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America’s Global Strategy Is COLLAPSING — What China Does Next | Silk and Steel · UK Column Radio

• 0:01
  Speaker 1: Hello and welcome to another episode of the Silk and
• 0:04
  Speaker 1: Steel podcast. I'm your host, Carl Zott. Today, I have
• 0:08
  Speaker 1: back on the show, crowd's favorite, Dr. Warwick Powell from Australia,
• 0:12
  Speaker 1: who is an expert on geopolitics and China relations. Dr. Powell,
• 0:17
  Speaker 1: welcome back to the show.
• 0:19
  Speaker 2: Good to be back with you.
• 0:22
  Speaker 1: So what do you have for us this week? I mean,
• 0:28
  Speaker 1: there's a lot we could talk about because Every two weeks,
• 0:33
  Speaker 1: thanks to Trump, there's constant news. And I think it's
• 0:39
  Speaker 1: unintentional because Trump needs to create these constant news to
• 0:45
  Speaker 1: distract the public from his own issues. So where do
• 0:52
  Speaker 1: you want to start?
• 0:54
  Speaker 2: How about we start with actually an executive order that
• 0:58
  Speaker 2: President Trump signed in the last 24 hours, which was
• 1:01
  Speaker 2: to enable the deferment on the payment of taxes and
• 1:08
  Speaker 2: excises on diesel in the United States in the name
• 1:12
  Speaker 2: of reducing the cost of diesel. Now, the reason why
• 1:15
  Speaker 2: I wanted to start there is because I think it
• 1:17
  Speaker 2: opens up. It's like a gateway to just about everything
• 1:20
  Speaker 2: else that's going on because in that executive order itself,
• 1:24
  Speaker 2: it speaks to the political dilemmas leading up to the midterms,
• 1:31
  Speaker 2: which is what, in about four weeks or so, three
• 1:35
  Speaker 2: and a half, four weeks, it speaks to actually a
• 1:39
  Speaker 2: tacit recognition that the cost of energy, particularly for transportation
• 1:46
  Speaker 2: in the United States, is creating substantial pressures on trucking companies,
• 1:50
  Speaker 2: logistics transport, and also households who use diesel for their transport.
• 1:58
  Speaker 2: And the extent to which it is a crisis is
• 2:02
  Speaker 2: not so much reflected in the wording of the preamble
• 2:06
  Speaker 2: and the discussion around the executive order, but actually in
• 2:09
  Speaker 2: what Energy Secretary Wright said online and in an interview
• 2:14
  Speaker 2: in relation to this, and he actually talked about this
• 2:17
  Speaker 2: as a crisis. and Vice President Vance also talked about
• 2:23
  Speaker 2: this as an embodiment of President Trump's quick action on
• 2:27
  Speaker 2: important issues, blah, blah, blah. But what it tells us
• 2:30
  Speaker 2: is that this issue of energy costs is starting to
• 2:36
  Speaker 2: bite politically, and Trump is seeking, of course, to ameliorate
• 2:40
  Speaker 2: that heading into the midterms. But it also speaks to
• 2:44
  Speaker 2: a different problem, right? And it's a problem around narrative
• 2:48
  Speaker 2: control and what's going on in reality. So in the
• 2:51
  Speaker 2: previous two weeks, the narrative control effort that has been really,
• 2:55
  Speaker 2: you know, it's been dialed up a notch, has been
• 3:01
  Speaker 2: to create the impression that oil flows through the Strait
• 3:08
  Speaker 2: of Hormuz have been restored. They've returned to pre-February levels, 80%, 90%, 100%,
• 3:16
  Speaker 2: depending on what you're looking at, that tankers are moving
• 3:21
  Speaker 2: through or had been moving through the Strait without impediment
• 3:26
  Speaker 2: from the Iranians and that, therefore, the Iranian claims and
• 3:31
  Speaker 2: attempts to enforce those claims around the MOU and the management,
• 3:37
  Speaker 2: if you will, of the Strait of Hormuz have collapsed
• 3:40
  Speaker 2: and and that the United States essentially has been able
• 3:44
  Speaker 2: to prevail in this particular arm wrestle over the Strait
• 3:48
  Speaker 2: of Hormuz. The problem with that narrative is that, one,
• 3:53
  Speaker 2: we've had ongoing pressures on diesel prices. So even if
• 3:57
  Speaker 2: that narrative has some semblance of truth to it, the
• 4:01
  Speaker 2: experience that many Americans in particular are having and people elsewhere,
• 4:05
  Speaker 2: so we know that Europe and other places and here
• 4:07
  Speaker 2: in Australia and all through Asia, are experiencing significant upward
• 4:11
  Speaker 2: pressures on gasoline and diesel prices. But that's one factor.
• 4:15
  Speaker 2: Another factor is the fact that the spreads between the
• 4:19
  Speaker 2: cost of the crude and what the refined product diesel
• 4:24
  Speaker 2: is being sold for is extremely wide, which is also
• 4:27
  Speaker 2: suggestive that, in fact, the crude volumes really aren't what
• 4:33
  Speaker 2: they claim to be. We've got depletion of the strategic
• 4:37
  Speaker 2: petroleum reserves, which also It's suggestive that, in fact, the
• 4:41
  Speaker 2: flows have not returned to normal. And so you've got
• 4:45
  Speaker 2: a whole range of these factors and issues which, at
• 4:50
  Speaker 2: a minimum, makes you question whether or not the narratives
• 4:54
  Speaker 2: around American control over the Strait of Hormuz, the failure
• 4:57
  Speaker 2: of the Americans, the Iranians, to impose their ability to
• 5:03
  Speaker 2: control the Straits under the terms of the MOU, et cetera,
• 5:07
  Speaker 2: all of that, I think, is something that we should
• 5:11
  Speaker 2: be very sceptical about. And in fact, we also now
• 5:15
  Speaker 2: know in the last 24, 48 hours or so, that
• 5:20
  Speaker 2: Iran itself has intensified its attacks on ships as they're
• 5:26
  Speaker 2: passing through the strait, with reports of anywhere up to
• 5:32
  Speaker 2: eight or nine tankers, I think, and possibly more, have
• 5:35
  Speaker 2: been struck, that missiles have been fired at American naval
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  Speaker 2: vessels that have been escorting some of these tankers without
• 5:45
  Speaker 2: a retaliatory response at this stage from the United States.
• 5:48
  Speaker 2: And we also have seen now footage of the successful
• 5:55
  Speaker 2: attack on Saudi Arabian refinery and pipeline infrastructure. So once again,
• 6:03
  Speaker 2: I think we are at a stage in this very
• 6:07
  Speaker 2: fluid and unfolding conflagration, the war and everything else around it,
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  Speaker 2: that suggests that the United States' ability to exert its
• 6:25
  Speaker 2: authority over the space, whether it's the Strait of Hormuz,
• 6:30
  Speaker 2: whether it's the Houthis or what have you, is really
• 6:35
  Speaker 2: in doubt. And the last piece, which I think has
• 6:37
  Speaker 2: a lot of question marks about it at the moment,
• 6:41
  Speaker 2: is what appears to be a very hasty withdrawal of
• 6:44
  Speaker 2: American bombers from the base in the United Kingdom, ostensibly
• 6:49
  Speaker 2: because there'd been some reported threats of Iranian or some
• 6:55
  Speaker 2: other terrorist interventions. We've had reports, you know what I mean,
• 7:00
  Speaker 2: that those rather humorous stories about terrorists that little collection
• 7:06
  Speaker 2: of men who are stealing fuel, really, suddenly becoming the
• 7:12
  Speaker 2: focal point for an anti-terrorism intervention, which was really just
• 7:17
  Speaker 2: an amateurish false flag activity, it seems to me. So
• 7:23
  Speaker 2: I think we've got all of that going on at
• 7:24
  Speaker 2: the moment, and people need to really hold tight, not
• 7:27
  Speaker 2: only between now and the midterms, but what happens thereafter.
