US-China Relations and Business Impacts: Ambassador Huntsman and Matthew Pottinger

Photo by Steve Griffin of the Deseret News 

Last Wednesday, Harris Bricken sponsored a Zoom conversation about U.S.-China relations featuring former Utah Governor and U.S. Ambassador Jon M. Huntsman Jr. and Matthew Pottinger, distinguished visiting fellow at the Hoover Institution and former deputy national security adviser. The conversation was moderated by Miles Hansen, president and CEO of World Trade Center Utah; and Boyd Matheson, opinion editor and head of strategic reach at the Deseret News, one of the oldest American newspapers published west of the Mississippi River. Ambassador Huntsman served as U.S. ambassador to China from 2009 to 2011, and earlier as U.S. ambassador to Singapore and Russia.

This was a terrific session and I strongly recommend you watch the entire discussion, but if you can’t make time, I thought I would recap some of what I thought were the highlights:

Ambassador Huntsman started out by acknowledging that the U.S. government has very few real-world actions it can take to nudge China into alignment with American policy objectives, whether in the area of human rights, regional security or trade balance. Per Ambassodor Huntsman: “The U.S. has very little leverage in dealing with China these days. For this reason, U.S. policymakers are increasingly having a tough time trying to deal with tools that can be used in checking China’s power.”

Former deputy national security adviser Pottinger noted that China’s just-released economic five-year plan is focused on decreasing the country’s reliance on imported goods and materials, while making sure China remains an essential part of the supply chain for the rest of the industrialized world: “The reason China wants this strategy of making the world dependent on China and a China not dependent on the world is in order to have coercive leverage, in the form of economic leverage . . . . to pursue political aims around the world.”

As a result, Ambassador Huntsman sees U.S. businesses, and the strong economic ties that bind the two countries together, as in in a stronger position than the U.S. Government to be able mitigate US-China discord:

The private sector is likely to have a greater impact on change in China than even the United States government … We have core values as a nation and they extend to our foreign policy, our economic engagement, our humanitarian policies … and we should never back down from our traditional values. The Chinese are looking for us to do that and that would be a display of weakness and, moreover, (should that occur) we will cease to become a guiding light in the world that many are looking up to. Our companies in the U.S. are an extension of our national values and our individual values, and that’s a good thing. Obviously, China is going to be concerned about companies that propagate U.S. values or are seen as a front for overt U.S. values, but that isn’t something we should shy away from. That’s what’s made the U.S. great, that’s what’s made our economy successful and that’s what’s made us the envy of the world. And it’s what China disdains most about the U.S.

Ambassador Huntsman, who is also an extremely successful businessman, noted that China regularly outperforms the U.S. in terms of strategic consistency. China also benefits from having played catch-up over the past 30 years and thus able to shift their strategy to track what has proven successful elsewhere: “China is very big on strategies and we are not in the U.S., which is one of our big problems. They stick to their strategies and learn from the world what works and what doesn’t.”

But for U.S. businesses, Ambassador Huntsman suggested that despite the current diplomatic chill, plenty of opportunity remains:

Some of the issues between the United States and China are downright irreconcilable. They’re not going to be resolved, and I think we just have to get used to a world in which we have irreconcilable differences. So, I think the way that things will play out and how our future will look is very much a combination of A) confrontation, and B) competition, because I think there will be a real battle over the advancement of technology. Whoever dominates in technology will dominate economically for the rest of the 21st century. And then, there will be an element of cooperation. And in that we have to figure out what the mega-challenges are, globally, whether that be environmental, whether that be future pandemics, or whether that be a nuclear threat. These are all issues on which the United States and China must stand up and work together on as the two leading nation-states of the world. So as you’re thinking through your business plans, I think you need to see the world in which there’s confrontation – that shouldn’t surprise anybody – there’s competition unlike anything we’ve seen, and there are also elements of cooperation that will be built into the relationship … First and foremost, be realistic and understand the risk and make sure you have a regional hedging strategy that allows you to not just understand the state of play between the U.S and China but the rest of the world and China. And, as you engage economically, be prepared for any eventuality. Because I’m not sure anyone can write the final chapter on how this relationship will play out over the rest of the 21st century. Unexpected things are going to happen, both out of Beijing and out of Washington.

Mr. Pottinger agreed that China presents plenty of opportunities, but there are similar opportunities elsewhere and U.S. companies would be wise to mitigate the risks of going “all in” on China manufacturing:

I think there’s a great opportunity now for logistics firms and supply chain management firms to step in to help American businesses, to lead the way in doing the hard work in forging those new supply chain manufacturing bases, whether it’s in Vietnam, Indonesia, Mexico, or back here to the United States. But I think, again, the idea of hedging is absolutely essential. It’s really an aberration in history that the world would have concentrated so much of its manufacturing on the east coast of an authoritarian country the way we’ve done in China for three decades or so. It’s an aberration and it’s unsustainable, and already you’re seeing foreign direct investment beginning to peel off into other markets.

Toward the end of the discussion, Miles Hansen read a viewer question and I thought Ambassador Huntsman’s response was important. The question was: “The conflict for companies is that if a company stands up for Western values or confronts China on some of its practices, you run a very real risk that China suffocates you. What can or should U.S. companies do to promote U.S. values within China?”

Ambassador Huntsman replied:

I don’t know if we’re talking about “Western values” or universal values, but soft power is very much an emanation of a free people. You can’t have soft power without a free society. And that’s why China fears our soft power, because in every instance it’s an extrapolation of people working in a free society and pursuing their dreams and ambitions. The folks who are really widely admired by the citizens of China here in the United States are not politicians, necessarily; they’re technology organizations developers, they’re athletes, they’re musicians, they’re writers, they’re poets; they’re all people who are associated with civil society and freedom. We don’t make soft power an overt part of our foreign policy, generally; we deal in a world of hard power. But soft power is just a natural extension of who we are as a people, and we should always do whatever we can to nurture and ensure that it flourishes, because it has touched countless people in numerous countries around the world.

Mr. Pottinger also weighed in on values:

I think the first and most important step is not to give up our values at home in the hope it will win us some sort of favor from Beijing. That kind of favor comes, and it’s fleeting. It usually doesn’t end well. Hollywood was a great example of that. The movie studios in Hollywood bent over backward to try to accommodate Chinese censorship standards to an almost comedic degree. If you look at Hollywood today, it’s seen a declining share of the Chinese box office, even as Chinese moviegoing has increased in overall size. It’s gotten much harder for Hollywood to make money in China. I’m hopeful that that realization eventually leads to more morally courageous films again out of Hollywood. So, don’t demote your values in the pursuit of market share. It’s not going to end well in the medium term for you anyway.

Again, I urge you to watch/listen to the entire discussion. Ambassador Huntsman is an experienced, thoughtful and articulate proponent of U.S. foreign policy from both the government and private sector perspectives, and former deputy national security adviser Pottinger had very insightful and interesting things to say as well.