Press Reaction to the November 2018 speech by Dr. Peter Navarro, Director of the White House Office of Trade and Manufacturing Policy, was biased in a negative direction.
Journal of Political Risk, Vol. 7, No. 12, December 2018
Anders Corr, Ph.D.
Publisher of the Journal of Political Risk
Dr. Peter Navarro, Director of the White House Office of Trade and Manufacturing Policy, gave a speech on November 9 at the Center for Strategic and International Studies (CSIS) in Washington, D.C. The title of the speech was “Economic Security as National Security”, which Dr. Navarro, a Harvard-educated economist, argues is the maxim of the Trump Administration. After the speech, Dr. Navarro was attacked in the media, but not about his main points. The negative, and one might argue biased, coverage came from the Wall Street Journal, CNBC, the Atlantic, and Director of the National Economic Council, Larry Kudlow, among others. The negative response centered on Dr. Navarro’s controversial claim that Wall Street elites have undue influence on U.S. policy having to do with China. Tempers were likely frayed at the time due to planning, negotiations and internal maneuvering in advance of a high stakes late November meeting then being planned between Presidents Trump and Xi Jinping at the G-20 meeting in Argentina. Worries were high that lack of progress on at least the outline of an agreement at the meeting could lead to deepening tariffs between the countries, and fears in the financial sector of falling stock markets or even a recession. But the bias and infighting of the attacks were unbecoming of these media outlets, and of Mr. Kudlow, the Director of the National Economic Council.
What Navarro Said
The focus of Dr. Navarro’s talk was on the industrial policy of China, including six strategies of economic “aggression” that Dr. Navarro says are utilized by China: 1) protect their own markets, 2) attack global markets, 3) secure resources, 4) dominate traditional manufacturing, 5) acquire technology and intellectual property by any means necessary, and 6) capture emerging industries like artificial intelligence and robotics.
Dr. Navarro then covered fifty ways in which China pursues its strategies of economic aggression, including high tariffs, high non-tariff barriers, currency manipulation, cybertheft, forced technology transfer, subsidies of state-owned enterprises, dumping, predatory debt financing, unfulfilled obligations, and what has been called the take-and-talk strategy. Competing effectively with China, according to Dr. Navarro, requires making the U.S. economy stronger through “tax cuts, deregulation, unleashing the energy sector, and fixing our trade deals.” A stronger economy, argues Dr. Navarro, will allow for a bigger defense budget. All of these points make sense prima facie.
Dr. Navarro’s economic critique of not only China, but of the way in which the U.S. has given into China’s demands is devastating, and his prescription of a trade war to right the economic ship will likely cause the financial sector significant pain. Wall Street banks and private equity firms have significant investment and deal revenues from China. The risk to short-term profits in the financial sector from addressing the issues with a trade war is so great, that one senses that traditional elites who live in and with the China trade are hard put to find compelling arguments against Dr. Navarro’s main points. To protect their trade flows, they elide his main points, nitpick the details and utilize misrepresentation. By doing so they hope they can wait out the Trump Administration, get Dr. Navarro fired, or both. Instead of addressing the major points of his argument, they focus their counterarguments on two of his points that they largely misrepresent, namely that Dr. Navarro is: 1) a protectionist, and 2) unfairly tarring the financial industry (what Dr. Navarro calls “Wall Street” for short) with supporting the Chinese Communist Party (CCP).
On protectionism, Dr. Navarro clearly stated at the CSIS talk that he is not a protectionist, but rather wants reciprocity in the trade relationship. He said, “what we seek – what the president is clear about seeking is free, fair, and reciprocal trade. I like to refer to the five zeroes, OK? My brother [Larry] Kudlow only goes for the three, but I like the five. What are they? Zero tariffs, zero non-tariff barriers, zero subsidies, OK? Zero currency manipulation and zero advantage from VAT tax versus income tax treatment. If we lived in that world – if we lived in that world and everybody actually played by the rules – this country would prosper, the rest of the world would prosper, and we would be the most competitive nation in the world because we don’t need cheap labor and we don’t need pollution havens to gain competitive advantage like some other countries around the world. We have the finest education system in the world. We have the most innovative thinkers in the world because we are a free people. Those two are highly correlated. And all we want to do is compete.” Dr. Navarro here does not sound like a protectionist, but rather a supporter of truly competitive markets. He simply does not want to give China an advantage in trade.
