Freakonomics Radio - 414. Will Covid-19 Spark a Cold War (or Worse) With China?

Episode Date: April 23, 2020

The U.S. spent the past few decades waiting for China to act like the global citizen it said it wanted to be. The waiting may be over.

The question is, in terms of global economic damage, global loss of life, global disruption, what sort of responsibility does China have for the spread of COVID-19 and on what grounds? Michelle, let's start with you. I think it's very clear that it came from one source or another in Wuhan. I think it's very clear that the Chinese government sought to suppress that information early on, even punishing people like doctors who were trying to make it known. And that mishandling of the early crisis significantly increased the global implications and the price that every other country of the world is going to pay in lives and in livelihood and economic terms.

Michael, same question, but really what I want to get to with both of you is, should China pay for COVID-19? And if so, how? Well, I think we should be realistic. It's not going to pay. There's different types of payment, by the way. If you're talking about monetary payment, it's not ever going to pay monetarily. There are no mechanisms to make it pay. Should it pay politically? Should it pay reputationally? Should it pay in a moral sense? I think the answer to all of that is yes.

Michelle Flournoy runs a strategic advisory firm called WestExec. She is a once and perhaps future government official. In my former life, I was the Undersecretary of Defense for Policy in the Pentagon in the Obama administration. And in that capacity, I dealt with the full range of policy issues, including U.S.-China relations. Michael Auslin is an historian whose forthcoming book is called Asia's New Geopolitics. I am a distinguished research fellow at the Hoover Institution at Stanford,

and before that was a professor at Yale. And I hate to force each of you to reduce yourself to a label, but if you had to categorize yourself on the China hawk dove spectrum, where do you stand? I'm a clear-eyed pragmatist. I see the challenges and threat pretty clearly, but I also am willing to work towards areas where it's in our interest to cooperate. I'm not a China hawk. I'm a CCP hawk. I just think that we understand the nature of the Communist Party and that it is adversarial to the values and systems that we cherish.

I would agree with the importance of realism in assessing the Communist Party's intentions and actions. But I also think there are areas where it's in our interest to find ways to collaborate and ideally finding ways to actually make progress together. And Michael, to the notion of collaboration, do you say, well, sure, that would be nice, let's try? Or are you more likely to say, well, not in this lifetime with them? No, I think the question isn't do we want to collaborate with China?

We've made that clear for half a century now. The question is to what degree do they want to collaborate with us? And on things that we care about, not just that they care about. And I think the evidence is increasingly clear that they are far less interested in collaborating with us than we had hoped. And that's one reason Michelle and I aren't sitting next to each other doing this. Over the past several weeks, we have focused our episodes on some of the most pressing and most concrete problems of the COVID-19 pandemic.

The massive economic damage and how the U.S. government is trying to address it. The strain on the food supply chain. The ethics of rationing medical care. Today, we're taking a step back to look at an issue that may seem less pressing, but could wind up substantially reshaping our future. That is, the relationship between the U.S. and China. That relationship has always been eventful, but COVID-19 has amplified things. Before the pandemic, we were frenemies at best.

We were already in a trade war, and some China experts think this event could push us into a cold war, or perhaps even something warmer than that. President Trump has taken turns complimenting China for its aggressive handling of the crisis internally and then, when his own COVID response has been criticized, berating China for failing to stop the spread. He also announced a plan to stop funding the World Health Organization over what he called mismanaging and covering up China's failures. Had the WHO done its job to get medical experts into China to objectively assess the situation on the ground and to call out China's lack of transparency,

the outbreak could have been contained at its source with very little death. This week, Missouri became the first U.S. state to sue China for COVID-19 damages. It's the kind of lawsuit that's not likely to go anywhere. Still, a lot of people who probably don't routinely give much thought to the U.S.-China relationship have been thinking about it a lot lately, especially as we learn just how much of the U.S. supply chain lies in China, especially the supply chain for medical equipment. And this partially explains why we are experiencing such vast shortages in basics like face masks and the chemicals needed to create millions of COVID testing kits. So today on Freakonomics Radio, how did the U.S.-China

relationship get to where it is today? What happens next? And is COVID-19 the last straw in U.S.-China relations? From Stitcher and Dubner Productions, this is Freakonomics Radio, the podcast that explores the hidden side of everything. Here's your host, Stephen Dubner. We recorded this conversation with Michelle Flournoy and Michael Auslin on Friday, April 17th. They were at their respective homes near Washington, D.C. I was at mine in New York City. So, as with most interviews during this era, you'll have to forgive any dog barks or door slams or random buzzing noise. On the day we spoke, New York State would have 540 new COVID deaths, its lowest total, believe it or not, since April 1st.

