farming out work to people willing to labor for less than at home and in even tougher conditions. In a global economy driven by the pursuit of lower costs and fatter profit -- a drive that has led so many multinationals to low-wage China -- Southeast Asia is emerging as China's own version of China.

"It's a bit like the United States and Mexico," said Deng Weiwen, general manager of TCL (Vietnam) Corp., the local arm of the giant Chinese television maker, which established a factory outside Ho Chi Minh City in 1999. "China and Vietnam complement each other."

In Vietnam, Chinese entrepreneurs have found a country -- much like their own -- in the midst of a wrenching transition from communism toward an economy governed by market forces. Chinese investors are already accustomed to doing business in a place where personal relationships and access to power often trump the law.

"We have no problem understanding that bribes have to be paid to get things done," said Zou Qinghai, a textile entrepreneur who heads the chamber of commerce for the Chinese province of Zhejiang in Hanoi. "Vietnam's way of developing is simply a copy of China's.

"For now, China's investment in Vietnam remains in infancy. Since 1988, Vietnam has attracted more than $50 billion, with roughly half coming from Taiwan, Singapore, Japan and South Korea, according to state figures. Mainland China has injected only $734 million while competing for foreign investment.

But much mainland money is filtered through partners in Hong Kong, which has sunk $3.7 billion in Vietnam since 1988, according to state figures. Chinese investment has surged in recent years. China has become Vietnam's largest trading partner, with two-way commerce expected to reach $7.5 billion this year, according to government figures.

"We figure that China will develop faster in the future, and Chinese businesses will have more interest in investing outside of the country," said Nguyen Anh Tuan, vice director for Vietnam's Foreign Investment Agency in Hanoi. "The potential for Chinese investment in Vietnam is very great."

Foreign multinationals with factories in the Pearl and Yangtze river deltas -- China's principal manufacturing zones -- are increasingly exploring Vietnam and other areas of Southeast Asia as alternatives to expanding in the Middle Kingdom. This is particularly so for Japanese firms, which fear the consequences of diplomatic sparring and street protests over Japan's perceived unwillingness to take responsibility for wartime atrocities.

Among Chinese companies in Vietnam, many have focused on locking up natural resources and energy. In October, as Chinese President Hu Jintao visited Hanoi, China National Offshore Oil Corp. signed a deal with a local energy firm to jointly explore for oil and gas in Vietnam's Beibu Bay.

Chinese manufacturers are now expanding into Vietnam, in part to lock up shares of the Southeast Asian market ahead of the creation of a planned free-trade agreement with China. Textile and garment-makers are shifting to Vietnam to sidestep quotas on their shipments into Europe and the United States.

Some investment is propelled by stricter enforcement of environmental standards in some areas of China. According to entrepreneurs in China who spoke on condition of anonymity for fear of angering government officials, leaders in coastal areas have been encouraging pollution-intensive industries such as plastics, steel and electronics to consider relocating to Southeast Asia.

A strong push is coming from Wenzhou, a city in Zhejiang province south of Shanghai that has long served as a locomotive for growth in China's private sector.In recent months, officials in Wenzhou have convened roundtables with local entrepreneurs to encourage major polluters to move. At one meeting, a vice mayor of Wenzhou specifically declared that high-polluting industries would be deprived of access to land, water and electricity, according to two participants.This year, the Wenzhou city government and the Zhejiang provincial government have jointly organized roughly 50 all-expenses-paid trips for local businesses to survey prospective industrial sites in Vietnam and elsewhere in Southeast Asia, the entrepreneurs said.

While few would describe China as a beacon of labor safety or high wages, Chinese investors acknowledged in interviews that Vietnam beckons as an even cheaper, less regulated place to run a factory.

"Here, the workers can really accept hardship," said Qing Song, deputy general manager at Lifan Vietnam, a motorcycle factory opened outside Hanoi by a Chinese company. "Whatever requirements you set out for them in a day, they meet."

At the factory on a recent afternoon, men uncoiled sheaths of aluminum without protective gloves, while others operated heavy machinery without goggles or earplugs. The work went on beneath corrugated aluminum ceilings in poorly ventilated structures. Men in flip-flops used a donkey cart to move bricks to a construction site.

For Li, Vietnam has offered refuge from the brutal competition of Chinese business. Born and raised in Wenzhou, he launched his plastic-bag factory in Henan province in 1992 as a joint venture with a local cement maker. They supplied animal feed and fertilizer companies with plastic sacks.

In the first years, wages in impoverished Henan ran as little as $12 per month. But as China has boomed and factories proliferated, wages climbed, reaching about $72 at the Henan factory. At the same time, China's appetite for energy has exceeded its generation capacity, forcing factories such as Li's to shut down during key hours.

A flood of cheap bank credit has nurtured many competing factories, keeping prices down and eroding profits. Today, Li's Henan factory sells bags for roughly the same price as five years ago even while the costs of plastic and energy have increased by nearly one-fifth."Now," said Li, "we can't make any money."

In November 2002, Li took a vacation to Hanoi. As he walked tree-lined streets navigated by bicycle rickshaws, past fading French colonial villas and peddlers selling bowls of noodles, he might have been in his own country a decade earlier. At home, there was too much competition. Here was a frontier of opportunity."

I just had this feeling that I had to go out of the country and invest," he said. "It just seemed interesting and exciting."

