An Emerging Technological Arms Race
Richard Nixon Presidential Library and Museum
July 13, 2018
Thomas G. Mahnken is President and Chief Executive Officer of the Center for Strategic and Budgetary Assessments.
He is a Senior Research Professor at the Philip Merrill Center for Strategic Studies at The Johns Hopkins University’s Paul H. Nitze School of Advanced International Studies (SAIS) and has served for over 20 years as an officer in the U.S. Navy Reserve, including tours in Iraq and Kosovo.
He currently serves as a member of the Congressionally-mandated National Defense Strategy Commission and as a member of the Board of Visitors of Marine Corps University. His previous government career includes service as Deputy Assistant Secretary of Defense for Policy Planning from 2006–2009, where he helped craft the 2006 Quadrennial Defense Review and 2008 National Defense Strategy. He served on the staff of the 2014 National Defense Panel, 2010 Quadrennial Defense Review Independent Panel, and the Commission on the Intelligence Capabilities of the United States Regarding Weapons of Mass Destruction. He served in the Defense Department’s Office of Net Assessment and as a member of the Gulf War Air Power Survey. In 2009 he was awarded the Secretary of Defense Medal for Outstanding Public Service and in 2016 the Department of the Navy Superior Civilian Service Medal.
Dr. Mahnken is the author of “Strategy in Asia: The Past, Present and Future of Regional Security” (Stanford University Press, 2014), “Competitive Strategies for the 21st Century: Theory, History, and Practice” (Stanford University Press, 2012), “Technology and the American Way of War Since 1945” (Columbia University Press, 2008), and “Uncovering Ways of War: U.S. Intelligence and Foreign Military Innovation, 1918–1941” (Cornell University Press, 2002), among other works.
Tai Ming Cheung is an associate professor at the School of Global Policy and Strategy and director of the UC Institute on Global Conflict and Cooperation (IGCC) at University of California, San Diego. He is a longtime analyst and leading expert on Chinese and East Asian defense and national security affairs, especially related to economic, industrial, technology and innovation issues. Cheung worked as a journalist, and political and business risk consultant in Asia from the mid-1980s to 2002 covering political, economic, and strategic developments in greater China.
His book “Fortifying China: The Struggle to Build a Modern Defense Economy” was published in 2009, followed by “Forging China’s Military Might: A New Framework for Assessing Innovation,” which he edited. He was previously a correspondent at the Far Eastern Economic Review.
As IGCC director, Cheung leads the Institute’s Study of Technology and Innovation, examining the evolving relationship between technology and national security in China. He also manages the institute’s Northeast Asia Cooperation Dialogue, bringing together senior foreign ministry, defense officials and academics from around the globe.
Tai Ming Cheung and Thomas Mahnken are co-editors of a newly released book, “The Gathering Pacific Storm: Emerging US-China Strategic Competition in Defense Technological and Industrial Development.
Jonathan Movroydis: Before the discussion today, I just wanted to lead with a couple of questions. Number one, how did you come to take on U.S.-China relations as a field of study?
And number two, in his 1988 book, “1999: Victory Without War,” Nixon said about the U.S.-China relationship, “Today, we are new friends who have been brought together after years of hostility, even hatred and war, but coldly calculated common interests. These interests could change and the friendship would change them. We have no shared experienced struggles or ideals to hold us together in the face of shifting international realities. Absent a major political for movement in China, our philosophies of government will remain diametrically opposed to each other. Therefore, to a large extent, this promising new relationship is hostage to events over which neither side has complete control.”
In “Gathering the Pacific Storm,” you write that the U.S. and China were fierce adversaries between the 1950s and 1970s. And although the relations warmed thereafter with Nixon’s trip to China in 1972, they found themselves once again sliding into military strategic competition in the opening decades of the 21st century. Can you give us some background how he reached this era of strategic competition? And did we get here because we became a hostage to events which neither of us could completely control, as President Nixon said? I’ll leave it to you guys.
Thomas Mahnken: Sure. Thank you. First off, it’s a real pleasure to be here. For me, it’s a real pleasure to be back in California, as somebody born and raised in San Diego or just North of San Diego. And so, you know, to answer the first question, how I got here, if you were looking at the high school version of me, I would tell you I wanna be in motion pictures.” Why not? Right? And specifically, I wanna direct motion pictures. But then I got to a point around my senior year of high school where…I also loved history and it was a love of history I got from my father who was a World War II vet. And, you know, I thought that what really, really fueled me, really fueled my fire was international affairs.
And then I wound up at the University of Southern California. I wound up taking a class on strategy. I started to read Clausewitz, Sun Tzu. I started to read these great strategic thinkers. And it just fueled a fire in me that fortunately, you know, has remained kindled ever since. And so I wouldn’t consider myself a China expert per se, although I’ve spent a lot of my career recently looking at China because of, you know, the challenges that the United States faces as a Pacific power, I think are really front and center to our security. So I found myself drawn into this topic because of a love of history and a love of strategy and just endlessly challenged and fascinated by the by the field. And as to answer the second question, hold on because I think that actually speaks to the beginning of our talk.
Tai Ming Cheung: Right. Okay. So, I mean, I’ve always been fascinated by U.S.-China relations, but I wanted to focus about why Tom and I have been focusing upon the defense technological dimension of the U.S.-China relationship, because this project that we’d been doing goes back about four or five years ago. So this is sort of in the early 2010s. And in the early 2010s, the relationship between the U.S. and China was still very corporative itself. There wasn’t sort of what we see today, this increasingly sort of adversarial, competitive relationship on the defense side itself. There was a lot more focus upon good corporative relationship itself. But even then, even about four or five years ago, we were seeing, this was towards the end of the Obama administration, that there was increasing structural problems that we saw that as the U.S. began to focus away from dealing with non-state actors, with terrorism, with dealing with Iraq and Afghanistan, there was a focus on who are their long-term strategic competition?
And the most obvious country was China because of its rising economic, strategic, and technological strength itself. And so what we see today, a lot of the trends have been there for the last 5, even 10 years itself. Unfortunately, it’s not rocket science itself. It’s like if you look at these geo-economic and geopolitical, geostrategic trends itself, the increasing competition that we see between the U.S. and China, I think we’re gonna see a lot more going forwards itself, which is a reason why you should buy our book.
Thomas Mahnken: And maybe even read it.
Tai Ming Cheung: No, you don’t have to read it.
Thomas Mahnken: Yeah, the buy is the most important part of that.
Tai Ming Cheung: Okay. So perhaps we could…to answer the second question then that Jonathan raised itself is like, I mean, is what we see in terms of where U.S. and China are going, can we prevent this increasing competition, this increasing like adversarial relationship? And I think , in many ways, it’s we’re talking about a lot of what’s going on in terms of international relations, where, like, these great power transitions, as a rising power, which is where China is with the dominant hegemonic power, which is where the U.S. is. So a lot of the international relations analysis says it’s like, well, when you get a rising power trying to, like, challenge what is the dominant power is you’re gonna get increasing frictions. Like, some people say, “Well, this may go to war or not.” I think that’s a big question that is not clear itself. But especially today, under the current administration itself, what we’re seeing is, and I think it’s an acceleration of this increase in competition itself. I don’t think we’re gonna get close to war, but we’re gonna get close to a lot more of the competition on the technological, the investment, those sides that in the past that were sources of cooperation. I think we’re gonna see even more problems.