• 7:32
  Speaker 2: There is nothing normal about the state of affairs claims
• 7:36
  Speaker 2: to the contrary I think are demonstrably false. Exactly what
• 7:40
  Speaker 2: the state of play is is obviously impacted by the
• 7:44
  Speaker 2: fog of war at the moment. But anyone who believes
• 7:48
  Speaker 2: or wants to believe that the state of global oil
• 7:52
  Speaker 2: markets has miraculously returned to the situation before February I
• 7:57
  Speaker 2: think is kidding themselves. So that's our starting point for
• 8:04
  Speaker 2: this catch-up, I think.
• 8:07
  Speaker 1: Yeah. I mean, the fuel price is obviously now a
• 8:11
  Speaker 1: front issue in the November election. You know, many people
• 8:15
  Speaker 1: have complained about the rise in prices at the pump.
• 8:18
  Speaker 1: So why doesn't Trump just talk? Why doesn't he just
• 8:22
  Speaker 1: talk and accept, go back to the terms of MOU
• 8:28
  Speaker 1: with Iran and let the oil flow again from Strait
• 8:32
  Speaker 1: of Hormuz? Wouldn't that be better for his election chances? Well,
• 8:38
  Speaker 1: I don't think it'll affect things quickly enough anyway, right?
• 8:40
  Speaker 1: So you've got to remember, you know, logistics isn't something
• 8:43
  Speaker 1: you can turn on and off. Logistics has to be arranged.
• 8:46
  Speaker 1: You've got to have tankers available.
• 8:47
  Speaker 2: They've got to actually make meaningful contributions to the overall stock.
• 8:53
  Speaker 2: You've got to get them to the right refinery. So
• 8:56
  Speaker 2: remember when the war first broke out again, there were
• 8:59
  Speaker 2: tankers on the water, which kind of created a time
• 9:02
  Speaker 2: delay between the impact of the war itself and the
• 9:05
  Speaker 2: impact that had on upstream supply and eventually how it
• 9:08
  Speaker 2: took about 50, 60 days before it started to materialise
• 9:12
  Speaker 2: downstream because there were tankers already on the water. You've
• 9:16
  Speaker 2: got the same challenge in the reverse as well. If
• 9:18
  Speaker 2: there's not a lot on the water and your reserves
• 9:21
  Speaker 2: are being chewed up, it would take time in any
• 9:24
  Speaker 2: regards for anything new coming out of the Gulf to
• 9:28
  Speaker 2: ultimately lead to an impact at the pump. So that's
• 9:32
  Speaker 2: your first issue. Tacoing is also, I think, a particular
• 9:35
  Speaker 2: problem because the United States and just about every president
• 9:41
  Speaker 2: that I can think of is not one to admit defeat.
• 9:47
  Speaker 2: What they will do is try and kick the can
• 9:50
  Speaker 2: down the road in some shape or another, hopefully to
• 9:54
  Speaker 2: find some other way of solving this problem without conceding
• 9:58
  Speaker 2: defeat or accepting defeat. some kind of a defeat. And
• 10:03
  Speaker 2: if they can't do that, they're going to try and
• 10:04
  Speaker 2: kick the can down the road even further still so
• 10:06
  Speaker 2: that it becomes the next administration's problem. So I think
• 10:10
  Speaker 2: kicking the can down the road now with four weeks
• 10:14
  Speaker 2: to go before the midterms is really, in a political
• 10:16
  Speaker 2: cycle sense, too late. But there are broader issues now
• 10:22
  Speaker 2: because what's at play in West Asia around the Persian
• 10:25
  Speaker 2: Gulf isn't just a question of the Strait of Hormuz.
• 10:29
  Speaker 2: It actually goes to the fundamental security architecture and the
• 10:32
  Speaker 2: fabric of the interactions between the states in that region.
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  Speaker 2: We now have, because of the outbreak of the conflict
• 10:42
  Speaker 2: between the Houthis, Ansar Allah, and the Saudi regime, There
• 10:49
  Speaker 2: are real risks, I think, at the moment to the
• 10:52
  Speaker 2: stability of the Saudi regime. So they've got problems of
• 10:55
  Speaker 2: their own. And should the Saudi regime collapse or significantly
• 11:02
  Speaker 2: weaken and fragment, that will have propagation effects across the
• 11:06
  Speaker 2: region where other actors will see this as opportunities to
• 11:10
  Speaker 2: reassert their own interests that have long been subordinated by
• 11:15
  Speaker 2: the dominance of the Saud family. and their interests. And
• 11:22
  Speaker 2: we could see the beginnings of something that you could
• 11:26
  Speaker 2: sort of think of as a very open-ended reconfiguration of
• 11:29
  Speaker 2: what the region looks like. And I say open-ended because
• 11:32
  Speaker 2: there's so many moving parts that having some sense of
• 11:37
  Speaker 2: precisely where these ends are, I think, is fraught with
• 11:43
  Speaker 2: incredible danger. And it could take a long time. There
• 11:48
  Speaker 2: are activists who are committed to the idea of Arab unification.
• 11:54
  Speaker 2: There are those who persist in trying to stymie that.
• 11:59
  Speaker 2: So the monarchies, of course, have strong interest in stymieing that.
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  Speaker 2: We have competing interests between the different monarchies themselves. We,
• 12:09
  Speaker 2: of course, have Turkey and others active in the region.
• 12:13
  Speaker 2: So I think the material conditions, of firstly a weakening
• 12:20
  Speaker 2: American presence and what that means to those regimes that
• 12:25
  Speaker 2: have been propped up and enabled by America's projected power
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  Speaker 2: into region. As all of that unravels, we don't really
• 12:38
  Speaker 2: know what the vacuum that's created a result begins to
• 12:43
  Speaker 2: look like as it gets filled by others. And again,
• 12:46
  Speaker 2: I think we are going to need to, you know,
• 12:48
  Speaker 2: people who think that these things sort of just end
• 12:50
  Speaker 2: because I think we watch too many movies and social
• 12:52
  Speaker 2: media encourage us to think in very short time spans, right,
• 12:57
  Speaker 2: very instantaneous results. I think we need to take the
• 13:00
  Speaker 2: view that just as the situation in Ukraine is now
• 13:05
  Speaker 2: into its fifth year, and in fact we know it
• 13:08
  Speaker 2: goes back further, but the special military operation in Ukraine
• 13:13
  Speaker 2: itself is now into the fifth year and let's not
• 13:18
  Speaker 2: be surprised by the by the by the prospect that
• 13:22
  Speaker 2: the conflicts in west asia will also continue for a
• 13:28
  Speaker 2: number of years to come and that's going to have
• 13:31
  Speaker 2: all sorts of ramifications not just within that region itself
• 13:34
  Speaker 2: but globally partly because of the medium-term impact that that
• 13:39
  Speaker 2: has on global oil which will lead to um accelerated
• 13:46
  Speaker 2: in parts of the world to find alternatives, such as electrification.
• 13:51
  Speaker 2: And that in and of itself will create a new
• 13:54
  Speaker 2: set of dynamics as old dependencies fall away and new
• 14:00
  Speaker 2: networks and new dependencies emerge. I want to ask how.
