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The Philippines - Be Nice to Thy Neighbor

12/30/2023

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Dr. Wordman

Every nation has its neighbors. Even an island country in the middle of the ocean has neighbors within easy reach of today’s rapid vehicles in the air or over the ocean. Large land-based countries tend to have more land neighbors simply because its long land borders. The largest six countries in the world are Russia, Canada, China, the United States, Brazil, and Australia. Russia and China each has 14 land neighboring countries with Afghanistan,Mongolia, and North Korea as their common neighbors. In addition, China has two Maritime neighbors, South Korea and Japan along its northeast coastline, and five in the South China Sea region, Philippines, Indonesia, Singapore, Malaysia, and Vietnam. Canada and the United States share a long land border. Canada has two maritime borders, one with France’s St Pierre and Miquelon and the other with Denmark off Greenland, Canada. The U.S. borders Mexico in the South and four more maritime neighbors. Brazil is the largest country in South America bordering 10 other nations. Australia is a big continent by itself thus having only seven maritime neighbors.
 
Neighbors cannot help but have border issues from time to time, but in general, neighbors settle their disputes under the principle: Be Nice to Thye Neighbor. After all, people do desire peaceful living, going about their daily lives with no desire to have troubles. Among the above six largest nations, each is trying to maintain its peaceful neighbor policy. The United States as the strongest nation in the world has maintained a good relationship with its neighbor Canada and Mexico. China and Russia behave in similar manner. However, their neighbors even though smaller in size do not necessarily adhere to the Be Nice to Thye Neighbor Principle, often because of the interference of a third party, the Russia-Ukraine conflict evolved into war largely because of the expansion of the NATO military alliance (now 32 members) inviting Ukraine to join. This made Russia feel threatened. Now this border war has lasted nearly two years with devastating damage to Ukraine. Obviously, Ukraine has forgotten the principle: Be Nice to The Neighbor.
 
Another hot spot area is the South China Sea where neighboring disputes do exist. China being the largest nation is trying to get all neighbors to sign a China-ASEAN Code of Conduct in the South China Sea agreement so that all neighbors in the region can live peacefully together maintaining a safe region for maritime activities, ocean transport, and collaboration for economic development. This process is naturally tedious requiring patient negotiation. The agreement has progressed to the second read stage nearing the signing stage. However, recently, the Philippines has increased its provocation about an abandoned ship at the Huangyan island which China has a sovereignty claim. The Philippines has a newly elected President, Ferdinand Marcos, Jr., who is the son of the deported Marcos ( served as president from Dec. 30, 1965 - Feb. 25, 1986) because of corruption (largest theft from Government on Guinness Record), extravagance (wife Imelda owned 3000 pairs of shoes in her dressing room closet), and brutality (prosecution against political opponents, Muslins and communists). With President Ronald Reagan’s encouragement Marcos fled to Hawaii. Marcos Jr. was elected as president in 2022.
 
After Marcos Jr. got elected, he made his first presidential trip to China showing his desire to be a good neighbor. Then the U.S. increased its influence in the Philippines through the military alliance that existed before. The U.S. obtained new military sites in the Philippines. Marcos Jr. made an about-face change in his foreign policy towards China. Now the Philippines increased engagement with the U.S. military exercises in the South China Sea and started a new round of territory dispute with China. The cause is the U.S. - China competition which deteriorated their relationship. The sad thing is that the Philippines is not acting in its own best interest, that is peacefully settling disputes and engaging China’s assistance for economic development. From all aspects, it would be beneficial to the Philippines when China extends its Be Nice to The Neighbor policy to her and she should respond likewise. If Marcos Jr. continues his current behavior, it will lead the Philippines to war with no better result than the Ukraine mess.
 
Recently, the Chinese leader met with President Biden. The U.S. got what it wanted which is China’s frank statement on China’s redlines. On the Taiwan issue, Xi laid down three principles, one demanding the U.S. honestly supports the one-China principle and opposes Taiwan's Independence. Second is that China expects the U.S. to take positive action supporting China’s peaceful reunification effort. Third, China will pursue peaceful reunification but will not rule out military action if the hope of peaceful reunification is broken. Although there was no public announcement regarding the Philippines and South China Sea, one may  logically extract the messages Xi passed on to Biden to be as follows: China is working diligently with ASEAN nations to develop a fair and workable code of conduct for the South China Sea. China expects all nations in the South China Sea to work together towards the common goal and they all hope the U.S. will support not oppose their effort. China is sincere in  leading this effort and will not tolerate any sabotage or unreasonable destruction of this collective effort.
 