Thomas Mahnken: Yeah. And I think, you know, the Obama administration towards the end, and certainly in the Trump administration, you know, there’s acknowledgement that we are in a period of great power strategic competition. And if we go back and I put my historian’s hat on and I look at past great power competitions, sometimes they lead to war. The competition between Great Britain and imperial Germany, and then Nazi Germany bred two world wars. The competition between Great Britain and the United States, late 19th, early 20th century, didn’t lead to war. It led to actually quite a good relationship. The Cold War, which I think for many of us is still our frame of reference, between the United States and the Soviet Union was sort of an intermediate case. Americans and Soviets did face each other, we now know, you know, in the skies over Korea, the skies around the Soviet periphery. We fought a whole series of wars including the Vietnam War. It really only makes sense within the context of the Cold War, but that big war between the United States and Soviet Union never occurred.
So the historian in me says, “Yeah, we’re not destined for any particular future.” But the historian in me also says that it’s worthwhile to go back and try to, even from a 2018 perspective, to try to figure out how we got where we are today. And if I do that, I would first look at things from China’s perspective. And I think from China’s perspective, Chinese leadership’s perspective, they have seen themselves as competing with the United States for some time. And I’d say that we’re using the word competition. It’s probably worth just clarifying that. For me, I think for Tai, when we say competition, we’re not talking about conflict. We’re also not talking about cooperation, although you can cooperate at the same time you compete. We’re talking about competition as maybe the center of a spectrum that’s delineated on one side by conflict and on the other by cooperation. So I think we talk about competition maybe in much the same way that those in business finance would think about competition. Competition doesn’t necessarily lead to conflict.
But the Chinese leadership has seen itself in competition with the United States for quite some time. And the landmarks on that path include the end of the Cold War where the Soviet Union went away as China’s primary adversary. They include the 1991 Gulf War, which didn’t directly involve China, but demonstrated the awesome capabilities of the U.S. military, capabilities that seem to hold at risk Chinese investments in defense. It includes the 1995, 1996 Taiwan Strait Crisis, and it includes something that Tai will talk more about in a little bit, the U.S. bombing of the Chinese Embassy in Belgrade during the Kosovo campaign. On the U.S. side, I think for a long time, the assumption, and this was embedded in Jonathan’s question, the assumption was that through working with China, through reaching out, engaging China, enfolding China in international institutions like the World Trade Organization, over time, we would build greater and greater areas of common interest and, if you will, tame China so that China became more and more like us.
I think that view, you know, has been shown to be incorrect in any number of ways. But I think a number of the milestones on our side included things like the 2001 EP3 aircraft shoot down, China’s development and testing of new military capabilities, and then most recently, China’s island-building campaign in the South China Sea, together with a predatory economic behavior and political warfare in the United States and other countries seeking to influence views. I think more and more that’s caused questions about the nature of the U.S.-China relationship. So, you know, we are where we are. It’s a competition that on one side, I think, has gone on for the better part of two decades. I think the U.S. is belatedly recognizing the competitive parts of the relationship to include the military part, which is what we really focus on, but also economic and political as well.
And so in the, in the military sphere, that has increasingly come to reflect the broader geopolitical rivalry. China has been investing in capabilities in particular since the 1990s aimed at, among other things, blunting the ability of the U.S. military to project power in defense of our interest. They’ve developed what, you know, in the jargon is called anti-access area denial capabilities. Capabilities really meant to hold us at arm’s length to give them greater freedom of maneuver near their territory, whether that would be in a conflict with Taiwan or potentially a conflict with Japan or other types of contingencies. And in developing these anti-access area denial capabilities, we, the United States, U.S. military, have really been the benchmark. They’ve had a series of focused investments really trying to render obsolete a number of the capabilities that we’ve developed and honed over decades.
For a long time, I’d say we did not take that challenge seriously. We took our qualitative advantage, our technological superiority, really to be a given. And it wasn’t really until the last 10 years that the Pentagon really began to worry that our technological edge was eroding. And there’s a concern, particularly, about Chinese investments in cutting-edge areas, areas like artificial intelligence, autonomy, quantum computing, that because we’re all sort of starting off with the same level playing field, that they really may be able to steal a march on us. And so, at least as far as the defense department’s concerned, this was true in the Obama administration and continues to be true in the Trump administration, we’re gonna see intensifying strategic competition between the United States, China, and to a lesser extent, Russia, in the military sphere.
Now in the Obama administration, the response to this was the so-called third offset strategy, where the U.S. would look and try to find, in emerging technology areas, game changers that could give us an enduring advantage. And that emphasis on seeking new areas of advantage continues in the Trump administration although you won’t hear the third offset strategy voiced. The idea of reclaiming an advantage by seeking new capabilities, I think, it really is central to what’s going on. Now, one thing I think that really has marked the Trump administration in both its national security strategy and it’s national defense strategy is a more overt discussion of great power competition and specifically U.S.-China, U.S.-Russia competition.
And I think you see that in the 2017 National Security Strategy. And I’ve put up here some quotes from that National Security Strategy. And I would say that the 2017 National Security Strategy really does stand out as a unique document. Before this document came out, I long held that you could rip the covers off of National Security Strategies published across multiple administrations, throw them on the table, mix them up, and even an expert would be hard-pressed to figure out who wrote what because they just tended to be anodyne. They all tended to say the same things. They weren’t really strategic. They were undifferentiated lists of desirable outcomes.
But I have to say that, you know, the 2017 National Security Strategy is the exception that proves the rule. It is very explicit, particularly in the case of China and Russia, in calling out these great power competitors. And you see, you know, from the quotes here, “They challenge American power, influence, and interests. They are determined to make economies less free and less fair, grow their militaries and control information and data.” And so, again, quoting from the National Security Strategy, it talks about the return of great power competition. And that strategy talks about China and Russia contesting our geopolitical advantages and trying to change the international order in their favor. So this is a marked contrast from previous National Security Strategies and previous administrations that had this concern but we’re reluctant, for various reasons, to give a voice to those concerns.
I think part of the reason behind that is here, for a long time, American policymakers had a set of assumptions about China and how China would evolve when enfolded, encompassed in international institutions. You know, what the National Security Strategy talks about is the failure of those assumptions, that reality no longer fits those assumptions. To quote the document, “Contrary to our hopes, China expanded its power at the expense of the sovereignty of others.” And so as portrayed in the National Security Strategy, this is ultimately a competition about what the world is gonna look like, how it’s gonna be organized, and what values will dominate. National Security Strategy portrays a China that’s not only using military instruments, but also economic instruments, political instruments as part of it’s an integrated approach to state craft. Military, right? Military investments as well.
Now, the National Security Strategy was used then to guide the National Defense Strategy, which is signed by the secretary of defense, by Secretary Mattis, and really governs the way the Defense Department is going to do things. And like the National Security Strategy, the 2018 National Defense Strategy talks about, really has as its light motif, the reemergence of long-term strategic competition particularly with China. You see, “The central challenge to U.S. prosperity and security is the reemergence of long-term strategic competition.” And one of the questions that’s really central to our work, to the work that Tai and I have been doing, is how well positioned is the United States, and are the United States and its allies, for a long-term competition with China? Right?