• 14:08
  Speaker 1: is China going to deal with and what impact it
• 14:11
  Speaker 1: will have on China. Recently, I was watching an interview
• 14:15
  Speaker 1: between Stephen Waltz and Chris Tucker. Stephen Waltz reinstated what
• 14:24
  Speaker 1: has been repeated many times among the Washington establishment, the
• 14:38
  Speaker 1: idea that somehow U.S. missed a window of opportunity to
• 14:44
  Speaker 1: contain China because of September 11th. Because around 2000, Bush
• 14:51
  Speaker 1: administration was already aware the potential rise of China and
• 14:57
  Speaker 1: was already working on ways to contain China. But then
• 15:03
  Speaker 1: September 11th happened So U.S. attention has been redirected to
• 15:07
  Speaker 1: Middle East. U.S. got bogged down in this great war
• 15:10
  Speaker 1: on pair. And this presented a golden opportunity for China
• 15:16
  Speaker 1: to develop and to now become a peer competitor. And
• 15:21
  Speaker 1: Stephen Walt's takeaway from that is like, okay, yeah, we
• 15:25
  Speaker 1: messed up that we allowed China to rise. And now
• 15:28
  Speaker 1: they're a big threat to the American hegemony. Do you
• 15:35
  Speaker 1: see the current U.S. obsession, I mean, U.S. quagmire in
• 15:40
  Speaker 1: the Strait of Hormuz will lead to some kind of
• 15:46
  Speaker 1: detente between U.S. and China, as we have seen with
• 15:53
  Speaker 1: Trump's visit to China and Xi Jinping's visit to the
• 15:56
  Speaker 1: United States?
• 15:58
  Speaker 2: Well, I think that there's two parts here. The first
• 16:00
  Speaker 2: part is this issue of the war on terror and the...
• 16:05
  Speaker 2: the role that that played in drawing American attention and
• 16:08
  Speaker 2: resources away from other pressing issues at the time. Well,
• 16:13
  Speaker 2: you know, history is what it is, right? And if
• 16:15
  Speaker 2: you actually go back to 2001, and I remember where
• 16:20
  Speaker 2: I was, I was literally sitting at my dining table
• 16:25
  Speaker 2: and through, at an angle through a door, I could
• 16:28
  Speaker 2: see the television in the lounge room. And at that time,
• 16:32
  Speaker 2: my housemate actually came called out and said, check out
• 16:38
  Speaker 2: what's on the TV. And I looked up and of
• 16:40
  Speaker 2: course it was images of the airplanes flying into the buildings.
• 16:44
  Speaker 2: But that created an incredibly powerful focal point, culturally, emotionally, psychologically,
• 16:54
  Speaker 2: that really went to the heart of American popular culture's
• 17:00
  Speaker 2: sense of its invulnerability And this reflected all the way
• 17:06
  Speaker 2: through the political class as well. If there's one thing
• 17:10
  Speaker 2: that the political class in the United States has in
• 17:12
  Speaker 2: common throughout the ages, it is a sense of its
• 17:15
  Speaker 2: own invulnerability, courtesy of its material capabilities, together with its geography, right?
• 17:22
  Speaker 2: It could go and pursue its various adventures around the
• 17:25
  Speaker 2: world in the safe belief that two great oceans and
• 17:29
  Speaker 2: two compliant neighbours makes it essentially an impregnable And that
• 17:36
  Speaker 2: belief was shaken to the core. I don't recall at
• 17:41
  Speaker 2: that time anybody in the United States saying, hang on
• 17:46
  Speaker 2: a moment, let's think again about whether or not we
• 17:50
  Speaker 2: should prosecute this war against global terror, just in case
• 17:54
  Speaker 2: it diverts resources away from our pressing problems of an
• 17:59
  Speaker 2: emerging China threat. There was no discussion of the sort.
• 18:03
  Speaker 2: So the idea of rewriting history almost as a lament,
• 18:08
  Speaker 2: almost as if, well, you know, that was a mistake.
• 18:11
  Speaker 2: You can only make a mistake if it was a
• 18:13
  Speaker 2: realistic choice on the table at the time. It wasn't, right?
• 18:17
  Speaker 2: There was no realistic choice that was subject to consideration
• 18:22
  Speaker 2: at the time about whether American resources should be committed
• 18:26
  Speaker 2: to this war on terror, global war on terror, or
• 18:30
  Speaker 2: let that go, don't worry about that, Let's just keep
• 18:34
  Speaker 2: doing or let's commit resources to some containment strategy around China.
• 18:39
  Speaker 2: And what that all told us as time passed on
• 18:43
  Speaker 2: is that, in fact, American material capacity was already stretched,
• 18:50
  Speaker 2: already stretched 25 years ago, not just become stretched in
• 18:54
  Speaker 2: the last five years or 10 years, but it was
• 18:57
  Speaker 2: already stretched back then. You've got to remember that American
• 19:01
  Speaker 2: military planning always planned on the idea of being able
• 19:04
  Speaker 2: to fight two contemporaneous full-scale wars against full-scale adversaries. Well, clearly,
• 19:11
  Speaker 2: I think the reality of the experience post 9-11 actually
• 19:18
  Speaker 2: meant that it couldn't. It already could not do that.
• 19:22
  Speaker 2: And what we're seeing now with its exposure via NATO
• 19:26
  Speaker 2: in Ukraine together with the situation in West Asia The
• 19:29
  Speaker 2: fact that its arsenal has been significantly depleted, its supply
• 19:33
  Speaker 2: chain is chronically limited, et cetera, et cetera, really tells
• 19:37
  Speaker 2: us that for the best part of a quarter century,
• 19:40
  Speaker 2: the United States' capacity to wage the kinds of wars
• 19:43
  Speaker 2: that are talked about being prepared to wage simply hasn't
• 19:46
  Speaker 2: been there. So I think that that's that one.
• 19:50
  Speaker 1: Issue.
• 19:50
  Speaker 2: The issue of the unfolding disaster in West Asia and
• 20:00
  Speaker 2: whether or not that creates both a need and space
• 20:03
  Speaker 2: for a new modus vivendi between China and the United States,
• 20:08
  Speaker 2: I think is a possibility, but it's not a certainty.
• 20:14
  Speaker 2: The United States, as we discussed last time, is a
• 20:19
  Speaker 2: complex body politic with many competing interests and embedded muscle memory.
• 20:26
  Speaker 2: So this idea of China being an adversary, America's greatest
• 20:30
  Speaker 2: competitive challenge, et cetera, that needs to be contained and,
• 20:33
  Speaker 2: if possible, actually held back. and better still discombobulated and
• 20:41
  Speaker 2: fragmented and destroyed as a threat. Those aspirations are deeply
• 20:47
  Speaker 2: embedded in the institutions of state and the think tank
• 20:50
  Speaker 2: apparatuses that essentially feed, you know, the political class on
• 20:57
  Speaker 2: Capitol Hill. So the idea that that particular political class
• 21:02
  Speaker 2: is suddenly, or that segment of the political class is
• 21:05
  Speaker 2: going to just, walk away from those commitments I think
• 21:10
  Speaker 2: is a little bit fanciful. It's like thinking that that
• 21:18
  Speaker 2: segment of the political class that has been prosecuting for
• 21:22
  Speaker 2: 30 years the ambitions of fragmenting Russia and essentially discombobulating
• 21:30
  Speaker 2: Russia and pulling it apart just because of various setbacks
• 21:37
  Speaker 2: along the way, don't expect them to abandon those ambitions.
