The Visionary Economist

Meet Mr. ‘Death by China,’ President Trump’s inside man on trade
By Steven Mufson 

Peter Navarro attends the "Death By China" screening at the Quad Cinema in New York City in August. He wrote, produced and directed the film.

If President Trump were to make a movie encapsulating his feelings about China, it might look a lot like this:
A red, white and blue ball with the word “jobs” appears on the screen. 

It rolls under the portrait of Mao Zedong through an animated Gate of Heavenly Peace, the iconic entrance in Beijing. 

There, where the ancient Forbidden City should be, belching smokestacks jut skyward.
Words then roll against a black background, saying that 57,000 American factories have disappeared since China joined the World Trade Organization and “began flooding American markets with illegally subsidized exports.” 

Next, a bread knife with the words “Made in China” is plunged into a map of the United States and animated blood runs out, trickling into the title: “Death by China.”
The movie actually exists, and it was written, produced and directed by Peter K. Navarro, a 67-year-old professor in the University of California at Irvine’s business school who is the head of the new White House National Trade Council. 

His task: to help rewrite the rules of global trade, from Mexico to China to Britain, and to bring back American manufacturing and jobs.
“The best jobs program is trade reform with China,” Navarro says in the movie, which is narrated by Martin Sheen, who starred in “Apocalypse Now” and as liberal hero President Josiah Bartlet in the TV series “West Wing.”

Mr Navarro has struck such a chord with Trump that he could end up playing an outsize role in the administration’s economic policy. 

The president’s announcement of his appointment called him “a visionary economist.”
“I read one of Peter’s books on America’s trade problems years ago and was impressed by the clarity of his arguments and thoroughness of his research,” Trump said in a statement. 

“He has presciently documented the harms inflicted by globalism on American workers, and laid out a path forward to restore our middle class.”

National Trade Council adviser Peter Navarro, right, and White House Chief of Staff Reince Priebus, center, wait for President Trump to sign three executive orders on his first Monday in office.

Putting nations on notice
Few of the people Trump has brought into the White House seem to be so in tune with the president. And for the moment at least, he has filled a policy vacuum by being visible while other Cabinet nominees struggle with confirmation.
Navarro has been one of just a handful of White House officials at Trump’s side for the signing of executive orders, such as withdrawing the United States from the Trans-Pacific Partnership and blocking federal funds for groups that provide abortions or abortion counseling.
In early February he attended a White House meeting about trade that included Trump and the Hill’s “big four” — Senate Finance Committee Chairman Orrin G. Hatch (R-Utah) and ranking Democrat Ron Wyden (Ore.), House Ways and Means Committee Chairman Kevin Brady (R-Tex.) and ranking Democrat Richard E. Neal (Mass.).
On Feb. 14 and 15, he briefed Senate Finance Committee members. 

According to people there, Navarro laid out principles — free and fair trade; bilateral deals, not multilateral ones; a reduced trade deficit; a strengthened defense industrial base; and automatic triggers for renegotiation when trade deficits occur.
Although he didn’t describe any mechanisms, Navarro also listed about a dozen more specific trade goals, including boosting the number of U.S. parts in imported finished goods; developing tools to punish currency ma­nipu­la­tion; cracking down on intellectual property theft that Navarro said cost $300 billion a year and “steals the seeds of innovation for the future”; and restricting heavily subsidized, state-owned ­enterprises.
He also said that World Trade Organization decisions had been “unfair” to the United States and that Chapter 19 of the North American Free Trade Agreement had allowed Canadian softwood lumber exporters to avoid duties. 

Navarro said that the Canadians “have played us.”
And like Trump, Navarro has put other countries on notice that the United States would confront its major trading partners even when they are close allies. 

In a ­Jan. 31 interview with the Financial Times, Navarro sent shock waves through Europe when he said that Germany was getting an unfair competitive advantage by manipulating the euro to lower its value and make its exports ­cheaper.

