Speech at the Carter Center and Emory University Symposium on “The United States & China at 40: Seeking a New Framework to Manage Bilateral Relations”

January 16-19, 2019

Atlanta, Georgia

Forty years ago, I was a small potato in the Legal Advisors Office of the U.S. State Department, and helped in the establishment of diplomatic relations between the United States and China. It was far and away the most useful thing I ever did in my professional life.

So I had been expecting to be celebrating this great achievement, and the bravery and wisdom of President Carter and my many friends who made it happen and who, sadly, are no longer with us – Zbigniew Brzezinski, Mike Oksenberg, Cyrus Vance, Richard Holbrooke, Herbert Hansell, Leonard Woodcock.

I first arrived in Asia in 1972. At that time, America had experienced three decades of war in East Asia and China almost five decades of continuous war. America had lost more than a quarter of a million soldiers on the battlefields throughout Asia, and I had been expecting that, in these weeks, we would be celebrating the fact that no American soldiers have died in battle in East Asia since President Carter’s momentous decision.

However, instead of celebrating, many Americans, inside and outside of government, are questioning the benefits of diplomatic relations and our policy of engagement: this policy, that has given us 40 years of peace, is unfortunately deeply troubled.

So as we kick off this conference, let me make two points. First, it is within the power of both of our governments to put the relationship back on track. To do so just takes the bravery thatPresident Carter and Deng Xiaoping demonstrated 40 years ago. Second, while I am deeply pessimistic about the relationship in the short term, I am strongly optimistic about it in the long term.

First, our so-called trade problem is fixable and, in truth, is the least of our problems.

Many of the changes the United States has requested (some would say demanded) are aimed at policies that I believe are in the interests of the Chinese people. These flawed Chinese policies are what I call ‘incumbent protection.’

After I left the State Department, I spent most of my career investing. I loved monopolies, oligopolies, and businesses where government protected our market share because it allowed me to make more money easily. But in fact, while tariffs, non-tariff barriers, unequal enforcement of regulations, and investment restrictions may be in the interests of the protected company or industry, they are not in the interests of the overwhelming majority of citizens.

One example: Investment restrictions in financial services reward the protected, generally state-owned businesses, and punish every borrower, equity issuer, investor, and customer in China. Simply put, the customers get more expensive products, poorer service, and less financial innovation.

If the Chinese government implements the reforms laid out in the Third Plenum of the 18th Party Congress, many of the structural issues the United States complains about would go away.

Such actions by China should be combined with a Bilateral Investment Treaty (BIT) that opens areas that are now closed to foreign investment. A BIT would also have the benefit of reversing the trend in the United States of expanding restrictions on Chinese investment.

Much more troublesome are the U.S. National Security and Defense Strategies, and China’s actions in the South China Sea. These American strategies, which I strongly disagree with, consider China a strategic competitor and revisionist power, along with Russia. However, China’s actions in the South China Sea in violation of international law, crackdowns on domestic dissent, and arrests of foreigners without transparency or due process, have helped push the United States in this direction.

In response, to these and other concerns, the United States is restricting Chinese investment in this country; limiting visas for those in certain fields; and casting suspicion on all Chinese in the United States, including its own American citizens. While we will not fight a war, I am deeply troubled by these developments and the many and varied implications of this rivalry.

One of them is budgetary. This year the U.S. military budget increased by $72 billion to a whopping $700 billion, and China’s military budget, while much smaller in absolute numbers, increased by a similar percentage.

These expenditures remind me of the words of one of the two American generals who became presidents. President Dwight Eisenhower famously said, “Every gun that is made, every warship that is launched, every rocket fired, signifies in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed.”

The exaggeration of the strategic threats by both sides results in diversion of resources that damages both the United States and China.

Though I am a shrinking minority, I believe the true threats to our societies are common threats. A mother in Shanghai and one in New York both fear that the Yangtze or the Hudson River will overflow its banks as a result of climate change and destroy their homes, that terrorism will claim families or friends as victims, that an economic crisis will deprive their children of a better life or a pandemic will ravage their communities. The people understand that the real threats of climate change, terrorism, economic crisis, and pandemics can only be combatted when the United States and China work together.

Because of this understanding, coupled with the strong and unbreakable bonds between the Chinese and American peoples, in the end the people will pressure their governments to emphasize the common, as opposed to the conflicting, interests of these two great countries.

So, in the long term, my vision of U.S.-China relations is an optimistic one that focuses on cooperation. However, it will only happen—this optimistic vision will only be realized—if the people in this room, at conferences like these, those who have watched our societies benefit from a productive Sino-American relationship, speak out.

You have that obligation! And if you do, as we at the National Committee do every day, I am convinced the relationship will get back on the right track, and as the Chinese say, “明天会更好.” Tomorrow we will enjoy a more peaceful and prosperous world.

Stephen Orlins is President of the National Committee on US-China Relations, and was previously managing director of Carlyle Asia, chairman of the board of Taiwan Broadband Communications, and President of Lehman Brothers Asia.