Just how will the Hong Kong protests likely play out?
How are the Chinese Communist Party’s economic and political systems fundamentally at odds with those of the West, and why is it so intent on controlling Hong Kong?
What is the Chinese regime’s strategy in the US-China trade war?
And how would a decoupling of the US and Chinese economies impact America and the world?
This is American Thought Leaders 🇺🇸, and I’m Jan Jekielek.
Today we sit down with Gen. Robert Spalding, who was a brigadier general in the U.S. Air Force, the chief China strategist for the chairman of the Joint Chiefs of Staff at the Pentagon, and a senior strategic planner for the White House on the National Security Council. Now, he’s a senior fellow at the Hudson Institute.
We discuss how the Chinese communist regime manages to control the narrative about itself and Hong Kong, and conceal its egregious human rights abuses. We also explore what Robert Spalding describes as the “parasitic” nature of the Chinese economy, which grew by exploiting the openness of Western values and economic systems.
Jan Jekielek: General Rob Spalding, excellent to have you back on American Thought Leaders.
General Robert Spalding: Great to be back. Thank you.
Mr. Jekielek: So, wow, let’s talk about Hong Kong. The troops are massing at the Hong Kong border, the PLA. Tell me what do you make of this?
Gen. Spalding: Well, the PLA said that they were staging for normally scheduled exercises. I don’t know whether that’s true, but I would not place any credence in reports of troops massing where the PLA’s concerned if they’re going to act. I doubt that we’ll get any forewarning of that.
Mr. Jekielek: So what are the implications? Let’s say they do act, what happens?
Gen. Spalding: Well, the implications are that the special relationship that U.S. and Hong Kong have that allows Hong Kong to be a window for China to Western capital markets will essentially go away.
Gen. Spalding: It will be politically unsupportable because essentially it will signal that the Chinese Communist Party is no longer prepared to support the “one country, two systems” policy.
Mr. Jekielek: Do you think it’s possible that they will?
Gen. Spalding: I think it depends on how fearful the Chinese Communist Party is of the spread of the protests from Hong Kong into the mainland. If they believe that they have solid control over the mainland, then it may be that they let the protests die of their own accord.
Mr. Jekielek: What do you think is the likelihood that we would actually know what the intentions are of the PLA?
Gen. Spalding: Well, deception, disguise is a part of the way the PLA does business, and so they were able to move 300,000 troops into Korea, for instance, during the Korean War, without us having even the slightest clue. And so I doubt, again, that any intelligence that we have that says the PLA is getting ready to mass to go into Hong Kong is going to be credible because I doubt that we’re actually going to know when they’re prepared to do so until they actually act.
Mr. Jekielek: So speaking of this deception and so forth, there are other means that the PLA or the Chinese Communist Party can certainly use to shift things. Have you seen any evidence of that?
Gen. Spalding: … The problem with social media today is it’s validating what you see. There’s plenty of reports of them changing into either Hong Kong police uniforms or protester uniforms or just tourist uniforms and then, essentially, attacking the protesters. It’s hard to tell whether those are actually Hong Kong citizens or actually coming from the mainland. In the case of the one officer, I believe, that was essentially cornered in the Hong Kong airport, there was supposedly identification on him indicating that he was from the Shenzhen police force. I don’t know if that’s correct.
My sense is though, that if there was going to be enforcement made by the mainland, it would come in ways that wouldn’t typically be known by the United States. In other words, I highly doubt they would want to mass forces in a way that would reveal what they were going to do. And then if you look at, certainly how Russia has behaved in Ukraine in terms of what some have termed little green men, I think it’s very much in line with that kind of thinking. How do you create the kind of conditions that you want without actually exposing yourself to the risk of definitively acting on behalf of the Chinese government?
Mr. Jekielek: There’s been a recent report we know that Secretary of State Pompeo met with Chinese representatives on Tuesday. So there’s some kind of discussion happening. Do you think it has anything to do with Hong Kong?
