← Hold These Truths with Dan Crenshaw
Hold These Truths with Dan Crenshaw
The Secret History Behind China's Grand Strategy | Rush Doshi
00:57:32
Loading summary
Transcript237 lines
- [00:00]
A
We hold these truths to be self
- [00:02]
B
evident, that all men are created. As a member of Congress, I get to have a lot of really interesting people in the office, experts on what they're talking about.
- [00:09]
A
This is the podcast for insights into the issues.
- [00:12]
B
China, bioterrorism, Medicare for all. In depth discussions, breaking it down into simple terms. We hold.
- [00:19]
A
We hold. We hold these truths.
- [00:20]
B
We hold these truths.
- [00:21]
A
With Dan Crenshaw.
- [00:22]
B
The eagle has landed. And welcome back to hold these Truths, Greatest podcast ever, where you owe us five stars, I think by now. We have a great guest today, Rush Doi. I'm saying that right? That's right, Rush. Thanks for being on. He's an assistant professor at Security Studies, assistant professor of Security Studies at Georgetown University's School of Foreign Service. Previous deputy senior director for China and Taiwan on the National Security council back in 2021.
- [00:50]
A
21 24.
- [00:51]
B
Yep. And of course helped in as a practitioner, helping coordinate US Policy toward China and Taiwan. Staff meetings between President Biden and Xi Jinping. Served as lead action officer for negotiations that launched Aukus. Also the author of and this is, I think mostly we're going to talk about today book that came out about five years ago, the the Long Game, China's Grand Strategy to Displace American Order. Also the co editor of Global China Assessing China's Growing Role in the World. So, Rush, thanks for coming on.
- [01:25]
A
Thank you, sir.
- [01:25]
B
Appreciate it. So Long Game, I think this is to start with a topic that people get a little bit wrong. And I've read other books along the same lines of this, that there's a misconception that China started to become our adversary on its own accord in very recent history. But the reality is much grimmer than that. It's been going on for a while. They've been looking at us as a threat for much longer than we ever thought.
- [01:58]
A
Yeah, that's right. You know, back in the 1980s, we were almost quasi allies against the Soviet Union. So back then we had a very different relationship. But after the Cold War ended, there was this trifecta around the time of the Cold War ending. You've got the Tiananmen Square massacre. Today is the anniversary, actually in 1989, June 4th. Yeah. And so that was a significant event that reminded them the US Poses an ideological threat. You had the Gulf War, which reminded them the US Poses a military threat. They never expected us to be so dominant. And then you had the collapse of Soviet power, which reminded them again, we were an ideological threat, but also undermined the glue that had tied us together. And from then on out, China understood two things. One, it needed the US in order to grow, become prosperous, become strong, but also saw the US as what its military called the, quote, strong enemy, or what its top political leaders called the, quote, main adversary or chief adversary. And that duality caused them to have a strategy that we call hide capability and buy time, basically to quietly, non assertively blunt us while getting stronger.
- [02:59]
B
How do they keep this from American analysts? Whether those analysts are academic or in government, this isn't something we caught onto. I don't even. First of all, when would you say we did catch on to it? And why did we possibly miss something so obvious back then?
- [03:21]
A
Yeah, well, the purpose of the strategy, hide capabilities and buy time, or ta guang yang hui, that was what they call a strategic guideline issued by Deng Xiaoping, the top leader, to the entire Chinese Communist Party. That was the foreign policy, essentially. That was the grand strategy, if you will. So the whole point of it was to grow, but to keep us basically from strangling that growth. And frankly, we had good reason not to. From the perspective of our business interests. We thought, we're going to reach this untapped market, we're going to sell a lot of stuff, we're going to get really rich off that. They're never going to catch up to us technologically. That was huge hubris. It wasn't true. And the Chinese did a very careful thing. They managed our perception of them carefully over time, and it worked pretty well. It worked really, until 2008. And in 2008, you got the global financial crisis. And with the global financial crisis, the most important factor in how China views the United States began to change. And that factor is its perception of American power. They fundamentally thought we were less powerful, and that meant they were more aggressive. And they retire, hide capabilities and buy time. And they adopt a strategy of essentially what they call, quote, actively accomplishing something. And that strategy is about making sure that now is the time to become a leader in Asia, to displace us.
- [04:33]
B
Yeah. Belt and Road Initiative. Is this all about the timeframe that that started?
- [04:37]
A
Exactly. Right. Yeah. You know, it's funny, people say that's all about Xi, but you're right, Congressman, A lot of that stuff begins before Xi, right around this time, 2008, 2009. And there's three big pieces. They want to build a military capable not just of denying us access to Asia, but of controlling the waters and airspace around Asia on their terms economically. They want to do the Belt and Road Initiative, but they also start using Economic tools to lock up other countries and make them follow Chinese dictates. And politically, they begin to build their own organizations in Asia. They want to lead Asia in this period.
- [05:07]
B
I'm going to screw this up as I try to reference it, but you'll probably understand what I'm talking about and be able to sound smarter than me again, I can't even remember which book I read on this. It was a while back, but it talked about again in this timeframe, the 80s and 90s, and how the Chinese were strategically thinking about this and how they saw us. I mean, it's. It's just. It's an interesting point because in America, we really think in terms of, like, decades. You know, we're not holding grudges against the Japanese or the Germans these days, which is. Which is crazy in the. In the long. In the grand scheme of history, the Chinese don't think that way. You know, they. There was. There was evidence that they were. They were comparing us to, you know, ancient history and. Right. And maybe you can fill out the blanks there. That's how far back they think and how we were. And then placing us in this historical context.
- [06:00]
A
That's right.
- [06:00]
B
Like before America ever existed, thousands of years, placing us in that, like, historical context as the enemy.
- [06:08]
A
Well, they've got this history themselves that they mine for lessons for how they should govern, how they should interact politically, what they should do strategically. And that period is called the Warring States Period.
- [06:18]
B
Right, that's what. Yep.
- [06:19]
A
And the Warring States period is this period of almost multipolarity. There's different actors in China fighting for dominance. There's all kinds of lessons, legends, video games, even today, driven by this period. But there's also efforts to sometimes look at where the US Fits into this, into this period in this history. The big thing here right now, I'd say about the way the Chinese view us is it's more formal than people realize. The Central Committee, which is the kind of group that runs the Chinese Communist Party, they meet and they pass judgments on where the world is going, the international balance of forces. And back in the day, we talked about the end of the Cold War. They said America is very strong. We should be careful. We should not assertively blunt them. After the financial crisis, they said, America's weaker than we thought. We should build our order within Asia. And then today we're in a world where they're feeling extremely confident and they're looking more globally.
- [07:10]
B
Yeah. Well, let's talk about their strengths and weaknesses in the modern era. I mean, in some ways we should be concerned, but there's also some negatives. And what's your thoughts? Especially recently with economic data. They spend so much money, for instance, on Belt and Road. There's so much that we can, we're always talking about competing but it's impossible. We're just not going to appropriate billions and billions of dollars for soccer stadiums in Africa. We're just not. And you know, I always wonder if the Chinese are really getting what they think they're getting out of some of this and what like an objective assessment of that is. Because they don't have objective assessments. You know, I think we make them 10ft tall as these, these, these long term strategists. But they also do really dumb things like mistakes, zero COVID policy. I mean they're like spraying runways for Covid. Like what are you doing? One child policy is, is obviously going to, I mean it's going to end up being this, this disaster of a demographic problem.