A few days earlier, New York City had passed 10,000 COVID deaths. The U.S. total is now above 40,000. On the day we spoke, it had been 35 days since President Trump declared a national emergency, 37 days since the World Health Organization officially declared a pandemic, and 108 days since authorities in Wuhan first reported a pneumonia outbreak caused by a puzzling new virus. I asked Michael Auslin and Michelle Flournoy to begin by assessing the Chinese response to COVID-19. Well, I think it's hard to make an assessment on how China and Beijing in particular has handled the COVID crisis because of the lack of transparency and information. It is increasingly accepted now, and the evidence is starting to come out of the degree to which the party state

covered up its knowledge of the crisis, the severity of the crisis, the actions it took, the house arrests of doctors, intellectuals, businessmen who tried to warn about this. We know now that in the beginning of January, what is known as document number three went out to research institutes ordering them to destroy samples, virological samples, or send them to central repositories. That information is coming from where, Michael? From sources of the New Tang Dynasty. These are Taiwanese, Hong Kong, and opposition mainland news sources. And if you look at today, the report on document number three, they had pictures of the document that went out. Given that we live in an age of information and disinformation, and especially given that the majority of the American press corps has just been expelled from China, New York Times,

Wall Street Journal, Washington Post, I am curious, when there's reporting from opposition in China about a document like this, how reliable we might want to consider it. Well, look, this is a very good question. I would say that the idea that an outfit like New Tang Dynasty doesn't have an agenda would be naive. Of course, they have an agenda. They're opposed to the regime, but they also have a track record of bringing out information that we haven't found in other places. And this is information, by the way, that the Chinese people are trying to get out. And we need to make a very clear distinction, of course, between the people and the government. And what we saw early on was Beijing's concern, not with informing its own people or the world about the crisis, but rather

with clamping down and controlling social media so that the information could not get out. So there have been subsequent rumors and counter rumors and charges and counter charges that the outbreak was either not an accident, that there was a lab doing research from which it may have escaped. There were rumors about the U.S. military bringing it in and these athletic competitions. So I would like you to just tell me your best thinking on that series of charges and countercharges? So I think what the science points to so far is a disease that came from bats that were either in the wet market in Wuhan or being used as, you know, test animals in the laboratory. It does not appear to be man-made. It certainly did not come from the U.S. military. I mean, that was a complete effort, you know, to point the finger in another direction by a Chinese foreign ministry

official, and it has no basis in reality whatsoever. But I think the real question is, did it come from bats in the lab or bats in the market? And, you know, there's both an intelligence inquiry and a scientific inquiry to try to figure that out. And, you know, there's both an intelligence inquiry and a scientific inquiry to try to figure that out. We may never know. We had a report just the other day that the U.S. not only helped fund part of that lab, but that State Department visitors at the lab several years ago warned about the lax security. So I think the pieces are coming together where it's no longer crazy to suggest that it came from the lab. But as Michelle points out, this was highly unlikely to have been a

bioweapon, highly unlikely to have been deliberately released. I do think the data in China, the number of cases and deaths attributed to COVID are going to get worse. I think the Chinese have already admitted that they're adjusting their COVID case numbers up because many people died at home and were not necessarily captured in the medical or hospital data. And to be fair, the exact same thing happened in New York City within the last few days, right? Sure, yes. I mean, I think the data that we're seeing now everywhere is going to get worse because we don't have a full picture of the disease yet. Just yesterday, the government revised upward by 40% the number of deaths in Wuhan. But people in Wuhan themselves for the past month have been using crowdsourcing by looking at crematoria activity and the number of people picking up urns of deceased family members

to come up with a widely accepted figure of 45 to 47,000 who died in Wuhan alone. Whoa, that's more than 10x what we've been told, yeah? It is definitely more than 10x. There was unquestionably a cover-up in Wuhan because the party state did not want the world to know how bad this was. More importantly, though, is that Beijing knew in early January that this disease was transmitted human to human. That is the key marker. They did not inform the WHO as they were legally bound to do under the international health regulations which they signed. They did not tell their own people. They let people travel. They did not inform the world that healthcare providers were getting sick, which is the way you know that it's transmitted initially between people.