Gen. Spalding: I would imagine that behind closed doors Secretary Pompeo’s being very vocal about what the Chinese Communist Party is doing in Hong Kong and ensuring that they understand that the U.S. wants to ensure that democratic principles, human rights, civil liberties are upheld. The rule of law, that Hong Kong special relationship will only remain as long as the “one country, two systems” policy is in effect, and probably, I would imagine castigating the Chinese Communist Party for even allowing the extradition law to be brought up in the first place, which essentially precipitated all of this.
Mr. Jekielek: Right. Which essentially means freedom ultimately is gone because you can just enact the extradition law.
Gen. Spalding: Right. Or Carrie Lam, right, not selected based on a policy of universal suffrage but based on the fact that she was amenable to the Chinese Communist Party.
Mr. Jekielek: So what do you make of the U.S. diplomat being doxed in Hong Kong?
Gen. Spalding: Well, I mean, this is very similar to, again, behavior we see out of Russia. So it’s consistent with the totalitarian regime that sees itself assailed on all sides, not by real things, but more like ideas, democratic principles, freedom of speech, freedom of religion. These aren’t universal values as America espouses, but in fact, they were designed deliberately to destroy the Communist Party, and they must be countered at every instance. And as a B-2 pilot, I experienced this directly living in China when I was told vociferously that the U.S. absolutely attacked the Chinese embassy in Belgrade because of its black hand and could not be persuaded otherwise.
Mr. Jekielek: Right. Black hands being …
Gen. Spalding: Black hands being the term they use for what they believe to be the United States undermining their rule.
Mr. Jekielek: The U.S. actually did respond with some public language calling this behavior, the doxing as thuggish. So that there has been actually some public statement related to what’s been happening in Hong Kong.
Gen. Spalding: But that was limited to the doxing of the diplomat.
Mr. Jekielek: Right. What should the U.S. do in this situation as it exists right now?
Gen. Spalding: Well, clearly I believe that we should always stand up for democratic principles, human rights, civil liberties. That is one of the features of the United States–that we are very vocal about our values and that we believe our values are universal. Of course we don’t try to forcefully impress those on anybody. But certainly we want to express when … because self-determination is part of that belief. That we want to express it, when that is not being allowed, that we find that contrary to what we believe to be our universal human values. So we should speak up about that. After the end of the Cold War in 1999, we dismantled the U.S. Information Agency. It was essentially designed to do public diplomacy independent from regular diplomacy which is state to state relations.
And so there’s this tension, there’s always tension between us talking about our values, the principles, the universal principles of human rights and freedom, and country-to-country relations. And, essentially, the Communist Party uses this tension to essentially control the narrative. Because what they tell our diplomats in private conversation is we don’t care if you tell us how bad we are with regard to human rights or democratic principles, just do it privately. Please don’t do it publicly. And we will respond much more favorably if you do it privately. And so if you come into the diplomacy arena within the China portfolio in the U.S. government, in the executive branch, then that’s what you’re taught. Don’t ever confront the Chinese in public, always talk to them in private.
Unfortunately, though, that allows them then to control the public narrative. And by our acquiescing to that, they are essentially creating the perception for the world that the U.S. and China agree on whatever the narrative is. In the case of the peaceful protesters in Hong Kong, Chinese Communist Party labels them terrorists and we don’t speak up, therefore, the perception is that both sides believe that they are terrorists, and, therefore, it creates legitimacy for China’s model, which is a totalitarian model. In a sense, when the U.S. does that, it’s not confronting the fact that they are totalitarians.
Mr. Jekielek: So would you advocate then for the reestablishment of an agency like this that you just described?
Gen. Spalding: I think not only has the elimination of the U.S. Information Agency created this public diplomacy inside the State Department that is responsible for government-to-government relations, but that tension is there inside one organization. And so if the primary mission of the organization is government-to-government relations, then it can tend to squash public diplomacy that impacts the ability to conduct those government-to-government relations. So I would advocate that we have an independent agency that does public diplomacy. Not only that, but there’s been so much effort, I think, by these totalitarian regimes to infiltrate and essentially twist what’s coming out of our public diplomacy agencies now called the U.S. Agency for Global Media that even during the 2017 protests in Iran, Radio Free Asia was re-tweeting Tehran’s talking points.
So we have a real challenge in ensuring that we have a public diplomacy that is absolutely vociferously talking about totalitarians, misuse of their control, and certainly denying universal human rights and civil liberties and rule of law to their citizens.