- [08:14]
A
Right.
- [08:14]
B
They cannot escape. So I mean there's some negatives too. That almost makes them scarier because that makes them a desperate, a desperate power. I think that might explain Russia's actions as of, as in the last few years as well. But you know, so what's an objective assessment of their economic situation? How the Belt and Road initiative is even going and you know how that why they're so confident.
- [08:40]
A
Yeah, I mean, I think that when, when their Central Committee meets, you're right, there's going to be a little bit of spin on the ball. Right. They can never say, hey, we're screwing this up, we're losing. But.
- [08:49]
B
And they can't tell Xi Jinping that.
- [08:51]
A
But there is a huge network in industry to like really carefully track the trends. And I think in general you can look, I mean some people say they always think America's in decline. Well, sort of. They may think that in the long term, but they watch the ebb and flow. They watch to see the twists and the turns. In fact, they use the phrase twists and turns. They're always us and they're sensitive to what happens in our country. But basically, if you ask me for a kind of mini net assessment, I mean, and this is more a comparison than a true net assessment. China's got the following big weaknesses and we'll get to the strengths. You mentioned demographics. That's exactly right. I mean there are some estimates saying that the number of births last year was lower than any time in almost two centuries. That's a pretty big deal. In about 70 years. I mean their Population might fall by half relative to what it is today.
- [09:34]
B
That's wild. And I've heard other reasons to believe that they actually don't even have the right numbers of children because there's an incentive structure for localities, municipalities to lie about how many kids are in their school because they'll get more money that way. And so you've actually undercounted quite a bit or over counted quite a bit your actual population as it is. And that's what we're doing. So it's even worse.
- [09:57]
A
It's possible that the population statistics have been gamed a bit in the demographic crisis a bit earlier. I mean, we're at the point now where they're declining in like objective terms. But. But the truth is, I think a lot of that demographic problem, if we trust some of the statistics, may not get that bad for another 10 or 15 years. Yeah, because demographics are lumpy. And there's a generation right now that's kind of a descendant of the baby boom generation in China under Mao. That'll ripple through the workforce.
- [10:21]
B
For now, it's still working.
- [10:22]
A
For now it'll probably in about 15 years is when they'll face real problems. Their current dependency ratio will be about as bad as Japan's today. In 10 or 15 years now they'll be a lot poorer relative to Japan on a per capita basis. Second big problem they got is debt. Right. They have a lot of debt. And you know, the truth is though, the US and other countries also have a lot of debt. So we have to think about that in terms of the composition for them, A lot of that debt's local. Right. They finance local governments largely through real estate. And this brings me to the third problem. They've got a real estate issue. Their housing bubble has burst. And a lot of people's wealth isn't as in America, in the stock market, in their 401k or even in their bank account. Because of China's financial repressive system, you can't make much money putting your money in the bank. And the stock market hasn't gone up much. So where do people put their money? In housing. So if housing busts, it's not like us in 08. It's a much bigger deal because that's everybody's wealth. It's all in housing. And as the population falls, that becomes a bigger issue. So we may not have seen the bottom of the real estate bubble. Now those weaknesses have to be offset and we have to understand the strengths as well.
- [11:22]
B
And let's get to that but yeah, what's how they finance things is a little, is interesting because we generally know how we do it, right? We sell bonds and you know, that's that, that's, that's what contributes to our debt. And it's also very transparent, right. You know, we take what statistics they give us. We're not sure what's true and what's not. But also, you know, the world isn't necessarily buying a lot of Chinese bonds or are they? I don't know. I mean, how do they finance this stuff? I've heard of, I don't know how true this is, but I've heard of instances where a Chinese bank is making a loan for maybe some belt and Road initiative and the Chinese government's like, and that loan is, we no longer owe it to you, so deal with it. I mean, that can't last long.
- [12:08]
A
They own the banks, right? Which helps, right? They own all the banks.
- [12:11]
B
So is it just like, is this monopoly money?
- [12:15]
A
There's going to be a real cost, but one of the things that their system allows them to do is roll over their costs for longer. And their government has a huge state owned sector, so the balance sheet is V. If they want to do industrial policy, for example, one thing that they can do is they can go to their state tobacco company and they can say, I'm going to take these assets you've got and get these loans issued on the basis of those assets to all my buddies who I wanted to succeed in this automotive sector, for example. And so their industrial policy, look at all the East Asian countries.
- [12:41]
B
They're like leveraging each part of their economy because it's solely state controlled. Again, this goes back to. That basically means monopoly money.
- [12:51]
A
At a certain point you're against China Inc. And the question is, when does the monopoly money? In a sense, when do the financial problems end up being prohibitive? In our system we have to be solvent. Our banks have to kind of pencil or we face a financial crisis. They can put that off for a while, but they face other crises, right? They waste a lot of money and there's no accountability for that waste. That's probably true today. In their industrial policy they also end up with some corruption problems. But fundamentally this story might be able to go on longer. What worries me about China is that with their industrial policy support, they can keep their companies more like in the game solvent longer than we can because ours are disciplined by capital markets. So that's where the dumping of their goods on foreign markets means our workers and our businesses lose out and across our industrial sectors going back 25 years, that's the story, right? America had a lot more manufacturing 25 years ago than it does today. Some of that story people say is automation. Automation doesn't explain the loss of entire industrial sectors. That doesn't explain how you lose whole sectors. That explains the change in labor in a sector. What we have seen is deindustrialization. And that brings me to China's strengths, right? I mean, their strengths are they're a manufacturer. That's really, really amazing. They're two times our share of global manufacturing. They're bigger than the next nine countries combined. They're three times their power. They're three times our car production. They're 11 times steel, 20 times cement. And they don't just produce a lot, they actually dominate global market share. So just a few examples, they're about 50% of the world's chemical industry, 50% of the world's shipbuilding on track for three quarters, three quarters of the world's electric vehicles, batteries, more than 80% of drones, 90% of critical minerals and magnets which they used against us in the trade war. 90% of pharmaceuticals like KSM's which we need for our antibiotics. Those are the key starting material to help us make medicine. And today you look at advanced therapeutics, right? Biotechnology, we invented it, we should be dominating it. We should be winning in it today. 60% of all the most interesting therapeutics, antibody drug conjugates, the preclinical work is done in Chinese companies in China, 60%. So we have basically allowed ourselves to lose this industrial base. And if you look across history, Congressman, one thing that always has mattered is scale. Right? You know, back in the day, Great Britain was just a little island, but it had the Industrial revolution, it had the steam engine, and it used that to basically become a world power. We won on the next two industrial revolutions. Mass electrification, Thomas Edison, mass manufacturing, Henry Ford became world war. Back to back champions. China wants to win the fourth industrial revolution and they've also got this manufacturing scale. And we outscaled Europe by winning our industrial revolutions. We were as dominant as China is today in manufacturing. Today, China outscales us in manufacturing. Now maybe it can't last forever, it just has to outlast us.