On the issue of Wall Street’s support for China’s position, one must quote Dr. Navarro at length to understand his points. The Wall Street Journal and Mr. Kudlow, did no such thing. Dr. Navarro said,
“DOD [the U.S. Department of Defense] clearly views China as an identified threat to America’s defense industrial base. Nothing could be clearer than that in this report. But this is a very different view. This is a very different view that DOD and other elements of this government have than the Wall Street and the – Wall Street bankers and the globalist elites. Let’s think about this now. Consider the shuttle diplomacy that’s now going on by a self-appointed group of Wall Street bankers and hedge fund managers between the U.S. and China. As part of a Chinese government influence operation, these globalist billionaires are putting a full-court press on the White House in advance of the G-20 in Argentina. The mission of these unregistered foreign agents – that’s what they are; they’re unregistered foreign agents – is to pressure this president into some kind of deal.
“Now, two points have to be made abundantly clear about this. First of all, President Donald J. Trump has done an incredible job – incredible job – on trade. He has had the courage and wisdom to stand up to the globalist elites, to stand up to the countries of the world that are engaging in unfair trade practices – non-reciprocal trade, high tariffs, high non-tariff barriers – using the world – using the United States as the piggybank of the world, and running up a trade deficit every year, because they do that, of over a half-a-trillion dollars, which is a pure transfer of wealth abroad: jobs, factories, money. That’s like a reverse mortgage on this country. Donald J. Trump has done a(n) amazing job of addressing that issue, and he didn’t need the help of Wall Street. He didn’t need the help of Goldman Sachs. And he doesn’t need it now.
“And here’s the most important point. When these unpaid foreign agents engage in this kind of diplomacy – so-called diplomacy – all they do is weaken this president and his negotiating position. No good can come of this. If there is a deal – if and when there is a deal – it will be on President Donald J. Trump’s terms, not Wall Street terms. But if Wall Street is involved and continues to insinuate itself into these negotiations, there will be a stench – a stench around any deal that’s consummated because it will have the imprimatur of Goldman Sachs and Wall Street. So, I would urge these unpaid foreign agents to stand down on this issue. No good can come of it. If they want to do good, then spend their billions in Dayton, Ohio, in the factory towns of America, where we need a rebirth of our manufacturing base and an end to the opioid crisis, which they helped create by offshoring our production.”
Dr. Navarro’s points here may use florid language like “globalist billionaires” that one does not usually hear on Wall Street, but they are essentially correct. I first examine his points in order, and then examine their misrepresentation by the press and Mr. Kudlow.
Let’s start with the existence of “globalist elites” or “globalist billionaires”. These would be people who put their business ahead of their country. That is arguably any CEO who puts their fiduciary duty to shareholders above all else. This is the job that CEOs are hired to do. The presence of international shareholders does not change the premise upon which they were hired. Were they to proclaim their patriotism over shareholder value, they would not keep their positions for long, nor the respect of the business community.
In the 1980s blue chip companies with increasing international revenue sources were called Multinational Corporations (MNCs) by liberal Democrats, and now right-wing Republicans use the same language. Because MNC revenues are sourced globally, they are seen by analysts on all sides of the political spectrum as having global rather than national political allegiance. I myself have met CEOs of such companies who seem to care more about earnings in the next financial quarter than they do about their country’s standing in the world, or their country’s values. I doubt that the existence of such individuals, including those with extensive investments and earnings in China, would be a surprise to most readers. And of course, those US company CEOs with major earnings in China would have a special interest in maintaining the peace that ensures the security of their investments in China, as well as continued deal flow with China. It is not Dr. Navarro’s comments on this that are surprising, but the fact that a high U.S. government official would be making them.