And the cutting edge of that, you know, the tip of the spear of that is China’s military modernization, which really has been going on a pace for a number of years and is calling into question, American dominance in a number of different areas. And it’s not just a modernization program that deals with, you know, existing capabilities. It’s not just about building aircraft carriers, building tanks, building fighter jets, but it’s also a competition at the technological cutting edge where the Chinese are investing a lot in a cutting-edge, leading-edge areas that have military and military applications. And so more and more people in Washington and beyond are asking whether, you know, the United States will be able to retain its qualitative advantage in these areas.
So to help us think through long-term strategic competition, we use a framework called Competitive Strategies. It’s a framework that was really initially developed in the business, in the business realm. It was actually initially pioneered in Harvard Business School back in the ’60s and ’70s but was first imported into the Pentagon, well, first actually into the National Security Council staff during the Nixon administration by a man named Andy Marshall who served as an assistant to Henry Kissinger for a couple of years in the Nixon White House before moving to the Pentagon when James Schlesinger became secretary of defense and established an office, an office that continues on today, called the Office of Net Assessment. And the Competitive Strategies Framework is really meant to get us to think and assess and plan over the long term based on our comparative advantages and how we can, in peace time, use military power to shape a competitor’s choices in ways that favor our objectives. It’s about using military tools without fighting, and hopefully, in a way to deter war.
The Competitive Strategies approach has as a couple of aspects, I think, we should focus on. First, is it is very interactive. Imagine it as, you know, thinking through a game of chess, a game of chess that lasts not minutes or hours, but years or decades, thinking through our moves and the responses that competitors are likely to take and doing so in a way that, over time, maximizes our advantage.
A second key part of the Competitive Strategies approach that’s germane is recognition of constraints. Now, I think we in the United States, we’re painfully aware of our constraints. We know there’s not enough time, there’s not enough money, there’s not enough resources. Well, our reality is also the reality of our competitors. The problem is we often don’t think about it that way. So whether it was the Soviet Union during the Cold War or China and Russia today, they also face constraints. Competitive Strategies approach really seeks to understand what those constraints are and use them to our advantage. And the third aspect that I think is of importance is time. Competitive Strategies approach looks over the long term and really seeks to recognize the time dimension of competition and make it a virtue, use it to our benefit.
So, and this is an abstraction, Competitive Strategies approach, really, one way to think about it is in terms of a three-move sequencing. You can think about it as chess moves. You can think about it as a tennis match. You could think about it any number of different ways. What Competitive Strategies says is, you know, when we take a move, when we do something, first, we need to think about our competitors’ reaction. Too often in Washington, we don’t do that, even that elemental step. But we need to take moves with an eye towards how our competitor will respond. And even beyond that, we need to take that first move with an eye towards the opportunities that’ll open up beyond that. I think a tennis match is actually a really good metaphor for that.
If we’re thinking competitively, we’re not just lobbing the ball over the net, we’re lobbing the ball over the net to a part of the court that it’s gonna be difficult for our competitor to get to. And even if he or she gets to the ball, lobs it back at us, we’ve set them up, you know, and we’ve set ourselves up for success on the next, you know, on the next volley. So it’s a way of thinking over time and thinking with purpose when it comes to strategic competition. The Pentagon used this approach first beginning in the mid-1970s. Why? Well, think about it. Mid-1970s, United States drawing down from Vietnam. There’s a lot of pressure on defense budgets, but there’s still a looming competitor out there, Soviet Union, and a looming competitor that was investing more and more in the military.
So the United States couldn’t reliably just outspend the competition. We had to be smart. And so it probably shouldn’t be a surprise that it was kind of first in the mid-1970s that the Pentagon began to think of these terms just as maybe it shouldn’t be a surprise that the Pentagon has once again returned to this perspective, drawing down after a series of wars, constraints on our budgets, and yet looming competitors out there. And they’re looking at Competitive Strategies as a way to enhance deterrence, to deter conflict, to convince competitors that, to go back to the first question, it’s better to compete than to go to war. And they’re also looking at Competitive Strategies as a way of pursuing asymmetric options. Let’s compete on terms that are favorable to us, not necessarily the terms that are favorable to our competitors. So that’s the U.S. side of it. And Tai will now kind of take us through the Chinese view and how China and Chinese leadership has seen this competition unfolding.
Tai Ming Cheung: So Tom painted a very good and very detailed and rich narrative of where the U.S. came from and what and the U.S. is now. I mean, it’s like, given that it’s about looking at this U.S.-China competition, China has been thinking about competing against the U.S., sort of, I would say much more earlier than the U.S. has been dealing with China. The U.S. only really began to focus against great power competition, China in particular, Russia, only sort of towards the end of the last decade, particularly with purpose in the early years of this decade because the U.S. was focused in the 2000s on dealing with terrorism, on dealing with what’s going on in Iraq and Afghanistan. And the Chinese have been thinking how to deal with the U.S. from a strategic, from a military perspective since the early 1990s.
So the Chinese had sort of a 20-year head start. So why were the Chinese so concerned about the U.S. itself? There was a number of events in the 1990s, as Tom sort of mentioned. First of all, it was the first Gulf War. So like when the U.S. was dealing with Iraq, the reason why…China wasn’t involved, but the reason why China was really worried about the consequences of the first Gulf War was that in 1990, 1991, the Chinese military were more like the Iraqis. They were this low tech, very large ground force itself. And the first Gulf War showed U.S. and allied technological superiority that could deal with armies even that were much larger through very, very, like, technological means. So this had a profound impact on China. And then the Chinese said, “Well, we weren’t prepared to fight the wars in the past, the Korean War or the Vietnam War itself. But we see that the Wars of the future are not about how big you are, but how technologically sophisticated.” So that was a wake-up call.
And then the next issue was in the mid-1990s when there was this concern in Beijing that Taiwan was going independent. There were a number of major issues across the Taiwan Straits. There was the rise of pro-independent political pop parties that were in power in Taiwan Strait. And so what you got was a growing concern in Beijing about the coherence and the sovereignty of the Chinese state. And what made it even more concerning was that the U.S., during the Taiwan Strait Crisis, they sent a couple of aircraft carriers through the Taiwan Straits itself. And so the Chinese said, “Well, it’s not just about Taiwan, it’s about potential U.S. intervention.”
And then a third important issue was, as Tom sort of mentioned, in 1999, there was the campaign dealing, so like, with the Serbian, the Yugoslav control of Kosovo itself. And so there was a major air campaign. And one unfortunate incident was that the U.S., with great precision, destroyed the Chinese Embassy in Belgrade. The Chinese said this was not an accident. This was deliberate because they said, “Well, the U.S. sent a B2 bomber all the way sort of across the world and using very, very, so like, precise equipment targeted and destroyed the embassy. How could that be an accident?” The U.S. said, “It’s like, well, we thought, we had the wrong like identification of what the embassy was itself.” They didn’t update their target. It used to be an old Yugoslav military logistics center itself. But what it led is the leadership in Beijing said, “Well, if they can do that to the embassy in Belgrade, they can do that anywhere in China. They can do that to the leadership compound in Central Beijing. They can do that to office facilities.”