- [15:34]
B
Yeah, and we hear this all the time in these, in these very stark terms. And there's not much disagreement about it in the left and the right.
- [15:43]
A
That's true.
- [15:44]
B
It's on the nuance, maybe here and there, right. You know, our manufacturing strengths have changed over time. Like you know, I guess higher end manufacturing, you can still find companies that only do it here. And that's great. But yeah, but for the broader spectrum and especially critical minerals. Yeah, it's a problem.
- [16:02]
A
So the high end is being threatened. Right. I mean the Chinese want to basically knock us out of aviation. They have this, they have their next generation aircraft biotechnology. We are losing that right now. So the question is what is going to take for us to.
- [16:14]
B
Yeah, yeah, that is my question. Like, like how do you. Because you deal with this, this pretty massive economy like centralized system that can act in ways that we just can't and won't. Right, right. You know, deliberation in Congress, as you are well aware, is designed to be slow and that's. God, it would be slow even if we all agreed on what exactly to do.
- [16:41]
A
Right.
- [16:42]
B
And I say this all the time. I was like we're not going to outspend them. We're not going to have our own belt and road initiative.
- [16:47]
A
Right, right.
- [16:49]
B
But then what exactly. I think the first thing is focusing on certain industries is critical. You know, by biotech being certainly one. Biotech also means like a million different things.
- [17:00]
A
Totally. Right.
- [17:01]
B
That's another podcast. The critical minerals one is one that's always on everybody's mind.
- [17:06]
A
Right.
- [17:06]
B
You know, that's a frustrating one because they don't really have critical minerals. They just have the processing capacity because they're willing to. It's just a will. They're just willing to pollute the air enough, which I remind everyone is still the same air. Speaking in global terms, you know, we need to have a strategy to nearshore that because like yeah, sure, they've, they've. And it's funny because you might argue too. I'm curious about your opinion on this. I've heard it before. They've. We should actually be a little happy because they've done all the hard work for us in a sense like making it cheap for us to get these critical minerals. Now it's not great they control them, but it is great that they've scaled it and, and done all of that hard work for us and we can just. But what we need to do then is, is make ourselves self reliant or at least near shore it to places like Mexico that wouldn't mind being the processing location for that. But I don't know, I mean I'm just throwing some thoughts out there like yeah, what is the answer to like how we actually combat that? And I mean seriously not right, not just throwing, you know, we can't we can't spend a trillion dollars on this idea.
- [18:11]
A
Yeah, well, the good news is that we don't necessarily have to because while China is got scale relative to us, if you combine the US with our allies and partners, we totally outscale them. And that I think is the key question. Right. I mean if you take the U.S. europe, Japan, Korea, the UK, Australia, New Zealand, India, you know, we are greater than them on manufacturing by 50%.
- [18:33]
B
We have all the stuff, we have all the resources. They, they are very resource light, which is a weakness we should know.
- [18:39]
A
True.
- [18:40]
B
They can't possibly feed themselves. They don't have the energy, they don't have oil, they import. They don't actually have critical minerals they own. They just have 80% of the processing capacity. So, you know, I always say, like I'm always going to bet on America. Not, you know, not because we're great strategists, but because we're so freaking lucky. We have got a very stable constitution. We've got big oceans on either side. We've got friendly neighbors, you know, a little too friendly to the north to be honest. Like just, you know, gosh, and, and a very, you know, stable constitutional framework, a decent demographic. We're just lucky.
- [19:12]
A
Yeah, right.
- [19:15]
B
China's extreme exceeding. Without any of that luck, you know, luck runs out eventually.
- [19:21]
A
I think that's right. We are lucky, but we're also smaller. And size and scale in particular matters.
- [19:26]
B
Yeah, a third.
- [19:27]
A
A fourth. Fourth.
- [19:28]
B
Yeah. I mean what's, what are they?
- [19:29]
A
One point, 1.4.
- [19:29]
B
They're 1.4.
- [19:30]
A
And you think about what that means if they can educate. 1.4, which they're doing. You talk about the scale of your molecular biologist, we talked about biotech or your electrical engineers. It has real impact, our superpower.
- [19:40]
B
And also they're probably better students.
- [19:42]
A
Well, I don't know.
- [19:42]
B
I mean, what do you think about that?
- [19:44]
A
Actually I think their system has.
- [19:46]
B
Because that's a common thing that we think like they're. These Chinese kids are just doing math and like they're doing calculus in fifth grade. We're all screwed. Is that like how much of this is.
- [19:54]
A
I think there's an element of their educational system that focuses on different, prioritizes different things than our system does. And that may give them some advantages, but we'll see how that all shakes out in the wash. For me, the thing about the US advantage that's biggest is actually the alliance of. Because if you were to take all that and add it up, like I said on manufacturing, we outscale them on GDP, we're, you know, they're bigger than us by 30% if it's purchasing power, we're collectively bigger than them. 2x if it's purchasing power. You know, on patents, they have more active patents and top sided publications right now than we do. Some of that's junk to be frank.
- [20:25]
B
Yeah.
- [20:25]
A
But let's just take it for what it is.
- [20:26]
B
Let's be honest. We're the ones who make, we're the ones who actually invent stuff. They steal it.
- [20:30]
A
They're definitely fat, what we call fast followers. They catch up, you know, very suspiciously fast. They have definitely stolen a lot of the stuff to get there. And you know, we, you know, back in the day we stole our stuff too from the Brits.
- [20:41]
B
We should do it a lot more.
- [20:42]
A
And probably the US is going to have to think a little bit more like that. Like how do we catch up when we're behind? Because we're behind in some of these sectors now. But look, you add up our allies collectively, we are three times them on patents, three times them on top side of publications.
- [20:55]
B
And I do make this point a lot. It's like, dude, it's not us versus China, it's everyone versus China. We have to think about it that way.
- [21:01]
A
We're a free world. You know, we believe in certain values, we have a certain form of government, we have the market. Right. And if we band together and we don't have to basically make it like we hate you, China. It has to just be, look, we got to have fair terms of trade here. If we do that, we will be okay. And what we need to do is not spend vast sums of money, although we could loan more than we do. We could do a better job with industrial policy. What we have to do is create incentives so that people flow into the industries we need. Right now the incentives flow the other way. Think about this, right? It is, you are still incentivized, even with some of the tariffs, to take your manufacturing, move to China, export from China, sell to your neighbor, only reduce the price a little bit, take that margin, dividend it out to your shareholders, have your stock price go up and be on the COVID of Fortune. That's still a play available to a lot of companies. If that play were not available as much, then you'd see capital flow into things. We want it to flow. And so we have to shape the financial sector to be willing to invest in America.
- [21:57]
B
Maybe let's go through that little scenario again because that's interesting. So we're talking about Solutions here. So what prohibition, what policy, prohibition or prescription are you placing?
- [22:07]
A
Yeah, good question.
- [22:08]
B
To make that happen, I would do
- [22:09]
A
a few things with the allies and domestically. I would say collectively we want to make it easier for all of us to trade with each other and we want to make it so that all of us collectively have a harder market to access relative to China that China can't just get in.
