Wednesday, February 23, 2011

China, Taiwan and the Prospects for American Business

World in View, Journal of International Affairs, recently published my article, Will America's Hot New Courtship of China Leave Taiwan in the Cold?  In the article, I ask a few questions about the complicated relationship between the U.S., mainland China, and Taiwan and the implications for American business and public policy.

Not a day goes by without a glowing report on the new bond between China and the United States.  From panda bears to people-to-people exchanges and more, America’s hot new courtship of China is in full bloom, and President Obama is leading the charm offensive. As the BBC suggests, "almost everyone is animated by the idea that we are witnessing an historic shift."


Before, during, and after the heralded visit of Chinese President Hu Jintao, the U.S. was abuzz about China.  In fairness, much of this is owed to China's own progress -- or liberalization -- in economic, cultural and trade affairs.  To be sure, today's China is not the same country Presidents Nixon, Carter, Reagan, Bush, Clinton or Bush II encountered.  China today is a much more benign behemoth.  It is far less menacing and mysterious.  It is a land of boundless aspiration and energy, as evidenced by the 2008 Beijing Olympics, where showmanship was eclipsed by scale.  But those descriptions only go so far.  While there are many words apt for the new China, "democratic" is not one of them.

Amidst the fanfare, Taiwan--one of the most critical issues in U.S. - China relations--has received remarkably little attention. Yet, since 1949, America has not had a more reliable or stable economic partner in Asia.  Taiwan is an unwavering bastion of Western-style democracy.  As such, it presents an enigmatic policy decision for Obama, as it has for his predecessors.  The President must preserve the "one China policy"  which means formal recognition of the mainland, while relegating U.S. contacts with Taiwan to the   "unofficial" category, as required by the spirit of the Taiwan Relations Act enacted in 1979.

But balancing two Chinas is no small feat of policy or diplomacy, and it will become more, not less, challenging in the future.

On the one hand is the Peoples Republic.  With a youthful population exceeding 1.3 billion people, and the world's largest army, China cannot be ignored.  Because its citizens yearn for Western accoutrements long denied, it is the mother lode of markets for American products.   Money is being made, consumerism is on the rise, and the future looks bright for any company that can crack the Confucian code to doing business there profitably. 

According to a recent Pew study, nearly half of all Americans say Asia is more important to U.S. interests than any other region, including Europe.  47% say China is the world's leading economic power, and 58 % believe it is very important for the U.S. to build a stronger relationship with China.

On the other hand is Taiwan, a small nation of 23 million people, also known as the Republic of China.  A model of multiparty democracy and free market capitalism, Taiwan's rapid economic growth in the decades after World War II transformed it into a developed industrialized country and one of the Four Asian Tigers. Its economic rise has been hailed as the “Taiwan Miracle,” and the IMF and World Bank categorize it as an advanced, high-end economy.  Through its sophisticated technology sector, led by consumer electronics, Taiwan plays a major role in today's global economy. It ranks 25th on the Heritage Foundation's 2011 Index of Economic Freedom, above Norway, Spain, Belgium and South Korea, as compared with China's much lower ranking of 135. 

In Taiwan, a free press and free elections thrive.  In China, by contrast, government censorship reigns supreme--both online and offline, and there are no elections.  According to the International Federation of Journalists, media coverage of such issues as domestic politics, public health, corruption, internet freedom, and developments in Korea, Vietnam and the Philippines require a government review or are restricted altogether.  China has been quick to crack down on any semblance of protest taking cues from the popular uprisings in the Middle East today. 

China considers Taiwan to be a breakaway province subject to its sovereign jurisdiction.  Taiwan sees itself as a free and independent nation.  This divergence has led to Chinese saber rattling across the Straits of Taiwan, and has prompted the Taiwanese to spend billions on advanced U.S. weaponry for self-defense.

In the comprehensive, forty-one paragraph, U.S. - China Joint Statement issued during the Hu visit, there was short shrift given to Taiwan.  Both sides "underscored the importance of the Taiwan issue."  China emphasized "the Taiwan issue concerns China’s sovereignty and territorial integrity," and expressed hope that the U.S. will honor its relevant commitments. The U.S. reiterated its support for a "one China policy" and encouraged the two Chinas to continue their dialogue.  Beyond that, not much more was said about the country. Thus, the road ahead for U.S. - China relations is clear.  America wants to balance the huge trade deficit it has with the Peoples Republic of China.  The U.S. exports $82 billion to China, but China exports $344 billion to the U.S, and holds much of America’s official debt. 

The two countries admit there are differences over human rights, but agree to continue a dialogue on the issue.  They agreed to establish military-to-military talks, and to cooperate on space exploration, law enforcement, the rule of law, science and technology, climate control, and the exchange of 100,000 American and Chinese students. With plans to institutionalize exchanges between the National People’s Congress of China and the U.S. Congress; to cooperate on global issues involving nuclear weapons, North Korea, the future of Sudan and intellectual property rights, and to expedite the pace and frequency of more dialogue, Obama and Hu Jintao have authored a new chapter in Sino - American relations.

But beware of change.