So how does China an and a rise in China at that time, how does it deal, deter, develop the capabilities to deal with the U.S. itself? But at that time, especially in the 1990s and in the 2000s, the Chinese were not in a position to really go head to head against the U.S. The U.S. was still the preeminent strategic power itself. So a lot of these concerns on the Chinese side, basically said, “Well, we have to keep this very, very quiet. We need to embark on developing our strategic military capabilities, but we can’t go head to head with the Chinese.” So that’s why they focused on what Tom mentioned. It’s like things like anti-access area denial capabilities. The Chinese said, it’s like, “We still need to emphasize the importance of economic development, but we need to pay a lot more attention to building up our military capabilities.”
Because in terms of the technological gap itself, the U.S. was still, I would say, in the 1990s, in the early 2000s, the U.S. was still sort of a one to two, sort of closer to two generations ahead of where the Chinese were in military capabilities whether in aviation, or it’s like, on the naval side or in space. So the Chinese, as the U.S. was focused on the war on terrorism after 9/11, the Chinese very quietly, but with great purpose, they began to invest very heavily in their strategic capabilities. And they did this in a couple ways.
So one is that they began to pull money into their research and development, into their military industrial complex, that they needed to build up their capabilities indigenously at the same time. And this is sort of, what the Chinese were, what we call trying to behave like a typical country that was catching up, right? It’s like, if you’re a country that’s catching up itself and you don’t wanna reinvent the wheel, you don’t wanna go and invest on research if other countries have done it. What you wanna do is that you wanna absorb those capabilities because it’s been done elsewhere. So what the Chinese did itself, they had this dual-prong strategy itself. But they said, “Let’s acquire these capabilities from the U.S., from other advanced countries.” And in particular at that time, it was from Russia itself.
And so during the 2000s, China really had a very sophisticated, very active strategy, both illicitly, like stealing, hacking, but they also did this openly. A lot of this was through legal means itself. They’ll buy Russian equipment. They’ll do joint ventures with foreign countries itself, because especially in the 2000s itself, the U.S. and China had a very good relationship. There was none of this strategic competition, at least out in the open. But as this goes forward, so sort of in the early part of this decade, this is when we see this strategic competition really coming out with the third offset strategy on the U.S. side and it’s a recognition. And so in China, and especially today, one of the big questions is that where has China caught up itself?
So in 2000s, as I said, China was about two generations behind across the board itself. They poured in this investment. They were very, very focused and, I would say, the gap in today, in the last couple of years, they’ve narrowed the gap by about a generation. In some areas, they’ve caught up. They’re all sort of at the same area, especially in some of these emerging areas. And so one of the big strategic questions going forwards is how innovative is China, right? How innovative is China both militarily, technologically, and in geo-economic terms? Because one of the big questions for the U.S. is that can the U.S. regain its technological superiority itself? It seems increasingly that it won’t regain that superiority that it’s had at the end of the Cold War or in the 1990s or the 2000s, but can it still stay one or two steps ahead of China itself?
And this is where the competition is today because the Chinese are investing very, very heavily itself. The Chinese, they still have this very sophisticated absorption strategy. This is one of the big concerns we have in the U.S. today that we see a lot of Chinese, so like, foreign direct investment in Silicon Valley, in a lot of the technological areas itself. And in Congress today, there’s a lot of efforts to try to beef up export controls, foreign investment controls itself. But the Chinese have also said, they’ve also realized, it’s like, “Well, getting the technologies from other countries can only get you so far itself.” But all great power, especially if you wanna be a great power for the long term, if you wanna be a sustainable great power that can compete against other great powers, you need to have your own innovation, indigenous innovation capabilities.
You have to have your great universities, your great research and development companies, etc. And this is what we see the Chinese are doing today. They’re pivoting from just relying on absorbing to building a really indigenous innovation capacity. And so the next 10, 15, 20 years, we are gonna see this increasing technological, and especially military, technological competition. What I’ll do is we’ll leave it because we’re trained to speak nonstop for about five or six hours, but we know we wanna get you to be able to ask questions and to interact with us. So perhaps, we’ll rattle on when you have questions to pose to us.
Jonathan Movroydis: Thank you Tom and Tai. We have a Facebook Live audience who actually would like to ask the first question. This is from Andrew Barbin. He’s asked, “Do you see the tariff tiff as a long or short-term issue? And outside of the core dispute areas, what other industries do you see having long-term impact?”
Thomas Mahnken: Do you wanna take that?
Tai Ming Cheung: Okay, sure. I mean I think what we see from the tariff…well, it’s not a tariff tiff. I mean, it’s now a full-blown trade war itself. I mean my main concern is that I don’t…and as a lot of congressional, like, representatives say, like, they don’t see where the U.S. strategy is itself. So we’re imposing these tariffs initially, like, on this $36 billion of commodities. Now we’re stepping up to $200 billion. But where’s the off ramp? Is it like, so the Trump administration says, “Well, it’s a win or lose. It’s like, I mean, we have to get the Chinese to admit defeat itself.” But the Chinese, I mean, they’ve seen this picture before and they say…I mean, it’s like they are not willing to, like, concede.
So what I see is that we may see more and more pain and we have to see who’s gonna blink first itself. And I don’t see where the strategy…what we need also is to have the two sides negotiating itself. And right now, all the news reports say there isn’t any negotiations between Beijing and Washington itself. So right now, I think it’s like, I mean, we’re in this really worrisome situation. I mean, I hope that we begin to have these negotiations and we work out, it’s like, that both sides sort of can claim victory and find some ways to compromise. But right now, we’re not anywhere near that.
Thomas Mahnken: Yeah. And I guess I would agree with Tai that it’s…I mean, tariffs are just one part of this. And I guess if I were to try to paint the strategic picture, it really…you know, it flows from the, as the National Security Strategy painted it, these flawed assumptions about where U.S.-China economic interaction would go. Right? So the assumption was that more engagement, more commerce would lead to a relationship with China that was closer to, you know, our relationship with Western economies. And that hasn’t come to be. China has used its position in the WTO to, you know, kind of, not advance Western values, but surprise, surprise, to advance Chinese values.
So I think that the greater strategy, and again, to agree it’s not…I mean, the tariffs are just tangentially related to it. I think is to try to better fireproof the U.S. and the U.S. economy against some of this predatory behavior while trying to keep as much of the international economic system that we’ve all benefited from, including China, as possible. And I think as with any strategy, putting that in action in terms of the U.S. domestic politics, executive, legislative politics, allied relationship, doing that in bureaucratic politics is really difficult. But if I’m giving strategy the benefit of the doubt here, I think that’s the strategy that’s behind at least some of this.
Jonathan Movroydis: We have a question in the back row.
Audience Member: Yes. Thank you very much for your presentation. I’d like to ask you a question about what I think is the key [inaudible 00:46:15] in U.S.-Chinese relations since the Shanghai Accord, and that is the situation in Taiwan. How long do you see that situation lasting or the status quo lasting until Chinese patience gives way? And what means can the United States do to avert a major conflict?