This is what caused the global pandemic. A Chinese researcher at the University of Southampton in Britain with a team calculated that if the party had acted just three weeks earlier, in a period when we know that it knew about this, to shut down travel and warn the world, 95% of this could have been avoided. But Michael, I gather from what you've written in the past that you're not surprised that those choices were made, correct? Transparency is the enemy of the Communist Party. It always has been. We know the nature of the regime. And we know the nature of communist regimes in general. And so we should respect that. We saw this in 2003. In fact,

ironically, it was the World Health Organization in 2003 that discovered that the party state was lying about the SARS epidemic. It did it in the 2008 Sichuan earthquake. It's done it over and over. And so at a certain point, I think we need to ask ourselves when we begin giving the party the respect of actually dealing with it as it is, and as it tells us it wants to be, as opposed to the party that we hope it to be. It's a little bit like waiting for Godot in the Chinese sense. How would you characterize the Trump administration's China policy pre-COVID-19? Well, I think Trump inherited as well as shaped a fundamental change in U.S.-China relations that began during the Obama administration and was shared across the political aisles, but from different perspectives. On the Democratic side, long-term

concerns about trade. On the Republican side, long-term concerns about security. But I think by the 2016 campaign, it was clear that the first era of U.S.-China relations, the one that began with the normalization of relations in 1979, was really at an end end and that the hopes and expectations that we had for the type of both partner as well as international actor that Beijing was going to become were not realized. And therefore, there was going to be a reassessment. Now, the particular way that Trump did it was based on his own long, actually very long standing interests about trade and his concerns about fair trade versus free trade. What it was, in a sense, was a great fusion. It was a fusion of positions on economics and trade, on security issues, on the propaganda and influence issues. And it snowballed

into something that I think most people in Washington didn't anticipate, and in part because they didn't take Trump too seriously, even after he was elected. You know, I would actually agree with almost everything Michael said in describing the change. I would just add that there's a lot of bipartisan consensus on the China problem and the nature of the problem. I think where there's been debate is over how it's been handled.

And many people have criticized the Trump administration for being quite transactional and tactical in its approach to China, quite bilateral, not leveraging our allies and partners who have shared interests with us and who have some of the same issues with China, not leveraging the power of a coalition and confronting China on some of these issues. Has the COVID pandemic strengthened, weakened, or just muddled the nature of that bipartisan consensus? I think it has complicated it, but mainly because the president is now trying to sort of blame Chinese, you know, poor actions, bad behavior, falsifying data, not sharing data, coming up with crazy conspiracy theories, explaining where the virus came from, and pointing fingers outside of Beijing or Wuhan. You know, there's a lot of clouding of the issue. The truth is the fact that we have not found a way to cooperate in a global pandemic is going to set back the relationship even further.

Let's talk a bit now about China as a global citizen. Michelle, I'd like you to tell us how your view of China has evolved over the past 15 or 20 years from your first kind of deep experience observing, trying to collaborate with the with the United States or international fora and say, look, we're just a developing country. We're trying to bring billions of people out of poverty. So there are limits to what we can do as an international good citizen. And, you know, don't worry about us. Yes, we're a rising power, but we've got all these things to deal with at home. We're not going to hurt anybody. We're not aggressive. You know, don't worry about us. They certainly didn't present themselves as a technology

competitor, and they weren't one seriously at that point. So they were in this posture, which we've come to call hide and bide. Hide your true intentions and aspirations to be a global power, to take on the United States as a competitor, and bide your time. Wait until China is stronger and more ready before you sort of pull away the mask and show your true intentions. Well, the arrival of President Xi soon after, as he consolidated power, was that moment where the mask finally fell. And he began taking much more assertive, if not aggressive actions in everything from contested areas of the South China Sea to trade and technology and so forth. And this is to Michael's point, I think this dropping of the

mask really occurred in the second Obama term in a way that was undeniable. But on the economic front, at least, and I realize neither of you are economists and that's fine, but when you talk about hide and bide, it could almost sound as though the U.S. is kind of a distant, absent observer. But in fact, we were very much a collaborator in this economic immersion by basically offshoring a great deal of our manufacturing there and really helping China on the world market in that way. How could that have been part of Hyde and Biden? I mean, it's hard for me to imagine that it could have been any more obvious, really. There was a belief in both Democratic and Republican administrations that the name of the game was integrating China into the global economy. Remember,

the United States sponsored their membership in the World Trade Organization, and that by doing so, by sort of fully integrating them, we would change their incentive structure and they would have the incentive to become what Bob Zoellick called a responsible stakeholder in the international economy and the system more broadly. By adding China to the WTO. That is Zoellick in 2001. He was U.S. trade representative under George W. Bush. We strengthened the organization by further integrating China's 1.2 billion people and $1 trillion economy into the world market network. This step represents great progress for China, the WTO, and the world trading system. That was a great theory. And we all bought it and we all worked really hard to bring it about. And it didn't work.

And do you think the Chinese were laughing when they made that agreement under those terms? I don't think they were laughing. You know, we can't treat even the Communist Party as a complete monolith. There were internal debates within Beijing between people who thought that that path was actually a good one for China, and then others who wanted to take a more nationalist and assertive posture. There were reasons to hope that this approach, which we saw it very much from our own sets of interests and our own sets of values, would carry out the way we wanted. But there's two problems with it that I think we should blame ourselves for. First, we didn't do our due diligence along the way. Was China living up

to the promises it made? Was it evolving in a way that would justify the continuation of that policy? We didn't do that, number one. And number two, and here's where it is a really a purely domestic issue of a split, I think, between the heartland and the coasts or those who are more globalist in orientation than those who are not. We didn't stop to think, what does it mean to offshore and hollow out so many American industries? You know, in the 1980s, we had 30 producers of antibiotics in this country.

