Oct 15 2010

Leo%20Hindery-thumb-250x337-1364 CEO Leo Hindery has been writing and speaking out for years about the emergence of China as one of, if not currently, the leading world economic giants. Increasingly, China has begun to throw its economic weight around in violation of many trade agreements. Most disturbing is its increasing 'big stick policy' in the South China Sea area. China has been in disagreements with Vietnam, Japan, Philippines, etc and have been using trade as a form of aggression to achieve its goals in the area.

Hindery writes powerfully of this emerging national security issue for the United States. He postulates this week on The Huffington Post:

"After three decades of double-digit growth, China has just passed Japan to become the world’s second-largest economy behind only the United States – and it should surpass us as early as 2030. And when China wins in trade, as it now does every day, it’s really only the U.S. which loses. In fact, for the last several years the correlation has been almost dollar for dollar, with America’s trade deficit with China in goods and services virtually mirroring China's overall trade surplus.

This should be enough of a clarion call to the administration to demand the integrated all-of-government approach to our trade relations with China that is the only one which is going to address the economic nightmare we find ourselves in with that country. Yet the realities around our trade with China trade continue to worsen – and become a whole lot more foreboding."

The progressive CEO explains the situation in the South China Sea sphere of influence:

"The most recent example of China’s aggression – and of it linking its trade practices with its growing military might – is its blockage of exports of “rare earth” minerals to Japan in retaliation for Japan’s detention of a Chinese fishing trawler captain operating in disputed waters of the South China Sea. At the same time, to show it really means business, it even cancelled the China tour of SMAP, the Japanese boy-band.

You might ask what could possibly have more value than a touring Japanese boy-band, well it’s those “rare earths”, which are not only “rare” but vital to almost everything worldwide that is on the cutting edge of technology, from hybrid cars to wind turbines to Boeing's helicopter blades to the tiny magnets that direct the fins of the bombs being dropped every day in Afghanistan to Raytheon's missile targeting systems to General Dynamics' tank guns.

These 17 elements in the periodic table – these “rare earths” – are now among the most sought-after materials in modern manufacturing, and China currently supplies a staggering 97% of the world’s demand for them. This is because in 1986 Chinese leader Deng Xiaoping made 'mastering' them a priority. And just six years later, Deng was able to say that, “The Middle East has oil, but China [now] has rare earths.” With this domination has come global trade friction, massive U.S. job losses and, now, threats to the national and economic security of America, Japan and any other nation which is dependent, as we each are, on access to rare earths for high-end manufacturing."

Hindery in his full article makes five detailed recommendations for our policy. He closes the article with:

Finally, as the rare earths contretemps has made abundantly clear, we must acknowledge with great urgency that China is growing more confident in leveraging its economic power through its growing military might, in order to advance its broad strategic interests and regional expansion objectives. We must conclude that if we don't manage this situation aggressively, this shift will soon begin to seriously adversely impact our allies in the South China Sea region and of course our relationship with China itself. We need to commit to our allies that with their asking, they will have the support of the U.S. to protect their national and economic security.

It's past time for China to see, firsthand, that the U.S. is committed to permanently linking our trade policies with our nation’s security interests, global defense responsibilities and foreign relations.

Leo Hindery, Jr. is Chairman of the US Economy/Smart Globalization Initiative at the New America Foundation and a member of the Council on Foreign Relations. Currently an investor in media companies, he is the former CEO of Tele-Communications, Inc. (TCI), Liberty Media and their successor AT&T Broadband. He also serves on the Board of the Huffington Post Investigative Fund. I work with Mr. Hindery and he is a personal friend.