As Dr. Navarro points out, these elites see the world differently than does the U.S. Department of Defense. The elites who manage Chinese investments and deals have little loyalty to their country, but much loyalty to their earnings in China. So they are biased in their view of the threat from China to U.S. values like democracy, or even to forward deployed U.S. defense. Their reasoning might be, if China or North Korea were to destroy U.S. military facilities in Asia, or somehow change the U.S. into an autocracy, the factories owned by their companies in China, or the deal flow with China, would not be affected unless war develops. So the overarching goal of these elites is to avoid war at all costs, even if that means a loss of sovereignty or democracy in the United States. Peace is the paramount goal, to which U.S. economic and military power, as well as values like democracy and human rights, can be sacrificed. Taking China’s side in its competition with the U.S. may lead the CCP to see the CEO as a “friend of China” which will get the CEO’s company privileged access to Chinese markets and the CEO as an individual access to a like-minded network of lucrative jobs, board positions, speaking fees, consultancies, and insider information.
Dr. Navarro then alleges that such elites who engage in “shuttle diplomacy” are “unregistered foreign agents”. I think there is no question that certain financiers such as Stephen Schwarzman are travelling back and forth between the U.S. and China, and that they seek to influence U.S. policy against tough economic defenses like trade tariffs. The Washington Post has called Mr. Schwarzman a “China whisperer”, and stated that Xi Jinping “has relied on Schwarzman as a go-between since Trump’s election.” This implies that Schwarzman is doing a service for Xi Jinping, who in part could determine Mr. Schwarzman’s compensation through state sovereign wealth funds that invest in Mr. Schwarzman’s company. Mr. Schwarzman made $786 million in 2017, 84% of which came from dividends on his company’s stock. A Chinese sovereign wealth fund bought into Blackstone in 2007 just prior to its public offering and raised its stake to 12.5% of the company in 2008. With increasing trade tensions due to Trump’s economic strategy, China sold, dropping its stake to 4.5% by the end of 2017. That sale of Blackstone stock by China put downward pressure on the value of the stock, and therefore on Mr. Schwarzman’s net worth. It might be seen as Xi Jinping’s financial punishment of Mr. Schwarzman for failing to convince Mr. Trump to abandon the trade war and make a deal. Had Mr. Schwarzman brokered a deal earlier, China might not have sold the stock, and Mr. Schwarzman’s stock would therefore be valued higher than it is currently.
If Mr. Schwarzman failed to register as a foreign agent per the Foreign Agent Registration Act of 1938 (FARA), yet was compensated in part by decisions made by Xi Jinping that were dependent on Mr. Schwarzman’s political influence on President Trump, and agreements between Xi and Schwarzman were concluded to this effect, a FARA lawyer might make a case that Mr. Schwarzman should have registered.
There are loopholes in the law to which Mr. Schwarzman might appeal, for example Section 613 includes exemptions in sub-sections d-f that provide room for agents to self-assess as not being covered for reasons of benefit to the country, or that the influence was on non-political issues. That would be a hard case to make to anyone who, like Dr. Navarro, believes that economic security is national security.
Such scattered pre-negotiations with China leading up to the G-20 meeting in Argentina, through self-appointed individuals such as Mr. Schwarzman, are a risk to the U.S. negotiating position. Rather than keep the President’s negotiating position confidential and operate through a single negotiating partner, U.S. Trade Representative Robert Lighthizer, Mr. Schwarzman and other private interlocutors provide China with multiple potential sources of information on sentiment in the White House, and possible avenues of influence through campaign donations, post-government positions, or personal financial benefits, as mentioned previously, to senior U.S. administration officials.
Dr. Navarro convincingly argues that the U.S. industrial base and supply chains are broken, endangering U.S. national security. Therefore, he says that billionaires such as Mr. Schwarzman could do more good for the U.S. by investing in rebuilding strategic industries in the U.S. manufacturing base, rather than by influencing the President to make a deal with China that will continue U.S. industrial and ultimately defense industry dependence on a country that is not only our economic but our military competitor, and that seeks to replace U.S. leadership globally.
Support for Navarro’s Viewpoint
Dr. Navarro’s argument that financial elites are seeking to influence President Trump has support among some journalists and analysts. The Asia Editor of the Financial Times, Jamil Anderlini, on November 14 called “American multinationals and Wall Street” the “one group that had always been Beijing’s best lobbyists in Washington”. But this is a dangerous strategy for Beijing. Mr. Anderlini argues that such Americans are rapidly becoming disillusioned with China.
