On February 24, Shen Haixiong, the director and editor-in-chief of China Central Television and Propaganda Vice Minister of the CCP tweeted out this message below:
I heard that many people like this cartoon? Well, I like it very much, too. I hope the DPP authorities will not seek independence and provocation. If you dare to cross the red line, countless infrared rays will await you! pic.twitter.com/yJzE0RjyjK
— Shen Haixiong慎海雄🇨🇳 (@ShenHaixiong) February 24, 2022
It says a lot. One doesn’t need to read his text.
According to a New York Times article on Friday, the U.S. asked for China’s assistance in getting Vladimir Putin to back off invasion plans. But given the animosity with Washington, China did not want to get involved. Instead, Beijing reportedly shared with the Kremlin what they were being asked to do by Washington. Beijing has continually blamed the U.S. for pushing Russia over the edge, avoiding critique of the Ukrainian government, whom they consider a Belt and Road partner.
“The U.S. has been increasing tensions and hyping up war for some time,” said Hua Chunying, spokeswoman for China’s Foreign Ministry. “Do you know how many arms and ammunition the U.S. has sent to Ukraine? If the United States had done more to promote peace and respect Russia’s security worries, war could have been averted, she said on February 22.
China is Russia’s biggest supporter.
On February 4, Xi Jinping and Putin updated their 2001 Treaty of Good-Neighborliness and Friendly Cooperation.
“They’ve joined forces,” Angela Stent, author of the book “Putin’s World”, was quoted saying by the New Yorker on February 7. Russia and China are challenging the post-World War II global economic system, a system that includes the creation of the big multilateral institutions that were designed to manage global trade and business. “We could be at the beginning of a new era as the Russian relationship with the West deteriorates and China’s does as well,” she told the magazine. The agreement puts Washington and its key allies “in a terrible bind,” she said. “The fact is, whatever we do to counter what Russia is doing only reinforces its reliance on China.”
The new Treaty references the U.S. military numerous times, including the Australia, U.K., U.S. trilateral security partnership that includes building nuclear powered submarines. China and Russia see themselves as the targets.
Other defense-related notes from the Treaty include:
- Russia and China stand against attempts by external forces to undermine security and stability in their common adjacent regions, intend to counter interference by outside forces in the internal affairs of sovereign countries under any pretext, oppose color revolutions, and will increase cooperation in the aforementioned areas;
- The sides oppose further enlargement of NATO and call on the North Atlantic Alliance to abandon its ideologized cold war approaches, to respect the sovereignty, security and interests of other countries;
China is not supporting Russia militarily, but is doing so financially. Within minutes of the invasion, China said it would offtake millions of tons of wheat, one of Russia’s most important exports, which can be viewed as a way to help keep the Russian economy solvent in light of new sanctions.
In essence, China threw an “economic lifeline” to Russia while it was initiating the toppling of the Ukrainian government, Australia’s Prime Minister Scott Morrison said.
China also increased its oil and gas imports from Russia in early February, signing a 10-year contract that secures income for Russia’s sanctioned energy giants Gazprom and Rosneft. As U.S. companies face tougher sanctions in their joint venture deals with Russian energy companies, China is ready to pick up the slack and move in, thus potentially dulling any sanctions impact.
China has become Russia’s main market since sanctions began in 2014 following the annexation of Crimea.
Other Treaty notes include:
- The sides believe that the advocacy of democracy and human rights must not be used to put pressure on other countries. They oppose the abuse of democratic values and interference in the internal affairs of sovereign states under the pretext of protecting democracy and human rights.
This is especially relevant for China. The Uyghur Forced Labor Prevention law will makes it harder for companies to do business in Xinjiang province, where thousands of Muslims are being held without criminal charges and often used as forced labor. Both Russia and China agree that gross human rights violations such as those taking place in Xinjiang should not mess with commerce.
Despite historically not being on the same team, Russia and China are teammates playing against the West. The biggest victor of the two is China, thanks to domestic policies and corporate interests that have decimated U.S. manufacturing through offshoring. This has great ramifications for any sanctions regime against China, in particular, as the U.S. economy is too enmeshed. Near-shoring and reshoring of critical supply chains needs to be a sidebar to any sanctions regime, including those against Russian imports.