The following month, he returned to Hanoi -- this time to look for a new factory site. Over the next several weeks, he and a translator rode all over northern Vietnam, meeting with the local governments that controlled land.He examined local market conditions, determining that -- unlike at home -- he could compete."

I used a means of deception," Li said, smiling. "I would visit other bag factories and pretend to be a customer and then ask for their prices," he said.

By January 2003, Li had settled on a new industrial park an hour's drive north of Hanoi. It was an undeveloped area of rice paddies, but it sat on the Friendship Highway connecting Vietnam to southern China, making it easy for Li to bring in Chinese technicians to construct and operate the factory.

He settled on a 50-year lease with the local government, which seemed pleased when he told them he would have jobs for 500 workers. The local minimum wage was $30 a month.

Still, Li needed approval from the Chinese government, which regulates capital leaving the country. By March 2003, less than six months after his first visit, he had the formal blessing to transfer $1.5 million to Vietnam to launch the factory. By May, construction had begun."

I knew if I was going to act, I had to act fast," Li said. "I couldn't be considering the pros and cons."These days, Li dons a blue suit as he crisscrosses Vietnam in search of customers, mostly state-owned animal feed factories. It is a new country, but so much is familiar -- the contractor who used shoddy materials in building the factory, the "special fees" and "expediting charges" that he hands customs agents at the port."

We Wenzhou people are used to that," he said. "In fact, it works for us. It's really convenient. A lot of things work quicker."

Li brings in materials from China to keep costs low. He lives in a factory dormitory room shared with another Chinese manager. He speaks no Vietnamese. He plays poker with the other Chinese managers and sometimes watches Chinese television via satellite. Mostly, he works.

"I'm not here to feel comfortable," he said. "I'm here to make money."

Special correspondent Eva Woo contributed to this report.

Now we turn to an utterly correct, impassioned and doomed plea from an American who protested extending PNTR to Vietnam:

Forum: Vietnam lures United States into trade deal
by Scott Johnson, an advisor to the Montagnard Foundation.
03/09/2006, The Washington Times
[...] a lure has been cast out to the United States [by Vietnam], just prior to Congress' scheduled vote on Permanent Normal Trade Relations (PNTR) with Vietnam this month, a lure to catch the U.S. Congress.

PNTR, you see, is a stepping stone for entry into the WTO and the proponents of PNTR will argue economic engagement is the key to Vietnam's development. They will say 'we must engage economically with Vietnam and this will assist Vietnam in changing its repressive ways."

This is what the U.S. trade lobby argues, and to be fair they have a point. However, Vietnam's northern neighbor (and communist brother) China, has spoiled the "miraculous cure all" remedy of economic engagement. The United States indeed granted PNTR to China some years ago and it didn't result in any great reforms.

Judging from a comment by Iowa Sen. Charles Grassley, Republican chairman of the Senate Finance Committee, one can see that China has actually ruined the image of economic engagement. Mr. Grassley stated in a Senate hearing on PNTR negotiations for Vietnam that, "We need to make sure that we aren't played for a sucker in the case of Vietnam, as we have been with China."

The question should really be, how does the United States do things differently to ensure Vietnam does indeed bring about the promised human rights reforms? Admittingly this is a dilemma as Vietnam has a history of diplomatic trickery and is one of the most corrupt nations in the world. But we can safely say that outright appeasement will not work.

Once Vietnam gains PNTR and accedes to the WTO, there are few if any sticks left to wield against Hanoi. [...]

[T]he United States needs to engage Vietnam, but not with a weak position on human rights. Now is the time to stand strong with the dissidents, time to show courage and state loud and clear that the United States will not tolerate repressive governments in the pursuit of trade deals.[...]

Now we turn to the bottom line:

A Trip-Up Before Key Trip,
Oxford Analytica November 2006, republished in Forbes
[...] President George W. Bush on Nov. 15 traveled to Singapore, on the way to the Asia Pacific Economic Cooperation (APEC) summit in Hanoi, Vietnam, on Nov. 17. The day before Bush's trip, Congress failed to pass a bill granting Permanent Normal Trade Relations (PNTR) status to Vietnam. For Asian leaders, the PNTR debacle may suggest that the U.S. administration is weak and unable to deliver on its trade agenda.

On his first trip to Vietnam, Bush had planned the delivery of PNTR status to Hanoi as a key goodwill gesture. Vietnam officially joined the World Trade Organization last week, and the United States will be out of compliance with WTO rules until it passes PNTR for Vietnam. In Hanoi, Bush had hoped to demonstrate U.S. resolve to close trade deals by presenting PNTR to Vietnam and signing the U.S.-Russia WTO Agreement with Russian President Vladimir Putin.

However, the administration's PNTR plans went awry yesterday when the House of Representatives refused to put the legislation to a simple majority vote, after the defeat of a vote on Nov. 13 under "suspension" rules, which would have required a two-thirds majority to pass.

The earliest that Vietnam's PNTR status can come before Congress again will be in December, but with the Democratic agenda gathering steam, there is no guarantee that the measure will pass quickly. The administration's best opportunity for passage will come before the end of the year, since Democrat support for PNTR is dissipating.

Despite the embarrassing PNTR defeat, Bush's trip to Vietnam should produce some significant gains:

-- Intel deal. Last week, Hanoi increased Intel's (nasdaq: INTC - news - people ) license to operate in Vietnam four-fold.