Mr. Jekielek: So there is this narrative exactly that the protesters are terrorists. That’s where it kind of got to most recently now. In these recent protests at the airport, there was violence. We’re seeing the protesters apologizing, we were too scared. There’s all this kind of stuff. What is the situation created? How does this work out for the protesters? How does this work out for the regime?
Gen. Spalding: I look at the protesters and I just see 20-year-old millennials, young kids that are facing a future where there’s income disparity, there’s really no hope. Probably a lot of them are living with their parents because there’s a huge gap between the rich and the poor. The real estate prices in Hong Kong are absolutely atrocious. The job market is terrible. And so I think they’re concerned about–rightfully so–concerned about their future.
And I don’t know where it goes. I think that they’re serious. They realize that the Umbrella Revolution really didn’t bring the kind of reforms that they wanted. It kind of petered out, and they seem committed to sticking to that. Now we’ll just have to see. Once the school year starts, over time, does it dissipate or does it become stronger in the face of the People’s Liberation Army not squelching it.
Mr. Jekielek: Do you see the CCP backing down here and offering more freedoms on the Hong Kong side?
Gen. Spalding: Absolutely not. Absolutely not. No. Because what that would then entail is that not only other–what they would call renegade provinces, Taiwan–but also provinces within China may then get a bad idea if they understand what’s going on in Hong Kong. And, certainly, some of the population, the mainland is aware of what’s going on.
Mr. Jekielek: So let’s talk a little bit about how Americans perceive China and perhaps this whole situation is playing into that. There’s been polls that are showing recently that Americans have an increasingly negative perception of I think probably China because they don’t maybe all see there’s a distinction between China and the Communist Party itself. But how do you think that will play into how the U.S. addresses this?
Gen. Spalding: I don’t think there’s anything quite as abrasing as seeing young millennials getting beaten and shot and doused with pepper spray. So I think it’s going to be very difficult for the Communist Party to move past the fact that this is all on camera for everyone to see because there is still some semblance of press liberty in Hong Kong, which I would imagine would be the first thing to go … if and when they do move in.
Mr. Jekielek: Is this a new cold war, U.S-China, or maybe not as new?
Gen. Spalding: Yeah. Well, it’s funny that we go out of our way to say that there’s not a new cold war, and the Chinese Communist Party officially says there’s no new cold war. But if you look at the actions they’ve taken over the last few decades, it’s clear that they have an agenda in mind. And if you read Document No. 9, it’s clear that they have an agenda in mind, and it doesn’t involve a thriving free America remaining a strong force in the world.
Mr. Jekielek: Tell us some more about Document No. 9.
Gen. Spalding: Document No. 9 was an official internal Communist Party document that was smuggled out and translated in 2013 and really talks about how what we believe to be universal rights or human rights like freedom of speech and freedom of religion, we’re not really advocating what is our fundamental beliefs, but, instead, they were specifically designed to be tools to undermine and destroy the Chinese Communist Party rule.
Mr. Jekielek: Wow. I don’t think a lot of Americans know about this.
Gen. Spalding: Well, I mean, most people don’t spend a lot of time thinking about China or certainly the Chinese Communist Party, they have a lot of other things they’d rather do.
Mr. Jekielek: So let’s talk a little bit about the trade war and the U.S. administration’s policies around trade with respect to China and all these back and forths. To me it feels like it’s not by accident that all of this is happening at the same time. Perhaps you’ve had some thoughts on this.
Gen. Spalding: … If you’re saying that there’s something to do between what’s going on in Hong Kong and the trade war, I don’t think that the Chinese Communist Party would have deliberately asked Carrie Lam to bring forward something that would create even more tensions in an already tense relationship. In fact, I think the Hong Kong protests are far more damaging to the Chinese Communist Party than the trade negotiations. I think they’re much more comfortable stringing along the United States with no intent to actually have a trade agreement … and really behind the scenes to go through Wall Street, through corporate America really putting pressure on the administration. [They are much more comfortable with that] than dealing with an uprising where a quarter of the population marches in the city of Hong Kong. It’s a completely different thing.