Thomas Mahnken: Do you want to take it.
Tai Ming Cheung: And then I’ll turn it…That’s an excellent point because when I look at all the geo-strategic flashpoints of concern in the world, and specifically in the Asia Pacific today, I would rank the China-Taiwan issue as to be the most concerning even more than North Korea, I would say. So even though North Korea is at the front and center of attention, North Korea is actually a relatively small issue that’s containable. China and Taiwan is something that can easily lead into major conflict and drag in the U.S. And I would say when you look at today, in the summer of 2018, the tensions and concerns over the Taiwan Strait has actually been going up. Up until a couple of years ago, Taiwan and China had a very good relationship.
It was very stable because you had political parties, the [inaudible 00:47:54] in place in Taiwan who was sort of fairly friendly towards Beijing. So there sort of stability. Since 2016, with the election of Tsai Ing-wen who is sort of from the Democratic Progressive Party, which Beijing really doesn’t trust because they see it as a pro-independence. Beijing has been putting the squeeze on Taiwan itself. So there’s been sort of a stalemate, sort of a deep freeze in cross-straits relations. What we’re seeing, especially in the last year, is that Beijing has been stepping up their military coercion tactics. They’ve been doing things, what they call encirclement military exercises. They’ve been flying strategic bombers around Taiwan. They’ve been sending their aircraft carriers into the Taiwan Strait itself.
This is sort of being fairly quiet itself. And so the U.S…and the Chinese are doing this because they worry about what the Taiwanese president is doing, but they’re also doing this because they worry that the U.S. is beginning to get closer to Taiwan. So there’s been a number of events. Like the last one was sort of over the weekend, the U.S. Pacific Fleet sent two of their destroyers through the Taiwan Straits as a Freedom of Navigation exercise, which they haven’t done since the 1990s itself.
Audience Member: They sent an aircraft carrier today.
Tai Ming Cheung: They sent an aircraft carrier today? Yeah. I mean, so what we’re seeing is that the problem is the Taiwan Straits isn’t that wide itself. If the U.S. Navy sends an aircraft carrier through the Taiwan Straits, I mean, they’re within range of Chinese military capabilities. And there’s very little mechanism right now. There’s very little talk between the U.S. and China over Taiwan, between Taipei and Beijing. And the Chinese leader, Xi Jinping has been making a number of increasingly, like, hard-line speeches about Taiwan. So, I mean, I don’t think we’re anywhere close to the level of confrontation that we saw back in the mid to late 1990s itself, but I see that beginning to ratchet up itself. So I’m very concerned on that.
Thomas Mahnken: Yes. And, you know, I would agree with Tai’s diagnosis that the prospect for China-Taiwan conflict should really be a subject of great concern. And I think in the United States, there’s been a tendency to ignore it. I think, you know, you call Taiwan an irritant and I think it’s very easy to see it from an American perspective that way. But let’s be clear that Taiwan is a nation of 24 million people, a thriving democracy, and I’d say a population that more and more sees itself as Taiwanese with their own identity rather than an appendage of the mainland. And I think that’s, you know, a key dimension of this as well. Whereas, you know, as Tai said, under the previous government, the government in Taipei, it was a period of stability in China-Taiwan relations. That government followed the hypothesis that greater ties between China and Taiwan would convince more and more of the Taiwanese people of common interests between China and Taiwan and that those ties would reinforce themselves. I think that hypothesis proved to be incorrect. That if anything, those greater links between China and Taiwan showed more and more Taiwanese people just how different they were from the folks on the mainland.
And so I think what you have on the one hand is a military balance that, you know, is shifting more and more towards China, but a political identity on Taiwan that goes in a very different direction. So your question was about the status quo. I think for many, the status quo is appealing compared to the alternatives. Now, Taiwan has it within its resources to do a lot more than it does now to deter a Chinese attack, to make Taiwan a hard target for Chinese coercion, you know, a hard rock. It’s a pun, right? The Republic of China, ROC, a hard rock against coercion and attack. But Taiwan hasn’t always done that in the past for a whole bunch of domestic political reasons, economic reasons and so forth. So I think, you know, if we think that the status quo is good or maybe the best achievable, feasible outcome, then again, there are things that Taiwan can do to make it much more difficult to coerce.
Audience Member: Thank you. My question revolves around, you mentioned that China took advantage of the 2008 financial crisis. China has a history of boom and bust. You could argue that perhaps they are towards the tail end of their boom, right? Two questions. How do you see a potential market turn in China sort of influencing what you guys are talking about? And maybe you could talk a little bit about the history of economic cycles in China. I think I read recently every 50 or 60 years, the coastal regions tend to crash. And if you look at where we are today, we are right there where they could conceivably have their own economic crisis. Maybe the whole calculus changes at that point. So that’s my question.
Thomas Mahnken: You wanna take it?
Tai Ming Cheung: Yeah. So luckily, so I’m not an economist, but I have a couple of colleagues who do nothing but look at the Chinese economy and they had to take a lot of medication when doing that itself. I mean, right now, I think, especially we’re in the first year of Xi Jinping’s second term itself. And so there was a lot of concern when Xi Jinping took power that a lot of the economic development in China where the economy was growing at 10%, 11% annually for a decade and all that. A lot of that was focused sort of upon investing in areas that really didn’t contribute much. There was like, they built these ghost cities. They invested in a lot of capacity where they couldn’t sell, especially iron and steel production. So there was a concern that there was a lot of this debt, a lot of this inefficiency that was being built into the Chinese economy. And so the soaring debt crisis, of especially local governments, was sort of becoming a big come concern.
So what the Chinese authorities under Xi Jinping, in the last two, three years, they’ve been trying to reduce this debt, trying to find more productive ways and markets for the surplus on economic capacity itself. So what they’ve been doing in China is to reduce and stabilize the level of economic growth. So from like double digits, today they sort of stabilized it to about 6% itself. And it sounds like from what my colleagues were saying, it’s like they’ve been able to achieve that. They didn’t have to do a hard landing. They did a relatively soft landing and it’s been relatively successful. The big issue is that how they can turn like a lot of the surplus capacity, especially in infrastructure, like in commodities, where do they find markets for that? Because within China, a lot of the economy has been built up itself.
So they’re focusing on exports, right? They’re focusing on building things like what the Chinese call the One Belt, One Road Initiative to export their infrastructure, their capacities to Central Asia, to other neighboring countries in the Asia Pacific region itself to be able to build and expand the Chinese economic footprint from just the mainland itself. At the same time, I mean, China’s economic growth, sort of the success of it, dates back to Deng Xiaoping and his reform and opening up since the late 1970s. Right? So in the late 1970s, in 1979, so China’s about to celebrate its 40th anniversary of its economic success story when Deng Xiaoping moved from a closed-door economy to opening up and integration itself.
And so what the Chinese development model under Deng Xiaoping was this investment-led, export-focused growth itself. And it was fairly low-quality growth. What Xi Jinping now has said, it’s like, “Well, we’re beginning to run out of steam.” So how are we gonna move from this 40-year-old model to the next step itself? And so he came up a couple of years ago with what he called the Innovation-Driven Development Strategy itself. So that instead of focusing upon building on, like, these last century, the old industrial economy model where you build like more and more traditional industrial output, you focus on innovation. So China today is in this major effort to sort of pivot away from late 20th century industrial economic growth to 21st century high-tech growth. And it’s a big gamble.