Sanctions: What to Do?
Russia was hit with U.S. and European sanctions this week. The Council of Europe stripped Russia of its permanent membership on Friday. Barring a surprise this weekend on the diplomatic front, which has failed numerous times before owning to both sides of the issue, this is looking like more than a temporary problem in Ukraine.
“Putin’s aggression towards Ukraine will end up costing Russia dearly; economically and strategically. We will make sure of that,” President Biden said.
Beyond the usual sanctions everyone talks about – such as sanctioning Russian banks, removing Russia from Permanent Normal Trade Relations (PNTR) status is another option for Washington. Russia was only granted PNTR status in 2012 as part of its accession to the World Trade Organization (WTO).
The argument for granting Russian PNTR was that it would be a boon to U.S. exporters.
In 2011, the U.S. exported $8.92 billion worth of goods to Russia. In 2019, it was $9.2 billion. Near zero tariffs didn’t do much for trade between the two countries. In 2011, the U.S. imported $19.5 billion worth of goods and in 2019 it fell to $14 billion.
Taking Russia off PNTR will become a WTO issue, but the WTO has been ignored before and should be ignored again, unless Washington allows the WTO to tell the U.S. it must offer almost duty-free access to a country that invades another one, unprovoked militarily. Some Democrats are already proposing this.
A follow on could be to move Russia to Column 2 tariffs. The two go hand-in-hand, but repealing PNTR comes first. And repealing PNTR does not mean Russia would be moved into the Column 2 tariffs, which are generally between 30% and 50%.
Lastly, what to do about China’s aiding and abetting?
The above Tweet from a CCP official showing a Panda with a rifle aiming at Taiwan isn’t merely a meme. It’s future forecasting.
Like Russia, if China feels backed against a wall by the West, it will lash out against Taiwan, an island the CCP considers a breakaway republic.
According to Janes Intel, China Air Force buzzed around Taiwan just when Russia attacked Ukraine.
— Janes (@JanesINTEL) February 25, 2022
It is clear that China has not reduced its cybersecurity breaches of U.S. companies, as a recent U.S. China Economic and Security Review Commission heard from numerous testimonies this month.
It is clear that China failed to live up to its Phase One trade deal, signed by the Trump Administration.
A low-hanging fruit for China is the Section 301 tariffs. The White House can even blame China for not holding up to its end of the Phase One bargain if it wants, and never mention Ukraine.
The Section 301 tariffs were never fully imposed on China imports. The Biden Administration still has the List 4 items to tariff, and should. This includes some 3,800 items for a combined $280 billion. List 4 was divided into 4a and 4b. The 4a list was supposed to get 15% tariffs, but instead it got $7.5%, which is almost meaningless when considering the currency differential between the dollar and renminbi. List 4b was never implemented.
China is watching how the U.S. treats Russia in all this. Their Foreign Minister Wang Yi said on Friday, for the first time, that a country’s territorial integrity needed to be respected. He mentioned Ukraine.
Whether or not Xi is throwing Putin under the bus remains to be seen. China’s economy is more dependent on the U.S. and Europe than Russia’s, and not only as a market for its goods, but also for the high tech hardware China needs to climb up the technology food chain.
If Washington wants to go after China for supporting Russia, full implementation of the Section 301 tariffs is the easiest way and more meaningful than sanctions. Like removing Russia from PNTR, all of this must come with policies to reshore or near-shore critical supply chains. The post-World War II model of interdependence stopped major wars in Europe. But it made the U.S. too dependent on Asia. Worse, supply chains dominated by countries controlled by governments that can turn on you on a dime is a massive national and economic security risk. Washington needs to consider this issue when imposing sanctions, and quickly enact policies designed to lessen the impacts of sanctions and tariffs in order to reindustrialize the United States and remove key sectors of the economy – from chipmaking to farming – from hostage standoffs between dueling economic rivals.