Biden’s China policy, US business and Australia

Sep 1, 2022
Relations between the United States and China, flags of the United States and China with some red dice on a green table.
Image: iStock

Washington’s concern about China is real and not just threat inflation, which seeks an enemy to promote military Keynesianism: the traditional method of transferring public money to private corporations in the military industrial sector.

China is not Europe. Europe obeys US orders, even if it doesn’t like them. China just disregards them. That’s intolerable to Washington, which defined the “rules-based international order” to serve its interests. Recall that the JFK-LBJ State Department defined the Castro threat as “successful defiance” of US policy back to the Monroe Doctrine. It has been possible to blockade and attack Cuba savagely for six decades of successful defiance, but not China. Unsurprisingly, in both the US and Australia, Sinophobia has now reached levels of madness not seen since the hysteria of the Cold War. And it is largely because Washington will not tolerate a rival Great Power, regardless of its actual external behaviour.

One significant factor in the construction of Joe Biden’s China policy is his need to reconcile the divergent interests of US business.

US capital is not monolithic, it has fractions. Those businesses which only service the domestic market have different priorities to transnational traders, for example. That’s why there has long been a range of views on free trade within the US business community. Government policies will produce winners and losers because gains and losses are “divisible”. It is therefore a mistake to talk about US capital unless you disaggregate it.

For example, the consumer sector – Apple, Microsoft and Tesla, etc, do not get or need military contracts to soak up excess production as Boeing does. They want good relations with the countries which host their production facilities: often in China. They want secure supply chains for Taiwanese-made semi-conductors and no maritime disputes in the trade routes which bring their products to global marketplaces. The last thing these US TNCs want is conflict over the Taiwan Straits with the US and its allies like Australia involved.

Similarly, US bankers and the Federal Reserve do not want to antagonise the Chinese so they begin to liquify the trillions of dollars they hold in US Treasury bonds.

General Dynamic, Raytheon and Lockheed Martin, on the other hand, have a vested interest in more hostile relations with China to justify the public subsidisation of new bombers, high tech weaponry, and other baroque technologies which are provided with government guaranteed markets: the very opposite of competitive free markets. For them, wars such as the current one in Ukraine, are a bonanza for profits and share prices.

It’s the latter fraction which tends to prevail when it comes to policy settings during periodic bouts of tensions, whether confected or real. But the CEOs of US transnationals who have off-shored production to China must feel increasingly uncomfortable by recent stunts like Speaker Nancy Pelosi’s provocative visit to Taipei, which both Biden and the Pentagon unsuccessfully opposed. The military-industrial business sector, on the other hand, were presumably delighted.

The military sector does not always prevail. George W. Bush was told by US business leaders to cool tensions with Beijing after the Hainan Island incident in April 2001. Bush was only finding his feet in the White House at the time and was ratcheting up pressure on the Chinese to return a US crew and surveillance plane which had been forced to land on Chinese territory. Ten days later the stand-off was resolved, however there is little doubt that CEO pressure concerned about their manufacturing centres, played a role in cooling Bush down.

Another example was Franklin D. Roosevelt’s New Deal. Political Scientist Tom Ferguson showed that capital-intensive internationally-oriented capital was fine with it, but labour-intensive domestically-oriented capital was bitterly opposed – in both cases for pretty clear reasons. However, only one fraction can ultimately prevail.

There have been other cases like this on a smaller scale, where tensions between fractions of US capital have played out in foreign policy and the military side of the state makes the final decision.

Take Cuba. US pharma, agribusiness and energy corporations have been eager to break into the Cuban economy for decades, as they wanted to in Vietnam after the US defeat. They have been consistently rebuffed by the military state. Punishing Cuba for its “successful defiance” of Washington was more important. In the case of Vietnam, Bill Clinton ultimately abandoned the commercial boycott of the country when European businesses moved in, unencumbered by competition from their American counterparts. Losing markets to competitors in the West proved to be a more powerful factor than sulking and refusing to normalise relations with a successful communist enemy.

It’s the same with Iran. Leading US corporations want to break back into the Iranian market, but the military side of the US state won’t allow it. The same thing occurred in 1953, when the CIA and MI6 overthrew the Mossadegh nationalist government in Iran. Eisenhower wanted US corporations to take over 40% of the British concessions after they restored the Shah to power. They didn’t want to. Operations were much cheaper in Saudi Arabia. Eisenhower threatened them with anti-trust initiatives, and they capitulated.

Noam Chomsky reminds us that it is important to distinguish the US military from military producers. The latter love preparations for war even more than war itself, which tends to waste effort on low-level junk rather exotic and expensive boondoggles. The military tends to be the dovish element in each administration. They opposed Pelosi’s provocative visit. They’ve also vetoed efforts to expand the war in Ukraine.

Australia’s relationship with China is quite different to the one the US has. So is its internal economic profile.

By a significant margin, China is our most important source of imports and destination for Australian exports. We have no large-scale manufacturing centres on China’s eastern seaboard: we barely have a manufacturing sector at all. Our foreign investment in China is comparatively small and we have been remarkably resistant to Chinese property investments and manufacturers such as Huawei. Our economic and strategic relationship with Taiwan is insignificant, as is the influence of the local Taiwan lobby. The prospect of going to war against our most important, nuclear armed trading partner over violence across the Taiwan Straits would be both economic suicide and a monumental act of madness: more so given we acknowledge Beijing’s sovereignty of the island.

Why the Albanese Government, especially Defence Minister Richard Marles, chose not to draw a line under the self-defeating approach of the Morrison Government towards China remains a mystery until the forces at play behind the scenes are better understood. Australia has very different interests at stake to those of the US and much less influence over the Middle Kingdom. Dangerous provocations and anti-Chinese groupings such as the Quad and AUKUS only reinforce harmful binary antagonisms that are not in Australia’s interests to pursue.

The dreaded fear of an independent foreign policy is now bipartisan. Even the days of “self-reliance within an alliance framework” under Bob Hawke seem a distant memory. Instead of shrewd and nuanced diplomacy, Canberra has opted for interoperability with the US military – an organisation which has brought violence, instability and misery wherever it is deployed.

Instead of a critical, sceptical and historically-informed view of modern US foreign policy, especially its crimes in Vietnam, Iraq, Afghanistan and Libya – to cite only four from a very long list – newly minted ALP ministers have arrived on the treasury benches pre-socialised into the apparently incontrovertible virtues of the closest possible alliance partnership. They may not yet be as obsequious as John Howard was with George W. Bush, as embarrassingly giddy as Julia Gillard was around Barack Obama, or as crudely matey as Scott Morrison was in Donald Trump’s White House, but the results will be much the same, and possibly worse.

Australia is not reluctantly being drawn into a conflict in which it has no positive interest. Having learnt nothing since the Cold War, it is yet again enthusiastically and thoughtlessly embracing its sub-imperial role, with predictably dire consequences.

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