So that’s why the Chinese are pouring trillions of dollars in artificial intelligence, on the internet, on, so like green growth, like electric power, electric batteries, nuclear, etc. because they see that is the growth model itself, but it’s gonna take a long time. And the big question is, can they make that pivot in time before they run out of the investment or the growth begins to slow down? So this is one of the big questions going forwards itself. I mean, China has enough capacity right now to be able to do this for another 5, 10 years. But we saw what happened when Japan tried to do this, right? The Japanese tried to do this in the 1990s, and eventually, they ran out of money and they’re now sort of in a stagnant situation.
Thomas Mahnken: So I would say just a couple things. So first, GNP is a lousy way of really measuring well and measuring the size of the Chinese economy relative to the U.S. economy. So Tai pointed out, you know, these massive infrastructure investments. So, you know, if you use GNP measurements, you build a ghost city, you raise it, and then you build another ghost city. And that’s like a three-for in terms of economic activity. You get credit for building, for tearing it down, and building it back up. And so if you actually look at…if you use other metrics for actual wealth, China’s economy doesn’t look quite as awe-inspiring as you do when you look at GNP.
Second, I think there are questions about the reliability of some of the data, the official data. Again, you have a system where there are some institutionalized incentives to overestimate. Now, that having been said, that’s not a reason to underestimate or disregard what China is doing. Just as I think, I don’t think you were necessarily saying this, but some people use the China crash hypothesis as a way of saying, “Oh, we don’t really have to worry about China.” Because the economic downside scenarios can be every bit as scary from a security standpoint as the upside ones. But I think that the real challenge, I think for us, and even for the Chinese Communist Party over the mid to long term is what Tai is talking about, or flows from what Tai is talking about, which is, you know, the bet that the Chinese Communist Party is making is that they can shift to this innovation economy, shift increasingly to consumption-led growth but also retain power.
And the way they’re looking to do that is by harnessing technology, not just harnessing technology as part of the economy, but harnessing technology when it comes for surveillance, for monitoring. So the Chinese model is…you know, and this is the model that they’re increasingly seeking to export as part of the Belt and Road Initiative. It’s an authoritarian growth surveillance state model and, you know, innovations in IT, you know, facial recognition, you know, all these things that we in the West thought years ago would lead to greater democratization and liberalization, they’ve harnessed in a much different direction. So, you know, if that vision plays out, no saying that it will, but if it does, then that could lead to not, you know, an open world, but two very different worlds or two parallel worlds, one more closed and one more open. And I think, you know, that should definitely concern all of us, not just because of American technological innovation, but the world that it would produce.
Jonathan Movroydis: We have a question in the back row.
Audience Member: Hello. My question is as history shows us, you know, in China, historically, revolutions can occur overnight. And the president’s, Xi Jinping’s, recent move to end term limits, is that actually a sign of the communist party’s attempts to try to rein instability before instability occurs?
Tai Ming Cheung: I mean, there’s concerns within the Communist Party about social unrest, social instability itself. But I mean, and Xi Jinping might have used that to end the term limits on his rule. But I think that wasn’t really the real reason itself. I mean, Xi Jinping really, I mean, he has a long-term plan and he wants to be in place in his long-term plan about making China great in the world again, but having the Communist Party at the center of this project itself with him at the top, I mean, this is a 10, 15, 20-year plan itself. And he wants to do that itself, and he’s done it extremely well. I mean when the 19th Party Congress took place last October, this was…I mean Xi Jinping was I’m trying to get his second term, so he was there for five years. He wanted to get another five-year term. And no one really thought that he would be doing, like dealing with this term limit issue itself. But afterwards, it’s like he brought this rabbit out of the hat. And it’s like in January, February, he pulled it out and took a lot of people by surprise.
So a lot of it, it’s about him, and how his vision is itself. I mean, in many ways, it’s like, I mean, one of the success stories of China’s overall development over the last 40 years has been its peaceful transfer of power from one leader to the next leader, right? Because when you look at authoritarian regimes itself, how many times do you see a peaceful transfer of leaders in the Soviet Union or in North Korea or in other places? It’s been pretty rare itself, but China managed to institutionalize that itself from Deng Xiaoping to Jiang Zemin to Hu Jintao. And that was seen to be a very important source of political stability where leaders, they say, “Well, we know that someone’s gonna be there for 10 years, and then we’ll have a next generation come up.” And that allows…I mean, it’s not democracy, but it allows like a fairly good, sustainable political system. Xi Jinping has pulled that out now.
And now the big question is, is like where does China come from here? And so I don’t think it’s a concern in the next 5 years itself, but I think in another, in 10 years, in 15 years…because Xi Jinping is 65 years old now, right? When he gets to 75, when he gets to 80 and with no term limits itself, I think you’re gonna see increasing political tensions and increasing tensions within the political system itself. And that’s when we should be really concerned. Of course, and at that time, this is when China is gonna get even more powerful militarily. So the domestic political issues will have global consequences.
Thomas Mahnken: I would agree with that. And I would just extend it to say that it’s not just about Xi Jinping in China, it’s also about Vladimir Putin in Russia. Right? So you have two great powers, authoritarian powers with, you know, more or less, at least it appears now, leaders for life. And with the ability to at least think and start to implement long term all at a time where we in the West find that increasingly difficult to do.
Jonathan Movroydis: We have a question right here.
Audience Member: Hi. I just wanna make a few quick statements before I dive into a question for you gentlemen. I have lived in the U.S. for 25 years and I myself am a beneficiary of President Nixon’s trip to China. And it seems to me that it really takes one to know one. There is a certain segment of the U.S. society, the elite intelligentsia, academia type who has a tendency to romanticize the Chinese society. Since Snow and Ms. Gayhorn [SP] and all the way to “The New York Times” Pulitzer prize-winning journalists. And to me, the root cause of this rivalry and this competition is to complete incompatibilities of political system. One based on equity, democracy, respect for human life. And the other is unfettered access to power that allows them, their immediate family, their henchmen for power, greed, and corruption.
So I would like to get your two gentlemen’s take on your thoughts on what caused these rivalries and competition considering that U.S. was the first country that invested in the first batch of Chinese students to come here to study. And American missionaries worked tirelessly with Chinese to help build a better society. And even Asian American in America is said to have the highest level of education, enjoy the highest level of living standard of all groups. Thank you.
Tai Ming Cheung: Do you want to…?
Thomas Mahnken: Yeah, sure. So look, to the question of, you know, what’s behind this? I think that’s a great question and it’s a question that we too infrequently ask. So if you’re asking me what is it that bothers Americans, the United States, about the rise of China? I don’t think it’s actually about the rise of China per se. I actually think there are four aspects to it. The first is that the rise of China has been has accorded with greater interests, greater international activism. So it’s not just that, I mean the Chinese Communist Party leadership is more focused internally than externally, but it’s more focused externally today than it was five years ago. And that’s expressing itself any number of ways. Second, it’s not just activism beyond China’s borders, but it’s particularly activism, an activity, in the East Asian maritime littoral where China butts up against American allies and even American territory.