And certainly based on the fact that the Communist Party believes that we are fomenting the revolution, they’re just going to harden their position on the trade talks. Right? Most likely what they believe is that we’re behind fomenting the revolution in Hong Kong in order to put pressure on them to come to an agreement on trade.
Mr. Jekielek: So, wait, you think that’s what they actually believe?
Gen. Spalding: That’s most likely what they believe. Because they believe that we are trying to overthrow them. So what better way to put pressure on them than to go after their weak spot, which is basic human rights.
Mr. Jekielek: Yet, President Trump has said Hong Kong needs to sort itself out. I mean, I’m paraphrasing here. He hasn’t come out and said anything like that at this point.
Gen. Spalding: Yeah. And I think that’s in following convention over 40 years of relations with China that you don’t address their behavior in public, you address it in private and, therefore, as I said, this allows them to control the narrative.
Mr. Jekielek: It’s been argued that Xi Jinping, because of the Hong Kong situation and this the trade situation really not going in China’s favor in any manner, shape, or form, is kind of being backed against a wall and in that sort of situation could do anything. What do you make of that?
Gen. Spalding: Well, I don’t know what anything means … I don’t consider them any imminent threat of military-type maneuvers. But absent military action? Everything was already on the table. It’s not like all of a sudden they put more tools on the table to undermine Western civilization in the United States. They were already doing that through finance, trade, investment, immigration, cyber, media, politics. They’re already doing that today. So it’s the same thing with Iran when people say, oh, if you attack Iran, they’re really going to bring out the knives. The knives are out. They’ve been out. So it’s just recognizing them for what they are.
Mr. Jekielek: So what knives are left other than the military option at this point?
Gen. Spalding: Well, I think the businesses that are functioning in China, the Western companies, the U.S. companies that are functioning in China, they could be held at risk. Their executives, their personnel working in China could be held at risk. Their money, it’s in China. Of course they haven’t been able to get out the money. It may never come out. There’s still tools that they can use. There are still companies, American companies that are working in China and finding their business in China–like Starbucks, for example. If you remember with the THAAD emplacement in South Korea, what they did with lot supermarkets and a number of the South Korean businesses in China, they put a lot of pressure on them. They could do the same thing to American businesses.
And therefore, I would imagine that’s why there’s pressure by corporate America and Wall Street to, essentially, take a hands-off approach to the protests. Don’t push too hard on the trade deal, in fact, don’t enact tariffs because that’ll anger the Chinese and then, therefore, they may come after our business. And there’s always fear. Anytime you talk to a company that has business in China, they’re very circumspect with regards to what’s going on in China.
Mr. Jekielek: One of the big banks a day or two ago is predicting these increased tariffs are going to create recession and so forth. So speaking to your dues, is that a response to …
Gen. Spalding: Well, it’s funny because the tariffs are designed to actually create pressure on what is fundamentally not an open-market system within China. In other words, if they subsidize their companies, if they create an uncompetitive environment, if they essentially allow their companies to have a tilted playing field in their favor, the tariffs are meant to be one tool to essentially balance the playing field.
And so if you have a state-owned enterprise and you know that resource allocation in the state-owned enterprise is less efficient than an enterprise that is based in a market that is a competitive market, then you know you have less efficient allocation of resources in that system. So, by definition, if capital flows into that system, it’s not producing the same amount of wealth as it would be producing if it was being invested in a market system. So just by nature of the fact that it’s meant to force investment to go to look other places that are more efficient because they’re are actually market based, then you would say, well, maybe that’s actually going to stimulate growth because so many of these state-owned enterprises are taking up capital that would be otherwise sent to industries that are in functioning markets. And also there is … you see, not to the extent that I would like yet, but you see the beginnings of reinvestment in the United States for things like manufacturing in the industrial base.
Mr. Jekielek: What about these giant investment funds that have invested a lot in what I increasingly see being argued are really bad investments.