-- Boeing purchases. The Export-Import Bank made loans to Vietnam that will enable it to purchase four Boeing (nyse: BA - news - people ) 787s for its national airlines. [...]

As he is only the second sitting U.S. president to visit Vietnam since the end of the war, Bush's trip to Hanoi (and Ho Chi Minh City) is his most important stop in his tour of Southeast Asia, which will also include visits to Singapore and Indonesia. Political instability in Washington's two bilateral security treaty allies in Southeast Asia--questions about President Gloria Arroyo's political legitimacy in the Philippines and the military coup in Thailand--have kept them off Bush's agenda.

Washington had hoped to use Bush's visit to Vietnam as a vehicle for strengthening relations with the Association of Southeast Asian Nations (ASEAN). Earlier in the year, the United States proposed a formal U.S.-ASEAN summit on the margins of the APEC meeting.

APEC presently excludes Burma, Laos and Cambodia as members. This automatic exclusion was convenient for the United States, which refuses to conduct high-level meetings with Burma. As the APEC host, Hanoi was eventually persuaded to accede to a smaller "ASEAN-7" meeting.

Last week, Washington threatened to back out of the U.S.-ASEAN summit if Thai Interim Prime Minister Surayud Chulanont attended while Thailand was still under martial law. However, the White House later agreed to accept a promise from Bangkok to lift martial law in the near future. This confusing climb-down may make Southeast Asian leaders wonder if the United States is sincere about its desire for a closer relationship with the region as a whole.

PNTR still has a chance of passing in Congress before the end of the year, but its temporary defeat has hurt U.S. credibility, both in Vietnam and in Asia as a whole. With his party's midterm election defeat and the defeat of the PNTR legislation, Bush may have difficulty at APEC overcoming the impression of an administration in disarray.

The above says nothing about offending US dairy farmers who export to Vietnam but God forbid the perception at APEC that US foreign policy is in disarray, so the first thing overboard is the democracy doctrine:

Congress Approves PNTR for Vietnam, Extends Trade Preference Programs
(December 18, 2006) As one of its final acts, the Republican-led 109th Congress earlier this month sent to President Bush a package of trade legislation that included permanent normal trade relations (PNTR) with Vietnam and renewed expiring trade preference programs, including the Generalized System of Preferences (GSP).

The legislation passed the U.S. House of Representatives by a vote of 212 to184 and the U.S. Senate by a vote of 79 to 9. "We are extremely pleased that Congress was able to pass this important trade package before it adjourned," said Clay Hough, IDFA senior vice president.

"Both PNTR for Vietnam and the extension of the Generalized System of Preferences are important to IDFA members, because they will allow U.S. companies to compete more effectively in domestic and global markets."

Last year, U.S. dairy exports to Vietnam were valued at $50 million. Once Vietnam is admitted to the World Trade Organization, which is expected to happen January 11, the country has agreed to cut its tariff rates on finished dairy products by 5% over the next five years. PNTR will give U.S. companies increased market access.

"IDFA supported the GSP extension because it allows products important to the dairy industry to enter the United States at a preferable duty rate," Hough said. "We expect U.S. dairy companies will benefit from this trade preference program." Although GSP was extended for two years, the administration can choose to revoke trade preferences after six months on certain products that are deemed able to compete effectively in the U.S. market without tariff relief.

Other trade legislation in the package included the Miscellaneous Trade and Technical Corrections Act (MTB) and the Andean Trade Preferences Extension Act (ATPEA). The MTB amends the U.S. Harmonized Tariff Schedule (HTS), modifying duty rates for certain products. IDFA had strongly opposed including language in the MTB that would increase tariffs on milk protein imports, and was pleased that the final legislation did not contain any regulations that would adversely affect U.S. dairy companies.

Regarding ATPEA, IDFA supports the bilateral free trade agreements that United States signed this year with Peru and Colombia, and believes that extending trade preferences for these countries is an appropriate measure. "IDFA looks forward to working with the new Congress next year to move the free-trade agenda forward to the benefit of the U.S. dairy industry," Hough said.

1) From The Washington Post article shown above.
2)30 years after the Vietnam War: China remains a threat by Thi Q. Lam, Pacific News Service, April 14, 2005

Frankenstein in Latin America and Caribbean: China pushes for plantation economies

"Some analysts believe that the commodities-based trade model used by China will undermine the progress that Latin America has made toward industrialization. While countries like Chile and Brazil have moved beyond raw materials exports, others with powerful presidents or ruling oligarchies may be tempted to fall back on plantation economics.(1)

"Latin American countries including Brazil, Argentina, Chile and Peru last week agreed to recognize China's "full market economy status" (FMES). So far, some two dozen countries have accepted the Middle Kingdom's FMES, and Beijing is poised to put more pressure on the European Union to do the same. Recognition of this status would enable China to better defend itself against charges of dumping that may be raised by its trading partners."(2) -- November 2004

I supply the second quote in the effort to head off Boris and other profound cynics among Pundita readers. Why, yes, in theory it is true that African and Latin American countries don't have to revert to bazaar and plantation economies if they simply refuse the Faustian bargain that China offers. In practice, China is taking measures that limit the ability of developing-world governments to stand up to China's practice of flooding their economy with dirt-cheap products.

Below are excerpts from an October 2005 paper by Stephen Hunter, Senior Policy Analyst for Latin America at The Heritage Foundation, titled Balancing China's Growing Influence in Latin America. The paper is worth reading in its entirety.

