Tuesday, October 11, 2011

Provoking China: Selling F-16 to Taiwan or The Currency Bill?

Monday, Oct. 10 marks the 100th anniversary of the Xinhai Revolution that ended the Qing Dynasty as well as 2,000 years of Imperial China.  Sparks have always been flying in the Taiwan Strait between Taiwan and China with the latest being the F-16 fighter planes Taiwan wanted to buy from the U.S.

From an op-ed piece by Bloomberg editors:
"The U.S. is obligated by a 1979 law to supply weapons to Taiwan, whose government broke from mainland China in 1949 after the Communist Party came to power.  Taiwan had wanted the U.S. to sell it 66 newer versions of the aircraft, and leaders of both parties in Congress pressured the administration to do so. China objects to any arms sale to Taiwan."
".....selling new planes to Taiwan might have needlessly provoked China, a vital U.S. trade partner." 
".....The last thing needed is outside provocation. So we applaud the Obama administration’s compromise decision last month to go ahead with a $5.85 billion deal to upgrade Taiwan’s existing fleet of F-16 fighter jets."
While I also admired the diplomatic maneuver by the White House, at the same time, I could not help but find this self-contradictory in the context of the Currency Exchange Rate Oversight Reform Act (aka China Currency Bill) just being passed at the U.S. Senate, which, by the way, curiously was not mentioned or referenced in the Bloomberg article.  .

Does the U.S. think China will not get totally "needlessly provoked" by the Currency Bill?  Think again!

From Global Times:
"China's Vice Foreign Minister Cui Tiankai warned that ...."Should the proposed legislation become law, the only result would be a trade war between China and the U.S. and that would be a lose-lose situation for both sides."
From Xinhua (Chinese government's unofficial mouthpiece)
"To put it simply, current anti-yuan moves in the U.S. Senate are more like a publicity attempt to attract voters and distract attention from the real problems facing the U.S. economy."
The Bloomberg article went on to cite a a study commissioned by Lockheed Martin Corp. (LMT),  who manufactures the F-16, that
"...[Selling Taiwan new planes] would have been worth $8.7 billion and created about 16,000 jobs at a time when the U.S desperately needs to reduce unemployment.  The assembly line might close now that the sale is off the table."
So let me get this straight...

On the one hand, for the sake of not to "needlessly provoke" China, the U.S. is willing to not only scrap a multi-billion-dollar revenue and jobs creating commercial deal, but also skirted its own law, and broke its commitment to an ally who fought side by side with the U.S. in WWII.

On the other hand, the U.S. has no problem slapping the Currency Bill in China's face without any regards to the potential economic and geopolitical impact.

The U.S. government obviously has decided to pick its battle based on American politics.  Last time I checked, when the U.S. passed the Smoot–Hawley Tariff Act in 1930, it acted only to deepen and prolong the Great Depression.

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