In 1996, Peter Navarro, then a Democrat, hoped that the backlash against the “Republican Revolution” led by House Speaker Newt Gingrich would sweep Democrats into office. Navarro used this flier in his unsuccessful campaign to unseat Rep. Brian Bilbray (R-Calif.).

‘The one that got away’
Navarro got his start in politics at the local level — as a Democrat. 

He ran unsuccessfully for mayor of San Diego in 1992, city council in 1993, county supervisor in 1994 and Congress in 1996.
“My citizen activism is a direct outgrowth of a classical and fiscally conservative training in economics at Harvard,” he wrote in “San Diego Confidential,” a revealing, cutting and readable memoir of his years in politics there. 

“It is a perspective rooted in one of the most important concepts in economics — the need for government intervention in the presence of a market failure.”
Initially he became active in a popular local group called Prevent Los Angelization Now (PLAN) opposing developers.
“A city should decide where it doesn’t want to develop,” he wrote, “saving at least some of the canyons and hillsides and wetlands from the bulldozer’s blade.”
But instead of running for county supervisor, a race he might have won, Navarro jumped into the San Diego mayor’s race. 

His opponent, Susan Golding, launched three negative ads and he responded with an ad attacking Golding, whose ex-husband was convicted of laundering illegal drug money. 

Ahead in the polls going into the last weekend of the race, Navarro attacked her again in a televised debate. 

In tears, she called the attacks on her family unfair; Navarro accused her of rehearsing the response and came off as dismissive. 

He lost.
Years later, he wrote that he still thought about “the one that got away.”
“He was almost the mayor,” said Larry Remer, a political consultant who worked on three of Navarro’s campaigns after that one. 

“He flubbed it, is what really ­happened.”
Remer said Navarro was a hard-working candidate who “realized the need to stay on a clear, concise message, a lot like ‘make America great again.’ Nothing could appeal to people in San Diego more than saying ‘not L.A.’ ”
But, he added, what undid Navarro as a candidate was his personality. 

“He would just burn through volunteers,” Remer said.
“He’s not quite as prickly as Trump, but he has the same ego issues.”
In 1996, Navarro took on then-U.S. Rep. Brian Bilbray (R-Calif.), hoping that the backlash to the Newt Gingrich revolution would sweep a Democrat into the House. 

He later wrote that Bilbray “was as much of an idiot as he was when he first ran” for Congress “but this time he was an idiot with a record — a bad one.” 

Nonetheless, heavily outspent, Navarro lost soundly.
Discouraged, divorced and in debt, he moved on.
In the mid-2000s, Navarro latched onto the issue of China’s growing global ambitions.

A ‘decent trade deal’
Navarro resurrected his public persona by turning to writing, doing a set of online basic economics books and a how-to investing book titled “If It’s Raining in Brazil, Buy Starbucks.”
In the mid-2000s Navarro latched onto the issue of China’s growing global ambitions, writing “The Coming China Wars,” “Death by China” and “Crouching Tiger; What China’s Militarism Means for the World.”
According to the New Yorker, Navarro in 2011 read that Trump told the Chinese state news agency Xinhua that he liked Navarro’s first book on China. 

They communicated after that but met in person only during the presidential campaign, when Navarro was one of the few economists to take Trump seriously.
At times, Navarro sounds moderate. 

“The last thing a Trump administration plans is a trade war,” he said at a Tax Policy Center event in October. 

“The issue simply is getting a decent trade deal with each of the major trading partners.”
And many of the issues he raises about China are real: Chinese companies steal intellectual property, receive cheap credit from Chinese banks, pay lower wages, and cough up more pollution and pay less for pollution controls. 

Navarro estimated in 2006 that unfair trade practices accounted for 41 percent of China’s competitive advantage over U.S. firms.
But the film, in which Navarro attempts to be toward China what Michael Moore is to the automobile industry, is hyperbolic in tone. 

It includes comments by AFL-CIO leader Richard L. Trumka, ordinary shoppers and Navarro himself, who fires salvos at American corporations that do business in China.
The narrator says that “no company has been happier” to move its capital offshore than General Electric. 

Then Navarro appears and interjects. 