The recommendations in the paper point to the difficulties the US finds with attempting to balance China's moves in the Western Hemisphere. The truth is that the Millennium Challenge Account is a great idea that was implemented a quarter century too late. Today, China can easily undercut every US attempt to tag loans and aid to sound democratic government practices in the developing countries.

Another hard truth is that it's easier for despotic governments to deal with each other in trade matters. As the paper notes, "...authoritarian leaders and/or corrupt oligarchies control a number of governments [in Latin America]. Signing purchase agreements with them is much easier [for China] than dealing with the panoply of private corporations found in more democratic countries."

However, the hardest truth is found by studying the poverty-stricken, hopelessly backward narco-states of Burma, Pakistan, and North Korea. All three countries are testimony to what more than a decade of large-scale Chinese assistance and trade have wrought. In an uncertain world, you can be certain that China will work the same economic miracles in any country where the government is foolish enough to ignore the meaning of a Faustian bargain. It's time that US diplomats emphasize this truth to developing-world governments eager to get into China's debt.

Now to the excerpts:

In the Western Hemisphere, the Chinese are taking advantage of failures of half-hearted market reforms and Washington’s unwillingness to pursue neighborhood relations with much enthusiasm. National Defense University professor Cynthia A. Watson notes, “[T]he 1990s turned into a period of severe disappointment as free markets led to rampant corruption and unfulfilled expectations in Latin America while Washington became the world’s superpower rather than a partner for the region." [...]

In November 2004, [China's] President Hu Jintao flew to Argentina, Brazil, Chile, and Cuba, where he signed 39 bilateral agreements and announced $100 billion in investments over the next 10 years.

In May of [2005], Communist Party Chairman Jia Qinglin visited Colombia, Mexico, Uruguay, and Cuba. Building on simple commercial agreements, China has advanced to economic assistance, direct investment, a few joint ventures, and military ties.

When Argentina’s financial collapse rippled through South America’s Southern Cone, China quickly seized the chance to increase its stake in Argentina and Brazil, while U.S. investment declined by nearly half. Joint ventures include partnerships with Great Dragon Telecom in Cuba as well as Colombia.

China is partnering with Brazil to improve that country’s railways and establish a rail link to the Pacific to cut transportation costs of iron ore and soybeans. Chile’s congested port at Antofagasta may get a facelift thanks to the PRC.To meet domestic industrial needs and con­sumer demand, China has pursued investments and agreements with such oil producers as Venezuela, Ecuador, Colombia, Argentina, Brazil, and even Mexico.

The best fit is with Venezuela’s authoritarian leader Hugo Chávez, who directly controls the state oil industry. President Chávez has invited the Chinese National Petroleum Corporation (CNPC) to participate in exploring the rich Orinoco belt. Meanwhile, the CNPC has invested $300 million in technology to use Venezuela’s Orimulsion fuel in Chinese power plants.

For now, Venezuela plans to increase exports to China by 300,000 barrels per day and recently signed an agreement with Colombia to build a pipeline to the port of Tribuga on the Pacific coast, since supertankers cannot pass through the Pan­ama Canal. An additional proposal with Panama would modify a Panamanian oil pipeline to facili­tate shipping oil to the Pacific coast.

On his 2004 visit to Beijing, President Chávez said shifting exports to China will help end dependency on sales to the United States.

In 2003, China bid on concessions to Ecuador’s major oil fields. The same year, the CNPC acquired a stake in the Argentine oil and gas firm Pluspetrol, which operates fields in northern Argentina and Peru. [...]

On the military front, China has expanded ties through exchanges. It reportedly has direct military-to-military relations with Venezuela, Argentina, Chile, Peru, and Uruguay.

The PRC began collaborating with Brazil on spy satellite technology in 1999, providing rocket launch expertise in exchange for digital optical technology that would permit high resolution, real-time imaging. Moreover, access to Brazil’s space tracking facilities could give China the ability to attack U.S. satellites with a variety of technologies currently under development.

Perhaps the most fruitful collaboration has been with dictator Fidel Castro. In 1999, China was reportedly intercepting satellite signals from facilities in eastern Cuba. In 2000, it obtained access to a base outside of Havana to intercept U.S. telephony.

In 2001, Russia announced that it would abandon its extensive electronic espionage center at Lourdes. PRC personnel reportedly now occupy it. A February 2004 agreement cloaks such operations under the pretext of technical communications cooperation. In fact, Radio China International signals originate from Cuba, as does interference with U.S. East Coast radio communications and air traffic control, according to Federal Communications Commission complaints. [...]

From Latin America’s perspective, expanding relations with China might seem like a good idea. It offers the following advantages:
Prestige. Dealing with China, a major world power, elevates a small country into the big leagues of global actors. [...]

Deals with few requirements. China can bargain on the spot without a lot of caveats. Its transactions are based on simple exchanges. Their leaders have broad authority to negotiate foreign deals without worrying about legislative oversight, the rule of law, or altruistic objectives. Unlike Western leaders, Chinese leaders represent state monopolies—which mesh well with Latin American government ownership or management of telecommunications, mining, and energy industries. They do not need to build up Latin American trade capacity to deal with diverse businesses.