Today, we have none. And you can just go through industry after industry on this. And what we didn't say was, yes, of course, we're getting better consumer prices, and we're creating efficiencies. But what does that do at home? You know, you asked about China, were they laughing all the way to the bank? Honestly, I think if they weren't laughing, they were probably amazed. Because you just have to think that they could never have imagined that we would help them to the degree that we did, which benefited some sectors of our society, but clearly not others. Okay, but where did this American assumption come from? Was it just wishful thinking? Was there some historical precedent? Our assumption based on post-war Europe, Germany, post-war Asia, Japan, and throughout the Cold War period was that as countries modernize, as they integrate with a global economy, you

always, or at least very often, see liberalization. You see the growth of a middle class that identifies itself in certain understandable ways. This is our modernization thesis. And in some ways, of course, the China of today is nowhere near the China of Mao. But did the nature of the regime change? Did the nature of its goals for China change? The answer was no. And certainly, I think we could have made that determination after 1989, after Tiananmen, but instead we doubled down. There is an argument to be made here for what the economist Robert Shiller calls narrative economics. He doesn't mean it as a compliment. Shiller's point is that stories

are dramatic. And even when the story goes sideways, we tend to keep believing it, at least the main plot. The U.S.-China story of the past several decades got off to a very dramatic start. President Nixon's departure for China, South Lawn, 17 February 1972. With Nixon describing a peaceful way forward for the two would-be enemies. We must recognize that the government of the People's Republic of China and the government of the United States have had great differences. We will have differences in the future. But what we must do is to find a way to see that we can have differences without being enemies in war. The first couple decades of this detente were exhilarating,

and the optimism easily carried over into the 1990s and early 2000s. The more China liberalizes its economy, the more fully it will liberate the potential of its people. Their initiative, their imagination, their remarkable spirit of enterprise. Dramatic changes have occurred in China in the last 30 years, and I believe equally dramatic changes lie ahead. And the United States will be a steady partner in China's historic transition toward greater prosperity and greater freedom.

And the optimism carried over into Obama's first term. I believe in a future where China is a strong, prosperous, and successful member of the community of nations. A future when our nations are partners out of necessity, but also out of opportunity. But then, as Michelle Flournoy put it earlier, the mask began to slip. The story had become much more complicated, but despite the obvious difficulties, it wasn't so easy to change course because it wasn't just China's story, but our story, too. and has been adopted and executed across multiple administrations. There's a huge amount of investment and attachment to that policy. And so as you start to get information that maybe would cause you to question it, if you were an objective observer, or there hadn't been years and years of buy-in and development, you might dismiss it and say, well, that's anomalous, or, you know,

we haven't given this enough time, or we haven't executed it as well as we should have. Economists have a name for this, too. It's called the sunk cost fallacy. Policy decisions are made all the time based on sunk costs, right? People get very, very attached. But Flournoy says there was a second big problem. The second thing is I think we tend to overestimate our ability to change other countries, to change the decision-making calculus of other regimes, even ones that look nothing like our own. And I think those two things combined, in this case, to have policymakers across administrations maybe underestimate the degree to which the policy wasn't working and hang on to it for longer.

Looking back, though, there was plenty of evidence that China's behavior had been fundamentally changing. Well, I'll speak to the area I know best, which is China's behavior in the defense and security realm. So we started seeing Xi make promises. For example, China was using landfill to create what it called islands in the South China Sea. The promise was made again and again, we will not militarize these, you have nothing to worry about, you're getting way too concerned about this United States back off. And then sure enough, within, you know, sort of deceiving the United States. He was untruthful about his intentions. It was a very blatant transgression, if you will, or act of aggression. So I think that even people who were very supportive of China,

and maybe some would argue might have been soft on China, even in those circles, their eyes were opened and they realized this is a change of behavior. This is something we have to reckon with. The U.S. has in fact been reckoning with China's aggression this week, sending warships into the disputed areas of the South China Sea to curtail Chinese military activity there. Some analysts think China is taking advantage of the global distraction over the COVID pandemic to step up their activity. Still, I asked Flournoy, why isn't it in China's interest to not antagonize the U.S. in this

way? Aren't there potentially greater rewards in cooperation? I think a lot of that depends on, you know, how you frame this. There was a period in the Obama administration when China would sort of misbehave. They'd break a rule. They'd be too aggressive in an action. They would meet a wall of opposition that the U.S. had sort of constructed. And that did tend to make them step back, at least tactically, for a time. I think in this case, Xi had his eye on a very different problem, which is he wanted to figure out how am I going to thwart US power projection in the region? If I want to take