As said above, the U.S.-China competition has been going in the wrong direction. The U.S. is spending a lot of its resources and energy to curtail China’s growth instead of focusing on how to find win-win collaboration benefitting people of both countries. China’s reaction to the U.S. pressure is diverting resources from economic development beneficial to improving people’s standard of living towards national security defense, redundant supply chain insurance, and military competition. Hopefully, the Xi-Biden summit has awakened both to stop walking into a dark alley. The deterrent strategy is based on a false hypothetical threat. When two nations begin to work together on supply chain issues, space research, and advanced technologies development, one can see through the false threat mirage and discover the benefits of collaboration. As for the Philippines, it will realize that Being Nice to The Neighbor is a golden rule and it will be doubly beneficial when the world powers engage collaboration rather than detente.


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Advice to American Voters on 2024 Presidential Election

12/23/2023

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Dr. Wordman
 
American political system has been relatively stable since the American Civil war (April 12, 1861 - April 9, 1865) for roughly158 years. As a capitalist nation, the U.S. political system is essentially controlled by the capitalists through the financial system (U.S. dollar-dominated capital market) and its domestic economy. The presidential election, a highly financed activity involving billions of dollars, has become an enterprise system of a four-year cycle coupled closely with the U.S. economy. The citizens have little influence on the process of producing a presidential candidate. Since WW II, the U.S. has become the strongest nation and largest economy in the world, the U.S. presidential election has been ‘nominally’ measured by who can maintain a prosperous U.S. economy and a strong foreign influence in the world arena. From the capitalists point of view, the above two measuring factors are essentially reflected in the performance of the financial (stock) market and diplomatic power influencing global stability and economy. For American citizens, the above two measuring factors should be their state (standard) of living and state (peace) of mind, but unfortunately, these factors can be obscured by capitalists-controlled media - financial market performance masking the standard of living and ideological propaganda brainwashing the state of mind. So, the 2024 presidential election is just another cyclic event for the capitalists to manage. The American voters can only wait for November 2024.
 
We are fourteen months to the next U.S. Presidential election. President Joe Biden has announced to seek reelection as the incumbent. The Democrat party essentially endorsed Biden’s candidacy. The two other contenders, one is Marianne Williamson, a ‘self-help’ author and the other is Robert Kennedy, Jr. nephew of John F Kennedy, but labeled as an anti-vaccine activist; both are far behind in polls. President Biden campaigned as a protector of democracy and a stabilizer of American diplomacy after Trump, but his deeds in rallying ASEAN and Latin American nations can hardly claim success. His anti-China policy may be more organized involving Allies, but the effect seems to make China more resilient. On the Republican side, the former President Trump is commanding a huge lead making the other twelve candidates seemingly irrelevant. Only eight candidates qualified (>1% support in polls) for the first debate where Trump declined to participate. The only highlight of the debate is perhaps that Trump is still the only viable candidate and Vivek Ramaswamy, an Indian American, entrepreneur, and author, was recognized for his debate skills acquired at Harvard. In the meantime, Trump is facing several legal charges ranging from interfering with elections to tax evasion. So far Trump has been able to turn his legal problems into campaign drama in a helpful way. Since both Biden and Trump are using anti-China rhetoric as their basic foreign policy, American voters need to understand the real significance of U.S. China policy.
 