• 21:41
  Speaker 2: And we see this playing out continually in the Ukraine
• 21:44
  Speaker 2: theatre at the moment. So I think that the domestic
• 21:49
  Speaker 2: political environment is very, very tough for those who advocate
• 21:55
  Speaker 2: for some kind of a 21st century detente or a
• 21:58
  Speaker 2: great power, a modus vivendi. The other reasons I think
• 22:04
  Speaker 2: that make that very difficult is that the United States
• 22:08
  Speaker 2: itself has not yet, even those who are mildly dovish,
• 22:14
  Speaker 2: you know, if that sort of description even makes sense,
• 22:16
  Speaker 2: but even those who are less hawkish, I'm not convinced
• 22:20
  Speaker 2: that they necessarily have a view that is willing to
• 22:28
  Speaker 2: essentially let go of American global ambitions, even without the
• 22:33
  Speaker 2: strong animosity towards China, the idea that America is the
• 22:38
  Speaker 2: preeminent power everywhere you go in the world, including Asia,
• 22:43
  Speaker 2: the idea that the United States can walk back from
• 22:48
  Speaker 2: its historic commitments to Taiwan, for example. All of that,
• 22:53
  Speaker 2: I think, is a very difficult road to walk for
• 22:59
  Speaker 2: just about everybody in the political class. You know, in
• 23:02
  Speaker 2: the last fortnight or so, we saw a report put
• 23:08
  Speaker 2: out by an American defence analyst, Jennifer Kavanagh, which basically
• 23:14
  Speaker 2: argued that the United States' interests are served by the
• 23:20
  Speaker 2: recognition of its material limitations in Asia, so much so
• 23:26
  Speaker 2: that it really should pull out of the first island
• 23:28
  Speaker 2: chain and retreat back to the second island chain. Now,
• 23:33
  Speaker 2: when that particular report hit the ether, hit everyone's screens,
• 23:42
  Speaker 2: what was most telling was actually the reactions to it.
• 23:46
  Speaker 2: The Washington establishment was apoplectic. The Taiwan lobby, of course,
• 23:53
  Speaker 2: freaked out. Folk in Japan were confused, just as they
• 23:59
  Speaker 2: were confused by President Trump and President Xi both recognising
• 24:07
  Speaker 2: that China and the United States were allies during the
• 24:09
  Speaker 2: Second World War. So all of that, I think, makes
• 24:14
  Speaker 2: it very hard for any kind of significant movement forward
• 24:20
  Speaker 2: in the next two years towards a new great power, Dayton.
• 24:27
  Speaker 2: It's not to say that the circumstances aren't in a sense,
• 24:31
  Speaker 2: grinding their way in that direction. But it's not going
• 24:35
  Speaker 2: to happen easily for now, I don't think. And if Trump,
• 24:45
  Speaker 2: who seems to be the least hawkish of them all,
• 24:48
  Speaker 2: by and large, though President Trump's often a little bit
• 24:52
  Speaker 2: inconsistent and all over the place with most of these things,
• 24:55
  Speaker 2: but without him, If you looked around that Washington establishment,
• 25:03
  Speaker 2: I'm not sure that there's anyone else there that could
• 25:07
  Speaker 2: present anything that resembles a moderated view on China at
• 25:13
  Speaker 2: the moment, whether it's AI, whether it's trade. You know,
• 25:18
  Speaker 2: we've seen even Trump's own appointee in Beijing, Ambassador Perdue,
• 25:24
  Speaker 2: recently complain about the rare earths situation and carrying on
• 25:30
  Speaker 2: about authoritarian China, et cetera, et cetera. So I do
• 25:36
  Speaker 2: think that there is, in a sense, a historical necessity
• 25:40
  Speaker 2: emerging from a chastened America coming out of this conflict
• 25:47
  Speaker 2: in West Asia, but it won't take place or it's
• 25:51
  Speaker 2: highly improbable to take place in the next two years.
• 25:54
  Speaker 2: It might take another 10 to 15 years for it
• 25:57
  Speaker 2: to unfold.
• 26:02
  Speaker 1: Yeah. I mean, Stephen Weld, and for people who don't know,
• 26:08
  Speaker 1: he's the co-author with John Mearsheimer on the book Israeli Lobby.
• 26:14
  Speaker 1: And their view of real politics is quite similar. They
• 26:20
  Speaker 1: are arguing that, you know, U.S. is doing imperialism really
• 26:24
  Speaker 1: stupidly at the moment.
• 26:26
  Speaker 2: U.S.
• 26:27
  Speaker 1: Can do the imperialism more smarter, right? And what should
• 26:30
  Speaker 1: happen is United States should ditch the whole Ukraine proxy
• 26:37
  Speaker 1: war with Russia, pull out of the Middle East and
• 26:41
  Speaker 1: put all its limited resources into East Asia to contain China,
• 26:47
  Speaker 1: because China is the next greatest competitor to the U.S.
• 26:51
  Speaker 1: hegemony around the world. You know, the theory is very beautiful.
• 26:56
  Speaker 1: I mean, I mean, rationally, everything makes sense. But if
• 26:59
  Speaker 1: you look at the record of the U.S. administration, apparently
• 27:04
  Speaker 1: nobody in Washington is following that playbook because they have
• 27:08
  Speaker 1: only gotten deeper into the Ukrainian crisis. They got dragged
• 27:12
  Speaker 1: into the Middle East quagmire again. And essentially, even though
• 27:18
  Speaker 1: they have been talking about pivoting to Asia since Hillary
• 27:23
  Speaker 1: Clinton was the Secretary of State, that was more than
• 27:26
  Speaker 1: 10 years ago, and Now, essentially, U.S. is actually pivoting
• 27:33
  Speaker 1: resources away from East Asia to places like West Asia,
• 27:39
  Speaker 1: to Persian Gulf. So, yeah, so, you know, like the
• 27:43
  Speaker 1: whole assumption of Mearsheimer and Stephen Waltz is that the U.S.
• 27:50
  Speaker 1: government is a wild oil machine that's run by, it's
• 27:54
  Speaker 1: like a monolith with this goal on preserving American hegemony.
• 28:00
  Speaker 1: But the problem is, as you say, the U.S. is
• 28:03
  Speaker 1: this very complex organization of many competing interests, many competing
• 28:09
  Speaker 1: oligarchs fighting at the top, and they all have their
• 28:13
  Speaker 1: own different interests. And the Israeli lobby wields a lot
• 28:19
  Speaker 1: of influence, which makes sure to keep the United States
• 28:23
  Speaker 1: in the Middle East for the foreseeable future.
• 28:26
  Speaker 3: What But what's China's response to all this? Because a
• 28:37
  Speaker 3: lot of people are saying it looks like the U.S.
• 28:39
  Speaker 1: Is lashing out. The U.S. is chimped out at the
• 28:45
  Speaker 1: prospect of losing its hegemony. Why does China just sit
• 28:49
  Speaker 1: back and do nothing? Why is China not doing more
• 28:55
  Speaker 1: to counter the U.S. hegemonic ambitions um what do you
• 29:01
  Speaker 1: say to that.
• 29:03
  Speaker 2: Yeah look um in fact i've had quite a number
• 29:06
  Speaker 2: of discussions on and off over the last six months
• 29:09
  Speaker 2: with people who for various reasons argue that china should
• 29:13
  Speaker 2: be more assertive at this current moment either as opportunity
• 29:18
  Speaker 2: you know the window of opportunity is there to take
• 29:20
  Speaker 2: advantage of um american weakness um or that You know,
• 29:26
  Speaker 2: China needs to step up and, you know, do more
• 29:32
  Speaker 2: to defend the United Nations international order or what have you.
• 29:37
  Speaker 2: And I can understand where all of that comes from.