Taiwan someday, if I want to use force to go after one of my sovereignty claims in disputed areas one day, how do I keep the United States military out? And in that scenario, taking the risk of putting some things on islands that will significantly improve his early air defense capabilities, maybe he calculates that that's worth the risk. So Michael, back in early February, you wrote in the Wall Street Journal that COVID-19 won't quote, bring down the government in Beijing, but that its spread is exposing wrote in the Wall Street Journal that COVID-19 won't, quote, bring down the government in Beijing, but that its spread is exposing weaknesses in the Communist Party's hold on power, and that it may also fundamentally change China's global image. And as we speak,

China just reported a massive contraction of GDP, nearly 7% for the first quarter of 2020. This is its first quarterly contraction since Beijing started reporting those numbers back in 1992. So tell me how significant you feel the party's weakness really is and whether Xi himself is in danger. Well, I think we do have to go back just a little bit and understand that the party of today is the party that developed in response to SARS in 2003, and the cover-up and the loss of reputational standing in China. In fact, in some ways, Xi Jinping himself was picked because of the party's fear that in the period after SARS, it was losing control of parts of society because it was seen as corrupt, as inefficient, as incompetent.

So Xi Jinping was picked by the party in order to bring back its strengths and reassert itself, it was far worse, that the same incompetence and venality and basically malign actions of the party would once again ripple through a society that had higher expectations now, that was wealthier, that didn't expect its lifestyle to be upended. We talked about the economic contraction, something like 40 million jobs potentially being lost. This is what the party fears. And so the crackdown that came about immediately once the officials began to understand the nature of this pandemic was precisely designed to avoid that. Their fear today, as opposed to two months ago, is that the world is no longer buying the propaganda line and the explanations. The very fact that the party was forced to revise upward the death rates in Wuhan

means that they know that their story is cracking. And that, by the way, is the reason Beijing launched an unprecedented global propaganda campaign in the face of this pandemic. You know, getting the World Health Organization to talk about how wonderful it had been, you know, giving, which was actually selling defective medical equipment. When Beijing understood the scope of this pandemic, orders were sent out to buy up as much PPE as possible. The total calculation of this is now that China bought about 2.2 billion pieces of protective equipment, including about 2 billion masks from Taiwan, from Japan, from Australia, from the United States. Now, some of that has been repurposed and sold back, but that propaganda campaign is breaking down. The fact that all around the world, governments have been returning the useless, worthless medical equipment, the tests, the antibody tests, the masks, the gloves that China sent made in China are being held up by export restrictions.

All of this is putting the party's reputation at risk. And so unfortunately, what I think you're seeing is a party that is doubling down on the propaganda, doubling down on the fantastic claims. You're having a party that is becoming more repressive, which has disappeared critics, public critics of the regime, prominent public intellectuals, prominent businessmen. This is a party that knows that it can't stand the sunshine of truth to come in. And that's a real problem for us in figuring out how to deal with it. How is the U.S. going to deal with it? That's coming up after the break. You're listening to Freakonomics Radio. I'm Stephen Dubner. We'll be right back.

How will the COVID-19 pandemic reshape the already testy relationship between the U.S. and China? That is the big question we're asking today of a pair of China experts, Michael Auslin of Stanford's Hoover Institution and Michelle Flournoy, the Pentagon's former Undersecretary of Defense for Policy under the Obama administration. As much as the pandemic has crushed the U.S., it's also been a disaster for China, though it's hard to say just how much and on which dimensions, because the ruling Communist Party isn't exactly transparent. In fact, it's quite often the opposite. So you have to wonder, with the government's various missteps and the unprecedented economic downturn, is China's strong-fisted ruler, Xi Jinping, at risk of losing his grip?

Well, I don't think he's, you know, immediately at risk, but this has revealed some real problems and some real cracks. And I think the Chinese leadership is extremely worried about the strength of the public pushback they've received in a number of areas. I do think that they are doubling down in trying to rewrite history. They're trying to present China as this highly efficient, organized, competent government who took all the right actions, which again is a kind of fictional account, but they're still selling that. And they're also running around the world with, you know, what I call PPE diplomacy of arriving in smaller, less developed countries with

equipment and assistance and so forth. And, you know, the U.S. is in part to blame here in that we have ceded, largely ceded, the global leadership field. When you look at past crises, whether it was the financial crisis, the AIDS crisis, the Ebola crisis, the U.S. has always stepped up. Republican, Democratic administrations always stepped up to lead and orchestrate an effective international response. We did not do that this time. We were sort of absent without leave from the G7 in terms of leading the G7, the G20, other organizations. And that means the field is open. It's just given China more room