Leverage against Uncle Sam. China’s expanding industries are a temporary boon to resource-rich Latin America. Exports (mostly commodities) to China have grown by more than 600 percent in five years.[7] Compared with U.S.–Latin America trade ($410 billion in 2004), China’s $40 billion trade with the region might seem inconsequential.[8] However, Chinese trade and investment gives Latin politicians and business elites, who largely control commodities, a bargaining chip when dealing with the United States.

However, closer ties to China also have significant disadvantages for both Latin America and the United States:

Growing trade deficits. Latin American leaders who sign trade and investment deals with the PRC have noticed that China’s exports are more affordable than their own goods, which contributes to trade deficits. Chinese goods are made by laborers who work for one-third of the wages of Latin American counterparts and who tolerate worse working conditions.

Officials in Argentina, Brazil, and Mexico have signaled their unease about trade with such a hot competitor. In September 2005, Mexican President Vicente Fox made it clear to visiting President Hu Jintao that dumping electronics and clothing was unacceptable. For every dollar that Mexico makes from exports to China, the PRC makes $31 from exports to Mexico.[9]

Disinterest in economic reform. Some analysts believe that the commodities-based trade model used by China will undermine the progress that Latin America has made toward industrialization. While countries like Chile and Brazil have moved beyond raw materials exports, others with powerful presidents or ruling oligarchies may be tempted to fall back on plantation economics. Income gaps between the rich and poor may widen as a result. Moreover, such narrowly focused economies are vulnerable to downturns in commodity prices. Some 44 percent of Latin Americans already live below the poverty line. If these countries fail to adopt reforms, social inequality and political instability could depress U.S. exports to the region and increase migration problems.

Scramble for resources. To obtain commodities, China offers tempting investments in infrastructure. In contrast, the United States cannot offer direct tie-ins to state industries and can only offer development aid, now in decreasing amounts. Chinese competition may make Millennium Challenge Account (MCA) money a less effective incentive to democratize governments and liberalize markets. The one-to-two year lead time from proposal to disbursement of MCA aid gives volatile governments a chance to back away from market-oriented performance requirements. [emphasis mine]

Evasion of American-style bottleneck diplomacy. China’s flexibility counters more rigid U.S. approaches. Obtaining any kind of assistance from the United States requires compliance on a battery of restrictions, including observing human rights, protecting the environment, promising not to send U.S. military personnel to the International Criminal Court (ICC),[10] not assist­ing current or former terrorists, and not using U.S.-provided equipment for any other than its stated purpose. American commitments also depend on legislative approval and can be reversed if the mood in the U.S. Congress shifts.

Prying eyes on America. From electronic espionage facilities in Cuba to port facilities run by Hong Kong billionaire Li Ka-Shing’s Hutchi­son-Whampoa conglomerate in Panama, China has an eye trained on the United States. U.S. intelligence agencies are aware of this, but Washington’s penchant for focusing on one threat at a time, such as the war on terrorism, could leave America vulnerable to Chinese industrial and military espionage.

Of course the quotes are from a policy paper, which uses the careful language of academia, but it's very clear that America is already vulnerable to China's espionage. Yet the greatest threat to the US comes from instability in our region of the world; China's moves in Latin America and the Caribbean need to be studied in that light.

1) Balancing China's Growing Influence in Latin America.

2) China's Encroachment on America's Backyard by Willy Lam, The Jamestown Foundation, November 24, 2004.

Frankenstein in Africa: China sets out to destroy Africa's manufacturing sector

Most media reports on China's increased presence in Africa have focused on the country's hunger for Africa's oil, gas and minerals. However, the scramble to sew up energy concessions diverts attention from China's strategy in Africa. China's government is methodically dismantling Africa's manufacturing sector through various tactics, including flooding Africa with very cheap Chinese goods that don't make a profit for China's industries.

The latter is not simply brass-knuckles capitalism or even neocolonialism; it is part of a coordinated strategy between China's state-controlled business sector and their military.

The primary objective is military -- to block US and European military activities on the African continent. The related objective is to block G7 and in particular American influence on the continent -- first, by dismantling Africa's manufacturing sector and overbidding on energy concessions so that African governments become dependent on revenue from energy exports to China.

Second, by isolating African governments from the help given by the IMF and international development banks, such as the World Bank, with strong G7 ties.

Those who know the history of the IMF-World Bank (WB) in Africa might be weighted to give China their head on the hope that China can't do any worse. Ah, but China's economic miracle would been impossible without their adhering to IMF guidelines and accepting loans from the World Bank and other development banks.

More importantly, after decades of ignoring the obvious, the IMF and the World Bank have realized that African governments can't make great headway until they combine economic reforms with anti-corruption measures and transparency in key government financial practices.

Another way to put all this is to say that just when the IMF hit on a development formula that can work in Africa, along comes China and tells African governments, "We'll give you everything you need without your having to rein in corruption and mess around with keeping your books straight. What's more, you can still spend more than half your revenue from energy exports on weapons purchases, for all we care."

If you tell me that China won't get away with it -- they're already getting away with it:

BEIJING, Sep 18 (IPS) - As world financial leaders are casting ballots this week to increase the voting rights of China on the board of the International Monetary Fund (IMF), Chinese leaders have been reminded that with more power comes greater responsibility and that Beijing will be scrutinised on the ways it chooses to use its new credentials in the global economy.

"The international community recognises that China has increased its role in the world economy," IMF chief Rodrigo de Rato told the media. [...] A bigger voice at IMF "would allow you to express your views but, of course, you will listen to the views of the others," he was quoted as saying. [...]