“When I go out and do speeches to corporate audiences on China, they want me to talk about strategy,” he says. 

“It’s like, ‘Hey, you’re going over to China. You’re giving them your avionics so you can participate in a regional jet game in China, and two or three or five years from now you’re going to try to sell your regional jets in Europe — and your biggest competitor is going to be that China guy. How stupid is that?’ ”

Peter Navarro, a University of California at Irvine business professor and economist, seen in August, is one of President Trump’s most visible advisers on the economy.

Navarro’s toughest audience has been his fellow economists.

Now, as a key Trump adviser, Navarro has run into more flak.

In a paper he wrote last year with now-Commerce Secretary Wilbur Ross, Navarro said that Trump could impose tariffs and encourage changes in consumer buying habits to erase the huge U.S. trade deficit. 

That would go hand in hand with greater investment in the U.S. economy.
Navarro and Ross say that getting rid of the trade deficit and boosting investment would also spur faster economic growth, which would bring in $1.74 trillion in tax revenue over a decade.
But if the United States erects tariff barriers to China, factories might go to other lower-cost countries such as Vietnam, Bangladesh or India.

Furman said that “if you’re trying to intimidate companies about moving operations or yell at them over supply chains, that’s not the way to make America a more attractive place. The way to do that is to build infrastructure, train workers and invest in technology, not to just beat up on other ­countries.”

Navarro’s close relationship with Ross could serve him well when Cabinet members arrive and leadership on issues grows more fractured, potentially creating rivalries with more savvy infighters such as National Economic Council head Gary Cohn. 

Yet for now, Navarro and Ross appear to be in sync with the president and his threats on trade.
That position is one that Navarro has held for at least a decade. 

His “Death by China” film takes a video of Obama speaking in the White House briefing room and splices in a Chinese soldier who removes the White House insignia behind Obama and puts up a Chinese flag.
The film also shows an empty factory with broken windows and unemployment lines, and juxtaposes that with Chinese container ships and busy Chinese factory workers. 

In the end, the credits roll to the tune of a glum, folky song whose lyrics Navarro helped write.

“Look around, tell me what you see.

Every day more people in the street.

I used to work in a factory.

By now I’d work for anything

It’s not me, it’s my family I wish to feed.

Not much, we got simple needs.

Too bad they sent our jobs away.

In China they’re not workers, they’re just slaves.

People, wait, it’s a world of trade and greed.

And the CEOs get richer, and our jobs all move offshore.”

It could be an ode describing the plight of Trump’s supporters. 

And it struck a chord with one crucial viewer, who said in a blurb on the film’s Web page: “Death by China” is right on. This important documentary depicts our problem with China with facts, figures and insight. I urge you to see it.”
The reviewer: Donald Trump.

The Necessary War

China and the U.S. poised to clash as never before
By Michael Den Tandt

Chinese warships take part in a drill on the South China Sea in 2016.
Canada is in a solid position, because of its robust imports of U.S. manufactured goods, to fend off the waves of protectionism now beginning to ripple outward from President Donald Trump’s White House.
The same can’t be said for the follow-on effects of looming U.S. trade actions against Mexico and China, which round out the list of America’s top three goods trading partners, alongside Canada.
Mexico, judging from recent signals emanating from the Trump administration, promises to be a pre-dinner snack on protectionist America’s plate. 

China is the main course. 

The president’s executive order withdrawing the United States from the Trans Pacific Partnership trade agreement, far from pulling America back from the Pacific region, sets the stage for an old-fashioned superpower standoff there.
Long before the TPP (which had comprised Australia, New Zealand, Japan, Singapore, Malaysia, Vietnam, Brunei, Chile, Mexico and Peru, Canada and the United States) ran afoul of right-wing nativists and left-wing populists in the United States, it was an Obama administration strategy for containing the increasing expansionism of Communist China.
The strategy’s most fervent advocates were the Japanese, led by Prime Minister Shinzo Abe. 

Taiwan was not invited to join TPP, doubtless because of the furious backlash this would have provoked from Beijing. 

