China and the Global Recession: Part II – Relations with the United States

Collin Spears

Collin Spears, BFPR Chief Foreign Policy Correspondent, Washington, DC Bureau

In 2001, the Bush Administration characterized China as a “strategic competitor” to the United States. This may still be an accurate depiction of U.S. – Sino relations, at least as it applies to certain aspects of the multifarious relationship between the two nations. Financially, China and the U.S. have long been symbiotic. Despite the mutual benefits attained from this situation, there have been numerous points of contention, issues that have only been aggravated by the global financial crisis. The U.S. and China will have to find politically palatable ways to work though some of these differences, because the future economic viability of both nations depends on it.

The People’s Republic of China (PRC) is the world’s largest single holder of U.S. Treasury Securities, which total about $700 billion U.S. dollars (USD). China also purchases U.S debt through third countries, which could bring the total closer to $1 trillion as of January 2009 (Shambaugh 2009). Much of these securities are held by China to regulate the Yuan against the dollar in order to ease the flow of the massive amount of trade between the two nations. In 1979, China – U.S. trade was valued at $2.5 billion as compared to over $400 billion in 2008 (Shambaugh 2009).

Brooks Sunday Global Review – Rajan Menon Interview: Obama’s NATO Challenge and the Afghanistan War

Rajan Menon

BROOKS SUNDAY GLOBAL REVIEW – TALK
Rajan Menon, Bernard Schwartz Fellow -The New America Foundation
Discusses: Obama’s First EU/NATO Visit, the War in Afghanistan and his book
“The End of Alliances” with Webster Brooks.

Brooks Sunday Global Review – Shujah Nawaz Interview: Toward an Obama Reponse to Pakistan’s Long March

Shuja Nawaz

BROOKS SUNDAY GLOBAL REVIEW – TALK
Shuja Nawaz, Director of The Atlantic Council’s South Asia Center
Discusses: “A Comprehensive U.S. Policy Toward Pakistan” Report
and the Kerry-Lugar Senate Bill on Pakistan with Webster Brooks.

China and the Global Recession: Part I – The Domestic Situation

BFPR ANALYSIS

By Collin Spears, Chief Foreign Policy Correspondent,
Washington D.C. Bureau

The consensus of mainstream China analysts is that the Chinese Communist Party (CCP) is a unified entity that is destined to guide China into a new golden where it will enjoy global superpower status. This sanguine narrative is maybe challenged as the current global economic recession has served to elucidate the genuine fragility of China’s political economy. Stability in the immediate future, let alone, decades from the present, is not a fact to be taken for granted, but a likely possibility to be continuously observed and evaluated.

The Chinese leadership is less of a cohesive organism than a mixture of overlapping and competing regional, ideological, and institutional interests. This leaves China vulnerable to conflict. The glue that binds the various CCP factions and the monied elites is a vast patronage system made possible by 20 years of unprecedented economic growth, no Maoism or a constitutional “balance of powers”. The Chinese elite are conscious of this. Even President Hu Jintao recognized the importance of various factions to maintaining national stability by designating two possible successors from divergent ideological perspectives, Xi Jinping and Li Keqiang. The CCP has also been touting the phrase “zhengdi tuandui” (team of rivals) in the media, in reference to political cooperation, which seem to be part of President Hu’s larger goal of creating a “Harmonious Society”. China’s ability to realize this harmony is heavily dependent on the financial liquidity that feeds its “Leviathan”.

Pakistan Moving Toward Revolution or Military Takeover Unless Zardari Resigns

Chief Justice Chaudhry to be Restored to Pakistan's Supreme Court

President Asif Zardari must tender his resignation now or consign Pakistan’s fate to a military takeover or another chaotic attempt by the democratic opposition to remove him from office. Those in search of a middle course to resolve the post-Long March crisis will find no safe harbor. Prime Minister Galini’s March 15 pre-dawn announcement restoring Iftikhar Chaudry as chief justice of Pakistan’s Supreme Court prevented bloodletting in Islamabad’s streets between democratic opposition forces and government troops. But it did not represent a principled compromise nor was the order to ’stand down’ troops a sign that Pakistan’s democracy has been strengthened. Quite the opposite, the lawyer’s movement and Sharif forces imposed their will on the government and the army. Thus, the events surrounding the Long March have widened Pakistan’s political chasm and expanded the power vacuum in an already fractured society. The question is what comes next?

