FAREED'S BLURRED VISION

He Keeps Reporting What He Wants To Believe

In his Washington Post column today, Fareed Zakaria reports that European leaders are worried about President Biden’s China policy and especially about his administration’s new international economic policies as explained recently by Treasury Secretary Janet Yellen and National Security Advisor Jake Sullivan.

As a long-time disciple of the old-time neo-classical, free trade gospel and a card- carrying Davos man, Zakaria has recently been calling for rejection of Yellen and Sullivan and a return to the straight and narrow globalization way. He wants to support his views by spreading doubt about the wisdom of the new Biden-omics. One way to do this is to quote from others who share his views. Of course, that could be a problem if there are not many who think like Zakaria.

In this effort, he turns to former UK Prime Minister Gordon Brown who immediately somewhat undermines the argument by admitting that Europe needs an industrial policy. But then he catches himself by declaring that a European industrial policy must not be in any way protectionist like Sullivan’s and Biden’s because Europe is too dependent on international trade to risk fiddling with how the machine operates. Unlike America, he says, Europe is not self-sufficient in energy and food production and like China depends on trade for its well-being and thus also needs continued access to the Chinese market.

Well, that does not tell us anything. The UK has a huge trade deficit with China as does the EU. So engaging in “free trade” with it can only reduce rather than increase self-sufficiency. Indeed, why is Zakaria calling on Brown? He was Prime Minister in 2007. This was long before China was the powerhouse it is today.

Then, to support his argument against the Biden-Yellen-Sullivan new industrial policy Zakaria quotes former Danish Prime Minister Helle Thorning-Schmidt as saying that Europe cannot divorce itself from China which is why it wants to “de-risk” rather than decouple. Hmmm. But that is exactly what Sullivan and Yellen and European Commission President Ursula von der Leyen have been calling for. Zakaria seems to be arguing against himself.

Without further quotes, he moves along to say that “many” with whom he spoke in Europe were afraid that in fact “derisking” would effectively be the same thing as decoupling and that America would somehow leave poor Europe alone while proceeding on its merry way.

Zakaria then leaves Europe and invokes former Singapore diplomat Kishore Mahbubani as saying that most of the world’s economic growth is coming from Asia and that the most rapidly growing trade in the world is that between China and the Association of Southeast Asian Nations (ASEAN). Thus, any deviation from present interactions with China would put the future of the ASEAN countries in danger.

That sounds logical, but there is a problem. The trade between ASEAN and China is heavily weighted toward exports from China. All the ASEAN countries have large and growing trade deficits with China. Conversely, all of them have big trade surpluses with the United States. So, on the surface, at least, it would seem that their growth is more linked to what happens to the U.S. than what happens to China.

Logically, they also should be seriously considering joining the U.S. move toward derisking.