An otherwise critical article in the Atlantic on November 14 admitted that Dr. Navarro “gets some important things right. China’s ascension to the World Trade Organization did jolt the Rust Belt far harder than elites in Washington predicted. Its tolerance of environmental degradation and lax labor standards do make its exports cheaper and therefore more competitive on the global market. To fuel its ascent, Beijing has broken trade rules, devalued its currency, and brutalized its own citizens.”
SinoInsider agreed with Dr. Navarro’s characterization of China’s influence operations on November 20. “Based on our observation, the Chinese Communist Party is indeed going ‘full court press’ with its influence operations. And the CCP does not appear to be relying only on ‘globalist billionaires’ to pressure President Donald Trump.” SinoInsider argues that China benefits from a pro-China information environment that Don Tse and Larry Ong ascribe to China’s broad-spectrum influence operations in academia, the media, politics, and business.
The Independent on November 29 examined the “private sector powerbrokers who influence things behind the scenes”. The author, Ben Chu, concluded that “If there is a trade war armistice it’s possible that a large share of the credit should go to these “unpaid foreign agents” with Wall Street connections, but given the lack of transparency about their behind-the-scenes manoeuvring [sic] it will, of course, be hard to know how much.” Chu analyzed the China connections of Stephen Schwarzman, Hank Paulson, Michael Bloomberg, and Henry Kissinger, which contrary to the notion of “unpaid foreign agents” showed evidence of extensive earnings in, because of, or from China.
Criticism of Navarro
While some media have supported Dr. Navarro’s points, the most influential media, which is arguably closest to the financial sector that Dr. Navarro criticizes, has produced the loudest headlines against Navarro. We should from the above have a fair understanding of what Dr. Navarro was attempting to communicate over the past month and that there is substantial evidence in his support. Now let’s consider how Dr. Navarro’s thoughts were represented, incorrectly I would argue, in the media.
Just four days after Dr. Navarro’s speech, on November 13, the prestigious Editorial Board of the Wall Street Journal published an uncharacteristically caustic response that set the tone for additional reporting in the weeks to come. Titled, “Peter Navarro’s Politburo Playbook”, the editorial played on public fears of the Trump administration’s Russian ties and authoritarianism, but in the article referred to the Chinese politburo. The subtitle showed the ostensible connection, which was that “The White House trade adviser calls private citizens ‘foreign agents.’” Foreign agents are not exclusively a problem for politburos, a point apparently lost on the Wall Street Journal.
Dr. Navarro’s claim of corporate foreign agents was a minor digression in the talk, and had nothing to do with the main point of the speech. The main points, by contrast, were insufficiently covered by the Wall Street Journal. The first sentence of the editorial belittled Dr. Navarro and in an increasingly common practice of the press against the Trump administration, tried to drive a wedge between a senior official and President Trump. We saw this previously when the press sought to split off Defense Secretary Mattis, for example.
“Peter Navarro likes to claim he’s running U.S. trade policy, even if he isn’t,” the Wall Street Journal pronounced, “and now he’s acting as if even Donald Trump works for him.” The Journal then admits that its prior sentence was not fact but an interpretation. “That’s the only way to read the White House trade adviser’s extraordinary public threat against private American citizens on Friday at the Center for Strategic and International Studies.” Dr. Navarro frequently salts his speech with material that lauds President Trump’s leadership.
And, there was no threat in Dr. Navarro’s speech. Neither are unregistered billionaire lobbyists working for the Chinese reasonably to be thought of as regular citizens. They are arguably doing an end-run around American democracy by trying to use their status and money to pull strings and get special favors from the White House for the benefit of China. If they are in fact unregistered lobbyists for Beijing, as the Financial Times has said, or get privately repaid through better business opportunities in China, they are in fact “foreign agents” as Dr. Navarro alleges. FARA treats non-monetary remuneration from foreign sources just as seriously as monetary remuneration.
There is broad agreement that current FARA laws are inadequately enforced. On November 29, a group of 32 China experts released a compendium of Chinese influence operations that calls for improved enforcement of FARA. These experts don’t go far enough. FARA needs loopholes closed, not just enforcement. But at least this should make clear that Dr. Navarro was on solid ground when he made his argument about unregistered foreign agents.
