The Pence Doctrine

I subscribe to Jim Rickards's Strategic Intelligence newsletter, which combines political with stock market intelligence. Rickards devotes the last issue to the Pence doctrine, based on the speech, embedded above, which the vice president gave at the Hudson Institute last October.  Rickards compares Vice President Pence's speech to George Kennan's Long Telegram, which set the stage for the Cold War containment policy of Truman and subsequent Cold War-era presidents.

Without revealing Rickards's proprietary stock advice, I conclude that investing in China is going to be a bumpier ride than most analysts have thought and that the rationales for the Trump trade war are  more complex and subtle than I had previously thought.   The arguments for free trade are correct, but they are entirely economic. Economics does not justify trade when trade creates a political or military threat. Chinese industrial espionage and its use of economic power to coerce trade secrets from American firms do create broad military threats whose costs are not borne by the firms that do business with China but who benefit from trade.

If economic actors are politically neutral and the Trump administration can wrangle concessions from Germany and China and then go back to free trade in short order, investors will be happy and economically the world will be better off. However,  Vice President Pence makes clear that there are intransigent political and military reasons to curtail trade with China, and these will not go away anytime soon even if the Chinese adopt a policy of reciprocity. (Economically, we are better off adopting a free trade stance even if a trading partner is protectionist. However, if we are selling ee cummings's nipponized "old sixth avenue el" to World War II Japan, it's a different matter.)

That American politicians and businesses have been willing to ignore China's history and ongoing practice of mass murder and political incarceration has been, until now, a moral disgrace. Americans, including me, have ignored torture and mass killing in the interest of a cheap sponge mop.  Pence states that one million Muslims are currently incarcerated in Chinese reeducation camps, where they are tortured and brainwashed.   Beijing continues to murder political dissidents; they continue to suppress minority religions, including  Tibetans and Christians as well as Muslims; they continue to attack free speech. Beijing's socialist state  has killed and continues to kill more human beings than almost any other in history--with a handful of similarly socialist exceptions.

Tech companies like Google and websites like Quora have long been apologists for China's mass murder regime. I was chastised and then I terminated my Quora account after a moderator insisted that my criticism of Chinese mass murder was outside Quora's speech parameters.  

As Vice President Pence points out, the Chinese state is taking control of  American newspapers and TV and radio stations. It runs cloaked newspaper advertisements on behalf of its political interests; it uses American airwaves as propaganda vehicles.  The Chinese mass murder state censors speech and scholarship in American universities.

The Chinese Scholars and Students Association functions as a spying organization against Chinese students here, and information it has gathered has been used to attack families of Chinese students.  It censors movie studies, and it has made direct changes to American-made films.  (Its power to do so comes from selective granting of access to its market.) In other words, Hollywood has been willing to sacrifice American security interests for access to the Chinese market.  It has attacked the New York Times and cyberattacked the Hudson Institute, where the vice president gave the speech.

President Trump, through the concerns enunciated by Vice President Pence, is the first president since Nixon's détente to identify the  threat that China poses. This has not been recognized in Democratic Party-dominated universities, Democratic Party-dominated newspapers, or Democratic Party-dominated media.  

If Rickards is right and the Pence doctrine is going to become foundational to American policy, the trade issue is going to become more complicated rather than less, and we may be in for a protracted cold war with China.