The issue before the Pakistani people, the region and the west is whose in charge? Zardari? Galani? Kayani’s Army or the ISI? The answer is obvious; there is no maximum leader or governing institution guiding Pakistan’s wayward ship of state. Zardari’s actions to keep Chaudhry under house arrest, pack the judiciary with his own judges, arrest opposition leaders and dismiss Punjab’s provincial government revealed that he is a petty dictator. The lawyer’s movement was and remains the last line of defense against the dictatorships of Musharraf and Zardari. The Army is the only instrument of national power that can prevent a total collapse of order in Pakistan, but at the expense of imposing marshal law and at the risk of provoking a fresh uprising of the democratic opposition.

Zardari is now a spent force with no moral or political authority. Galani lacks the political base, muscle and stature to lead Pakistan out of its crisis. Army Chief Kayani and Pakistan’s western backers want to avoid at all costs another military takeover. Not only would a military dictatorship bring the opposition into the streets, it would paralyze the Army’s already difficult task of containing the al Queda/Pakistani Taliban offensive in the Northwest Territory and FATA.

For all these reasons, former Prime Minister and PML-N leader Nawaz Sharif is surfacing as a force the U.S and Britain must contend with. As leader of the second largest political bloc in parliament and the dominant figure in Pakistan’s most populous and wealthy province of Punjab, Sharif is a power player. With historically close ties to Pakistan’s Muslim political parties, the U.S. has always been uncomfortable with Sharif. Initially raised to power as Prime Minister in 1990 by the stridently Islamists Generals Hamid Gul and Mirza Aslam Beg, Sharif eventually opposed the Generals and their plans to export nuclear technology to Iraq and Iran. However, many believe America’s and Britain’s concern about Sharif’s Islamic ties are overblown. Sharif has moderated his views over the years and his close connection to Saudi Arabia where he was exiled has enhanced his standing.

Upon returning to Pakistan in late 2008, Sharif entered a coalition with his long-time rival Benazir Bhutto to oppose Musharraf’s dictatorship prior to her assassination. To Sharif’s credit he has consistently fought to re-seat Chaudhry and the judges that were illegally removed by Musharraf. He correctly insisted that Zardari give up the extra-constitutional presidential powers he inherited from Musharraf’s corrupt dictatorship. Thus, when Sharif supported the lawyer’s movement call for the Long March on Islamabad, his action cannot be considered as political opportunism. Whether Nawaz Sharif and his brother Shahbaz’s disqualification from holding office will be rescinded by the courts is not clear. But one thing is certain; Pakistan’s political crisis will not be resolved without Sharif playing a critical role.

With each passing day, Pakistan is spiraling deeper into the abyss that can only end in a catastrophic collapse. Beyond its unsustainable leadership void, the stress fracture of ethnic separatism is propelling Pakistan toward a dangerous breakup of the state. The Pakistani Taliban and al Queda forces are expanding in the Northwest Territory and SWAT Valley. Kashmir is a contested hot zone of conflict with India and the source of contentious debate among Pakistan’s political factions and especially within the army. A confederation of radical Pashtun tribal leaders, Tajik, Uzbek, Afghan, Chechen and Middle Eastern jihadists control large sections of the Federally Administered Tribal Areas. Balochistan has long been a rear-guard base area for Mullah Omar’s Taliban forces and Baloch nationalists’ forces opposed the central government’s writ. Indeed, taken as a whole the Northwest Territory, FATA and Balochistan constitutes a virtual Pashtunistan state that operates beyond the government’s writ.