to come in and try to rewrite history and play the hero, even though their mishandling of this from the beginning is what created the problem in the first place. To what degree is that failure a function of Trump himself? I think that this president does not think in terms of leveraging multinational institutions and alliances and partnerships and building coalitions. He thinks in a very bilateral, transactional way. And in this case, he's been exclusively focused domestically. But what is very clear is it's in our own interest to be playing more of a role on the world stage, because neglecting what's about to happen in the developing world in terms of the spread of the virus there,

that is the most likely source of a second wave that comes back to the United States eventually. In the beginning, of course, the United States, the CDC offered on January 6th, I believe, to send a team to China, as we always do. And Beijing refused that and to this day has refused not only Americans on the ground, but also sharing the samples that they either destroyed or collected. So if this had been the type of state that you can deal with, as you deal with many other states, I think there probably would have been more of that leadership. I just want to stress, every choice that China made in the early days of this pandemic, it made freely. No one forced Beijing to cover it up. No one forced it to silence whistleblowers. No one forced it to mislead the World Health Organization. And instead of twisting ourselves into pretzel knots trying to figure out how do we get cooperation from Beijing, I think some of our effort should be

spent trying to say, why don't we work with other technologically advanced nations that we know we can have some type of more trusting relationship with and see if we can come up with the vaccines. We absolutely should be going around the world looking for partners to work with, as opposed to thinking that magically Beijing is going to start acting in a way that, quite frankly, it hasn't for decades. And this gets us to the question of our over-reliance on globalization. We don't make the masks, the gloves, the respirators, the PPE, the antibiotics, anything anymore. You know, I absolutely agree that we need to take a hard look at medical and health supply chains and sort of think about public health more in national security terms and bring some of those

supply chains home. And so I agree with the point the U. the US was not in the position to be a primary provider of assistance because we needed to, you know, focus at home. That said, if we had convened the G7, the G20 early, we could have brought those groups together to try to orchestrate a response that was more equitable and fair to the global community as a whole. And that group might have pressured China, called China out on some of those actions and said, hey, we know what you're doing. This has got to stop. And the rest of the G7 did want to meet, I understand, yes? Yes. And the G20, I mean, they eventually did. But without the U.S. leadership role,

without a clear agenda, without the U.S. driving towards certain agreements, when we try to confront China alone, we are not as strong as when we confront China with others alongside us who see the situation in the same terms. What happens if China is first to the bench and first to market with a COVID vaccine? How do you see the distribution sharing of that happening? You know, I think that they will certainly have an advantage. I do think, to Michael's earlier point, that some of the problematic nature of the equipment they've shipped, you know, their uneven reputation on the quality of their pharma products and so forth, will cause people to want to test it pretty heavily first. That said, I don't think there's going to be a single vaccine, you're going to have multiple vaccines, multiple drugs, multiple solutions. But let's say a good vaccine or good treatment comes to

in one particular country, let's say it's the US, how should the US think about cooperating with China when this recent history has been so fractious? Well, look, we're going to do what we always do, which is to be a good global actor, and we're going to offer it immediately to China, I have no doubt. We care about global governance. And I think that's what is so distressing about what China has done during this crisis, that it undermines global governance, the ability to believe in it and to have it effectively act when you need that this was transmitted from human to human, I think we would have acted completely differently. And the sad part is, is that such a huge part of it could have been avoided if only China, Beijing had acted as a responsible global stakeholder, which it didn't. Okay, so the big question really for both of you, what does COVID-19 do overall to U.S.-China relations? Are we at the beginning of a new Cold War? Does the war get warmer than cold?

You know, I do think this will accelerate trends that were already in the works. It's reduced trust between the parties. It's increased hostility on both sides. And we're heading into an election season, and we're already seeing President Trump try to use this as a political issue of who can be tougher on China. I did want to add the Chinese failure to share information was a huge problem. We cannot blame all the mistakes that have been made on the U.S. side only on that. I think this is a classic case where we need something akin to a 9-11 commission to, once this is all over, to dispassionately in a bipartisan or nonpartisan fashion,

go through the fact base to understand what can we attribute to China and where did we drop the ball and where do we need to make changes? We have to think of public health as a national security imperative. I hear people say that a lot. What do you mean by that exactly? What that means is that we have to actually seriously invest in a robust public health infrastructure, the ability to detect, monitor, trace disease early. It means looking at stockpiles, not only a national basis, regional, state-level basis. It means onshoring some of the critical supply chains that we've discovered have been such a problem for us in this crisis. It means planning, exercising, making sure that senior leaders have been through some simulation of this before the first time they

confront it, because the lessons learned are quite searing if you've been through this. I've been through some of these exercises myself. One of them is the importance of truth-telling, transparency, constant and clear communication. Second is someone who's accountable for running the show, not the president. I want to caution against the assumption that we need a massive new government agency. When we have a problem in the United States, we tend to create a new organization to solve it. Whereas I think it's more about correcting the deficiencies in some of the structures we have, creating a more coherent interagency process, and really ensuring that we know who would be an experienced, accountable, competent leader in a crisis like this, rather than a sort of ad hoc task force. Michael, at the end of that Wall Street Journal piece, you warned that we shouldn't rule out a revolution in China, some sort of revolution, at least. You've also described what you could see as a hot war between the US and China sometime down the road. Yes?