In the most high-profile infrastructure aid-programme of recent years billions of dollars were offered to Angola in an effort to consolidate ties and secure China's access to the country's oil reserves. The financing has allowed the Angolan government to avoid dealing with the IMF, which has long criticised its finances for lacking transparency.(1)

So, why would China need to listen to the views of other IMF members, if they can buy out a government's need to deal with IMF guidelines?

Already China is writing one ill-conceived loan after another to African governments -- who just got their debts written off by the G7 countries! Remember Gleneagles? All the hand wringing and weeping buckets by the British about the need to forgive African debt?

China's increasing economic prowess has enabled it also to extend fresh loans to African countries the majority of which, the G7 says, are ill equipped to repay. Loans from China come with few conditions and at a time when many highly indebted countries in Africa have had their existing debts written off by Western governments and donor agencies.(1)

No sooner was the ink dry on debt forgiveness when China raced in with the checkbook and carte blanche: whether or not the loan is necessary and helpful to an African economy, China writes it up. And no matter how high-priced the loan, the African government accepts it, even with no means to repay.

China utilizes a variety of instruments to advance its interest in ways that western nations can only envy. Most of China’s investments are through state-owned companies, whose individual investments do not have to be profitable if they serve overall Chinese objectives.

Thus the representative of China’s state owned construction company in Ethiopia could reveal that he was instructed by Beijing to bid low on various tenders, without regard for profit. China’s long term objective in Ethiopia is in access to future natural resource investments, not in construction business profits. In other cases, China can use aid, investment and technical inputs to win long term gains and access, with a willingness to “lose” much in the short run to gain in the long run.(2)

Here you might ask where China -- still a developing country -- is getting all this money from. China is rolling in cash. In November China announced a trade surplus of $102 billion. China's monetary reserves have topped $1 trillion.

How is all this maneuvering by China sitting with the Africans? The ones who have seen the Chinese juggernaut up close; e.g., African manufacturers who've had their plants closed by China's competition, are aware of the dangers. Yet many feel they have no choice but to take the path of least resistance -- particularly if their government controls the energy sector targeted by China's military and the African government is a despotic one. That kind of government is the prime target for Chinese strategy. The implications for democracy in Africa and for the US-led war on terror are very serious. A 2005 report for The Heritage Foundation observed:

The most pernicious effect of the renewed Chinese interest in Africa is that China is legitimizing and encouraging Africa’s most repressive regimes, thereby increasing the likelihood of weak and failed states. [...]

African dictatorships are regular buyers of Chinese weapons and military equipment, which they often use to oppress minority populations, quash political opposition, harass neighboring countries, and extinguish any glimmers of democratization. [...]

China’s ideological support of African despots lends them international legitimacy and influence in the United Nations and other international arenas that help to blunt pressure from the Western democracies on human rights, economic openness, and political freedoms. At the same time, when it serves Chinese interests, Beijing succors would-be junta leaders and illiberal rebels who want power and would roll back political reforms in immature democracies. These rebels seem to believe that if they want to overthrow a legitimate government, China will work to bolster their international legitimacy in the United Nations and other international fora.(3)

My only quibble with the observations is that while China's support of despots is very dangerous, the most pernicious consequence of their actions is to push Africa backward. America and other advanced democracies have been able to supplant their manufacturing sectors in large measure with information technology. African nations that lose their manufacturing sector have nowhere to fall back except to the most primitive type of business: that of being a middleman in trading:

KANO, Nigeria -- The pasta factory that Umar Sani Marshall's family owns on the outskirts of this ancient city had not churned out so much as a single piece of macaroni in more than a year. The other former titans among Kano's once-mighty manufacturers were doing no better, producing mostly cobwebs as the city's markets overflowed with cheap imports from China.

So last month Marshall [...] decided to forsake his legacy as scion of one of Nigeria's leading industrial families. He strapped $5,000 to his waist and flew off to Asia in search of a new kind of fortune, built not on making goods but trading them.

By the time he returned 12 days later, Marshall had started a new business dealing cars and auto parts, as a middleman between Chinese suppliers and Nigerian consumers. Along the way, he said, he found the kinds of profits that long have eluded Kano's manufacturers, and he learned a few lessons about how to work with Chinese businesses instead of competing against them.

"When you go there with the intention of buying socks, you will come back with a jacket and hat" as well, Marshall said, smiling as he pretended to place a top hat on his head.

His shift, from manufacturing to trading, mirrors a broader one across Nigeria and much of Africa.(4)

I wonder how long Mr Marshall thinks he can get a great deal from the Chinese, once his nest egg from his family's manufacturing empire dries up.

Fifteen years ago, 500 factories hummed with work in Kano, but fewer than 100 remain operational today, most at far less than full capacity, according to the city's Chamber of Commerce. Tens of thousands of jobs have been lost. Meanwhile, Kano's Kwari textile market, the biggest in West Africa, has swelled with stall after stall of Chinese fabrics and clothing.

The textile situation is illustrative, so I'll quote from a longish passage in a Council on Foreign Relations report:

Chinese goods are flooding African markets, and – not so different from the United States – there has been growing concern in Africa about the effect on local industry. The primary focus is on textiles where the growth of Chinese exports constitutes a double whammy for Africa. Exports of Chinese textiles to Africa are undermining local African industry while the growth of Chinese exports to the United States is shutting down the promising growth of African exports in this field.