Moreover, the battle lines between Nawaz and Zardari camps have been drawn after Zardari’s draconian dismissal of the Punjab’s provincial government and the controversial nomination of Salmaan Taseer as the new Punjab governor. The takedown of Punjab’s elected government has also exacerbated tension between the Punjab and Singh provinces.

As the central government weakens the influence and power of the separatist movements and radical Islamists is growing. The antagonisms spurned by these separatist movements are splintering the ranks of Pakistan’s military as well. For the neighboring governments of India, Iran, Afghanistan and China the instability in nuclear armed Pakistan increases their need to back various proxy forces and run covert operations inside the country to protect their interests.

The clock is ticking and time is running out on Islamabad. Pakistan’s political insolvency, spiraling economic crisis and the growing pressures of regional/ethnic separatism are leading inexorably toward a violent collision at the center. Last week Nawaz Sharif said the Long March was “a prelude to revolution.” We beg to differ. The revolution started in 2008 when the lawyer’s movement challenged Musharraf’s dictatorial rule. It has proceeded through twist and turns, regained momentum and surged ahead again. The Pakistani people must now sweep Asif Zardari aside, restore Iftikhar Chaudhry and the dismissed judges to their rightful place and reconstitute the Punjab provincial government; all without asking the permission of Washington, D.C and London.

Collin Spears Named Chief Washington, D.C. Foreign Policy Correspondent for Brooks Foreign Policy Review

Collin Spears, Chief Foreign Policy Correspondent

BROOKS FOREIGN POLICY REVIEW PRESS ADVISORY
March 19, 2009
Contact: (860)778.0002
For Immediate Release:

COLLIN SPEARS NAMED AS CHIEF FOREIGN POLICY CORRESPONDENT – WASHINGTON, D.C. BUREAU FOR BROOKS FOREIGN POLICY REVIEW

Hartford, Connecticut — Today, Collin Spears was named as the Chief Foreign Policy Correspondent of the Washington, D.C. Bureau of Brooks Foreign Policy Review. “As an astute observer, researcher and resident of East Asia, Collin brings a unique set of reporting and analytical tools to our Washington news desk” said Webster Brooks, Editor of the Brooks Foreign Policy Review (BFPR) and Sr. Fellow at the Denver University Center for New Politics and Policy.

Spears studied Mandarin Chinese at the Shanghai International Studies University. He also lived and worked in Japan as a teacher and IT contractor. Spears said “I’m excited by the opportunity to join the BFPR team and hope that my contribution will expand the scope of the execellent analysis already being generated.” Spears took a Masters of Liberal Arts in International Studies at the University of St. Thomas and a BS in International Business and Information Technology at Old Dominion University.

In addition to reporting on East Asian affairs, Spears will transfer his talents to broaden BFPR’s coverage of European and Central Asian foreign policy issues. Spears is a native of Lima, Ohio.

Brooks Foreign Policy Review is the international affairs arm of the Center for New Politics and Policy at the University of Denver. In addition to its policy blog on www.newpolicycenter.org, Brooks Foreign Policy Review host a weekly talk show with leading foreign policy experts and newsmakers called Sunday Global Review.

Lebanon’s 2009 Elections, the Cedar Revolution and Obama’s Syria Card

David Schenker

BROOKS SUNDAY GLOBAL REVIEW WITH DAVID SCHENKER
Washington Institute for Near East Policy, Director, Program on Arab Politics

On Sunday March 15, David Schenker talked with Sunday Global Review host Webster Brooks about the upcoming June 2009 parliamentary elections in Lebanon. With the Hizbollah/AMAL list challenging the March 14th Cedar Revolution Movement’s parliamentary majority, a great deal is at stake in the elections. During her recent visit to the Middle East by Secretary of State Hillary Clinton dispatched two U.S. diplomats to Syria. The Obama administration’s overtures to Syrian President Bashar al Assad has fueled speculation that the U.S. seeks to end Syria’s diplomatic isolation and probe for an opening to wedge the Syrian-Iranian axis. David Schenker just returned from the Levant and shares his views on the 2009 Lebanese elections, Hizbollah and Syria’s role in Lebanon and the Obama administration’s entreaty to Damascus.

