Why Nobody Invests in Japan
Tokyo’s Failure to Welcome Foreign Capital Is Hobbling Its Economy
U.S.-Chinese relations, the current wisdom goes, are in need of a fundamental rethink. In October, U.S. Vice President Mike Pence trumpeted the United States’ determination to compete relentlessly in order “to reset America’s economic and strategic relationship with China.” But even before Pence’s speech, there were calls to reexamine U.S. assumptions about China. The hopes of liberalization on which previous policy was based, the former Obama administration officials Kurt Campbell and Ely Ratner recently argued, have proved ill-founded. It’s time, they say, to search for a “better approach.” Even if U.S. President Donald Trump and Chinese President Xi Jinping reach a deal on the trade dispute, pundits warn, the broader relationship is unlikely to improve much. China’s assertiveness, its conduct in the South China Sea, and its internal repression render a genuine détente with the United States difficult, perhaps impossible. As with the Peloponnesian War or World War I, a rising power means trouble—and it is time that the United States recognized it. One can get behind Trump’s policy or search for an alternative. But either way, a new paradigm for the relationship is purportedly necessary.
Grand concepts are sexy. But the hunt for new ones should not distract from the equally important search for the mundane precepts that will allow everyone to survive the current febrile atmosphere. The trade war is bad, but there is the potential for a far worse clash. Washington is so volatile that a situation that would be easily resolved in normal times could prove explosive. Sooner or later, there will be a genuine crisis. History offers no shortage of worrying examples. The Taiwan Strait crisis of 1995–96, the U.S. bombing of the Chinese embassy in Yugoslavia in 1999, and the Hainan spy plane incident of 2001 each brought China and the United States to the brink of outright conflict. Reflecting on how the protagonists managed to find their way out of those sticky patches might provide a blueprint for the future. The story of the origins of World War I, for example, as the historian Christopher Clark has pointed out in his masterly account, The Sleepwalkers,is “saturated with agency”: the decisions people made mattered. The same is true of each of the post–Cold War U.S.-Chinese crises. Decisions allowed peace to prevail between China and the United States before. They could do so again.
Given the strong emotions Taiwan triggers in China, the 1995–96 Taiwan Strait crisis was probably the most dangerous post–Cold War confrontation between Beijing and Washington. In 1995, Taiwanese President Lee Teng-hui, who seemed set on independence for the island, was granted a visa to visit the United States and speak at Cornell University. Beijing was furious. It recalled its ambassador and canceled high-level defense talks. Not content with this, it staged military exercises and sent missiles flying across the Taiwan Strait. The United States, for reasons that remain mysterious, did nothing. So in 1996, in the run-up to the Taiwanese presidential election, China decided to test more missiles and conduct more exercises. This time, Washington put an aircraft carrier 200 miles east of Taiwan and sent another sailing toward the theater. If World War III was going to break out, this was as plausible a time as any.
The 1999 U.S. bombing of the Chinese embassy in Yugoslavia was, the Americans would repeatedly explain, an accident. In China, many remain convinced that there was nothing accidental about it. China was in the midst of talks over its accession to the World Trade Organization (WTO). Beijing halted them. Chinese protesters surrounded U.S. diplomatic buildings in China and burned American flags. It was not quite as bad as the Taiwan Strait crisis, but it was a more combustible moment than any Trump and Xi have managed to produce.
Tense as it was, the fracas over the embassy bombing was tame compared with the Hainan spy plane incident of 2001. U.S. reconnaissance planes flying over the international waters abutting China had long been harassed by Chinese pilots. Then, in April 2001, one of those pilots, Wang Wei, rammed a U.S. plane in midair. Wang and his plane were lost to the sea; the U.S. EP-3 aircraft managed to make an emergency landing on Hainan Island. Incensed Chinese officials demanded an apology. Equally incensed American officials refused. It was the Chinese pilot, they pointed out, who had acted unprofessionally in international airspace.
In none of these incidents was a peaceful outcome predetermined—or even likely. The terrifying thing about the Taiwan Strait crisis is that despite observing two of the cardinal rules of crisis management—keep communication channels open and communicate intentions clearly—the two sides still managed to stumble into a situation where China was lobbing missiles at Taiwan and the United States was wondering where to send its carrier battle group to respond. U.S. warnings did not stop China from staging military exercises and announcing missile tests (perhaps because China had concluded from U.S. inaction in 1995 that Washington did not care much about Taiwan). China’s assurances that it had no intention of attacking Taiwan did not stop the United States from deciding that maintaining its credibility demanded a military response (possibly because China had also declared that if Taiwan moved toward independence, Beijing would not stand by). Beijing and Washington were talking to each other throughout, but the talks did little to ease the tension. Things could easily have gotten much worse. The Chinese could have continued testing missiles or even openly attacked U.S. forces. The Americans could, as the China scholar Wu Xinbo emphasizes, have provoked further belligerence by stationing an aircraft carrier in the strait itself. The successful de-escalation seems to have hinged not on the extensive communications about intent and interests but on two key decisions: the U.S. decision to not put a carrier in the strait and the Chinese decision to call a halt to its missile tests. These decisions were taken not as a result of demands made and met but with each side largely in the dark about what would happen next. The moral of the story: Even if communication fails to solve things, sensible decisions can, with a bit of luck, help antagonists stumble to safety.