Southern Africa provides a good example of both effects. Chinese exports of textiles to South Africa grew from 40 percent of clothing imports to 80 per cent by the end of 2004. Out of 100 T-shirts imported into South Africa, 80 are from China. In the same period, from 1996 onward, employment in the sector in South Africa has decreased. By the end of 2002, 75,000 had lost their jobs in the industry.

The impact on African exports comes from the ending of the Multi-fibre Agreement (MFA), which had allowed countries like the United States to place quotas on clothing and textile imports from particular countries.

Under that system, the United States had long put quotas on China. More recently, the United States enacted the Africa Growth and Opportunity Act (AGOA), which gave African countries almost unlimited access to the American market. Textiles was one of the fastest growing exports under AGOA, with rapidly growing industries in Lesotho, Swaziland, Ghana, Uganda, Kenya and elsewhere on the continent.

Once the MFA expired in January 2005, however, Chinese exports to the United States soared and African exporters found they could not compete. More than 10 clothing factories in Lesotho closed in 2005, throwing at least 10,000 employees out of work. South Africa’s clothing exports to the United States dropped from $26 million in the first quarter of 2004 to $12 million for the first quarter of 2005. [viii] South African industrialists and workers have clamored for protective action, joined by church leaders and opposition leader Tony Leon. Textile workers joined other workers in a nationwide strike June 27 [2005] to protest job losses. The trade union federation, COSATU, is calling for a restriction on Chinese imports, and is urging retailers to stock 75 per cent of locally made goods. Industry is calling for customs officials to impound undervalued Chinese imports. [ix]

The impact has been no less in West Africa. In Nigeria, low cost imports have largely devastated the textile and other consumer product industries of Kano and Kaduna. In these largely Muslim cities, one Nigerian parliamentarian described a frightening situation of vast numbers of unemployed youth, a powder keg in Nigeria’s already fractured society. Given Nigeria’s underdeveloped and unreliable supply of power, which forces most industries to rely on back-up diesel generators, the prospect of Nigeria regaining a competitive edge seems remote. [x]

In Ghana, threats of closures have come from some of the leading industrialists. Reflecting the rise and fall of the effects of AGOA, the head of Gregory Knitting said, “We in clothing and manufacturing are seeing shocking times. Sales in 2003 were reasonable, they were better in 2004, and very bad in 2005.” [xi]

If China has been forthcoming in aiding and investing in Africa with few strings and considerable cash, it has been equally firm in defending its export policies. China’s Economic and Commercial Counselor in South Africa warned South Africans that “unfair and discriminative restrictions will never be accepted by China.”

He pointed out that China was within its rights under the WTO and had invested carefully during the ten years of the MFA to become efficient and competitive.

“Thanks to the arduous efforts over the years, the Chinese textiles and clothing industry managed to sharpen its international competitive edge and gained the comparative advantages it now enjoys.”

If Africa needed to be told of the competition it now faced, he added that even if African countries placed restrictions on Chinese goods, they would not be able to control the substitute flow of goods from India and Pakistan. The solution, he said, was for South Africa to adopt a “positive attitude.”(2)

Adopt a positive attitude with a gun at your head. How very Chinese.

Now what's wrong with the argument from China’s Economic and Commercial Counselor in South Africa? I went over this in the 2005 post titled Pharaoh:

[...] there is a way to tilt the playing field against America and against all democracies that engage in global trade. The unfair advantage comes when democratic peoples compete with despotic governments. This is because the despot can order his subjects to learn whatever profession and work in whatever industry gives an edge in exports.

African manufacturers and their employees are not in competition with Chinese manufacturers and their employees. They are in a struggle against a despotic government. It's not a playing field; it's a slaughterhouse.

The die is cast; in a November summit, Chinese and African leaders wrote deals worth $1.9 billion.

The agreements, signed between 12 Chinese firms and various African governments and companies, followed Chinese President Hu Jintao's pledge on Saturday to offer $5 billion in loans and credit, and to double aid to Africa by 2009.

In a joint declaration ending the summit, delegates announced a strategic partnership and "action plan" that charts cooperation in the economy, international affairs and social development. "We propose to enhance South-South cooperation and North-South dialogue to promote balanced, coordinated and sustainable development of the global economy," said Hu, reading out the declaration.(5)

What can the United States do to offset the worst of China's machinations on the African continent? Some good suggestions are found The Heritage Foundation's February 2006 report:

To protect and advance American interests and influence in Africa, the United States should:

Develop a coordinated, comprehensive strategy.
Appropriate U.S. agencies should develop a comprehensive and coordinated strategy based on a review of the challenges and obsta­cles in each country and the available American resources. Consistent, constant, and coherent American engagement in Africa will help to counter the illiberal forces that stunt African development.

Increase the U.S. diplomatic profile in Africa.
The United States has demonstrated considerable commitment to promoting economic growth and development, representative government, health, and human rights in Africa. Since 1960, Wash­ington has provided $51.2 billion (in 2003 dol­lars) in official bilateral development assistance to sub-Saharan Africa.[36]

The United States is the largest humanitarian aid donor ($3.3 billion in 2003) and also the largest source of bilateral and multilateral support to combat HIV/AIDS, malaria, and other infectious diseases.[37]

Secretary of State Condoleezza Rice’s reorganization and expansion of diplomatic posts, combined with extensive public diplomacy to publicize U.S. assistance efforts in Africa and shared interests between the two regions, will help to change the pervasive African perception that the United States cares little for the region. To further these efforts, President George W. Bush should go on an extended trip to Africa to strengthen relations with Africa.