Obama and the European Union’s Growing Financial Crisis

Since the 911 attacks in 2001, Afghanistan, Iraq, Iran and the “war against terrorism” have defined the challenge of U.S. foreign policy and the burden of policing American empire. But the collapse of Wall Street banking houses has seized-up markets across Europe and propelled the continent into the maelstrom of capitalism’s global crisis. Thus, the Obama administration is now confronted with a far reaching foreign policy challenge. The severity of Europe’s financial dilemma was underscored by British Prime Minister Gordon Brown’s early March visit to Washington D.C. in which he called on President Obama to articulate a “Global New Deal” to staunch the international financial meltdown. Absent Sir Gordon’s Shakespearean theatrics that evoked memories of a New Deal-Marshall Plan, what’s at stake is the survival of Europe’s most significant achievement of the past 30 years – the establishment of the single market and currency, and the integration of Europe’s two halves after the demise of the Soviet Union.

For an Obama Administration beset by America’s deepest economic downturn since the Great Depression, Europe’s faltering economies carry the risk of destabilization across the continent and the potential to aggravate America’s recovery. Obama is in no position to bemoan European leader’s reluctance to address their bank’s toxic assets and adoption of modest stimulus packages. Indeed, Obama has dodged the issue of shutting down failing U.S. banks and ferreting out billions in bad paper the banks continue to hold. Moreover, he has not pursuaded U.S. banks to resume commercial lending. Nevertheless, when the President attends the G-20 Summit in London on April 2 and addresses the European Union in Prague three days later, he will be expected to provide leadership and tangible proposals if he is to gain European acceptance of America’s global leadership role.

President Obama’s task may be more difficult now that German Chancellor Angela Merkel has united with French President Nicolas Sarkozy in rejecting Gordon Brown’s call for a “global stimulus package” to steer the world out of recession. The Obama administration has been pushing for Europe to do more on stimulus. At a G-20 planning session of finance ministers and banking governors held in Sussex, England, Merkel said it was too early to determine the effects of the first multi-billion dollar stimulus package; suggesting that consideration of a second stimulus package was pre-mature and irresponsible. Without specifying any committments, Merkel said EU members will pump more funds into the International Monetary Fund to rescue stuggling nations and highlighted the need for tougher regulation on banking hedge funds.

Among the traditional western members of the EU, the discourse concerning the best path to stem the financial crisis has been intense and sometimes quite divisive. Much of the debate has centered on the role of stimulus and spending, where opposing camps have emerged. With the largest economy in Europe Germany has and is expected to spend more than other countries. However, Chancellor Angela Merkel has consistently opposed Europe attempting to spend its way out of the crisis. Having already spent 4.2 percent of its GDP on economic stimulus, Merkel insist Germany is in the vanguard of fighting for economic recovery. Chaffing under the possibility that big spending will lead to an explosion of debt and rising inflation, Merkel has strung together a coalition of fiscally conservative smaller nations that includes Sweden, Finland, Denmark, the Netherlands and Luxembourg.

Merkel’s French counterpart, President Sarkozy, has been the proponent of more protectionist policies and has enjoyed the support of Ireland, Greece, Italy, Spain and Portugal – all members of the euro zone and all posting extraordinarily high debts. As a supporter of bigger spending programs in Europe, Sarkozy has often been at odds with Merkel, but sided with the Chancellor in opposing Gordon Brown’s proposed global stimulus package.