- [22:21]
B
Right now we're doing that tariff war
- [22:24]
A
and the tariffs are not the best instrument for it, but they're an instrument and they have to be part of the solution set with China. Non tariff barriers are very interesting. Right. So take cars. The Chinese wanted to sell all these electric vehicles to the U.S. i think that would have devastated our auto industry. A lot of that stuff was subsidized. They vertically control that industry. So what do we do? We say you can sell, but you got to make sure that those cars have US software because otherwise it's a potential weapon. They say they don't want to do that, that's fine. They can't sell, then that gives us some time to catch up. And let's not forget this. The Chinese built their lead in autosom with a tariff. I mean, they had a tariff to make it harder for us to sell there. That gave their industries time to grow.
- [23:01]
B
What are they? What is a Chinese car? I mean, they're not really here. They're not like really here though. I mean, they're sold around the world
- [23:08]
A
because of our policy. Yeah, we've kept them out, but you know, there's a path that they want to sell them. BYD Xiaomi these are really impressive cars though. Like, they are, you know, pretty good. And around the world they're selling well. So the question is, how do our car companies catch up? They need some time. Yeah, yeah. They need some support, they need some accountability. They have to be accountable.
- [23:27]
B
And so the way to do that is through trade agreements with our allies. You're saying that kind of like squeeze and we're always trying to do that. We're trying.
- [23:35]
A
We could do better though.
- [23:36]
B
But you know, there's two sides to that decision. You know, we push all we want. And you know, this, I mean, this is a whole government thing. That takes a strong ambassador.
- [23:47]
A
Exactly right.
- [23:48]
B
And it takes a strong Commerce Department. That's, that's strategizing in all of these ways. I mean, what is your general opinion on President Trump's tariffs with China?
- [23:58]
A
Right. You know, we in the Biden administration had increased tariffs on China as well in some sensitive sectors. We used A lot of non tariff tools to basically protect some of our markets. Here's the basic point. You can't let $1.4 trillion global goods surplus, which is what China has, just flow anywhere it wants to go. That's going to devastate people's industries and we're going to need some protection from that. So the President's instinct on that is right. However, I would worry that, you know, going last year up to 145% with just no ramp, pushed the Chinese into a corner. And once they were in that corner, they reached for a tool they hadn't used very often. And that tool, which they used in a big way, was rare with minerals and magnets. And our manufacturing sector needs those minerals, which we talked about. 99% of some of them come from China. So when they say I won't sell it to you, that's a real problem for manufacturing and for cars.
- [24:44]
B
It is. I'm also kind of glad they did it just to wake everybody up.
- [24:47]
A
And now we're working to fix it.
- [24:48]
B
Yeah, yeah. I mean it's going to take some time, but it's, we have, it's, it's a frustrating problem because it's so it is easy to fix. Again, critical. You know, rare earth minerals are not rare.
- [24:59]
A
No.
- [25:00]
B
You know, you just dig up a bunch of dirt and then refine. You just got to refine it. The refining process is messy. A lot of chemicals, a lot of energy expense, expenditures. But you can do it.
- [25:10]
A
Right.
- [25:10]
B
And most of the places you do it or you would at least dig it up are our allied countries. It's not in China, Australia, Canada. This isn't hard to do.
- [25:19]
A
And you know, we will invent new methods of refining as well because we have to now. And think about the cost. Right. The total amount we imported from China of these minerals might be less than the price of an F35. Would you pay 10 times that price for the sake of Rare Earth independence? 100 times? The answer is actually yes. We're talking what, $3 billion.
- [25:37]
B
Then we need to eventually, you know, and eventually it scales, scales and we figure it out. And that's what I guess kind of my point earlier about they've done us a favor.
- [25:46]
A
Yeah.
- [25:46]
B
You know, by making it so cheap for us for a while. But it's, we reach a point where we need to start taking control of that.
- [25:54]
A
That's where their confidence comes from. They felt like they won that last round of the trade war and they're acting as if they did.
- [25:58]
B
You know, what do you think? I mean, I think that. I don't even know what I think.
- [26:02]
A
I think that they. I think that a trade war like that is so complex that the winner is whoever we think the winner is. Right now, China thinks they won't, and I think the US Thinks they won, so they won. The truth is President Trump had some instruments he could have deployed against them, and he chose not to for the sake of stability.
- [26:18]
B
Like what?
- [26:18]
A
Well, we could have done a lot of things. We could have gone after, for example, some of the smaller banks in China, you know, gone after using financial sanctions. Yeah, financial sanctions. They use export controls against us. They stop us from getting access to goods. Well, they're manufactured. That's their advantage. But our strong point is finance. So we could have gone there. We could have gone after chips more. We could have gone after legacy chips. You know, their rule, Congressman, was any product anywhere in the world that has 0.1% of its value come from Chinese rare earths to be sold to anybody else requires a license. And that's a crazy, crazy system. And you ask them, hey, is that. Would you model that off of. People say, hey, they're copying our export controls. Not true. They're modeling that after our financial sanctions because anything you do in the world requires the dollar. So they wanted something like that as pervasive and fundamental as that.
- [27:04]
B
Yeah, it's definitely not the same thing. I mean, they're real fuckers for thinking like that. But that's interesting.
- [27:11]
A
That's how they justify. Now, a lot of our people who I think were a bit defeatist said, ah, see, we did export controls and they learned from us. That was silly. What actually happened was they were trying to copy our financial sanctions because they know we have the high ground in global finance. So we have a lot of tools. We're a powerful country. We have a lot of friends, we have a lot of. We're the market, you know, the best market in the world to sell to is the American market. It's the highest margin you can get. So we didn't take advantage of those instruments. And I can go through others. There's still time and it's not over yet.
- [27:39]
B
Yeah, there's definitely still time. What do you make of a lot of people? I get asked this question a lot, and I have my own answer to it, but curious what yours is. Am I worried about the dollar becoming irrelevant? Whether it's to the BRIC countries? Are BRIC countries even still a thing? When you really think about who they are. But, I mean, kind of, you know, it's hard to put India and China together like in, like a happy place together. Pretty sure there was a pretty massive amount of conflict between them in any case. Right. There's, there's a, there's a sector of bad actors whether, you know, Iran, Russia, China, Venezuela, maybe not so much as more Cuba, North Korea, whatever. There's a long list that would love to, to see de dollarization.
- [28:28]
A
Right.
- [28:28]
B
You know, but, but my answer to that is usually I don't see that happening. What is your thoughts?
- [28:33]
A
You know, it's hard. Right. The U.S. share of transactions and reserves has not fallen dramatically relative to the level it was right after the Cold War, even. So you could say America still, you know, the dollar is still king. There's been some flight to gold, but, you know, that's gonna, it's gonna have its own challenges. Where I think, what I think is interesting is there's an, there's a play here. Right. The dollar may be the dominant currency, but there may be some ways you can bypass it if you control your own payment system. So the Chinese have tried to build parallel financial infrastructure so they can transact with others in their own currency, potentially
- [29:05]
B
one day swift banking system.
- [29:07]
A
So they've got their own version, right. Called chips. And they do all the pieces of financial transactions within that structure. And when they want to help out Iran or Russia, they can do it without us seeing it and without us necessarily being as able to sanction them. Now if we figured out a certain bank is doing something, we can cut them off the dollar system. We haven't been very eager to do that in cases where I think probably we should have. And in this case of the trade war we had, I mean, we really needed to threaten some of those smaller banks, like the banks, for example, supporting Iran or Russia. When I hit them. Right. They're already involved in bad activity.