Nevertheless the Taiwanese, led by President Tsai Ing-wen, had welcomed the pact because of the renewal of U.S. regional security guarantees it represented.
This is why, when Trump and Democratic party insurgent Bernie Sanders began looming large a year ago, both attacking the TPP, opinion leaders in Japan and Taiwan began feverishly speculating about the future of U.S. engagement in Asia.
The U.S. Navy is the guarantor of last resort for international law and international shipping through the South China Sea, worth an estimated US$5-trillion annually. 

China is attempting to assert a claim over much of that open ocean, contained by its so-called nine-dash line, as well as a group of small islets in the East China Sea in Japan’s Okinawa Prefecture.
Chinese incursions into its neighbours' territory have become commonplace in recent years, causing Japan to re-garrison its farthest-flung islands. 

Regional nerves have been further frayed by the People’s Liberation Army’s rapid building of various regional shoals and reefs into what appear to be air strips and fuel depots.
During his campaign for the Republican nomination, adding to his barrage against the TPP, Trump asserted key Pacific allies such as Japan and South Korea weren’t pulling their weight and should be made to pay for protection, or do it themselves. 

The ensuing received wisdom has been that, under Trump, the U.S. would beat a gradual retreat from the Pacific, leaving a clear field for China to continue to grow its influence.
The missing piece in this assumption was trade — a fact made increasingly obvious as Trump cabinet nominees led by Defence Secretary James Mattis and Secretary of State Rex Tillerson have appeared before Congress. 

The president’s inaugural speech confirmed it.
The administration’s self-stated sine qua non is the resurrection of American manufacturing, which it hopes to bring about by reversing a significant goods trade deficit with Mexico, nearly $60-billion in 2015, and a massive goods trade deficit with China, $366-billion in 2015.
China’s export-driven economy has long relied heavily on access to the U.S. market for steady, rapid growth. 

But that expansion, formerly in double digits, has slowed in recent years as the Chinese economy matures. 

This irreversible slowdown has been posited by some analysts as the underlying reason for Xi Jinping’s heavy-handed assertion of control over all aspects of the Chinese state — and Beijing’s new restlessness with regional limitations on its influence. 

Any dramatic curb in Chinese exports to the United States is likely to exacerbate such pressures.
Ergo, all the signals coming from senior Trump administration officials — from the president himself, with his Taiwan-friendly Tweets, on down — are not of waning interest in the Pacific region, but waxing. 

Only rather than the softish power of multilateral trade ties, the primary instrument of American power projection will be military — aircraft carriers and nuclear deterrence.
Answering questions from journalists in Washington, D.C., Monday, White House press secretary Sean Spicer said “we’re going to make sure we defend international territories,” echoing earlier remarks by Tillerson. 

Beijing responded Tuesday by saying its claims in the South China Sea are “irrefutable,” just as it has insisted that its claim to Taiwan, which it considers a wayward province, is non-negotiable.
The Trump administration’s first foreign policy statement, meantime, reads as follows: “Our Navy has shrunk from more than 500 ships in 1991 to 275 in 2016. Our Air Force is roughly one-third smaller than in 1991. President Trump is committed to reversing this trend, because he knows that our military dominance must be unquestioned.”
It boils down to this: Two superpowers possessed of the world’s largest economies, both nuclear-armed are about to clash — economically and strategically — as never before. 

Batten the hatches.

After U.S. Vote, Expect Hardening on China

Stage is set for more intense rivalry with Beijing no matter who wins on Nov. 8
By ANDREW BROWNE

A Chinese woman watches a televised debate between U.S. presidential candidates Hillary Clinton and Donald Trump at a cafe in Beijing.

SHANGHAI—Chinese leaders have learned to block their ears to China-bashing from U.S. presidential candidates, ignoring it as an ultimately harmless quirk of American election politics. Once voting is over, they figure, it will be business as usual.
They’ve been right time after time; ever since Nixon’s opening to China in 1972, incoming Republican and Democrat administrations have picked up China policy more or less where it left off.
This election, though, promises a different outcome—not a wholesale reworking of Nixon’s policy of engagement, an approach that still commands staunch support in U.S. policy circles and boardrooms, but a recalibration. 