The Wall Street Journal then makes another presumption, critical to its lede. “Presumably Dr. Navarro is referring to the likes of Blackstone’s Stephen Schwarzman, former Treasury Secretary Hank Paulson and others who are working in public and behind the scenes to ease tension between the world’s two largest economies. These are private individuals, not deputy flunkies at Commerce, and they have longtime relationships in China. Some also have investments there.” Calling the U.S. Director of Trade and Industrial Policy a “flunky” is unbecoming of the esteem that the Wall Street Journal has garnered from most of the U.S. public.
But this additional Wall Street Journal presumption only proves Dr. Navarro’s point. Mr. Schwarzman and Mr. Paulson are reportedly unregistered and they are lobbying “behind the scenes” to change U.S. policy towards China in a manner that will improve the value of their Chinese investments, at least until the next financial quarter before it becomes clear to shareholders that China stole the technology on which they were counting on for years or even decades of profitable business. By the time shareholders realize this, the CEOs who made the deals, and their compensation based on short-term earnings, will be long gone.
Neither is Dr. Navarro so far off in educating the public about Chinese influence, or in asking for those with financial conflicts of interest in China to show some respect for the democratic process in Washington D.C. According to China expert Larry Ong, “Having discussions about Chinese influence is a crucial part of educating the public about the CCP. And educating the public about the CCP and its operations is the best inoculation against propaganda and disinformation. Public education is best carried out by experts, journalists, or scholars with a track record of exposing the CCP and [who] have no business interests on the mainland.” The most important public education on China is that addressed to the top public servant, and that public servant is now President Trump. For the Wall Street Journal, apparently, Wall Street billionaires, but not Dr. Navarro, have the right to advise the President. “He’s boxing in his boss and denying him the flexibility to do a deal,” according to the Editorial Board. That relatively uncommon language of “boxing in” or “boxed in” would be mirrored by the New York Times, which quoted a “person familiar with his [Trump’s] thinking” in its November 21 article.
The Wall Street Journal then conflated “U.S. interests” with the generic term “business” without even bothering to specify U.S. business much less regular citizens like workers or even the unemployed. “None of this serves the President or U.S. interests,” writes the Editorial Board. “Mr. Trump needs all the allies in business he can get, as last week’s election showed.” But the November 2018 mid-term election that returned the House of Representatives to Democratic control, if anything, showed that Mr. Trump ought to pay more attention not to “business” but to swing voters, like the labor force that would benefit by Dr. Navarro’s steel and auto tariffs. While the Wall Street Journal’s editorial was probably cheered by Wall Street, it is apparently out of touch with successful electoral strategy, which depends on votes from all geographic regions of the country, and all types of workers.
The end of the Wall Street Journal editorial implied that Dr. Navarro’s trade war would lead to a slowing U.S. economy and President Trump’s defeat in 2020. “Others in the White House might also tell Mr. Trump that the world economy is slowing, thanks in part to the headwinds to growth from trade friction. If President Trump can’t point to a strong economy over the next two years, he can forget about a second term. Maybe the question to ask is whether Mr. Navarro is a Democratic Party agent.” That last sentence in the editorial was a very low blow indeed, designed to put a wedge between Dr. Navarro and the President. The Wall Street Journal is apparently hoping that President Trump will fire Dr. Navarro.
The day after the Wall Street Journal editorial, November 13, the Director of the National Economic Council, Larry Kudlow, disavowed Dr. Navarro’s comments before rolling TV cameras on the White House lawn. He said Dr. Navarro “was not speaking for the President, nor was he speaking for the administration. His remarks were way off-base. They were not authorized by anybody. I actually think they did the President a great disservice.” Just in case that did not register, Mr. Kudlow added, “I think Peter very badly misspoke. He was freelancing and he’s not representing the president or the administration.” Kudlow too, by saying that Dr. Navarro did a “great disservice” to the President, was apparently angling to drive a wedge between Dr. Navarro and President Trump.