- [29:37]
B
I don't know. I don't know why not.
- [29:41]
A
We haven't done it yet either in this administration. So.
- [29:43]
B
Yeah, and it's, and it's, it's not an administration that's shy about using tools. So, you know, and I'm not involved in those conversations. I don't know. Sometimes it's good to have just tools in your back pocket that you're waiting to use. But, you know, I think what's our, what's our grand strategy, though?
- [30:00]
A
That's exactly the question.
- [30:01]
B
What's, what's the goal we're trying to get at?
- [30:03]
A
Yeah. And when you're in a trade war and they've Pulled out their bazooka. That may be the time.
- [30:09]
B
Yeah. Putting some of those remind them of the other tools that we have pulled out yet. What do you make of the region generally? We have our kind of obvious strong allies with Taiwan and South Korea, Japan, Australia, and let's count Philippines in there. But then you've got your countries that are just closer to the problem would like to be our ally. I think in most cases, if not all cases, but are caught between Iraq and a hard place like Oman and Qatar. Right. The Iran situation, what is that? What is that? What does that alliance look like right now? What could we do better?
- [30:53]
A
I think that there's two things I'd say the first one is that our allies are watching us to see are we still going to be in Asia. You know, there's a view that after Iran, maybe the US hasn't done as well as it hoped. Maybe we got to take the ball and go home to the Western Hemisphere.
- [31:07]
B
Yeah.
- [31:07]
A
I think that view is wrong, by the way.
- [31:09]
B
Yeah. It's not all what we're like. I mean, I know for a fact that's not what we're. We're investing very much in Asia.
- [31:15]
A
Yeah. We're not. We're not doing that as a matter of practice. And there are some who advocate for it, and I think they're wrong. And it's partly because, like, the best real estate isn't all in our hemisphere. Some of the real estate that really matters for the global economy is elsewhere. You got to play everywhere.
- [31:27]
B
Well, I just mean from a defense perspective, like anybody saying that we're losing focus on paycom is just. That's just incorrect. It just. I see why and I see it every day. So I know we're not kicking the eye off the ball. If anything, I'd like to think what we're doing is. I mean, interrupt you. Sorry. I assume it's a different question, but what I see us doing is taking. We have so many ankle biting foreign policy problems. That's what I call them, ankle biters. Venezuela was an ankle biter. Cuba is an ankle biter. Iran is it a larger dog, but it's still an ankle biter. The Russia, Ukraine conflict, that's an ankle biter. And it's stable for. For now. The more of these ankle biters you take off the map, the more you can focus on the cartel is another ankle biter.
- [32:15]
A
True.
- [32:15]
B
Big ankle biter because it's close to home. But the more of these you take off the map with just strategic, just boldness, like I mean, the Maduro raid being the perfect, the perfect example. You're not going to get that many perfect examples because the world's a messy place. I remind people of that when talking about foreign policy. You want foreign policy to be perfect. In hindsight. Yeah. Well, the world's a messy place, so expect messy operations. Sorry, that's the world, live with it. But anyway, you take those off the. That's how I see the grand strategy is, you know, maybe that's hoping that's the grand strategy, but that's how it should be anyway. And then the real focus places in, you know, the next 50 years with China and the space race. They didn't mention the space. That's a big problem too.
- [32:59]
A
We have the lead there. Yeah.
- [33:01]
B
In some ways I can't get into that.
- [33:05]
A
It's okay. I remember.
- [33:06]
B
Yeah, it's, it's scary, but we're getting there and. Yeah. So. Okay, so back to my original question. And this feeds into like what you did on the National Security Council.
- [33:15]
A
Sure.
- [33:15]
B
Because you were involved in launching Aukus. Maybe explain what that was.
- [33:19]
A
Yeah, So I was very lucky to have that chance to serve after, you know, my book came out, while I was in government, which was, you know, kind of unusual. But August, you know, there was a day where I got called in. We have the Australians with the proposal. My boss says Kurt Campbell, now former Deputy Secretary of State says, you know, not very many people know about this. It's got to be kept secret or it's not going to happen. And I want you to basically help me run this and negotiate it and basically write the papers for the President and all that stuff. What was it? It was an effort to get Australia the ability to have a nuclear powered attack submarine. And what that did is two things. One is it gave Australia the better ability to defend itself because they've got a lot of water to watch out for and their subprogram isn't up to that task. And second thing it did is create enduring ties between us. There was a time 10, 15 years ago where people thought, look, Australia is doing so much business with China, they may not stay in our camp. And Aukus was a demonstration on both sides that we're committed to each other. And it also gave us a bit of access to Australia for, you know, our own submarines. Now we can do resupply there, we can do other things there. You remember back in.
- [34:24]
B
So Aukus was basically a submarine deal, principally. Yeah. But it's more than that.
- [34:29]
A
There's pillar two.
- [34:30]
B
Where's the K Coming out of this uk. Okay, it's uk. I was like, what is.
- [34:36]
A
I remember the day we like, we had, we were like, what should we call this? And the Australians were like, how about we call it Aukus? And we thought, gosh, that doesn't sound that appetizing. Like it's kind of weird acronym.
- [34:44]
B
It's fine. We stuck with it because I wasn't. I mean I've always thought of it as just us, Australia. And then literally right now I'm racing through my head because the UK is so obviously an ally that I don't think of it as being. But the reason we do it together
- [34:57]
A
is back in the 50s, we proliferated to the UK and actually to France. Nuclear submarine technology. We invented it. Hyman Rickover American Greatness who was pissed
- [35:05]
B
off about this submarine deal? There was, it was, I mean the Chinese, obviously.
- [35:08]
A
France.
- [35:09]
B
France was right. Because they wanted to sell it to them.
- [35:11]
A
They did.
- [35:12]
B
Yeah.
- [35:12]
A
And what France was selling was a diesel submarine.
- [35:14]
B
Yeah.
- [35:14]
A
Which, which wouldn't.
- [35:16]
B
What are you thinking?
- [35:16]
A
Which wasn't going to have the payload or the range of the endurance that a nuclear tax submarine would have. Now maybe the French could have offered their nuclear submarine to Australia and maybe they'll offer it to India one day. That could be a good thing. So I think French talk about India before I forget.
- [35:30]
B
Side note that one.
- [35:31]
A
We'll come back. But bottom line is Aukus. One other thing I got to say about Aukus, you may remember this. Back in 2021, we haven't talked about what it means if China wins.
- [35:38]
B
Right.
- [35:38]
A
What does it mean if like they accomplish their goal? We should talk a little bit about that. But if the, if, if you want an indication, look at what happened in 2021 back then, the Chinese went to Australia, they beat the heck out of them economically. They did all this coercive stuff, stopped buying a bunch of stuff. They tried hard. It didn't work, but they tried. What did they say was the price for unwinding the coercion? They gave a list of 14 demands to Australia. The 14 demands, and about half of them were changes to the way Australia does its own internal governance that would make it fit what China wanted. So I'll give you some examples. Australia was supposedly gonna. Was supposed to allow Huawei in the Chinese telecommunications company. They didn't wanna do that. They were supposed to stop attributing China as a cyber attack vector, but they didn't wanna do that. They were supposed to stop.