Well, I agree with Michelle that unfortunately, we're at a spot where I think it's going to be very hard to go back to business as usual with China. And without, this is not meant to be a blame game or finger pointing in any way. But I would just say that there were always voices that were more skeptical, but they were often disregarded. And I think that we would have been better served if we had incorporated some voices that questioned the path we were on with China before this, so that we would have had a more balanced approach. But are you talking about Democrats and Republicans? Because we've certainly cycled through administrations. There's certainly been plenty of Republican administrations that had a shot at it, right?

You know, I really am trying to avoid putting it into the, you know, media got you terms, but I think those who in general felt that greater engagement is an unalloyed good, and those who are more skeptical that you have to look more to core national interests. And so, that's gotten us to a bad point, whereas, as we've noted, the bipartisan fusion consensus now is that we're in a great power competition, a cold war with China. I think the real question is, does China believe it's in a cold war with us? Because we've spent 50 years doing everything we can to integrate it. And so the question of US-China relations going forward really comes down to what do we do? It goes to some of the debates that we've been having over the past three years over 5G and Huawei, allowing China unrestricted access into our

universities, talking about countering its propaganda campaigns, whether those are Confucius Institutes, its Facebook buys, its legacy media, such as Global Times and Xinhua. In other words, you're saying that people who accused others of being paranoid about China should stand down a bit, and the people who were accused of being paranoid should have some reason to feel justified, essentially. I think it was Henry Kissinger who may have said, just because you're paranoid doesn't mean they're not out to get you. So it's how we go forward.

So looking forward and invoking Kissinger, let's imagine for a minute that rather than, you know, Nixon going to China, it's Michelle and Michael going to China, you know, three months from now. And you have an audience with Xi and some party leadership. And it's your job to start to unwind this hostility while recognizing the legitimacy of the hostility and propose a way forward. Give me a couple very specific things you say and or ask for. I think the thing I would focus on is the importance of reestablishing deterrence, to be very clear on what the United States thinks of as its core interests. China talks about its core interests all the time as if

they're sacrosanct. We have to be much more clear about what is it we are willing to defend. Where are the lines? And then I think we have to make the necessary investments to ensure that there's absolutely no possibility that China could misjudge that we have the capability to defend ourselves and to protect our interests. And that means not only investing appropriately in a new set of military capabilities and operational concepts. But first and foremost, investing in the drivers of American competitiveness at home, whether that's science and technology, research and development in 5G, artificial intelligence, quantum computing, et cetera.

Reinvesting in 21st century infrastructure, reinvesting in access to higher STEM education, smart immigration policy, where we attract the best minds of the world, and we actually keep the ones that we want. You know, we wouldn't have Silicon Valley without the best and the brightest coming from around the world to start their companies here. I mean, we are fantastic at rising to a moment of crisis or opportunity. You know, this is a moonshot moment. This is a time for us to do what we do well and step up. Okay, Michael, your turn. Michelle would. I think she would be going and representing the two of us. So, first, I agree with everything she said, but I think then there's another side of it that we can bring in. And the other side is telling China what we are going to do. And there's different policy options. I think one is that we tell China we're going to add an asterisk after its name now, just the way we do,

you know, after information that can't be believed for sure. I think it needs to know that we are not going to base policy on what it tells us. We're going to, at a minimum, try to do what Reagan said, which was trust but verify. But in this case, it may be not trust and verify because we have been misled about cyber hacking. We've been misled about the South China Sea islands, misled about COVID, all of it. So number one is to make clear that we're not anymore taking on face value what it says. It has to re-earn trust. That's number one. Number two is to decide and then tell China that we're going to adopt either a zero tolerance, which is a little hard, but maybe more a two-strike rule, which is you get one pass. And if the action happens again, then action will be taken.