In the article on Mr. Kudlow’s reaction, his former employer CNBC alleged that Dr. Navarro “doubled down” and “lambasted” Wall Street and that the comments “helped weaken the stock market”. The CNBC article did not offer evidence for the latter claim. CNBC characterized Dr. Navarro as “hawkish” and “aggressive”, saying that he encouraged President Trump’s “tough talk with Beijing throughout an escalating trade war”. At the end of the article, the author offered evidence to buttress Dr. Navarro’s claims. “Gary Cohn, the former top national economic adviser, argued against imposing tariffs on China. Cohn was formerly the president and chief operating officer of Goldman Sachs.” Goldman Sachs has extensive business in China.
On November 14, The Atlantic published an article on Dr. Navarro titled, “The ‘Madman’ Behind Trump’s Trade Theory”. The subtitle, rather than mentioning Dr. Navarro’s M.P.A. and Ph.D. in economics, both from Harvard, sought to show him as an eccentric, reading: “Peter Navarro—a business-school professor, a get-rich guru, a former Peace Corps member, and a former Democrat—is among the most important generals in Trump’s trade war.”
The body of the Atlantic article repeated that Dr. Navarro was an “improbable” choice as a “general” in Trump’s trade war. The author added that Dr. Navarro was “a failed candidate for public office several times over. He holds no formal role in trade negotiations, and controls no levers of policy. He is not in the Cabinet.” After thus belittling him, the author goes on to disturb and scare the reader with Dr. Navarro’s ostensible eccentricity and extremism.
Dr. Navarro’s influence comes from “bold ideology and lock-jawed dogmatism”, and “out-of-the-mainstream convictions” shared with Trump. The author then incorrectly implies that Navarro seeks “decoupling the Chinese and American economies as a good and necessary goal.” The article again incorrectly states, and without providing evidence, that “Navarro’s role is to shepherd Trump’s more extreme ideas into reality, ensuring that the president’s convictions are not weakened as officials translate them from bully-pulpit shouts to negotiated legalese.” The article belittles Dr. Navarro as growing up an “East Coast latchkey kid” and tars him with the notion of madness.
“He is the madman behind Trump’s “madman theory” approach to trade policy, there to make enemies and allies alike believe that the president can and will do anything to make America great again,” writes the Atlantic author. The article implies that most of Dr. Navarro’s ideas are “outré”, meaning unconventional. It does not seek to explain the madman theory of negotiation and brinkmanship, developed by Harvard economist Thomas Schelling. The author cherry picks from Dr. Navarro’s history, quoting him as calling himself “the cruelest and meanest son of a bitch that ever ran for office in San Diego”, and exaggeratingly calling his political memoir of the time “200 pages of name-calling, score-settling, dad jokes, and dirty jokes”.
Compare the Atlantic article, and the Wall Street Journal’s treatment of Dr. Navarro, with the respect shown to China’s Ambassador to the U.S., Cui Tiankai, in a Wall Street Journal interview on November 26. In a fearsome headline, the Wall Street Journal states that the, “U.S.-China Trade Fight Risks Fragmenting Global Market, Says Beijing’s Ambassador to the U.S.” The subheading sounds like China is taking an eminently reasonable position, perhaps even making a concession, on one of the sticking points in the negotiations: “Cui Tiankai urges companies concerned about forced technology transfer to report cases to Beijing.” Whether companies under pressure to transfer technology to Chinese partners think that reporting as much to Beijing will do anything but mark them as uncooperative is another matter. Six of the eight questions in the transcript could be typed as softball questions. After one such question, Ambassador Cui spontaneously applauds the very “Wall Street” elites that the Journal previously surmised were some of those referred to by Dr. Navarro as “globalist elites”.
The Journal admits Dr. Navarro’s point when it asks, “Some people China would rely on as sort of back channel, intermediaries, don’t have the clout that they once did. What’s your take on this?” Ambassador Cui replied, “I think, first of all, this is not a problem for China. This is a problem for America itself. What will serve the best interests of the United States if we don’t listen to these experienced people? We have to talk to people in the administration in order to arrive at a solution of the problem. But at the same time, I think advice and assistance from people like [Former Treasury] Secretary [Hank] Paulson and others is extremely helpful. I think that both sides should make best use of their experience. We should listen to their advice seriously. And I, myself, I’m talking to people like Secretary Paulson, Dr. Henry Kissinger, Mr. Steve Schwarzman and the [U.S.] Chamber of Commerce here in Washington very often. I want to listen to their advice, their assessment of the situation and their views about the effective ways of solving the problem.”