- [36:22]
B
Stop blaming us for hacking you.
- [36:23]
A
Yeah, exactly. But actually Stop saying that Xinjiang is a genocide. Stop saying that Covid origins need to be investigated. Stop preventing your state from joining the Belt and Road. If your states want to join the Belt and Road and your central government says no, let the states decide. I mean, issue after issue, that's bullshit. Stop having your journalists attack us. Stop funding think tanks that attack us. Stop having your parliamentarians attack us, and so on. You go down that list and you realize that part of what they wanted to do was change the nature of Australia, right, In a way that would be more conducive to China. Australia said no. And that was in part why we did Aukus, because we wanted the Australian people and the government to know that it is time. When the Chinese were bearing down on them, we weren't going to leave them on the field. As my boss put it at the time, we were going to stand with them. And I think today Aukus faces challenges. I know you've been a supporter and I think it's important for us to keep that program alive.
- [37:12]
B
Yeah, yeah, of course, but. And so moving on from Aukus and the rest of the region, you know, we work with the Philippines, we work with Japan, we work with Korea. Then there's Vietnam, there's Cambodia, there's Singapore, there's Thailand. Closer to the problem, caught between more of a rock and a hard place. How do we manage that?
- [37:36]
A
The truth is that a lot of these countries in Asia are facing a big problem from China. And it's not just a security problem, Right? It's that if you think there was a China shock that hit American industry after China joined the wto, we all know that happened. We lost millions of jobs. It was real. And like fentanyl addiction is related to it, we're now going to face a second China shock. That's what's coming today. That's what's coming in our high value sectors now. We are a little less exposed for a lot of reasons than our friends in Japan, in Korea, in Taiwan and in Europe, especially Germany. Germany today is losing 10,000 manufacturing jobs a month largely to Chinese displacement.
- [38:11]
B
They've just given up.
- [38:14]
A
They are not. We need to fortify them. And so what we need to help these countries realize is their future economically will lie with us. It will lie with us together. It will lie with them selling to us, us selling to them, investing in each other, sharing our industrial methods so that we can collectively be stronger. That message is a message that matters for Japan and Korea and Taiwan. And then there's a security picture, right? They are Seeing the Chinese military buildup, which is the biggest military buildup in modern history. We're talking about nine carriers, according to oni. This is now declassified in the next decade. We're talking overseas military bases in places they don't really need. Overseas military bases.
- [38:48]
B
Yeah, they started with Djibouti. And a big part of what we
- [38:51]
A
were doing early on, building on the Trump administration's approach, was to basically push back on the spread of those bases. We had a strategy. We declassified it, talked about it publicly, but they were looking at the Atlantic, Latin America, Gulf of Guinea, you know, Middle East, Mediterranean, lots and lots of places.
- [39:06]
B
I mean, there's hundreds of thousands of Chinese workers in Venezuela. I mean, presumably still are. At least we're controlling the oil now. So, again, that's a good opinion, but they were moving in under our noses.
- [39:19]
A
There's a lot of overseas entanglements and a lot of resource sectors. Right. They've bought up a lot of the key mines, a lot of the key critical minerals deposits around the world. But the funny thing about that is, if you've ever seen the movie Sicario, it ends with this phrase. You may have seen the movie. At the end, the main character says to this woman, like, you're living in the land of wolves. Now, it's like China might have invested in these ports, for example, near the Panama Canal, but in the end, Panama has rule of law. It decides whether that's a good deal for Panama or not.
- [39:46]
B
That happened pretty quickly.
- [39:47]
A
And this is a good thing. I mean, those ports are now in the hands of some European companies. Might be better if they were in the hands of American companies. But the bottom line is that they're not Chinese. And so those kinds of things suggest that while China has overseas assets, it has overseas liabilities because it cannot necessarily secure them. They want to change that, and on current coercion speed, they will.
- [40:08]
B
And it does seem to me that, you know, a lot of their stuff falls apart. It's kind of the old, you know, as we all know, it's made in China. No wonder it broke, like. Yeah, well, they make a lot of things cheap at scale. But that. That also seemed to be true for infrastructure as well. And I think some developing countries have maybe caught onto that.
- [40:26]
A
It's true that on infrastructure, they cut corners. Like, a good example is in Ecuador, where they paid off a very top official son and got access to build this dam in Ecuador. They got all this money to do it, and the dam has huge problems. A lot of cracks. They got to Release the water so it doesn't break. They do that in unpredictable ways. Farmers drown. I mean we're talking about a real problem. But I will say this Congressman, on manufacturing, they're pretty legit now. I mean they've got problems with some of their stack but they are really moving up the value chain.
- [40:52]
B
Yeah, so you mentioned that before about what to worry about the high value manufacturing and which is what we've generally been been good at. Services, high value manufacturing like the little, the robotics, the machinery that only the Germans know how to make because they're just so.
- [41:08]
A
Well then the German, the Chinese bought that German company Kuka. Remember that? So you're right. Machine tools. Kuka, the biggest machine tools player in the world. In some ways China bought that and
- [41:17]
B
Germany just let them buy it. This is frustrating as well.
- [41:20]
A
Well, you remember this. I think back then after it happened all of us said wait a second, that was a disaster. And we saw this wave of investment restriction regulation come up, including in the US which past firma, which is a kind of way of regulating inbound investment from countries like China. So we ended up responding, but it was too little too late in for robotics today. China installed last year like 300,000 industrial robots. We installed 30,000. So that means that they're going to generate a consistent and permanent operating advantage in manufacturing unless we help our companies up tool upskill and like improve their capital equipment. Why don't they do it now? Because interest rates are 7%. They don't get the loan or they get a high interest rate. It's not going to work for them financially. They better just live off that current order book. But in China you want to upgrade your capital equipment, the bank will give you a loan and you will not have to pay very much. You can do it.
- [42:08]
B
Yeah, we can only spend again. We can never outspend them, especially when they're using monopoly money effectively to subsidize themselves. It's a difficult problem. We tried with the CHIPS act and I'm not sure that has the, the outcomes that maybe we had hoped.
- [42:23]
A
I'm a little less pessimistic. I feel like on chips we're making real progress. I mean Intel's progress a lot better now than it was. We got these big fabs from TSMC from Taiwan coming in, setting up and then you look at how much do we actually have to spend. You talk about American advantages. One we didn't talk about is capital markets. We can finance. They may have a big balance sheet. We have the whole world that wants to invest in our country.
- [42:45]
B
Right.
- [42:45]
A
We have enormous capital advantages. Every country that had to catch up in manufacturing had to use its banks to do it. They had to issue all kinds of loans. They had to hold those companies accountable for us. We're not starting from that far behind. We have manufacturing, we have allies and we have capital. So the careful allocation of capital in a few key sectors is affordable. We're not talking about subsidies, we're not talking about grants, we're talking about loans. You do that low cost at scale, we can afford it and we can with, with careful investment. We can't outscale them.
- [43:15]
B
Is that like a policy prescription you'd recommend is effectively loan programs? I mean, I remember chip manufacturers during the, when we were debating that in the CHIPS act and you know, there was a, there was provisions on simply tax credits. And like most companies are like, that's what we actually like tax credit. Yeah. Because that's, it's applying for the CHIPS grant part is just a mess. Nobody does it.