The aftermath of the Yugoslavia embassy bombing in 1999 could also have been nastier. The mobs of nationalists gathered outside U.S. diplomatic facilities could have attacked the Americans stationed there, making it harder for U.S. President Bill Clinton to offer the unequivocal apology that he did. Had that happened, the U.S.-Chinese relationship would have devolved into mutual recriminations, possibly outright violence. At the very least, communication channels would have been poisoned by the time the Hainan spy plane incident took place. Yet, luckily, clear communication did work. The bombingdisrupted U.S.-Chinese relations but did not derail them. China was determined to handle the issue without jeopardizing its long-term goal of joining the WTO. Chinese President Jiang Zemin had been discussing China’s accession to the WTO with Clinton since the two met in Seattle in 1993. When the embassy was bombed, China ceased talks with the Americans. In May, Clinton called China to say he was sorry and wanted to resume the talks. The current atmosphere, Jiang shot back, was unfavorable to discussion. In August, Jiang said he was willing to start talking again, but Clinton would have to write a formal letter of apology. Clinton delivered; the letter came through on August 27. The Chinese Politburo decided that restarting the talks would help stabilize the U.S.-Chinese relationship and would be in China’s interest. The two countries finally started talking again in September. John Wayne said apologizing was “a sign of weakness.” In this case, it was what was needed to defuse the situation.
The spy plane crisis of 2001 had the makings of a tragedy at several different points. At first, both sides reacted with anger. The Chinese maintained that the U.S. aircraft had rammed the fighter deliberately; they demanded an apology and reparations. The U.S. ambassador to China, Joseph Prueher, a former admiral who knew something about such matters, pointed out that it was impossible for a slower plane to catch up with and ram a faster one. Washington was angered by China’s irresponsible conduct in international airspace. At this point, matters could have degenerated. The U.S. crew could have been mistreated in Hainan. U.S. officials could have continued to insist that the Chinese were at fault. Any of those developments might well have triggered conflict. The intensity of that conflict would have depended on further decisions, but once violence has begun, it has a habit of escalating.
Soon, however, tempers calmed. Prueher, after a chat with Kenneth Lieberthal, a former official on Clinton’s National Security Council who happened to be in Beijing at the time, decided on a change of tack. U.S. Secretary of State Colin Powell was willing to let him try. Although he continued to refuse to pay reparations and offer a formal apology, Prueher avoided blaming the Chinese for the incident and focused on securing the crew’s release. “Our goal and the Chinese goal was the same: to get the crew out,” he later said. The Americans decided that they could express sorrow for the pilot’s death and for the Chinese failure to hear the plane’s call, without apologizing. The Chinese decided that they could construe such expressions as an apology even though the Americans said they were nothing of the sort. A letter expressing those sentiments saved everyone face and quashed the need for further escalation. The 2008 Olympics bid was still pending; the vote on China’s WTO membership was yet to be taken; and when all was said and done, the United States was China’s biggest trading partner. There was so much for which China needed the United States that it could not afford to sacrifice its interests just to make a point about a dead pilot.
Each of these cases contained the seeds of World War III. Those seeds failed to sprout thanks to the decisions each side took during the crisis. Some have argued that China was willing to back down in the past when a war would have been suicidal but would not do so now that it is stronger. But this cynicism ignores two points. First, people often do suicidal things. That these crises got to the point they did took enormous irresponsibility on each side. Two, a war between China and the United States would still be suicidal. Wars are hard to predict, but one thing is clear: a U.S.-Chinese conflict would have no winners.
These examples offer some guidelines on how, in a crisis, the United States can navigate its way to safety. The first is best summed up by U.S. President Barack Obama’s doctrine “Don’t do stupid shit.” Offering inconsistent responses, testing missiles to try to influence an election, bombing an embassy, and ramming a plane are all bad ideas. So far so obvious, but history suggests that top officials need to be reminded of the importance of not doing stupid things. Lower-tier officials, who are often in charge of making these decisions, would benefit from the same lesson. Not rushing to change things in Taiwan, giving foreign vessels a wide berth at sea, not making threats from which one cannot back down: These precepts should be internalized by everyone working in any capacity on U.S.-Chinese relations.
The second lesson is that even if all concerned do their best, stupid shit will still happen, generally when you least expect it. It can take just one mistake for things to go badly wrong. That means China and the United States will have to respond to future crises, which brings us to the third guideline: Leavethe other side a clean path out of the mess. People tend to do badly when they are backed into a corner. Give them a way to emerge with dignity and they might just take it. That the United States did not send an aircraft carrier to the Taiwan Strait gave China room to climb down, as did the U.S. decision to apologize for the embassy bombing. That the United States wrote something that could be read as an apology in 2001 allowed the Chinese room to release the prisoners, which in turn allowed the Americans to retire honorably. Humiliation does not go well with peacemaking. In a crisis, each side should ask itself: Does the course I am following allow my counterpart to beat a dignified retreat?
The final lesson is to remember the world beyond the current crisis. One of the things that can help end confrontations is the reminder that China and the United States have huge stakes in each other’s well-being. Over the last quarter century, China’s relationship with the United States has been about much more than Taiwan or spy planes. For China, it has been about trade, technological exchange, accession to the WTO, the bid for the Olympics. For the United States, the relationship has been about bringing China into the international community. There were larger stakes than it seemed during each crisis. That remains true today. Although the business community, once so vociferous in its demands for good relations, has grown disenchanted, the relationship goes beyond profit (and U.S. businesses have shown reluctance to abandon the China market altogether). A host of issues—climate change, terrorism, trade, poverty reduction, avoiding Armageddon—requires the two countries to get along for their own good. A list of those issues should be plastered to the wall of everyone working on Sino-American relations.
These lessons seem platitudinous, but platitudes matter. At times like these, when talk of conflict is rife, they need reinforcing. Perhaps U.S. and Chinese officials should arrange a series of meetings to analyze past crises and ask: How did we get out of it alive? And how might we do it again? Christopher Clark wrote recently that “the quest for peace” required “feats of imagination as concerted and impressive as the sci-fi creativeness and wizardry we invest in future wars.” The Chinese and Americans who averted war in the past should start considering what such feats of imagination might look like now.