U.S. attitudes toward China are hardening across the political spectrum. 

Whoever wins— Hillary Clinton or Donald Trump—is likely to pursue a tougher line on a mix of issues from trade and investment to the South China Sea.
Meanwhile, ahead of next week’s vote, Xi Jinping, whose administration has revived Mao-era anti-American attitudes and slogans, has enhanced his power. 

At a Communist Party meeting last week, he gained a new title: the leadership’s “core.” 

Nationalism fuels his ambition. 

As China’s economic and military capabilities advance—and America declines against China in relative terms -- the stage is set for a more intense round of strategic rivalry.
To his critics, Obama has been feckless on China, outsmarted and outplayed as a result of his eagerness not to let wrangles over specific issues—cyberattacks, intellectual-property theft, trade deficits—derail efforts to jointly manage global problems like climate change.
Mrs. Clinton has taken a harder line on trade than Mr. Obama and has pledged to take on Beijing over unfair trade practices: “If I’m your president [China’s leaders] are going to have to toe the line,” she said in April.
Mr. Trump told an election rally earlier this year in reference to China, “If Obama’s goal had been to weaken America, he could not have done a better job,” a refrain he’s repeated endlessly.
Inevitably, Mr. Obama’s successor will be forced into new trade-offs. 

Both candidates have indicated the relationship with China is too important to let fail and that it needn’t be adversarial. 

Only the problems are growing more intractable, and America’s choices starker.
Tensions are building in East Asia. 

Chinese intrusions into waters disputed with Japan are getting bolder. 

We don’t know whether Xi’s construction of seven fake islands in the South China Sea, fit for military purpose, has satisfied his revanchist desires or merely whetted his appetite for further adventures.
Some issues, such as North Korea, are building to a crisis.
At some point, U.S. intelligence services are likely to inform the next president that Pyongyang has acquired the ability to strike American cities with nuclear missiles.
When that day arrives, the White House will have to weigh all options, from a more impregnable missile shield on China’s doorstep to the almost unthinkable move of pre-emptive attack.
North Korea is Beijing’s client, a wayward one to be sure, but ultimately enabled by Chinese flows of food and energy.
Unless China has a change of heart and throttles its neighbor with sanctions before it can threaten America with a nuclear doomsday—or, even more unlikely, decides to try to bring down the regime—this nuclear scenario could precipitate a full-blown U.S.-China confrontation.
On trade, the trends are similarly worrying.
American direct investment in China has sputtered amid growing complaints about issues like forced technology transfers, while Chinese companies are marching into the U.S. in record numbers. 

Negotiations on a bilateral investment treaty have dragged on for years.
Many American business executives, once optimistic advocates for engagement with China, have turned into skeptics.
Chinese leaders have avoided commenting directly on the election.
Mr. Trump has threatened sweeping trade sanctions against China.
At one point he suggested Japan should acquire nuclear weapons—a Chinese nightmare.
If war between Japan and North Korea broke out, “Good luck,” he said, “enjoy yourselves, folks.” Still, Beijing likely would rather take its chances with an erratic Mr. Trump than Mrs. Clinton, a proven hawk.
As secretary of state, Mrs. Clinton fronted for the U.S. “pivot” to Asia, and early on gave it a military flavor.
She challenged Chinese officials publicly over the South China Sea, infuriating them.
Behind closed doors she warned them to rein in North Korea or else “we’re going to ring China with missile defense,” according to hacked emails released by WikiLeaks.
The Clinton campaign has neither confirmed nor denied the authenticity of the emails.
The nationalist-leaning Global Times called the campaign mudslinging between the two candidates a “race to the bottom.”
The U.S.-China relationship will survive the messy democratic process.
But a remarkable consensus on the need for China policy to stay stable between administrations seems to have been supplanted by an equally broad conviction: It’s time for change.