Presently, Americans are experiencing high inflation and a sluggish economy with unemployment and lack of workers happening in different sectors of the economy. The Biden Administration seems to realize that decoupling or de-risking may not produce any positive effect on the American economy except making China focus on plucking its deficiencies. The Administration is seeking dialog on the one hand and enacting more sanctions against China on the other hand, a very confusing China policy. The former British Minister of Trade and Industries, Vince Cable, had openly spoken in a speech (2022 available on YouTube) about China. Previously, Cable had stated: “China has never undermined a rules-based International system and we ban Huawei because we were told to.” These words may not be what Biden wanted to hear, but they are the truth. In Cable’s 2022 speech at a British university, he was again very candidly speaking the truth. First, he disputed that China had a secret plan to out-power the U.S. It was simple arithmetic that if China sets a goal to achieve 1/4 of Americans’ standard of living for the Chinese population (4x of U.S.), China will produce an economy equivalent to or bigger than that of the U.S. The U.S. needs not to fear China but needs to accept the reality (like the U.K. being the number one economy one century ago now ranked number eight). It is simply a reality that the U.S. must get used to like the U.K. did. Hopefully, the Biden administration will listen to the advice (face the reality) and keep an open mind to engage with China rather than to de-couple with China with a Cold War. The Americans facing two anti-China candidates must ponder Cable’s speech and let the candidates hear the truth.
 
Let’s suppose that China can continuously succeed in its economic development, what would happen to the West and to the World? Extrapolating from Minister Cable’s speech, it should be a good thing that a billion-plus people will have a middle-class standard of living rather than in poverty. That means the West and the world can do lots of trade with China. There were numerous areas for cooperation, pandemic prevention, climate change control, sustainable energy, medical and biological research, financial systems, space exploration, etc etc. China not only can provide resources for collaboration but also can offer a huge market for end products. From the world economy stands, China will be a locomotive for the world. From the world security point of view, China can be a stabilizing force comes to defusing nuclear threats, for example, in dealing with North Korea, Pakistan, and Iran. The only impact to the U.S. is that it will accept China in its rule-based system allowing China to have a voice. Is this too much for the U.S. to lose? Cable’s speech can be viewed as a sensible West (G7) view. The rest of the world will most likely welcome this outcome, as exhibited by ASEAN and the African and Latin American nations’ desire to not take sides between the U.S. and China competition.
 
A piece of advice to American voters for the 2024 presidential election is that since we have little chance of producing a candidate to replace Biden or Trump, we need to focus on how to make them accept the truth and face reality for the benefit of the U.S. future.




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De-coupling and De-risking Are Not Workable Based on Economic Principles

12/16/2023

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Dr. Wordman

A recent article by Yao Kun published in the China Review Press in Hong Kong, "De-risking" is a precise "decoupling", which does not work and is not popular," explains how tightly the U.S.-China economy is integrated and how complete and efficient is China’s manufacturing chain thus making de-risking, a new name for precision decoupling, unworkable and unpopular. Yao’s article is correct and stands from the Chinese point of view. After reading it, this author felt the resonance and urge to speak. Therefore, as a long-time U.S. resident, I felt like offering an analysis of the same issue from the perspective of the U.S. I will analyze, based on economic principles and the U.S. national status, why it is impossible to decouple with China fully or substantially. Selective and precision de-risking must also consider mutual benefits to avoid harming each other. Starting from economic principles, there is no need for complicated theories and models, one should be able to see that under the current global economic structure and the advances in transportation, communication, and financial facilities (international and regional development banks), a large-scale industrial and commercial decoupling between the U.S. and China will not be possible from a cost-benefit analysis point of view.

Changes in U.S.-China relations are inherently related to politics, but economic competition remains a practical and unavoidable cause. The U.S. is a large country with rich resources. Since its very beneficial victories in the two World Wars, the U.S. has moved towards hegemony., and even dominated the world stage after the disintegration of the Soviet Union. As a result, it has developed a habit of setting rules and regulations for dealing with economic and international affairs and does not allow competitors to challenge its hegemony status. However, whether in political or economic theory, competition among nations is inevitable, oftentimes leading to war. After human beings have experienced nuclear wars and their destructiveness, they hope that rationality will guide them never to use nuclear weapons in wars, and of course, best to compete without wars. But the rise of China has challenged the hegemony of the U.S., and their economic competition has caused today's rift between them. Economic competition is also the reason for the rivalry between the two governments and their military. If China had been still economically backward, the U.S. would not try to suppress China. This is the American point of view. In the following, we will analyze the infeasibility of de-coupling and de-risking between the U.S. and China from the standpoint of economic principles.

