For years, the Chinese regime has been able to rely on a powerful bloc to represent its interests in Washington: corporate America.
Prestowitz, who was a trade official in the Reagan administration and now president of the Economic Strategy Institute, a Washington-based think tank, told The Epoch Times there now exists a “crazy imbalance” in the U.S.-China relationship, thanks to the outsized role that big business plays in American politics.
“U.S. corporations are more representative of China politically, and in terms of trade negotiations, than they are of the United States,” he said in an interview.
“This is a huge issue that I fight constantly.”
Take, for example, Apple, which assembles most of its products in China and counts the country as its second-largest consumer market. Its CEO Tim Cook holds enormous sway over America’s political elite, according to the author.
In Beijing, however, the CEO is “on his knees,” Prestowitz said. “He’s at the mercy of the Party, just like everybody else,” he added, referring to the Chinese Communist Party (CCP).
When these big company heads engage with officials and Congress, they say they represent the interests of U.S. businesses. But Prestowitz described this as “total nonsense.”
Fueling the Rise
How corporate America became a cheerleader for China is detailed in Prestowitz’s book. The story is enmeshed in almost four decades of U.S. engagement with the regime, since President Richard Nixon paved the way for the opening of relations in the 1970s.Successive administrations encouraged U.S. trade and investment in China, in hopes that globalization would make the communist country more democratic.
The CCP also found a partner in President Bill Clinton, an enthusiastic promoter of “constructive engagement” who brokered China’s ascension into the World Trade Organization (WTO) in 2001. In selling the deal to the American public, Clinton said in 2000 that the move meant the regime would “import one of democracy’s most cherished values, economic freedom,” which would “have a profound impact on human rights and liberty” in China.
Evidently, none of those things happened.
The CCP has since expanded its human rights abuses targeting religious and ethnic minorities, and stifled critics across the mainland and Hong Kong, while tightening its control over Chinese citizens by deploying the world’s most pervasive system of tech-surveillance.
Yet, how did America’s political elite end up being seduced by the “siren song,” as Prestowitz describes it, that promised liberalization through trade?
“The answer, I think, is that they desperately wanted to believe for two reasons,” he writes in his book. “One was that the corporations that largely run Washington saw huge business opportunities in China and were determined to cash in. The second was that the leading pundits and academics of the time told them it was all true.”
The author goes on to illustrate how corporate bosses, Wall Street bankers, and former officials-turned-Washington-lobbyists rushed to cash in on the China market. There was Robert Galvin, former CEO of Motorola, who used the opportunity presented by the Tiananmen Square Massacre—when an isolated Beijing was in desperate need of foreign backers—to negotiate a favorable deal to move the company’s factories to the country. Maurice Greenberg, former CEO of insurance giant AIG, and Fred Smith, CEO of FedEx, both eager for a slice of the China-sized pie, were also powerful friends of the regime at home.
Smith “became a master at playing Washington, putting ex-senators and congresspersons on his board, donating to all the influence makers just as [Greenberg] did, and making big contributions to political campaigns,” Prestowitz writes.
Over on Wall Street in the early 1990s, Henry Paulson, then an executive at investment bank Goldman Sachs, spearheaded a plan to help consolidate China’s struggling state-owned companies (SOE) into large firms and take them public. Chinese SOEs raised hundreds of billions of dollars on domestic and international exchanges, netting Wall Street billions in profits. Paulson went on to become treasury secretary under the George W. Bush presidency and now heads the Paulson Institute, a think tank “dedicated to fostering a US-China relationship that serves to maintain global order,” its website says.
“Paulson did extensive writing and speaking as a self-styled China expert,” Prestowitz writes. “[Y]et there is no evidence that he or anyone else on Wall Street understood that far from privatizing that country, they were strengthening the Party’s authoritarian rule and its ability to project its power beyond China’s borders.”
Holding Corporations Accountable
The author recommends that the Foreign Agents Registration Act be strengthened so that corporations and other organizations that do business with China have to reveal their links.“They should all be required to make full disclosure of their political donations and their ties to China when they testify, speak, or write for public consumption,” Prestowitz writes.
Returning to Apple’s CEO, he highlights that the “public must know that when Cook talks about China, he is a hostage to Beijing because of Apple’s extensive production operations there.”
Beyond greater transparency, Prestowitz wants certain large multinationals to register a charter with the federal government, on top of the charter registered with a state (typically, Delaware). This federal charter would set tougher standards on firms, such as how they can behave politically, and how they operate in other countries, he said.
For instance, the United States could punish companies that aid foreign governments in repressing its citizens, or cave in to demands by foreign powers that jeopardize American’s freedom of speech or religion, the book says.
“You can use the charter to really discipline the company and to really put obligations on the CEOs and the top executives,” Prestowitz said.