Gen. Spalding: Right. So, let’s see. You have a lot of money invested in China and the U.S. government comes to you and says, hey, we need you to really work on this project because it’s really necessary for the Department of Defense … and maybe say it’s a $50 million project. And you have $8 billion invested in China, and the Chinese Communist Party comes to you and says, if you do that $50 million investment, you’re never going to see your $8 billion. That’s the challenge we have in corporate America and Wall Street. They are fundamentally aligned with the Chinese Communist Party because the money that they have there is captive, and they can’t get it out unless they actually behave according to how the Chinese Communist Party wants them to.
Mr. Jekielek: I’ve been thinking about the end game in all of this, and a number of people have argued that there really isn’t a constructive solution to this whole U.S.-China standoff with the Chinese Communist Party in place. I wonder if you could speak to that a little bit.
Gen. Spalding: Well, I think it’s very much the same as when you had the USSR. … Right now we’re very much re-approaching not a multilateral world but a bilateral world with the free world led by the United States and the not free world led by China. And I think that they have fundamentally different worldviews. If you go back to the Atlantic Charter–democratic principles, free trade, rule of law, self-determination. That’s the world that we built. That’s Bretton Woods, that’s WTO, that’s the United Nations, right? Those are the systems we put in place to ensure that we didn’t have a conflagration like World War I or World War II.
And I think one of the things that we have as a result of World War II are nuclear weapons. I do think that nuclear weapons actually require countries, leaders to think very carefully about using their weapons against a liked armed opponent, which is probably one of the reasons why North Korea has worked so hard to get nuclear weapons.
So I think that you have two systems, a closed system and open system with fundamentally different worldviews. The problem is the closed system has been embedded inside the open system and slowly turning the open system into a closed system by essentially creating a perception that it’s a better system. Right?
So China’s economy has been growing at double digits for … and certainly over 5 percent for decades. How is that possible? It’s defied the law of economic physics. It shouldn’t be growing. Well, it’s growing because it’s parasitic, right? And it’s designed to be so because it’s embedded within an open system, and so in essence, it’s turned openness into vulnerability and allowed it to hijack.
Inside that openness not only have they achieved the ability to have economic advantage, they have also marketed their system as better for the whole world. So a harmonious world with China at the head, everybody will have a car in their garage and a nice home and send their kids to school, and everything will be great. They’ll just have to not question the rule of the Chinese Communist Party. And so those two systems are not viable together. They’re only viable separated.
And then from that point, it becomes which system do the people of those nations want to live under? Do they want to live under a closed system where they find it increasingly difficult to meet their economic livelihood, right? By definition, that’s what happened in closed systems. China wants state-owned enterprises running the economy. The state-owned enterprises are run by the Chinese Communist Party, right? So the economy is run for the benefit of the few. It’s a fundamentally flawed system. It’s been proven time and time again. So rather than government being for the few, government for the many, those are the two separate systems. Once they’re separated, then they begin to compete.
Then people in free countries, you can begin to realize, OK, this isn’t really a better system. Socialism doesn’t work better because I can look over there just like if you go to … after reform and opening in China, right? Everything was growing, things were going great. If you took a trip down the Yalu River, right, which I have, and on the right hand side–so if you’re going towards the sea and on the right hand side you look to Dandong, which is there on the Chinese side of the river with the big skyscrapers and lights and everything going on. And you look to the left into North Korea, and there’s nothing, right? There’s hungry people. And at night the lights are completely shut off because there’s no money for power, right?
The people on the side that have reform and opening could see the people on the side that didn’t have it. That’s not a better life. As those two systems become separated, the open and the closed, and clearly China has decided to ally itself with the closed. The people on the other side, the Chinese people will begin to look outside and say, hey, look what they have. Why don’t we have it? Well, you don’t have it because the government is not for you. The government is for the Chinese Communist Party.
Mr. Jekielek: Well, isn’t this whole argument up to now, it’s been, hey look, we are actually giving you everything. We are giving you this 5 percent growth a year. We are giving you this economic prosperity. You’re saying this is all basically a false prosperity.
Gen. Spalding: It’s a result of being able to tap into Western innovation, Western talent, Western capital, all of those things, right? … The ability for WeChat to be in China and be in the West when its competitors can’t be in the West and in China. So they’ve created a model where their companies can be vastly successful, but other companies that are outside the system can’t, right? So they’re using their closed system within the context of a larger open system to essentially change the entire system to be more of a closed system.