The Logan Act of 1799 is a Federal law that criminalizes unauthorized negotiation by U.S. citizens with foreign governments to decrease the likelihood of individuals undermining the U.S. negotiating position in conflicts. It reads, “Any citizen of the United States, wherever he may be, who, without authority of the United States, directly or indirectly commences or carries on any correspondence or intercourse with any foreign government or any officer or agent thereof, in relation to any disputes or controversies with the United States, or to defeat the measures of the United States, shall be fined under this title or imprisoned not more than three years, or both.” Given the danger of increasing Chinese influence in the U.S. through influential Americans, the Logan Act, like FARA, should be enforced more than currently.
According to the New York Times on November 21, “Mr. Navarro’s comments [on Wall Street’s involvement in a potentially weak trade deal] also frustrated Mr. Trump who, according to a person familiar with his thinking, felt boxed in by the remarks.”
That Mr. Trump felt “boxed in” would seem to confirm Dr. Navarro’s argument that the financial community sought to influence Trump on the trade deal in order to make it softer on China. President Trump apparently then felt it more difficult to grant such access, or to make a soft deal with China, in light of Dr. Navarro’s comments. The Times called this arguably normal policy contention “dissonance”, and quoted Jon Alterman, a former Democratic congressional staffer and CSIS expert who focuses not on China, but on the Middle East. The New York Times reporter apparently seized on the opportunity of the disagreement between Dr. Navarro and Kudlow but was hard put to find an expert willing to reinscribe any division within the Trump administration. Alterman duly claimed that the administration’s approach to China was a departure from the ostensible unity of the Obama Administration.
“It feels to me like the administration doesn’t quite have one strategy toward China,” said Jon B. Alterman, a global security expert at the Center for Strategic and International Studies. “Not only do you see administration leaders saying different things, but it feels like they’re not integrated, especially in the absence of something like the TPP, which was a genuine long-term strategy to deal with China’s rise.”
The actual China expert at CSIS, Bonnie Glaser, was critical of China, but the New York Times article buried her quote at the very end of the article.
Alterman holds the Zbigniew Brzezinski Chair in Global Security and Geostrategy at CSIS. The only paid trustee at CSIS according to its required IRS nonprofit filing in 2016 is Henry Kissinger, who is usually soft on China and whose company, Kissinger Associates, reportedly does millions of dollars of business on China-related issues. CSIS has in the past received donations from Wang Wenliang’s Rilin Enterprises. Mr. Wang has been involved in multiple scandals, including cash-for-vote schemes in China and donations to the Clinton Foundation and Virginia Governor Terry McAuliffe (Democrat). One Rilin donation to CSIS was for a program named for Mr. Brzezinski that was opened with a speech by former Australian Prime Minister Kevin Rudd, who is generally seen as soft on China. A CSIS board member at the time simultaneously served as Rilin Enterprises’ general counsel.
The New York Times regularly receives advertising revenues from China state sources to include Chinese state media advertising inserts designed to look like genuine news. News coverage from media that is partially funded by Chinese national sources, and that utilizes multiple quotes from a single think tank that has itself been funded by Chinese national sources, should not be accepted uncritically on topics where media owners have a conflict of interest.
On November 25, the New York Times Dealbook characterized Trump and Dr. Navarro as extremists who might turn a trade war into a real war, and Trump’s other economic advisers as moderates. “The Trump administration is torn over what comes next. Some of President Trump’s advisers, like Peter Navarro, cast the situation as an epic struggle over who will control the commanding heights of the 21st-century economy”, went the summary in the Times, which did not give Dr. Navarro’s title. “Others, like Treasury Secretary Steven Mnuchin, Commerce Secretary Wilbur Ross, and the director of the National Economic Council, Larry Kudlow, have tried to put the brakes on Mr. Trump’s most belligerent trade moves. How likely is it that trade war turns into real war?”