• 29:39
  Speaker 2: I think China's view, so firstly, let's just try and
• 29:44
  Speaker 2: describe and understand where it's coming from and perhaps why
• 29:47
  Speaker 2: it might be coming at the situation this way before
• 29:51
  Speaker 2: thinking about possibilities. I think China's general view is that
• 29:56
  Speaker 2: when the world is experiencing such dramatically upheaval, particularly surrounding
• 30:04
  Speaker 2: the maelstrom that has partly been caused by, but it's
• 30:09
  Speaker 2: partly being inadvertently impacted by the United States. That in
• 30:18
  Speaker 2: and of itself is something that demands of China a
• 30:23
  Speaker 2: calm disposition. So China's assessment of what the world needs
• 30:29
  Speaker 2: and what's in China's interest at the same time is
• 30:32
  Speaker 2: a calm and stable China because there's so much madness
• 30:37
  Speaker 2: and craziness going on. So that's, I think, the first thing. Now,
• 30:41
  Speaker 2: some people might say, no, no, China really should be
• 30:44
  Speaker 2: contributing to the mayhem and taking advantage of it. But
• 30:48
  Speaker 2: I think it's quite clear that that's not part of
• 30:51
  Speaker 2: Beijing's standard calculus and, therefore, regardless of what people say,
• 30:56
  Speaker 2: it's unlikely to do that. I think the second thing, though,
• 31:00
  Speaker 2: is that China is not inactive either, but it's active
• 31:04
  Speaker 2: in a very particular set of ways. One is that
• 31:07
  Speaker 2: it continues to try to make use of the institutions
• 31:13
  Speaker 2: of the United Nations and those sorts of forums to
• 31:18
  Speaker 2: present views. Now, of course, political realists will look at
• 31:23
  Speaker 2: that and just sort of snigger away and say, well,
• 31:25
  Speaker 2: that's pretty pointless, really, because the United Nations has no teeth.
• 31:29
  Speaker 2: But be that as it may, I think the first
• 31:32
  Speaker 2: thing China does is that it seeks to at least
• 31:36
  Speaker 2: conduct itself in a way as if these institutions do matter.
• 31:39
  Speaker 2: And I think it does that in part because it
• 31:41
  Speaker 2: knows that the minute it doesn't and you let these
• 31:44
  Speaker 2: institutions totally fall apart, rebuilding them actually becomes far more difficult.
• 31:49
  Speaker 2: Preserving flawed institutions is better than trying to rebuild from scratch.
• 31:59
  Speaker 2: I think that that's the calculus as well. Again, some
• 32:01
  Speaker 2: people will say, no, no, let it go, build it
• 32:04
  Speaker 2: up from scratch. But at the moment, that's China's calculus.
• 32:09
  Speaker 2: I think the third thing, or the second thing that
• 32:13
  Speaker 2: it's actively doing, but the third part of this is
• 32:15
  Speaker 2: that it is doing what it believes to be the
• 32:19
  Speaker 2: most necessary contribution to the medium and long run transformation
• 32:28
  Speaker 2: of the global economic system and that is by implementing
• 32:33
  Speaker 2: and making available to as many countries as possible the
• 32:37
  Speaker 2: means by which they can become more developed than they
• 32:41
  Speaker 2: have been historically and they're doing this because it reduces
• 32:45
  Speaker 2: points of systemic vulnerability right so it's good for development
• 32:50
  Speaker 2: so china's been a friend of the global south it's
• 32:53
  Speaker 2: it sees itself still as a member of the Global South.
• 32:56
  Speaker 2: It is a developing country. Yes, we know that it's
• 33:01
  Speaker 2: highly developed in all sorts of ways, but as many
• 33:04
  Speaker 2: of your viewers will know and your own travels will
• 33:07
  Speaker 2: tell you, you don't actually need to go that far
• 33:10
  Speaker 2: away from the big, big cities to see a country
• 33:14
  Speaker 2: that is still yearning for a lot of development. So
• 33:19
  Speaker 2: I think China is prosecuting a strategy around development. It's
• 33:28
  Speaker 2: also creating in its own way some possible parallel institutions
• 33:35
  Speaker 2: that go to questions of security, whether it's through things
• 33:38
  Speaker 2: like BRICS, which is actually much more of a development institution,
• 33:41
  Speaker 2: I might add, not a security network, but it's more
• 33:44
  Speaker 2: of an economic development network. But through things like the
• 33:47
  Speaker 2: Shanghai Cooperation Organisation, it is starting to, I think, flesh
• 33:52
  Speaker 2: out an institutional sense of what a stable multipolar future
• 33:59
  Speaker 2: might look like as opposed to a chaotic multipolar future.
• 34:03
  Speaker 2: It's also laid out a roadmap. So we've got development,
• 34:06
  Speaker 2: we've got security, we've also got this idea of living
• 34:12
  Speaker 2: in a world of difference. So this is actually a
• 34:15
  Speaker 2: direct challenge to the historical modus operandi of Western liberalism,
• 34:21
  Speaker 2: which is to bland out global difference by imposing a
• 34:25
  Speaker 2: very particular version of civilization and modernization. So China is
• 34:30
  Speaker 2: articulating a sense of what it is to live in
• 34:34
  Speaker 2: a world of difference. And lastly, it is now starting
• 34:40
  Speaker 2: to also tackle the wider questions of governance. You'll notice
• 34:43
  Speaker 2: that I've articulated four core things there, and they're actually
• 34:45
  Speaker 2: the four pieces of China's major interventions globally around its proposals.
• 34:52
  Speaker 2: Global development, global security, global civilization, global governance. So that,
• 35:00
  Speaker 2: in a sense, is what China's doing. So the question
• 35:04
  Speaker 2: to me is arguably twofold. One, is that the right path?
• 35:08
  Speaker 2: And are they doing it quickly enough and rapidly enough?
• 35:13
  Speaker 2: And my own sense is that, by and large, it's
• 35:18
  Speaker 2: about as good as it's going to get, unless... it's
• 35:22
  Speaker 2: willing to entertain a kinetic conflict somewhere. And at this stage,
• 35:29
  Speaker 2: it's not willing to entertain a kinetic conflict somewhere. That's
• 35:33
  Speaker 2: not to say that it won't, but it's to say
• 35:36
  Speaker 2: that right now, it's not willing to push things further
• 35:42
  Speaker 2: in a way that creates greater risks of kinetic conflict,
• 35:44
  Speaker 2: particularly with the United States. So that's where I think
• 35:48
  Speaker 2: China's response is. Obviously, it's looking after home base first, right?
• 35:52
  Speaker 2: making sure that 1.4 billion people have got food on
• 35:55
  Speaker 2: the table, have got electricity, have got functional public services, water, wastewater, transportation, education,
• 36:05
  Speaker 2: you name it. So they're the things that China's worried about.
• 36:08
  Speaker 2: It's trying to create a developing country that's also in
• 36:15
  Speaker 2: the middle of fundamental transitions. where it can't rely on
• 36:19
  Speaker 2: things like fossil fuels alone for developmental purposes and has
• 36:22
  Speaker 2: to do things in a different way. All of that
• 36:24
  Speaker 2: brings an incredible amount of challenge to the way the
• 36:30
  Speaker 2: system works. I mean, there's stresses everywhere because there's change.
• 36:37
  Speaker 2: And bringing a population along with you on this transformational
• 36:42
  Speaker 2: journey is actually your most challenging thing to do from
• 36:45
  Speaker 2: the point of view of governance. And so that's where
• 36:50
  Speaker 2: I think China's coming from. I think it's prepared itself
• 36:52
  Speaker 2: reasonably well for global oil disruptions. We've seen that for
• 36:56
  Speaker 2: the last six months. The question now is whether it
• 37:03
  Speaker 2: is able to accelerate its contributions into the global south
• 37:07
  Speaker 2: at an economic development infrastructure level together with the rest
• 37:11
  Speaker 2: of the infrastructure, right, which is to protect those countries
• 37:14
  Speaker 2: from the fallout of the unraveling of American hegemony, you know,
• 37:21
  Speaker 2: payment systems, standard systems, information technology, open source AI, you
• 37:27
  Speaker 2: name it. And so, you know, when people want a
• 37:33
  Speaker 2: China to, well, often people want China to be another America,
• 37:37
  Speaker 2: but just a nicer version to push back on the
• 37:39
  Speaker 2: United States. And if that's what the expectation is of China,
• 37:44
  Speaker 2: I'm pretty certain that those with that expectation will be
• 37:48
  Speaker 2: very disappointed.