Confronted with the uncertainties of the market and dubious about the potential success of America’s economic stimulus plan, increasingly nationalist inclinations are surfacing within the EU that are undermining the fabric of the EU’s integrated single economy. Financial panic and sharp divisions within the 27 member European Union are deepening. The economies of the fifteen Euro-currency zone nations like Greece and Ireland are hemorrhaging. When eight Eastern and Central European EU countries outside the currency zone united behind Hungarian Prime Minister Ferenc Gyurcsany’s call for establishing a 190 billion EU fund to restore solvency to their states, Prime Minister Angela Merkel quickly rejected the proposal. Merkel also dismissed another plan to expedite some of these countries’ ascension into the Euro-currency zone. Merkel said Germany would not support a blanket bailout and that aid for each country should be decided on a case-by-case basis. That sounds prudent, but the slow dribble of funds doled out to each country may lack the financial punch needed to deliver these countries from the crisis. In response, Prime Minister Gyurcsany told reporters “We should not allow that a new Iron Curtain should be set up and divide Europe.” Oh really. Surely this was music to Moscow’s ears.

Outside the EU the fate of Ukraine looms large. It stands on the brink of financial default. Although it is a non-EU member state, Ukraine has emerged as a strategic defense and energy battleground between Europe and Russia. Like the fall of any Eastern European nation Ukraine’s default could unleash a domino effect of collapsing other EU countries. Banks in Austria, Italy and Sweden are heavily invested in Eastern Europe, and would see the value of their assets plummet quickly if one of these states goes belly up. The eight Eastern states are Poland, Slovakia, Czech Republic, Bulgaria, Romania and the three Baltic states.

So what will happen when President Obama goes to Europe in two weeks? Not much. President Obama will certainly remind Europe that it has the largest collective economy in the world, and that to save it will require bold action. If Europe were to fall deeper into recession it would have severe implications for America’s economic recovery and could push the U.S. deeper into recession. He will assure Europe that America remains committed to free trade over protectionism. Leaving aside Gordon Brown’s utopian idea of a “Global New Deal”, Obama will pledge America’s support for more stringent international banking regulations regarding transparency, overleveraging and derivative instruments. And President Obama will pledge America’s support for coordinated “recovery assistance” plans with the IMF and the World Bank for European nations staring into the abyss of financial default. In short, President Obama will have little to offer.

At the end of the day, Europe’s leaders must reach consensus on a short term plan on how to financially process its troubled Eastern European states and Ukraine. Prime Minister Merkel’s faction must also be prepared to compromise on spending. Although she has won the argument on rejecting a second stimulus package, the price Europe must pay to extricate itself from the present crisis cannot be purchased on the cheap. If anything can and should unite Europe’s leaders, it is the specter of Russia hovering over Eastern Europe ready to pounce on any opportunity to bring its former Warsaw Pact allies back into Moscow’s orbit. For the moment EU enlargement is off the table. Europe has a crisis it must attend to or the EU as we know it, will be no more.

Dr. Hooshang Amirahmadi: American-Iranian Council President on Brooks Sunday Global Review 3-8-2009

Dr. Hooshang Amirahmadi

DR. AMIRAHMADI TO DISCUSS THE OBAMA ADMINISTRATION AND THE FUTURE OF U.S.-IRAN RELATIONS

Hartford, Connecticut – On Sunday March 8, Dr. Hooshang Amirahmadi, President of the American-Iranian Council (AIC) and America’s foremost expert on Iran will conduct an in-depth interview on the Obama administration and the future of U.S.-Iran relations on the Brooks Sunday Global Review. Under Amirahmadi’s leadership the AIC gained a rare approval from the U.S. government to establish an NGO lobbying group in Tehran, Iran. The AIC has been a leading non-profit/non-partisan organization promoting the renewal of diplomatic relations between the U.S. and Iran. Dr. Amirahmadi is also a professor of Middle Eastern Studies at Rutgers University.

Among the topics Dr. Amirahmadi will discuss with host Webster Brooks are Iran’s nuclear program, the June 2009 presidential elections, Iran’s regional involvement in the Middle East and the prospects of improved relations between the U.S. and Iran under President Obama’s administration. The interview can be heard on the Brooks Foreign Policy Review website at www.brooksreview.wordpress.com on Sunday March 8,2009 at 8:00 p.m. ******