Several experts predict it will be impossible to relegate Taiwan to the margins of the U.S. - China narrative much longer.  In his earnest effort to be on the right side of history, President Obama should find a way to match America's deepening dependence  on China with more tacit assurances for Taiwan.  Anything less would be anathema to America's long-term interests in the Asia Pacific region and would dishonor the U.S. commitment to promote democracy abroad.

(c) 2011.  Adonis Hoffman



Monday, February 07, 2011

Business Need Not Fear Obama--Anymore

With uncharacteristic prescience, I wrote in Broadcasting & Cable Magazine in December 2008 that the big business community had nothing to fear from an Obama presidency. While it has taken almost two years, and a few public chastenings, it seems that Obama is doing what it takes to reassure the corporate sector that he is a friend, not a foe.

As he crosses the Lafayette Park Rubicon to speak with the U.S. Chamber of Commerce, there may be no turning back. After breaking bread with Tom Donahue and the corporate titans he represents, Obama has cast his future lot with business over labor. While this may be a masterfully necessary move for the adroitly pragmatic Obama, it may not be sufficient for the Chamber to abnegate the hundreds of millions it will pump into Congressional races next year.

These political considerations aside, here is why business need not fear Obama, anymore.

Acumen over Antagonism, Results over Retribution

For all of the campaign bluster blaming big business for American economic woes, Obama is not and never has been an anti-corporate crusader. He is much more interested in results than retribution. Obama’s key economic appointments suggest his administration will pursue acumen over antagonism when it comes to the business sector. The designation of Daley as chief of staff says it all.

Deal-Making over Dogma

If Obama has proven anything, it is that he is an uber pragmatist who prefers practical solutions over dogmatic ties to political philosophy. While business may have taken solace in the mainstream Republican ideology, it will be surprised at how non-ideological Obama may prove to be. After all, he has shown a willingness to borrow from the best of conservative, liberal, progressive and libertarian thinking in the development of his own unique world view. His commitment to success will compel him to think and act far outside the constraints of predictable political dogma. His call to review anti-business regulations is the height of mid-stream correction.

Balancing Commerce and the Constitution

More than any other president before, save Thomas Jefferson and James Madison, Barack Obama is acutely aware of both the expanse and the limitations of government power. His facility with constitutional law may be unparalleled in American presidential history. As a constitutional scholar, Obama knows, or should know, the balance that must be struck between permissible government regulation of business, trade and commerce on the one hand, and the light touch of regulation on the other that fuels innovation and investment in the marketplace. Above all, he should appreciate the wide swath that the commerce clause of the constitution cuts through our lives and should direct his cabinet and his erstwhile Congressional cohorts to err on the side of less—not more—government regulation.

In the area of commercial marketing and advertising, for example, a string of successive Supreme Court decisions have struck down burdensome restrictions on commercial speech as impermissible under First Amendment jurisprudence. The president-elect should recognize that heavier regulation in that sector, alone, will mean less revenue for many, many industries.

It will be important for the President to send clear, unambiguous signals to his fellow Democrats in Congress that he expects them to treat business with prudence and pragmatism, and cooperate with the House Republican leadership. He must develop a better working relationship with Energy and Commerce Chairman Fred Upton (R-MI) and stalwart committee members Joe Barton (R-TX) and Cliff Stearns (R-FL), if any reasonable headway is to be made.

Of course, as with any other administration, the business community will have its differences and spates with Obama. The healthcare law overhaul is a mixed blessing for business, but the principle remains anathema to the GOP. Reducing regulation remains the Republican mantra, especially following remembrances of Ronald Reagan's 100th birthday

Whatever the issues that will bring business and Obama face-to-face, I would bet that the president's goal every time will be to carve out a win-win scenario so the public good does not obstruct the gains of the private sector. Last but not least, all indications are that Barack will challenge big business—as he has challenged us all—to become its best; to live up to higher standards and ideals, and to contribute to society and humanity in a way that it has never done before. Such an outcome surely would profit our nation and the dividend would go directly to the bottom line.

(c) Adonis Hoffman 2011


Tuesday, February 01, 2011

Quality and Transparency Help Corporate Reputation

Not surprisingly, the more open and trustworthy a company is, the better its reputation. According to an annual survey, only 45% of Americans trust business. This is a decline from previous years where more than half of Americans had greater faith in the corporate sector. The proliferation of negative news reports and the availability of more information on the activities of big corporations, apparently are contributing factors.

With the advent of "information ubiquity", the primary way a company can maintain or improve its sterling corporate reputation is to provide quality, become more transparent, ensure employee welfare, and be more trustworthy. Of course, this mandates more, not less, communication across various platforms for CEOs and other business leaders.

In the U.S. 85% of "informed publics" aged 25-64 believe corporations should create shareholder value in a way that aligns with society’s interests, even if that means sacrificing shareholder value. Another 61% believe government should regulate corporations’ activities to ensure business behaves responsibly. The U.S. is surpassed only by Germany, the U.K., Ireland and (surprisingly) China in these opinions.

For much greater detail, check out the Edelman Trust Barometer, a useful study of how well-informed people across the world feel about business. Thanks Edelman.