• 37:51
  Speaker 1: Well said. I mean, China is obviously the most prepared
• 37:56
  Speaker 1: nation for the current energy crisis that was initiated by
• 38:01
  Speaker 1: the illegal U.S.-Israel attack on Iran. But however, this is
• 38:06
  Speaker 1: still having an impact on China. For example, China just
• 38:09
  Speaker 1: recently announced an export ban on diesel, gasoline, jet fuel,
• 38:17
  Speaker 1: all the refined gasoline product. China earlier, right after the
• 38:22
  Speaker 1: breakout of the war, China had placed that ban briefly,
• 38:25
  Speaker 1: and then you lifted the ban, basically save all the
• 38:30
  Speaker 1: countries in Southeast Asia and East Asia that needed the
• 38:34
  Speaker 1: refined petroleum products. But when China realized that's not necessary,
• 38:42
  Speaker 1: it lifted the ban. All the countries in China's neighborhood
• 38:47
  Speaker 1: are a sign of relief. But now China has reimposed
• 38:52
  Speaker 1: the export ban. For people who don't know, China is
• 38:55
  Speaker 1: one of the world's largest refiners of the petroleum product.
• 39:02
  Speaker 1: So now this is going to have an impact both
• 39:05
  Speaker 1: inside China and the border beyond. Is this because China
• 39:10
  Speaker 1: is seeing this conflict as possibly not ending anytime soon,
• 39:15
  Speaker 1: and it could develop into like a long-term energy crisis?
• 39:19
  Speaker 1: That's why it's trying to protect its domestic producers as
• 39:21
  Speaker 1: best it can?
• 39:24
  Speaker 2: Yeah, absolutely. I don't think that the folk in Beijing
• 39:28
  Speaker 2: are under any illusions that this conflict will resolve itself quickly.
• 39:35
  Speaker 2: And it entertained discussions with Iran, as we know, when
• 39:41
  Speaker 2: the SCO and then BRICS met, and then the Iranian
• 39:44
  Speaker 2: foreign minister visited Beijing. So within the space of three weeks,
• 39:48
  Speaker 2: there were three clearly very intense They're not casual get-togethers.
• 39:57
  Speaker 2: The subject matter is obviously substantial and serious. And those
• 40:01
  Speaker 2: discussions clearly went to, I think, a number of pivotal questions.
• 40:06
  Speaker 2: One is obviously the Strait of Hormuz in terms of
• 40:08
  Speaker 2: the flow of oil. China made statements together with President
• 40:13
  Speaker 2: Trump that it doesn't believe that any country should impose tolls,
• 40:17
  Speaker 2: et cetera, et cetera. It can say all those things.
• 40:21
  Speaker 2: that in a sense is the easy thing to say politically.
• 40:25
  Speaker 2: The truth is, is that it knows that it can't
• 40:28
  Speaker 2: do anything about the situation in which the Iranians will
• 40:32
  Speaker 2: impose some kind of payment. And in fact, I would
• 40:35
  Speaker 2: suggest that Chinese refineries and others over the course of
• 40:40
  Speaker 2: the last three or four weeks have actually been paying
• 40:43
  Speaker 2: in one way or another for the passage of some
• 40:46
  Speaker 2: of these tankers leaving the Strait of Hormuz as they've
• 40:50
  Speaker 2: wound their way to India and to China. So I
• 40:55
  Speaker 2: think China has been rebuilding some of its reserves. It
• 40:58
  Speaker 2: didn't use a lot of them. It's got more reserves
• 41:00
  Speaker 2: than most people, I think, understand, and most observers and
• 41:05
  Speaker 2: market analysts. But it has been building them up again.
• 41:10
  Speaker 2: Let's see whether or not this particular suspension of exports
• 41:15
  Speaker 2: is a long-term thing or is a short-term thing. Is
• 41:18
  Speaker 2: it really just managing a bit of a valve? because
• 41:23
  Speaker 2: I think one of the challenges with being China is
• 41:28
  Speaker 2: that it does have, it carried with it expectations of
• 41:33
  Speaker 2: what great powers are meant to do, you know, which
• 41:36
  Speaker 2: is to act responsibly. And responsibly means, you know, to
• 41:42
  Speaker 2: contribute to a stable environment for the world and the region.
• 41:45
  Speaker 2: It means to assist where you can. It can't lock
• 41:49
  Speaker 2: itself off and and let the smaller countries in the region,
• 41:54
  Speaker 2: in its immediate region, suffer badly because it's going to
• 41:57
  Speaker 2: get blamed badly. So these are the balancing acts that
• 42:00
  Speaker 2: I think Beijing is constantly having to deal with. And
• 42:04
  Speaker 2: I wouldn't be surprised if any of the countries in
• 42:08
  Speaker 2: Southeast Asia start to experience serious supply-side crunches leading to
• 42:15
  Speaker 2: not just increased prices, right, but leading to genuine distress, right,
• 42:20
  Speaker 2: food delivery, hospital, health-related issues, then I think China will
• 42:26
  Speaker 2: actually step up and come to the party because that
• 42:31
  Speaker 2: passes a threshold where any reasonable great, if it wants
• 42:37
  Speaker 2: to still be seen as a reasonable great power, doesn't
• 42:41
  Speaker 2: actually look at somebody and say, yeah, well, bad luck, right?
• 42:45
  Speaker 2: You know, you're a small guy and your people are
• 42:47
  Speaker 2: starving because you can't move things from A to B, but,
• 42:50
  Speaker 2: you know, too bad i think china will step in
• 42:54
  Speaker 2: um it's not going to let southeast asia crumble in
• 42:57
  Speaker 2: a mess that's not good for china either so um
• 43:02
  Speaker 2: so let's see how long this lasts for and what
• 43:05
  Speaker 2: happens i mean we've got the the big meeting in
• 43:08
  Speaker 2: in shenzhen in uh what about three weeks time i
• 43:12
  Speaker 2: guess end of november anyway um so that's the apex
• 43:17
  Speaker 2: uh you know let's see what comes out of that
• 43:18
  Speaker 2: as well but um China does not, I think, work
• 43:24
  Speaker 2: on the basis that this conflict and the consequence of
• 43:27
  Speaker 2: this conflict will suddenly resolve quickly. I think the other
• 43:30
  Speaker 2: thing you've got to bear in mind, Carl, and I
• 43:31
  Speaker 2: think we've touched on this last time as well, is
• 43:35
  Speaker 2: China's sort of broader role in regional reconfiguration. So, what,
• 43:40
  Speaker 2: four or five years ago, it actually began to play,
• 43:44
  Speaker 2: I think, an even more intense role in shaping the
• 43:49
  Speaker 2: the configuration of regional economic development collaboration and infrastructure through
• 43:54
  Speaker 2: agreements with Saudi Arabia, the UAE, the Gulf states and Iran. Now,
• 44:00
  Speaker 2: a lot of that, of course, has been unravelling as
• 44:03
  Speaker 2: a consequence of this war. But at the same time,
• 44:06
  Speaker 2: a lot of that continues to exist both in a
• 44:09
  Speaker 2: physical sense, but also in terms of things like payment systems,
• 44:17
  Speaker 2: and also in terms of the frayed fabric of regional
• 44:24
  Speaker 2: diplomatic connectivity. And I don't think China is being entirely
• 44:30
  Speaker 2: passive behind the curtain when it comes to trying to
• 44:40
  Speaker 2: frame the conditions in the region that can get the
• 44:47
  Speaker 2: protagonists to a point where at least they can find
• 44:52
  Speaker 2: some modest common ground. Now, that's going to be a
• 44:55
  Speaker 2: big move because the modest common ground, given that Iran's
• 45:00
  Speaker 2: interests need to be respected and taken into account, unless
• 45:04
  Speaker 2: you believe they're going to be destroyed, right, or decimated
• 45:07
  Speaker 2: or whatever President Trump's favourite word is, unless you believe that,
• 45:11
  Speaker 2: then Iran's interests are legitimate interests need to be respected,
• 45:16
  Speaker 2: which means that the Gulf monarchs are going to need
• 45:23
  Speaker 2: to recognise that. And that's going to change the way
• 45:28
  Speaker 2: the region works. And one of the big ways it's
• 45:30
  Speaker 2: going to change the region works is that the United
• 45:32
  Speaker 2: States will play a lesser role. Now, that's a difficult
• 45:36
  Speaker 2: thing to do because the United States really doesn't want
• 45:38
  Speaker 2: to play a lesser role. It's been forced to, right,
• 45:43
  Speaker 2: but The prestige effects together with losing direct capacity to
• 45:52
  Speaker 2: manipulate and influence a significant resource basin in the world
• 45:57
  Speaker 2: is something that I think, again, goes back to that
• 46:00
  Speaker 2: body politic question, right? Who inside the Beltway in Washington
• 46:06
  Speaker 2: is going to wake up one morning and accept and
• 46:10
  Speaker 2: embrace the opportunity of being relieved of this burden, right?