Encourage human rights, democratic principles, and good governance.
Atrocious human rights violations in Sudan, Zimbabwe, and some West African nations remain a primary concern. The United States should make a more consistent effort to moderate the conduct of repressive African regimes and to help young African democracies lay the institutional foun­dations for a free, open, stable, and prosperous society in their individual countries and throughout the region. To this end, the United States has made “good governance” a requirement to qualify for Millennium Challenge Account aid.

Washington should go a step further by denying bilateral economic assistance to countries that consistently violate human rights or resist the transi­tion to representative government and by promoting this policy in both international financial institutions and the United Nations.

Increase trade and economic relations with Africa.
Although U.S.–Africa trade accounts for only about 1 percent of total U.S. trade, it has grown rapidly since passage of the African Growth and Opportunity Act (AGOA) in 2000. AGOA significantly lowers, through 2015, trade barriers to goods exported from African countries, provided that they have established or are making progress toward market-based economies, enhancing the rule of law, represen­tative governance, lowering barriers to U.S. trade and investment, improving human rights, and other goals.[38]

While AGOA is a positive step, the United States should continue to press the region and individual countries for permanent free trade agreements that liberalize trade in goods and services, lower investment barriers, and strengthen property rights. Such agreements would encourage stronger economic growth and increase economic ties between the United States and trade partners in Africa. Charity and international aid will not solve Africa’s prob­lems, but economic reform and growth can.

Encourage development of energy resources. Africa is an increasingly important oil supplier for the United States, providing 15 percent of total U.S. oil imports, which is forecast to increase to 25 percent within the next decade. Given America’s desire to diversify its energy supplies, the United States should press countries in Africa to open their oil and gas sectors to foreign investment and remove regulatory and other barriers that constrain economic development of those resources.

Increase security engagement. The American military is the world’s premier fighting force, making many nations eager to gain access to U.S. military training and facilities. Security engagement, including the International Military Education and Training program (IMET), will increase the likelihood of advancing U.S. goals, such as civilian control of the military and counterterrorism and peacekeeping capabilities.

Seek new international partners. International cooperation is a “force multiplier,” and Washington should look beyond traditional partners in Europe to the democratic nations of Asia and Latin America to help advance these important issues.(3)

The Council on Foreign Relations chimes in their advice:

In terms of promoting political and economic reform, now so much the parlance of both political and development thinking, the major impetus must come from Africans themselves. The United States can do much to encourage that, with aid targeted to judicial reform, democratic institutions, the Parliament and Human Rights Court of the Africa Union, and African civil society. Providing truly large amounts of aid over several years, to reward good performing countries – the philosophy of the Millennium Challenge Account but not yet realized – is another promising initiative.

Both the United States and Europe also still have one more major economic card to play: opening their markets to African agricultural products. The benefit to Africa could dwarf all that China and India together could do for Africa’s development. But the EU and the United States are held back from playing this card by domestic pressures, despite regularly stated pledges to take the necessary action. If we are serious about Africa, and going beyond humanitarian aid and charitable impulses, this is the most valuable step we can take.

Finally, the United States should begin to engage China on Africa. China has more than economic objectives. China is seeking to be recognized as a major power.

It has become more active in supporting UN activities, including the provision of peacekeepers to the UN. It rarely vetoes UN resolutions (unless recognition of Taiwan is at stake) even when it has reservations. In March of this year, China abstained rather than veto a UN Security Council resolution asking the International Criminal Court to investigate human rights violations in Darfur and setting in motion a process that could lead to sanctions against Sudanese officials.

In sum, China seeks its place in the sun, including respect.

The question then is does China want to be seen in Africa as the defender of rogue states, the more aggressive seeker of Africa’s natural resources, without regard to transparency, development and stability there? Is there room for developing some rules of the road, some common objectives, some ways in which Chinese economic gains for Africa (and itself) can come side by side with building more stability and democracy there? Are there incentives – more joint ventures, more common work on both the exploitation and preservation of natural resources in Africa (e.g., the rain forests) – that the United States can offer? In sum, are there more areas of win-win situations in Africa for both the United States and China?

It is better to explore these possibilities than to start down the path of trying to limit Chinese influence, for the odds are against that happening any time soon.(2)

China is seeking its place in the sun by making a very deliberate attempt to destroy American influence in Africa and across the globe. Provided the US government is very clear on this point, of course we can try to work out "win-win" situations with China. But meanwhile, row away from the rocks. China needs to be confronted -- at the United Nations, the IMF, World Bank, and WTO -- on the worst of their actions in Africa.

1) With China Lending, IMF-WB Conditions Take a Toss
by Antoaneta Bezlova.

2) China's Rising Role in Africa by By Princeton Lyman, Director of Africa Policy Studies, Council on Foreign Relations, July 2005.

3) China's Influence in Africa: Implications for the United Statesby Peter Brookes and Ji Hye Shin for The Heritage Foundation, February 2006.

4) From Competitors to Trading Partners: Africans Adjust As Business Ties with China Grow by Craig Timberg, The Washington Post, December 3, 2006.

5) The Washington Post.