That’s why you see so much advocacy for socialism now because people look to China and say, well, they’re successful economically. Well, they’re successful economically because they’re pulling wealth and knowledge and talent and technology out of the open system. We would never let the Soviet Union do that. Ever.
Mr. Jekielek: Right, right. Exactly. So a very cunning strategy it would seem.
Gen. Spalding: It’s a beautiful strategy.
Mr. Jekielek: OK. Well, yet, and the Trump administration’s approach is incrementally slowing that down and stopping it seems like.
Gen. Spalding: So, number one, restore this tie between free trade and democratic principles that are in the Atlantic Charter. In other words, it’s not just about open markets lead to wealth and wealth leads to democracy. Open markets and deliberately talking about our democratic principles together, so it’s open markets and democratic principles, the way we organize our society, that actually makes it successful. Realizing that is number one, first and foremost. Number two is just like you said, protecting all the areas of our openness that China has essentially used against us. Number three, and this is the one that I think still needs to come, is reinvesting in our country–infrastructure, industrial-based, STEM education, research and development, all that are at historically low levels because capital in particular is seeking a place where you have low labor protections and low environmental protections. And then finally rebuilding the institutions along democratic lines–U.N., Bretton Woods, WTO. Hey, you want to be a part of this? You have to support democratic principles, and you have to obey by the rules. It’s a rule of law system. It’s not a rule by law system for the benefit of the few. That’s it.
Mr. Jekielek: This is the win-win you would say for America and also for China.
Gen. Spalding: For the Chinese people.
Mr. Jekielek: Right. Where does the Communist Party fit into all this then?
Gen. Spalding: Well, I think in Asia, you’ve had Taiwan, you’ve had Korea both go from really authoritarian regimes to democratic regimes. I believe at some point Vietnam will be on that path. I think at the end of the day, it doesn’t matter if you’re a communist or you’re not a communist, you would want to be living in a society that your children, your grandchildren have the most opportunity. Now, what do the Communist Party members have as a benefit? They’ve moved a lot of their wealth out of the country. Their kids can go and come and go in the West as they please. So they have the best of both worlds. They have this kind of conclave where they can basically rule like Yertle the Turtle, but at the same time they can go out, and their kids, their grandkids can experience the freedom of the West.
Mr. Jekielek: So why do you think they’re so determined to impose this closed system on Hong Kong?
Gen. Spalding: For their own benefit. The families have enormous wealth in Hong Kong. They have properties, they have money. And it also is a place for them to have access to U.S. dollars.
Mr. Jekielek: But because it’s been open, it’s also been, let’s say, economically successful…
Gen. Spalding: So Hong Kong has really never been fully open. When it was a colony, even when England was increasingly trying to democratize Hong Kong, from Zhou Enlai on, the Communist Party has been–even before turnover–the Communist Party has been stopping them from do that. So there’s a clear history of the Chinese Communist Party making sure that democratic principles went only so far in Hong Kong. Not any farther.
Mr. Jekielek: Why this extradition law now?
Gen. Spalding: That’s the $64,000 question. I think that Carrie Lam and the ruling coalition there in Hong Kong believed they had such a super majority that it would be no problem to get passed. Now that may be true, but what they forgot to look at is what the views of the population were. I’m sure she didn’t realize that 25 percent were going to stand up and say no, including many in her own government.
Mr. Jekielek: Or that they would understand the implications were, this basically means freedom is lost.
Gen. Spalding: Well, you know, I would say that Carrie Lam and all of those that have a very pro-Beijing stance, they look at freedom in gradations, right? My freedom versus your freedom. As long as I have more freedom than you, that’s a good system.
Mr. Jekielek: OK. So, Rob, now that we’ve kind of fleshed out the picture here, Hong Kong, trade, how the Communist Party fits. Ultimately, where do you see this situation going with Hong Kong in the near future?
Gen. Spalding: I think eventually the Chinese Communist Party will move in to suppress the protests. I just don’t know when it’ll be.
Mr. Jekielek: So the writing’s on the wall.