• 46:15
  Speaker 2: whether it's those who are sympathetic to the Greater Israel Project,
• 46:20
  Speaker 2: whether it's those who are concerned about American access to
• 46:23
  Speaker 2: oil and gas, whether it's American concerns about China's ability
• 46:28
  Speaker 2: to access oil and gas, whatever it all is, all
• 46:32
  Speaker 2: these interests will coalesce around a very common view inside
• 46:36
  Speaker 2: the Beltway, and that is America is not going to
• 46:39
  Speaker 2: leave this part of the world willingly. It's going to
• 46:42
  Speaker 2: need to be leave it out. And that's going to
• 46:46
  Speaker 2: perpetuate the problems and the conflicts in the region. And
• 46:50
  Speaker 2: it will take some time for these issues to get
• 46:53
  Speaker 2: worked out. And I suspect that there will be some
• 46:55
  Speaker 2: more violence along the way.
• 46:59
  Speaker 1: Yeah. Unfortunately, that's just the facts we're facing. Now, I
• 47:06
  Speaker 1: want to switch the topic to Europe for a little
• 47:09
  Speaker 1: bit because the European Union seem to have really adopted
• 47:18
  Speaker 1: kind of American approach toward China. You know, they're not,
• 47:22
  Speaker 1: they're now just drafted a new mechanism that threatened to
• 47:27
  Speaker 1: retaliate against China in terms of trade. You know, essentially,
• 47:33
  Speaker 1: they kind of copy the Trump trade policy and then
• 47:38
  Speaker 1: try to use that to apply to China. What is
• 47:41
  Speaker 1: the political impetus for this? Why are the Europeans doing
• 47:45
  Speaker 1: this right now? I mean, like you would think they
• 47:47
  Speaker 1: would benefit more from trading with China because the European
• 47:52
  Speaker 1: interest with China is primarily trade and China is still
• 47:57
  Speaker 1: one of the largest market for the European products. Why
• 48:02
  Speaker 1: are Europeans right now gearing up for a trade war
• 48:05
  Speaker 1: with China?
• 48:08
  Speaker 2: Blame shifting and distraction and squeaky wheels. The idea that
• 48:16
  Speaker 2: you would copy the playbook from Washington that has demonstrably
• 48:21
  Speaker 2: failed speaks volumes about the public policy and political imagination
• 48:27
  Speaker 2: of the elite in Brussels. Why you would do this
• 48:33
  Speaker 2: Unless you've got this sort of sense of, well, maybe
• 48:36
  Speaker 2: the Americans just didn't do it long enough and hard
• 48:38
  Speaker 2: enough and stick to it. Double down, which seems to
• 48:42
  Speaker 2: be the Brussels way. If it doesn't work now, it's
• 48:45
  Speaker 2: because we're not doing it enough. Let's double down and
• 48:47
  Speaker 2: let's do it 21 times. And so that's one. There's
• 48:53
  Speaker 2: a madness in Brussels. But why are they doing this? Well,
• 48:57
  Speaker 2: in part, I think it's because the... the industrial economies
• 49:02
  Speaker 2: of Europe, particularly Germany and France, who have a number
• 49:06
  Speaker 2: of key industrial categories that are subjected to Chinese competition now,
• 49:11
  Speaker 2: are essentially reacting to the squeaky wheels of corporations and
• 49:18
  Speaker 2: other vested interests And also I think they're reacting to
• 49:24
  Speaker 2: a political sense that the de-industrialisation that has been taking
• 49:30
  Speaker 2: place in these countries over the last three or four
• 49:33
  Speaker 2: years needs to be blamed on somebody. So this is
• 49:38
  Speaker 2: the China shock stuff. Now, we've seen it actually in
• 49:41
  Speaker 2: the last few days, the publication of a recent academic work.
• 49:45
  Speaker 2: It took some years to get published, but it was
• 49:47
  Speaker 2: a deconstruction, a statistical methodological deconstruction of one of the
• 49:52
  Speaker 2: preeminent pieces of academic pieces that laid the foundations for
• 49:56
  Speaker 2: the entire China shock narrative over the last 12, 13 years, right?
• 50:02
  Speaker 2: And it just sort of pulled it apart. But we're
• 50:05
  Speaker 2: back at the China shock thing again. And the reason
• 50:07
  Speaker 2: we've got China shock is because a political policy elite
• 50:13
  Speaker 2: confronting a reality of deindustrialisation is going to need to
• 50:17
  Speaker 2: find a culpable party. And the culpable party is either
• 50:22
  Speaker 2: someone else or they need to start to look at
• 50:25
  Speaker 2: themselves and the decisions made by industry within their own,
• 50:31
  Speaker 2: you know, polities. They're not going to go there. They're
• 50:34
  Speaker 2: not going to say, well, you know, policy decisions we've
• 50:37
  Speaker 2: made concerning low-cost energy Well, we're not going to blame
• 50:42
  Speaker 2: ourselves for that. We're not going to blame industrial capital
• 50:46
  Speaker 2: for investing offshore, for not investing enough. We're not going
• 50:50
  Speaker 2: to blame member state governments for running austerity programs for
• 50:53
  Speaker 2: the last 13, 14 years after the global financial crisis.
• 50:57
  Speaker 2: So if you can't look at yourself in the mirror
• 51:00
  Speaker 2: and hold yourself to account for the plight that you
• 51:04
  Speaker 2: and your industry now faces, then you've got to find
• 51:07
  Speaker 2: the culprit somewhere else. China is it. One of the
• 51:10
  Speaker 2: other interesting things I should say, Kyle, is this whole
• 51:14
  Speaker 2: China shock story. If you actually break down the product
• 51:19
  Speaker 2: categories into fairly granular product categorizations, what you find is that,
• 51:25
  Speaker 2: in fact, it's only in a relatively small number of
• 51:30
  Speaker 2: high-end categories that the Germans and the French are starting
• 51:34
  Speaker 2: to feel the pinch. In most other categories, there's not
• 51:37
  Speaker 2: an issue at all. And so this whole issue of,
• 51:42
  Speaker 2: you know, this China shock thing, it really does revolve
• 51:46
  Speaker 2: around the fact that five years ago, those industries that
• 51:51
  Speaker 2: were manufacturing things that were supposedly at the top end
• 51:56
  Speaker 2: of value adding and complexity and sophistication without any competition,
• 52:03
  Speaker 2: those industries and those enterprises are now coming under a
• 52:08
  Speaker 2: competitive challenge that they've never had to experience ever in
• 52:13
  Speaker 2: their entire life, ever. High-end German precision equipment and machinery,
• 52:22
  Speaker 2: for example. Motor vehicles. Motor vehicles has historically been a
• 52:27
  Speaker 2: really complex thing to make. An ICE motor vehicle, internal
• 52:34
  Speaker 2: combustion engine motor vehicle, has 15,000 to 20,000 parts. That's
• 52:39
  Speaker 2: a complex piece of engineering and assembly and production lines
• 52:44
  Speaker 2: and supply chains, ecosystems, you name it. Now China is
• 52:48
  Speaker 2: rolling out EVs with 200 to 300 parts, okay, where
• 52:53
  Speaker 2: a new EV comes off the line every 76 seconds,
• 52:57
  Speaker 2: where new model iterations are being done in 14 to
• 53:00
  Speaker 2: 18 months as opposed to three to four years. So,
• 53:04
  Speaker 2: of course, this is going to put pressure on traditional
• 53:07
  Speaker 2: industries that have been slow to act. But let's not
• 53:10
  Speaker 2: look at that. Let's not look at why it is
• 53:13
  Speaker 2: that these companies have been slow to drive the development
• 53:19
  Speaker 2: and application of research and development, slow to adopt the
• 53:23
  Speaker 2: latest in technologies, particularly around electric vehicles and other forms
• 53:29
  Speaker 2: of new energy, I might add, like ethanol and things.