Third, it’s what appears to us to be an increasing disregard for the international status quo and a challenge to the international status quo. And fourth is even if we don’t like to talk about it or if we only talk about it, you know, occasionally or episodically is what you raised, which is the fact that China has an authoritarian political system and we don’t. And whether we talk about a national security strategy of expanding the democratic world, which that was the Clinton administration strategy, or we don’t, the Chinese Communist Party leadership still believes that we are out to overthrow them. Whatever the U.S. government does or doesn’t do, they see us as aiming, you know, to put them in the dustbin of history.
And so I think, you know, those are the four things that really concern a lot of people about China’s rise, whether we understand it or not or it’s only sort of intuitive. Now, you know, some of those things we may be able to influence, we may be able to influence China’s attitude towards the status quo, we may be able to influence how externally or internally focused they are. But the issue of political system I think is there. And we need to acknowledge that.
Tai Ming Cheung: So I will be fairly quick. So I guess it’s like if we look at sort of the net positives and the net negatives of what China has achieved over the last 40, 50 years, right, I would say it’s like, I mean, if you look at the economic development of China, it’s lifted a significant number of people from poverty to a relatively sort of middle class standard itself. Yes. If we look at sort of like the nature of the political system today in China, it’s authoritarian itself, but there’s a greater amount of transparency. There is like a rise of civil society, although it’s been pulled back under Xi Jinping. There’s like greater innovation that is taking place. So if you look at China in 2018 compared with China under Mao Zedong in 1978, I would say China is a net positive. And it’s a major engine of prosperity, growth, and innovation in the world itself.
Are there major issues? Yes. In terms of the political system, in terms of its crackdown on human rights, it’s the corruption that has taken place itself. But many of those issues have also allowed China…because of the authoritarian nature of the Chinese system, has allowed it to push through with all this top down economic growth itself. So I think it’s like we have to take a fairly balanced view itself. I mean, yes, the main concern now is can we help to influence and shape China going forward itself? And it’s like, I don’t think we can. I mean, the Chinese sort of, especially Xi Jinping, has made it fairly clear. It’s like, “Well, it’s like the U.S. getting us into the WTO, like they want us to shape who we are.”
So the Chinese said…it’s like, we are a civilization that goes back a couple of thousand years itself. It’s like, I mean, we have our own destiny itself. I mean, it’s like does that mean that we cut off relations with China, that we don’t engage? I don’t think that that’s a good way to go. It’s like, I mean, it’s not easy itself, but we have to work with China itself. It’s like, I mean, to cut off investment flows, to prevent Chinese students from coming, etc., or likewise there itself, but we also need to have more reciprocity. If the Chinese are like preventing, restriction to U.S. companies from investing in China, we also need to do that. So we need to take a stronger approach itself. But I think we need to be much more nuanced and much more careful than a lot of the rhetoric that has taken place today that we need to cut off relations with China in significant areas itself.
Jonathan Movroydis: We have a question right here.
Audience Member: Tai, I’m gonna follow-up on the end of your last point. Tom, I’m gonna come back to your earlier point on restraint and the Whole-of-Government. So certainly, from an assurance and a deterrent standpoint, DOD has a significant role to play in all this. But a big part of this, particularly with the restraints, goes to the rest of the Whole-of-Government, goes to the legislative branch, and how do you effectively pull that Whole-of-Government effort together? You know, whether it be CFIUS issues, whether it be ITAR issues, you know, educating the defense industrial base, but maybe more importantly, educating the larger population and, you know, dealing with ICE issues on visas for students, theft off of college campuses of intellectual property. I mean, how do you effectively pull this together?
Thomas Mahnken: Right. So that’s a great question, and honestly, I mean it, it gets to the heart of a lot of what we’re doing and trying to do at Center for Strategic and Budgetary Assessments, which is, I mean, if I look at, you know, what we do very well and have done historically is help people think about challenging topics and challenging issues. And what you’ve laid out, I think correctly, are a set of challenging issues that the American people, the U.S. government face, right? If we just talk about investment or the economic realm, how are we to…whether we as the U.S. government, you talked about CFIUS process, or how our business leaders, how are we to judge benign activity from malign activity when it comes to immigration visas? How are we to judge? What are the criteria that we should use to judge benign activity from malign activity?
And I think what, you know, if I was to encapsulate kind of the mood right now, it’s that people are looking around. They’re realizing that some things have changed, but they’re not quite sure how they should be thinking about these things. And, you know, the DOD, the military, because so much of its business is long term, it gives DOD an advantage in thinking long term. DOD kind of has to think long term. It can do it poorly, it can do it well, but so many things that defense does requires long-term investment, long-term development. You know, that’s not something that other parts of the government need, right? So our diplomatic core doesn’t have to think long term. You could say that it’s commendable, it’s desirable, but you don’t have to to be a good diplomat. Commerce, treasury, you don’t have to always think strategically. A white house does not have to think strategically.
But we’re in a period where I think that that is really needed. And as you say, thinking across national security, Whole-of-Government, really is important because to flip things back over on the Chinese side, they really do have an integrated strategy that they’re pursuing that’s not just military, but also includes economic, political, a whole suite of tools. So to recognize that, you know, we need to understand its totality and we need to do a lot of public education. We need to give people the frameworks, the tools, the lenses through which they can understand things and figure out what should be of concern, and back to Tai’s previous point, what really shouldn’t be of concern.
Jonathan Movroydis: We have a question right here.
Audience Member: I’m persuaded by Michael Pillsbury’s book, “The Million Dollar for the Hundred-year Marathon,” which is China’s strategy to replace America as the super power of the world. And I think he points back to Mao Tse Tung back in 1972 that created the strategy for China. And later was persuaded by Sun Tzu who wrote this book, “The Art of War.” It says, “Let somebody else do your fighting.” I don’t think Mao ever thought that we’d go to war with the United States. He’s gonna let other people fight the wars for them. And he said, “We’ve got to beat the U.S. with technology.” And I think that’s what they’ve been on for this…they’ve had us really fun…they’ve stolen much of our technology and their students are very, very good. And you take things like precision medicine and the genomic analysis and DNA, they have 75 clinical trials going in the CRISPR gene editing business, and they’re doing it with humans. I’m not so sure we’re doing it with humans, but I think they’re really very consistent in what they’re doing there whereas we’re splitting our philosophies here in the United States.
Thomas Mahnken: So just a couple of comments. I mean, you know, one of the attributes of, you know, a catch-up country, as a country that sees itself as lagging, as being the underdog, is tremendous motivation over the long term to achieve. Whereas if you’re the dominant power, you’re used to being ahead. You know, there’s every motivation to lay off a little bit. It’s the tortoise and the hare, right? So we shouldn’t be surprised, and I would say shame on us for being surprised, that the Chinese have gone to great lengths to steal intellectual property, to get it, you know, to buy it, to do all sorts of things. Shame on us for not being, you know, more diligent in protecting those things, number one. Number two is, I think, you point out, one of the byproducts of an authoritarian political regime is you can, you know, do all sorts of things, and whether it’s in the kind of genetic fields or you could look at it when it comes to China’s atrocious record when it comes to the environment, you can do all sorts of things that in Western democracies just wouldn’t pass muster because you don’t have to at least directly worry about the people.