Because what we've never done throughout this entire relationship has really been willing to impose costs for broken promises or bad behavior. And then third, and maybe most importantly, is to make clear to Beijing that we are going to expect reciprocity. And I've heard people say that that's really bad because that means we're going to become like China. We're going to act like them. That's not going to have unalloyed press access here. They don't allow our American cultural centers on their campuses. We shouldn't allow unfettered Confucius Institutes academic access. Our students can only go to limited numbers of programs. Their students can go anywhere. The point is not to punish China. The point is to make clear that relationships must always be two-way streets. And so, if I'm going, it's not to say, look, we're throwing down the gauntlet, and this is now a purely adversarial relationship. It's to say, in many ways, we're going to start acting, first of all, to protect

our interests, but secondly, in ways that you've been acting, and then hopefully that will allow us to come to a better point at the end of the road. And how do you each expect your message to be received? I think initially, the Chinese leadership would probably not want to hear strong statements about our ability to deter and defend our interests and so forth. But I think it's very important to communicate them clearly. I also think that the trip would be more successful if we had done our homework first and really brought along the allies and partners, particularly democratic allies and partners, who share our interests and our concerns about Chinese behavior. Michael? I think they'll hate it, but that's okay. Again,

the point is not to become friends with China. We've already learned that trying to become friendly doesn't get us very far. The point is to create a working relationship that is very clearly defined. And I certainly agree with Michelle on bringing along friends and partners and allies. Look, Asia is a lot bigger than just China. And we've allowed China to define the Indo-Pacific for us as China. It's an enormous area. There's India, there's Taiwan, there's Japan. Let me ask a question about straight-up political outcomes,

which I think you guys have both done a really nice job of pretty much avoiding the straight-up politics. But Michelle, it's said that you were a likely pick for Secretary of Defense, said Hillary Clinton won in 2016. It's also being said now that you are a likely pick for Secretary of Defense if Biden were to win in November. So I'd like you to answer this question first. How would you describe the differences in the U.S.-China relationship starting in early 2021 in a second Trump term versus a first Biden term? Well, putting your premise aside, you know, I do think there's a huge difference. I think if the Trump administration wins a second term, you're going to see more of

the same, which is a very tactical, transactional approach and an inconsistent approach, one that sort of weaves between, you know, one day I'm having the friendliest call in the world with my buddy, President Xi, and the next day I'm blasting him in the media or imposing additional tariffs and so forth. I think what you'd see in a Biden administration is, first of all, a valuing of expertise and a bringing in of the best experts on China and the relevant issues to the table. I think you'd have a very deliberative process to really look at our China strategy in all of its dimensions, and also to connect it to the important areas of investment here at home. And that's going to be

even more necessary in the wake of this pandemic. So I think you try to bring all the different elements of power together, diplomacy, defense, development, towards taking on a more clear-eyed approach to China. Thank you. Michael, which would you see would offer a better China policy, a second Trump term or a Biden term, and why? Well, first, let me be clear that if Michelle is Secretary of Defense, I'm very happy to serve as her Assistant Secretary for East Asia and the Pacific,'s make sure that gets onto the recording. Look, I think one of the great things about American foreign policy for most of the country's history has been its bipartisan nature. We're all old enough to have grown up under the saying that

politics stops at the water's edge. And I certainly would like to see us go back to that. I think in some ways, it's okay to be transactional with China. I don't like being transactional with allies, but China's been transactional with us. I think you have seen some excellent talent in the first term of this administration, but quite frankly, our bench really isn't all that deep. We don't do what we did in the Cold War, which was to develop through area studies an incredibly deep reservoir of people who, in this case, know China inside and out as much as is possible for someone who's not born and raised and lives there. So, all of us, I think, are working to some degree at a

disadvantage. And of course, we all know how hard the job is. It's relentless. So, I think that in the Trump administration, if there's a second one, it's going to be trying to reach out and bring in more people who potentially did not serve yet. And I think in the Biden administration, it will be interesting. Will there be new talent? Is it simply going to be people from the Clinton administration and the Obama administration? Or will it be some new talent and new voices? Because all of us, I think, have to develop a new generation, a new cadre of China specialists to deal with the second era of US-China relations, which we're in and which is not like the first one. You know, the one thing I would add is, even as we are more clear-eyed in our approach to China, there are areas where we have to sit down

and have a more candid conversation about how we prevent the worst case based on misunderstandings about each other. And I'll give you an example. Chinese military doctrine, they think they're going to stop US power projection by massive attacks, cyber attacks on our critical infrastructure and in space. And they think that will just stop things. When you think about that, if you take down the electrical grid around a military base, you're probably also going to shut down electricity going to hospitals. Americans are going to die. When Americans die in a Chinese cyber attack against the United States, a president is going to feel obligated to respond. The Chinese don't understand that.

We need to have some dialogues that make them understand that and to try to take some of the more dangerous scenarios off the table by mutual agreement. My thanks to Michelle Flournoy and to Michael Auslin for this conversation. I hope you learned as much from it as I did. We'll be back next week. Until then, take care of yourself, and if you can, someone else too. Freakonomics Radio is produced by Stitcher and Dubner Productions. This episode was produced by Daphne Chen.

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