The Times conveniently left U.S. Trade Representative Robert Lighthizer and National Security Advisor John Bolton, out of the summary. Mr. Bolton is hawkish on China and relevant if one accepts the notion that economic security is national security, and that there are linkages in the trade war to non-trade issues like the synthetic opioid Fentanyl and North Korean denuclearization. Ambassador Lighthizer, on China trade policy, is closer to President Trump and Dr. Navarro than the President’s other advisors mentioned by the Times.
On November 21, the South China Morning Post (SCMP) reported an anonymous “source with knowledge of the matter” as saying that Dr. Navarro would not attend the dinner between President Trump and Xi Jinping at the G-20 meeting in Argentina. The Nelson Report on November 26 reacted, “That could be a hopeful sign on the U.S.’ part of making actual progress on the dispute.” But contrary to the SCMP report, Dr. Navarro did finally accompany President Trump, Mr. Lighthizer, Mr. Bolton and the other advisors to the Xi dinner. The South China Morning Post anonymous source who stated that Dr. Navarro was not attending the dinner, news that other media widely repeated, was incorrect. The SCMP is owned by China’s Alibaba Group, cofounded by Chinese Communist Party member Jack Ma.
When the news of Dr. Navarro’s exclusion was reversed three days later on 29 November, the stock market reportedly fell as a result. The Dow, S&P, and Nasdaq lost between 0.6% and 1.0% each. But basic materials were up 0.2%. Some or all of the gains may have been due to dovish moves by the Federal Reserve and generally positive comments from both U.S. and Chinese officials on the upcoming Xi-Trump meeting.
At the meeting, President Trump did not give in on his 10% tariffs against many Chinese goods, and he won concessions including on Fentanyl, which China was forced to publicly declare to be a controlled substance, and more Chinese purchase of U.S. agricultural goods. While President Xi was able to buy himself two or three more months of negotiating room, President Trump won the only incremental gains, putting him in a stronger position for negotiations over the next three months.
Media representations of Dr. Navarro’s economic theories are light to nonexistent, but their bias and negative reporting of the economist behind much of current U.S. trade strategy is high. This matches their social and business partners on Wall Street and in China, who want to keep doing deals regardless of their long-term effects on U.S. democracy and national security.
Dr. Navarro brought up a critical point during his CSIS speech about international business elites who lack sufficient patriotism and commitment to the U.S. and its national security. U.S. business is often more concerned about its short-term earnings than about long-term shareholder value. Even less is it paying attention to U.S. national security and democratic values. This is ironically less a failure of the business community, and more a failure of U.S. law and its enforcement. Such law should more strenuously regulate U.S. business interactions abroad when they enter into gray zones that are political or affect U.S. national security. That includes U.S. trade policy, as Dr. Navarro rightly points out that economic security is national security.
One area of U.S. law that needs enforcement is that related to the Foreign Agent Registration Act of 1938. But even if FARA registered Mr. Schwarzman and others who advocate what some would call appeasement in the face of growing Chinese power, the problem would not be fixed. How many people in the public will really spend the time to look up agents on the FARA.gov public website? Which journalists, politicians or academics would be dissuaded from meeting with, and enjoying the largesse of one of the richest men in the world, even were they to check the website and realize how deeply his compensation is based on Chinese government decision-making? Those closest to Mr. Schwarzman already know where his bread is buttered, and those who seek to climb ladders of money and power probably don’t penalize Mr. Schwarzman for being close to Xi Jinping. Quite the opposite. Mr. Schwarzman is just one example of many who derive power and wealth from China, and who are politically influential in Washington, DC.
Mere registration is clearly insufficient. The most effective way to decrease CCP influence in the U.S. Government is to remove the ability of corporations and individuals doing business with Chinese entities from providing political favors, lobbying, campaign donations, and lucrative post-government employment or business contracts for high government officials. We have allowed our government to be corruptible, and the CCP is taking full advantage of all its resulting avenues of influence. All opportunities to corrupt U.S. government officials, by foreign governments and domestic interests with foreign revenues that could be used for leverage, should be closed. Some of these ideas are what Dr. Navarro is starting to reveal in his speech, and they are fundamentally correct. The media would do well to examine its motives for closed-minded diatribes against Dr. Navarro, and reassess accordingly.
Anders Corr, Ph.D., is Publisher of the Journal of Political Risk. JPR Status: Working Paper.