Audience Member: So what would you do? What would you do about this $400 million [inaudible 01:22:51] with the trade war? I think $400 million is a trade deficit with China. We have to do something about that.
Thomas Mahnken: Sure. And I think that’s where it gets to, you know, looking at international economic institutions and looking at are they playing by the rules that we all agreed to, and I actually think even within the WTO, for example, there are all sorts of parts of the WTO which China signed up for that haven’t been tested. And we need to test those out and we need to call them into account and see how they behave.
Tai Ming Cheung: I mean, I guess, I mean, one of the reasons why China’s been able to catch up and become increasingly like prosperous and advanced is through industrial policy, right? So there’s all this, like [inaudible 01:23:49] about sort of “Made in China 2025” and some of these like top down, state-run, like, initiatives. So one of the questions for the U.S. is should the U.S. also have the state play an important part and industrial policy? We can see that in defense industrial, it’s very, very important because the relationship there, but should the U.S., should the federal government have initiatives on artificial intelligence, on robotics, or all these where the Chinese are doing that? And that’s a valid question.
But one of the reasons why, especially since the end of the Cold War, the U.S. authorities decided that the market is much more important than the state where in China, the state is much more important than the market, is that over the long run, the evidence is that the state is a lousy industrial economic player, right? It’s like it distorts markets. It favors national [inaudible 01:25:00]. So maybe in the near to short term, the state with industrial policies plays is very beneficial itself. But if you look over the long term, this is why the U.S., despite all the criticisms about, so like, economic growth, etc., the U.S. is still the engine of innovation in the world. That’s why Silicon Valley and all these other innovation hubs and social media, it all comes from the U.S. It’s because it’s the market that plays. But that works, so like, when we have technologies that are, like, more and more mature.
But so I think for the U.S., it’s finding that right balance between the state and the market. We may have moved too far to just letting the market have full control. We should sort of move the pendulum a little bit more back itself. So the U.S. can say, “Well, the Chinese can do whatever they get, but the U.S. needs to get its own house in order.” And we should really think about this, like, reexamining the role about where the federal government can play, especially because as the Chinese and others have pointed out, we’re in a technological revolution today, right, whether it’s in information or in AI and all these other areas. And when you’re when you’re in a technological revolution itself, you need all the players within your system to all cooperate.
Jonathan Movroydis: We have time for one final question. I just want to remind everyone that “The Gathering Pacific Storm” is available for purchase at museum store and both gentlemen will be available to sign your copy. Our final question.
Audience Member: Thank you. And I’ll keep this brief since I’m keeping people from talking to you guys personally. Along the lines what you said regarding technology and being in an innovation revolution, one of the challenges that the U.S. faces right now is the fact that not only Chinese but anybody in the world that has the resources and a plan can come to Silicon Valley or to the U.S. and start capturing this technology and then using it for their own benefit. And so the question I have is in light of the new air mobility movement that’s growing right now, the fact that we are in the age of “The Jetsons,” if Uber has anything to do with it and other companies, and the technologies that are gonna drive that, like AI, like 5G, like all these different things, what can the U.S. do right now to be able to position itself and clean its own house and put it in order to be able to be in a position to compete not only with China but with any other entity that wants to be a player in the next 20, 30 years?
Tai Ming Cheung: So on that, I will sort of differentiate between two areas, right, between the militarily significant and the commercial. So if there are technologies that are important to national security, military issues itself, I mean, I think it’s like the U.S. should do a much better job at policing that itself. And when you talk about technology itself, we’re not just talking about the hardware. We’re talking about the research and development. We’re talking about the people. It’s like the whole ecosystem. And the problem is that a lot of the technology controls, the export control systems were built 30, 40 years ago when we fought much more in terms about just the hardware side. So we need to really rethink how innovation is taking place, and that’s what the Chinese are doing because the Chinese, it’s like…
The Chinese initially, they said, “Well, we’re gonna buy the companies itself,” especially in semiconductors. And then the U.S. and other countries said, “Well, we have to stop that.” And then the Chinese said, “Well, if we can’t buy the companies, we’ll just hire the people, right? Or we’ll just look at the subcontractors or look at the research institutes and go there.” So it’s the ecosystem that we have to protect. We need to do a much better job at doing that. But that’s just for the military. But if it’s commercial, if there’s no national security issues itself, I think we just allow the market to compete itself. We should have, like, better ways to allow companies to come in, get the best people from around the world, etc. etc., allowing to put barriers up itself, not allow visas. Because if the U.S. decides, “Well, we’re not gonna allow Chinese researchers to come, especially the brightest and best,” where are they gonna go? They’ll go to Europe. They’ll go to like other parts of Asia itself. The U.S. should be competing against that rather than put walls around itself. But this is only in the commercial areas itself. On the national security, we should be much more careful on that.
Thomas Mahnken: Yeah. And I think the beginning of that, it really, as Tai was alluding to, is conceptual, right? So when we think about a national security, we think about that defense industrial base and that’s, you know, who are the companies that are in the defense sphere, the big primes, the second tier producer? And I think we have a pretty good handle on that. But you know, what we really need to be doing is thinking about the national security innovation base, which is actually much broader than a defense industrial base. It includes, if you will, the defense industrial base of the future, not just, you know, who’s manufacturing aircraft today, who 10, 15 years from now is gonna be at the forefront of AI and robotics and areas like that.
We need to encompass them in our understanding. And that means not just companies but also human capital, people, and that also includes parts of our educational system as well. So we need a more expansive view of what we need to protect and we need to protect it because, by the way, it’s under attack now, right? So some of the areas that we don’t even think about as being relevant to national security, they’re under attack now. So we need to protect them. So we need to have a better understanding there and then I think what we also need to do, and Tai was alluding to when we were talking about the broader society, is we need to really exploit our strengths as a society. I mean, when we think about it, we are nearly unique.
The United States is nearly unique in the world in our ability to bring in immigrants from all around the world to make them American citizens and make them a vital part of our society within their own lifetime. I can count on my hand, I probably wouldn’t even use all of all of the fingers on one hand, the other countries that are able to do that. That is a strategic asset that we have only and perfectly and only partially used in the past. Right? So we put up all sorts of…we bring in the best and the brightest from around the world and educate them in science, technology, engineering, mathematics, and then we put up huge barriers to them remaining in our country. So we fuel other, you know, other countries’ innovation economies just by our existing laws.
Why not, you know, every foreign student that comes to the United States, we’ll say, graduate school in particular areas, why shouldn’t their degree come with a green card attached to it? You know, that is something that is in our DNA as a country, that is a nearly unique advantage. We could if we wanted to. I’m not necessarily we want to. We could induce brain drains, you know, among our competitors. But that’s another area where public policy doesn’t always match, you know, our strategic assets. I think we’re gonna need to…you know, in a more competitive, more contested environment, we’re gonna need to think about those things.
Jonathan Movroydis: Thank you, Tai. Thank you, Tom. Please give both gentlemen a round of applause. Again, “The Gathering Pacific Storm” is available for purchase in the museum store and both gentlemen will sign copies for you. Thank you so much for being here.