Gen. Spalding: I think the writing’s on the wall. Now, it could be kids go back to school, the thing peters out. In that case then that’ll be the telltale sign. If we’re still here in October, and they’re shutting down the airport, and there’s a major protest in Hong Kong, I would be surprised. So one way or the other I think they’re going to end.
Mr. Jekielek: OK. And do you think we will see the type of violence on the protesters side that we saw? Again, the whole thing is very interesting, including the apologies. I don’t think I’ve seen that before, that I can think of.
Gen. Spalding: Well, I think this idea of turning the other cheek only goes so far, and so I would imagine that as passions become inflamed that they’re going to respond. But I mean by and large they’ve been very, very disciplined in being a very peaceful protesters. So I think any violence on the part of the millennials that just want their freedom, I think is out of character and more or less driven from desperation or actually the brutality that they themselves are suffering.
Mr. Jekielek: Right. OK, what about the trade side, how do you see that playing out knowing what we know right now?
Gen. Spalding: Yeah. I don’t believe we’re going to have an agreement. I believe the Chinese Communist Party believes they can push the president out and they can get a more favorable candidate in 2020. And even if they don’t that over time they believe they can afflict enough pain on the U.S. economy that we’ll back off. And barring that, I believe they’re prepared to decouple their economy. Because I think in their own minds, they’ve reached a level of technological and economic security on their own ride that their model can survive on its own. And I’m sure it can survive. It’ll just stagnate.
Mr. Jekielek: OK. That’s fascinating. Actually, that isn’t a perspective I’ve heard before. What indicators are suggesting that to you? I’m just curious.
Gen. Spalding: Well, I think that what will definitely show that is if they move into Hong Kong because they will be prepared to close Hong Kong as a window to the West. But, otherwise, there’s no real explanation for doubling down by tearing up 50 pages of an agreement that they had negotiated with the U.S. And so when you’re analyzing this, you’re saying, well, we’re going to go shoot for another president, you know that the president that you’re currently negotiating with, if he does win, right. So there is a, hey, we don’t actually get a new president. And so you have to do a little bit of worst case scenario analysis here. You say, OK, well he gets reelected. Now he really puts the screws to us. OK, well, we have to be prepared to essentially have that worst case scenario happen which is essentially decoupling.
So I believe they’ve already made the decision that they’re prepared to have a decoupled economy, and they think that they have enough now that they could survive on that. And over time using the Belt-and-Road initiative, that they could create a larger closed market where they’re the dominant player and that increasingly we would be pushed out. Now, physically, they’ve already essentially constructed that through the port and shipping system. They have a very efficient port and shipping system that essentially if we do decouple, we’re going to be pared off from. So that’s an enormous trading advantage for them.
Mr. Jekielek: So let’s say this decoupling does happen. Are you saying this is actually advantageous to America?
Gen. Spalding: Oh, absolutely it’s advantageous. Even if China was able to, from an economic perspective, capture the Eurasian landmass, I think there’s enough latent economic activity between just North and South America that you could have a very vibrant economy. Remember, the United States is primarily driven by consumption and zone economy. So adding in, investing in the countries of Latin America in a way we never have, right? We’ve really traditionally and only invested in the European countries. If we could invest in Latin American countries that have plenty of people that want to work, a lot of raw materials and build those up to be thriving, developed economies just like in Europe, you would have a strong North and South America that would be very economically vibrant. And so, of course, now you’ve got the Europeans essentially realizing what they’ve bought into with China, and so I think over time you would see those pare away.
So, I mean, if you’re just talking purely in economic terms, which is by the way, what I think we are talking in, I don’t think anybody’s going to go to war with us again. Nuclear weapons is a terrible thing to contemplate. And so we’re talking about really economic competition, and is an open model or a closed model better? I think even if we were decoupled from the Eurasian land mass, which is what China’s strategy is, that as long as we essentially cultivated North and South America as one economic union, it would be incredibly prosperous for the United States and for the countries of Latin American and Canada.
Mr. Jekielek: But we would have shed this parasitic relationship.
Gen. Spalding: Right. Which in and of itself probably adds 1 to 3 percent GDP growth into the next decade.
Mr. Jekielek: Rob Spalding, fascinating to have you here.
Gen. Spalding: Thank you.