Are American multinational corporations ready for the Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party?

The Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party.

A mouthful, I know.

But here is the geopolitical situation facing American multinational corporations (MNCs).

Rep. Mike Gallagher (WI-08) dropped this nugget on Face the Nation.

The Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party plans to speak with the National Basketball Association (NBA), The Walt Disney Company, and "other companies... that have substantial business interests in China."

Face the Nation host Margaret Brennan also asked if Gallagher plans to hold a field hearing in Taiwan.

Gallagher indicated that the Committee can hold meetings beyond the US and does hope Committee members will visit Taiwan when appropriate, but did not confirm a field hearing in Taiwan.

I suspect American MNCs are woefully unprepared for this Committee and hope that any discussions with their senior executives are off-camera, on background, and not officially before the Committee.

Consider that when Barack Obama was running the White House, he gave Xi Jinping a list compiled from American MNCs on how to better open the Chinese marketplace.

Now we have a Committee asking for the same list but seeking to close down that marketplace.

The Chinese marketplace is immensely important to American MNCs.

Take Apple.

According to Statstic, Apple's net revenues from the US were $133.8 billion in 2021 compared to $68.4 billion from China.

After 2015 when the company generated $58.7 billion in revenues, 2021 was Apple's best year in China.

And before you think this geopolitical situation is so simple because it's China, go and check your investments.

And once you have completed that task, consider that if American MNCs depart the Chinese marketplace, German, French, British, Japanese, South Korean, and Australian MCS will be pleased as punch to have less competition.

The US government has a long history of institutional inability to integrate economic strategy with foreign policy goals.

The Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party is the latest attempt by the US government to place economic strategy on par with diplomatic and military goals in an attempt to decide the national interest of how American MNCs deploy their shareholder capital and make independent business decisions.

The real question the Committee should seek to answer is, as a nation, do we believe it is right and proper for the US government should decide for American MNCs and their shareholders that mercantilism or liberalism is the best means to pursue US geopolitical objectives?

Communications will play a vital role in answering this policy question.

It is not the time for "no comment."

If you need help with your geopolitical business communications, Caracal is here to help.

Enjoy the ride + plan accordingly.

-Marc

ITK Daily is geopolitical business intelligence for senior executives with global ambition.

ITK Daily curates news @ the intersection of globalization, disruption, politics, culture, + sport and provides actionable insights and sharp commentary.

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Putin and Xi: Look to Beijing for the real reason behind the Ukraine invasion

Marc Ross + Michael Keane

The Hill Opinion Editorial

March 14, 2022

Many observers explain Russia’s invasion of Ukraine as Russian President Vladimir Putin’s nostalgic desire to reconstitute the boundaries of the Soviet Empire. We believe such an explanation is straightforward, consistent with Russian history — and completely wrong. This “Hot Tub Time Machine” take on Putin’s motivation is as erroneous as it may be comforting to the many Cold War-era policymakers who still populate think tanks in Washington.

In their 2012 debate, former President Obama famously dismissed now-Sen. Mitt Romney’s (R-Utah) concern about Russia as “the 1980s calling to ask for their foreign policy back.” Obama was, of course, as wrong as he was snarky, but understanding what’s driving Russia’s strategic threat today is even more important than Romney’s vindication that Moscow is indeed a menace. And for that we would direct everyone’s attention to China, its business model and its interest in Taiwan.

Russia and China have an overlapping strategic interest in taking down the United States, as well as complementary business needs. China’s simple business model is to buy and import commodities and then to make and sell mass-produced goods, which it exports to the world. In other words, China seeks to import every commodity traded on the Chicago Mercantile Exchange and manufacture every good sold at every retail store in the Mall of America.

China is the world’s biggest exporter of mobile phones, computers, electronic integrated circuits, solar power diodes, semiconductors and automotive parts. Conversely, China is the world’s biggest importer of commodity food products and natural resources, including oil and strategic minerals, which are produced in abundance in Russia (and Ukraine).

Importantly, this business model demands that commodities be sourced globally without disruption or significant friction to feed both the assembly lines inside China’s manufacturing plants and the workers staffing them. The slightest hiccup on the conveyor belt and Chinese leader Xi Jinping becomes Lucille Ball in the chocolate factory. Replace the slapstick comedy with a likely coup and you can understand that Xi probably lives in a constant state of anxiety.

Xi wakes up every day with a lengthy grocery list of food products and natural resources he needs to keep the populace employed and the manufacturing plants humming — and most of this grocery list arrives by sea. The second-largest economy in the world has over 60 percent of its trade traveling by water.

China’s economic security is highly dependent on freedom of movement for cargo traveling through the Strait of Malacca, which connects the South China Sea and, by extension, the Pacific Ocean with the Indian Ocean.

Now enter Beijing’s own political objective: Taiwan. Any military adventure that Xi deploys in an effort to unify the “breakaway province” of Taiwan with China likely would be met with an almost immediate sea blockade. Such dependence on the sea is an unacceptable vulnerability for China’s business model; hence, Xi’s desire to create a land bridge for food products and natural resources.

But how to pivot from the sea to the land? That’s where Putin comes in. The former KGB agent is a man of special operations and dark arts, with the sentimentality of a crime syndicate boss, which in reality is what he is. Think of Putin not as the leader of a country, but more of a mob enforcer for his country’s organized criminals (oligarchs) and now for Xi, a fellow autocrat with his own near-abroad target in Taiwan.

Putin has exhibited a willingness to make the Russian military an enforcement arm for bad actors. For years Russian troops have supported Bashar Assad in Syria and, just a couple of months ago, Putin’s soldiers also acted forcefully in Kazakhstan to quash a movement to overthrow the government.

It is best to see Putin not as some nostalgic madmen seeking to reconstitute the Soviet Empire, but as a clear-eyed mobster using his military might to expand his crime syndicate’s business relationships by cozying up to the growing economic powerhouse that is Xi’s China. Note also that China has enormous investments in Ukraine and would benefit from an even greater stake there.

So, Putin controls enough petroleum resources, minerals and wheat to guarantee Xi’s conveyor belts can keep humming. At the same time, even a Chinese feint toward Taiwan may be enough to cause the United States and NATO to falter in Ukraine and relieve pressure on Putin’s forces there or be able to yield a negotiated settlement that is favorable to Moscow.

This Russia-China relationship marries China’s mercantile business model with Putin’s mercenary military — a marriage of convenience and commerce. Xi is happy to outsource the messiness of a war and the social ostracism to Putin, and the mobster of Moscow is happy to oblige. This time it’s not the 1980s calling; it’s “The Godfather.”

+ Marc Ross is the founder of Caracal, a geopolitical business communications firm. He was communications director for the US-China Business Council. Follow him on Twitter @marcaross.

+ Michael Keane is an adjunct professor at the Pepperdine University School of Public Policy teaching foreign policy. He is the author of “The Dictionary of Modern Strategy and Tactics.”