The U.S. launched a trade war with China and then a technology war, on the grounds of national security, Today, with allies, they have raised the banner of de-coupling and de-risking. First, the U.S. has selected the semiconductor industry and its manufacturing chain to launch a technology blockade and de-coupling of production and supply chains. Semiconductors are closely related to the lifeblood of U.S. military enterprises. From raw materials, wafers, and chips to communications, computing, and electronic equipment, they have been all controlled and banned for export to China. In addition, high-end chip manufacturing technologies (below 14 nanometers) are completely prohibited from being sold to China, and their manufacturers and enterprises are induced to move their production facilities to the U.S. to decouple from China. However, high-end semiconductor technology requires high-end talents, a large amount of research and development funding, and the support of a mature and sizable market for low-end semiconductor technology products. For decoupling and duplicating a competing industrial chain, the cultivation of a large amount of capital and talent is a challenge for both the U.S. and China. Currently, there are 1484 semiconductor factories (fabs) in the world, absorbing annual investment of $80-100B, and the number of talents required will increase by at least 100,000 annually, from 2 million (2021) to 3 million (2030). The U.S. produces less than 60,000 engineering and computing graduates with bachelor's degrees. The U.S. each year only produces 600,000 college graduates. It can be inferred that from consideration of talent demand alone, decoupling of the semiconductor industry and maintaining two mutually competing production and supply chains between the U.S. and China is not feasible.

The demand (market) for the low-end products of the semiconductor industry in the U.S. is much smaller than that of China, and it must struggle to support high-end semiconductor R&D, manufacturing, and competition. Semiconductor is a high-energy (electric power and human intelligence) industry. Decoupling and breaking up the industrial chain into two competing ones will inevitably increase the pressure on the demand for electric energy and manpower. China announced lately that from the beginning of this August, it would control the export of gallium and germanium to counter the U.S.’s export control to China. It can be said that the measure is intended to teach the U.S. a lesson in economic principles. Gallium is needed in high-end semiconductor industry (including the military). Its production is scarce, China accounts for 80% of the gallium world production. It is obtained as a low-yield byproduct of processing alumina in extracting aluminum, and the manufacturing process requires a lot of electricity. China's gallium export accounts for 29% of world export. The U.S. does not manufacture gallium itself but needs it in its naval and marine radars and high-end semiconductor products. The U.S. imports Gallium from Japan. In addition to obtaining gallium from aluminum production, Japan also imports Chinese low-quality gallium and buys scrap metal equipment for recovering gallium. In 2021, due to the increase in gallium prices, Germany restarted the gallium production plants that had been closed for five years. Although the U.S. stated that it would not be a problem to keep importing gallium from its allies, Japan and Germany would raise prices based on economic principles. This China's countermeasure to U.S. semiconductor sanction will certainly send an effective message to the world.

The de-coupling and de-risking strategy of the U.S. has harmed others economically and not necessarily benefited itself. It has prompted China to be self-reliant. The Chinese market is large enough and its population is sufficient to produce the required technical talents without relying on immigrants. It will only take some time to complete its semiconductor manufacturing chain. If the U.S. continues its current technology-sanction strategy, the result will be worrisome. First, the return on investment cannot be guaranteed, the two industrial chains cannot complement each other, and there may not be enough market for products. Second, there will be a problem of having sufficient sources of talent. Large-scale reliance on immigrants will cause social problems. The U.S. may not be able to attract elite immigrants like the post-WW II period (1950’s and 60’s) when there was a huge economic disparity. Today, the security problem in the U.S. is worrying elite immigrants. The phenomenon of global elites rushing to the U.S. no longer exists, and the current large number of border immigrants are mostly poor people (or criminals running away from foreign governments) presenting a burden to American society. Third, it is even more impossible for multiple industries to fully decouple, which will cause unhealthy competition and negative economic effects such as inflation. There is a shortage of humble and knowledgeable politicians in the U.S. today, but sooner or later economic and social phenomena will wake up the American people. The media only needs to report more and truthfully. Some people predict that the U.S. and China may go to war, as close as 2030, but this author thinks hopefully that such a date may be the time limit for the U.S. to wake up. If China can maintain its rational anti-hegemony policy and behavior, the U.S. will come to its senses!




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