- [43:36]
A
Well, the interesting thing now is you've got the Trump administration pursuing a lot of loans to companies that are, let's say you're facing the valley of death, as we call it in that sector. Right. They can't reach the scale they need fast enough. They need bridge loans to survive or to do capital expenditure. They want to build a factory, but they can't pay a 10% interest rate from Wall Street. They need a lower rate in better terms.
- [43:57]
B
We did the tax write off so that at least we got that part done.
- [44:00]
A
Yes, sir.
- [44:00]
B
Small, small, small win there.
- [44:02]
A
But I guess there's a lot of, there's a lot of pessimism and fatalism. Right. When people look at this right now and I think that's wrong, I think
- [44:07]
B
people should recognize people are just overwhelmed by it.
- [44:10]
A
Yeah.
- [44:10]
B
Maybe that's especially in Congress. It's just an overwhelming problem. And like this is why we had a China Select Committee.
- [44:16]
A
Right.
- [44:16]
B
I think, you know, but do you
- [44:18]
A
think it'll nab teeth? You think it'll continue if the House.
- [44:20]
B
Does it even still exist? I don't know.
- [44:23]
A
It exists today.
- [44:24]
B
I mean. Yeah, I mean it has no jurisdiction. Right. And it gets to a whole other problem. It's like who's whole of government? Who's creating that strategy? And that's hard because the China Select Committee will come out with a, a proposition. But it is just that, it's a, it's a legislative proposition. Then it goes through all the committees of jurisdiction.
- [44:42]
A
Right.
- [44:42]
B
Which is hard.
- [44:45]
A
There's no One place where you can do Big China policy, right?
- [44:48]
B
No, because industrial policy, I mean, you're talking about critical minerals. Well, okay, well, so that's. That's my committee on Energy and Commerce. It's literally my subcommittee, because we oversee epa. But then again, if you're talking even though we do environment, it turns out that the National Environment Protection Act, NEPA permitting reform, well, that's natural resources, right. And then I think it just. Then you got transportation infrastructure in there somewhere. This is one of the problems with the way Congress is set up.
- [45:14]
A
Well, I'll defer to you on some of that, of course, because of your greater experience, but I will say this. I mean, the things that we have to do are finite, too. They are knowable and they are solvable, and we don't have to do them alone. And I think what is important and maybe incumbent on folks like me to do is help lay out here are the four things, right?
- [45:31]
B
And prioritize.
- [45:32]
A
And prioritize among them. And tell the story of why it's not going to break the bank, because it doesn't have to. And if you add up our allies, again, we kind of get there. And so I think I will say one thing. You know, the Biden administration worked with allies in a way focused on persuasion. That gets you far, but not far enough. Sometimes you got to bring the hammer down. Trump administration, I think, much more coercive. You got to have both. And if you got your carrots and your sticks with your allies, you do the right investments at home, basically. Invest at home and align with your allies abroad, you can basically get us in a better spot. The Chinese government 40 years ago didn't have any of this stuff. China was just coming out of the Cultural Revolution, the turmoil of Mao, 1980. They were not an industrial economy the way they are today. It happened in 40 years. And big changes happen in a short amount of time. When you've got the policy right, we've got to get the policy right. And it's not the most complex thing in the world to figure out how to do some of this stuff because other countries less sophisticated than ours were able to. To do it. So we can do it.
- [46:25]
B
No. Yeah, it's not complex, you're right. But the politics is hard, right? The politics of it is extremely complex. It's one of those weird cases where it's. It's not even very controversial. That's what's so frustrating about some. Some of these issues. They can be, because, I mean, every time we start talking about permitting reform for, okay, well let's have more critical, let's do some mining. Well, that runs into obstacles with our colleagues. So you know, it's not, it's not for lack of trying. And it's, it's, it's, it's out there as a, as a problem that we know we need to fix. But yeah, some academics like you, fixing, simplifying the problem for us is always welcome. And we said we were going to talk India. That's a complicated relationship. Both us in India. Yeah, and India and China.
- [47:09]
A
Right.
- [47:09]
B
I mean, you know what the second largest. What's their population these days over.
- [47:13]
A
They're actually bigger than China.
- [47:14]
B
They're now bigger than China. I mean this is, this is, this is not a country we can ignore. So what's, what do you, what's your general sense?
- [47:20]
A
Look, I think, I think India is part of whatever balance you want to. I think the question, you know, balance is good in the world, right? Balance of power is usually good, preponderance is better. But you got to settle for balance sometimes. And I think if we don't act, the Chinese are going to, they're going to overcome, they're going to be number one in a lot of fields. They're going to be pretty powerful just because of scale and because their Leninist system gives them some advantages. We need India, Europe and others to help balance them out. India, I think has aspirations to be able to do manufacturing within their own country. They want to lead in technology and they want to work with us. They see the US as their critical partner. Not Russia. They need Russia for the weapons because their entire kit is Russian and they don't have the Russians on their side. They'll have no ammo. But they need America for the long term. And our two countries are democracies. We have enormous people to people connections. We generally see the world in similar ways when it comes to liberal values and democracy. We have differences on those points too, of course, but that's, that's what they are. And China and India have problems. I mean China is the biggest backer of Pakistan. China is pursuing influence plays in all of India's neighbors so that they can surround India. They're putting bases near India and they killed Indian soldiers just five years ago on the border. A lot of them.
- [48:29]
B
That seems like a lot more recent, but I guess that was five years ago.
- [48:32]
A
Just five years ago.
- [48:33]
B
Yeah.
- [48:33]
A
And so India has real problems with China and China basically doesn't even respect India. They're so condescending towards India and it's A mistake. Because if the Chinese were half as smart as. As they should be on this issue, what they do is they get the Indians to go in with them. They'd say, look, India, we're going to do all this manufacturing for you. We're going to put Pakistan in a box. We're going to invest in your country. We're going to grow together. They can't do it.
- [48:55]
B
That is. Yeah, it's like I said, they're not 10ft tall.
- [48:58]
A
They make mistakes.
- [48:59]
B
Intellectually speaking, they do make mistakes. They pick some strange partners.
- [49:05]
A
Russia.
- [49:06]
B
Yeah, yeah. It's like, why? What benefit is that?
- [49:09]
A
And they're beating the heck out of Japan right now, driving them further and further towards the United States. Whereas, you know, just 14 years ago, there was a government in Japan that wanted to make nice with China. What do they do to that government? They basically beat that government down on a territorial dispute. So I think you asked me what their weaknesses are in terms of their decision making. They tend to disregard the kind of sovereignty and political systems of other countries near them. They treat them from a position of superiority and they drive them away. They tend to discount the fact that their model, while successful in some ways economically, isn't attractive to everybody else. And they tend to throw in with some of the wrong countries. They go all in on countries like Russia and Iran where they don't have to. And that play then alienates Europe or alienates the Gulf countries in ways that then put China in a worse position. So I'm not going to tell President Xi, here's how you can beat us. But I'm glad he's making some of the mistakes that he's making.