• 53:33
  Speaker 2: Why is it? that so much of this industrial base
• 53:36
  Speaker 2: remains a laggard and it's been caught out. Instead of
• 53:42
  Speaker 2: asking those questions, we're just going to blame someone else.
• 53:47
  Speaker 2: It's a little bit sad, actually. It really is a
• 53:50
  Speaker 2: bit sad because Europe's industrial future can be extended and
• 54:01
  Speaker 2: given life to through deeper integration and collaboration with supply
• 54:07
  Speaker 2: chains involving Chinese companies. But at the moment, given the
• 54:12
  Speaker 2: politics of Europe, that's not going to happen. So there
• 54:18
  Speaker 2: you go. They'll make foolish decisions again. It'll just be
• 54:22
  Speaker 2: another round of foolish public policy. And who loses? The
• 54:29
  Speaker 2: question I'm always interested in, Kyle, is, In the end,
• 54:32
  Speaker 2: who are the real losers out of all of this? Well,
• 54:34
  Speaker 2: maybe there is a bit of protectionism and will protect
• 54:37
  Speaker 2: a relatively small number of shareholders and others. But the
• 54:40
  Speaker 2: big losers is the mass of the working people of
• 54:44
  Speaker 2: Europe who will be exposed to reduced choices, higher costs,
• 54:51
  Speaker 2: lower quality. So the living standards of ordinary working Europeans
• 54:58
  Speaker 2: will actually be diminished dramatically. by these policies rather than enhanced.
• 55:05
  Speaker 2: There are many case studies where European living standards have
• 55:08
  Speaker 2: been improved by intensive collaboration with companies from China. But
• 55:14
  Speaker 2: that's not the current story at the moment. And it
• 55:17
  Speaker 2: looks like those voices are going to lead them up
• 55:22
  Speaker 2: further up, not just lead them up, but lead them
• 55:24
  Speaker 2: further up the economic cul-de-sac, the cul-de-sac that they allowed
• 55:29
  Speaker 2: themselves to be led down by the Americans. And in fact,
• 55:33
  Speaker 2: they hasten themselves through their foolish policies concerning energy.
• 55:43
  Speaker 1: Yeah. I also saw some people argue online that this
• 55:48
  Speaker 1: is all just political grandstanding. It's all the European politicians
• 55:54
  Speaker 1: that are just doing this as a political gesture, but
• 56:00
  Speaker 1: they're probably never going to go actually implement those trade
• 56:07
  Speaker 1: tools against China because too much is at stake.
• 56:12
  Speaker 2: Well, they might not. I mean, look, politicians are known
• 56:22
  Speaker 2: for this sort of stuff. And And no doubt some
• 56:30
  Speaker 2: of them who are backing this publicly are privately hoping
• 56:33
  Speaker 2: that they'll never have to implement any of it. The issue, though,
• 56:39
  Speaker 2: isn't whether or not there's a group of politicians who
• 56:42
  Speaker 2: occupy that kind of space. It's whether the political and
• 56:46
  Speaker 2: economic pressures build in a way that forces their hand.
• 56:50
  Speaker 2: I don't know whether it will or it won't, right?
• 56:51
  Speaker 2: Because you see waxing and waning. I mean, you see
• 56:54
  Speaker 2: this out of the French government. where Macron one day
• 56:58
  Speaker 2: will say one thing and then on another day say
• 57:00
  Speaker 2: the total opposite. And whether the elections coming up over
• 57:09
  Speaker 2: the next 12 to 24 months is going to change
• 57:12
  Speaker 2: that as well. What's the impact, for instance, of political
• 57:18
  Speaker 2: success of, say, the National Front in France or the
• 57:23
  Speaker 2: ongoing political success of, the alternative for Deutschland, is that
• 57:28
  Speaker 2: going to reshape the political coalitions that create the pressures
• 57:35
  Speaker 2: for different policy directions, right? Will that lock in the
• 57:42
  Speaker 2: incumbent political elite to this particular pathway as part of
• 57:45
  Speaker 2: their attempt to hold the ground? Because one of their
• 57:48
  Speaker 2: weak points now politically quite clearly is the energy costs
• 57:51
  Speaker 2: on households and industry and de-industrialisation. Now, how are they
• 57:57
  Speaker 2: going to create the impression that they're capable of doing
• 57:59
  Speaker 2: something meaningful about this? And so politics often leads to,
• 58:07
  Speaker 2: particularly electoral politics, leads to bad decision-making when desperate people
• 58:14
  Speaker 2: seek to cling onto power. It would be, look, it's easy,
• 58:20
  Speaker 2: of course, to sit back here from 10,000 kilometres away
• 58:25
  Speaker 2: But sometimes, of course, it is better to have the
• 58:28
  Speaker 2: long or the distant view. And what's the old saying?
• 58:40
  Speaker 2: The person sitting on the sidelines can often see things
• 58:43
  Speaker 2: clearer than the person involved in the mix, right? And
• 58:47
  Speaker 2: I think that from the sidelines, I think that it
• 58:52
  Speaker 2: is quite clear that the European trajectory should be deepening
• 58:56
  Speaker 2: its collaborations with Chinese supply chains and companies, not the reverse.
• 59:01
  Speaker 2: I'm not convinced they'll do that, but maybe they need
• 59:04
  Speaker 2: to make more errors along the way before the current
• 59:08
  Speaker 2: mob of elite are turfed out. and a new political
• 59:11
  Speaker 2: settlement has arrived that leads to more sensible policy frameworks
• 59:16
  Speaker 2: in the interests of European working families and working communities.
• 59:24
  Speaker 1: Wow. An hour just flew by. We had some internet
• 59:28
  Speaker 1: issues and Hopefully we got through with it. And thank
• 59:32
  Speaker 1: you very much, Professor Powell, for making the time to
• 59:36
  Speaker 1: speak to us. It's always a pleasure to have you back.
• 59:40
  Speaker 1: If people want to follow you on social media, where
• 59:44
  Speaker 1: would they go?
• 59:46
  Speaker 2: Two places, Carl. Thanks again for asking. Firstly, my Substack, warwickpowell.substack.com.
• 59:52
  Speaker 2: And check out my book, Thermoeconomics in a Time of Monsters,
• 59:56
  Speaker 2: which is available on Amazon.
• 1:00:00
  Speaker 1: Well, there you have it. Dr. Warwick Powell from Australia.
• 1:00:04
  Speaker 1: Thanks everyone for tuning in. Until next time.
• 1:00:07
  Speaker 2: Bye-bye.