- [50:00]
B
Well, yeah, and that's another weakness, is that some people would say, like, you know, there's massive blackouts throughout China, and probably there's a good chance Xi Jinping never even knew about it because, like, he's insulated. They don't want to tell him. Well, they don't want to tell him bad news. Yeah, yeah, right. And that's what it is to be a dictator. That's why Putin didn't know that is, you know, caravan of tanks and up armored vehicles was out of gas because his generals had been siphoning it and selling it. So, you know, we have advantages at least to having an accountable democracy.
- [50:32]
A
We have a lot of advantages. I think that, you know, on the one hand, some people tend to underestimate China's strengths, and that's a real problem. We have to deal with that problem. That's what I believe. But on the other hand, people underestimate our strengths too. And when I look at them on net, I think if the US acted, if we saw the political problems that you deal with kind of on a daily basis, if we were to fix some of that, if our politics got out of the way on some of these questions, we'd be fine. And that what I don't want to see people do is look at China and say what you were saying earlier. Some people think they're 10ft tall. And you're right, they're not. And if you think they're 10ft tall, then it leads you to some dark places. Some people are saying, hey, what we have to do is get the American people ready to basically live in a world that China runs to accommodate America to that. Now that sounds like some kind of sophisticated thing, but I'll tell you, I don't think union workers want to do that. That I don't think the UAW agrees with that. I don't think most Americans agree with that.
- [51:24]
B
I don't hear that very, I don't hear that kind of pessimism very often.
- [51:27]
A
There's more and more of it now. And so what we, I think are, what our responsibility is, is to help people realize this is a formidable competitor, but not beyond our means. If we play smart and look, we're not here to blow up their system. I don't think, anyway, I think we want to live a lot. We're gonna have to live with them.
- [51:41]
B
Yeah, they're powerful. I don't like, we don't like to publicly say the word containment, but I think you can't even. I don't even.
- [51:47]
A
You're too big. You know what I would say is balance.
- [51:49]
B
Manage.
- [51:50]
A
Well, manage I like. So manage competition is what we kept saying. And actually the Trump administration has a similar approach sometimes on managing the competition. Competition is a state of affairs. We're going to be competing because that's just reality. The question is when we do, when we compete, we're going to do stuff they don't like, they're going to stuff we don't like. We've got to make sure that as we take those steps, it doesn't blow the whole world up or blow up our relationship. That's the managed part. And you can only compete if you do the management. And if you think about it kind of from a long term perspective, what's the goal here? The goal is balance. We want us and our friends to be able to balance Chinese power globally with the Soviets. That Wasn't necessary the same way eventually they collapsed. But with China you can't count on that. So we need balance.
- [52:28]
B
We can count on a decline, but not maybe an open collapse the way we saw. So we talked about these weaknesses that they could blow up. It's true. It's hard to say.
- [52:37]
A
You could, you know, in 15, 20 years, the demographics, or even sooner could, could bite and, but we can't count on it.
- [52:43]
B
And what's scary about that is that, does that move up a timeline? Do they get desperate with Taiwan? I mean, we should talk about that in the last few minutes, you know, how bad is it? And real quick, I want to introduce this question with, with something you said earlier and what I say to people about why we're involved in so many places around the world. Because that irks a lot of, you know, typical Americans who were like, why are we in this part of the world? I don't understand why. And you know, why are we helping Ukraine? Why this? Well, my answer is it's not about Ukraine. It's about the fact that it's the first major land invasion since World War II in major countries. And if you just remove yourself from that, then you can bet that 50 years from now it's not that you'll be speaking Russian, but you'll, but you'll be living in that Chinese mercantilist system that the Belt and Road initiative is best describe it. I'm curious if you agree with this assessment. Belt and Road Initiative to me is trying to force the rest of the world to live under their economic policies. Right. This sort of state owned enterprise kind of subsidization policy. And that's the, that's Belt and Road. Or maybe, maybe it's a form of colonialism as well mixed in with that. But, but in any case, The bell go. In any case, you know, that's, you know, why do we care about Taiwan? It'd be hard to get the American people to go to war for Taiwan, that's for sure. So there's an, obviously have an interest in preventing it. But how do you explain to people in simple terms why it even matters?
- [54:15]
A
I mean, it's a fair question. And I think that, you know, if there were a conflict over Taiwan or even if Taiwan were just taken out by a Chinese invasion, we're looking at a 5 to $10 trillion hit to global GDP, which is going to put us in global Great Depression territory. We're talking about all the AI stuff that's happening around the world, which is keeping some of Global growth going, all that is made in Taiwan, 99% of those chips. We're talking about the fact that this is also, it's interesting, some people are persuaded by the economic argument, others by the values argument that we want Taiwan to endure, be able to decide its own fate, maybe with China, maybe without. And that is because they're a free society, they have elections, they believe in liberal values and the same reason we care about Ukraine. And so you take some of those arguments together and different people respond to different ones. I think you're right that it's probably difficult to get people to say let's sign up to fight China in the Indo Pacific. They're enormously powerful, but at the same time China has to do something really hard. Cross 100 miles of water with only a handful of beaches and only a handful of months where it makes sense and take an island in the biggest amphibious invasion in history. And they may not be able to pull that off. And it's not like Taiwan is a slouch. They're a top 20 global economy. They have in a fully indigenous drone supply chain. They make their own anti ship cruise missiles. And Iran has showed us the power of precision guided weapons against a superior force. And Ukraine has showed us that too. Taiwan can run some of that play. We call it being a porcupine. You work on this yourself. I know Congressman, from your leadership on the issue. And so is it hopeless? No. Is it important to manage it? Yes. Is China in a hurry? No. So it doesn't have to be an apocalyptic situation. I think there are ways to manage it and get more time on the clock. And this matters. If you put Taiwan aside, where's the world going to go? Where's the world going to go? If China's successful, you just keep talking.
- [56:02]
B
It doesn't pick it up that badly.
- [56:05]
A
If China's successful with their broader grand strategy, I think it's a world of partial Chinese hegemony. You mentioned belt and road. But militarily it's where they've got nine carriers and bases on every continent and they're able to project power in the places they can't today. Like us economically, they dominate the supply chain. Everybody depends on them. They depend on nobody technologically. They win the next historic industrial revolution and they use that to not just be richer than us, but to leapfrog us politically and on the diplomatic and political side. They want to embed their autocratic values around the world. They expect export their surveillance kit to everybody because they want them to have it. But also because they want the world to be safer for autocracy. You put that together, that's not a world that anybody really wants, and it's a world that we can't avoid. It requires us doing the things we mentioned at home on industrial policy, investment, getting our house in order, and it requires working with our friends who also want to work with us and need us more now than ever before. It's all doable.
- [56:57]
B
Yeah. Yeah. I think that's the thing to end on. Right. It's a. This is a very solvable situation, and one. We have a lot of advantages. And like I said before, we're just lucky. Our predecessors did us a great service in many ways, based on geography, resources, a stable political framework. I know people don't feel that way, but it is, in fact, that way. And we've got a lot of advantages. We just got to use them.
- [57:24]
A
That's right. We are blessed and we shouldn't give up.
- [57:27]
B
All right, well, Rush, thanks so much for the fascinating conversation.
- [57:30]
A
Thank you, Congressman.