National

When President Trump demanded that China cut its $375 billion trade deficit with the U.S. by $200 billion, Chinese officials and the U.S. press shrieked. It seemed impossible. However, there's a simple way for China to give Trump this “win”: buying $200 billion worth of American oil, as well as liquefied natural gas (LNG) from Alaska, Texas and Louisiana.

The details: Alaska is estimated to have nearly $1 trillion worth of LNG that it's eager to sell and heartland states have several trillion dollars’ worth of oil and gas reserves available for export. While there would be some delays in delivery — new production and transportation infrastructure would first have to be built — the trade deficit is measured by date of sale, so the impact would be seen right away.

The backdrop: China has an immense energy demand, accounting for 60% of global growth in oil, gas and coal consumption since the 2008 Great Recession. It has more than $3 trillion worth of foreign exchange reserves, over $1 trillion of which is held in U.S. dollars. Buying and paying up front for U.S. energy, then, amounts to little more than changing the mix of assets in its portfolio. In fact, Commerce Secretary Wilbur Ross has repeatedly called on China to import more American LNG, recognizing that it would also help diversify China’s supply sources.

From the U.S. perspective, selling natural resources is less desirable than selling manufactured products. But by doing so, Trump could credibly claim to cut the bilateral trade deficit by more than half. Moreover, these contracts would allow American companies to secure loans to build oil and gas infrastructure whose construction would employ tens of thousands of American workers.

While this proposal may sound far-fetched, Governor Bill Walker of Alaska is already seeking Chinese financing for a $43-billion deal to export LNG, and the Alaska Gasline Development Corp. has almost completed negotiations with its Chinese counterparts. The Chinese oil conglomerate Sinopec has also proposed a $7-billion, 700-mile pipeline from the Permian Basin shale oil field in western Texas to the Gulf, another effort the package could include.

The other side: Most economists dismiss bilateral trade deficits as irrelevant. They insist that deficits are simply the consequence of Americans consuming more than they save. But this argument misses the political economy of trade and the opportunities it offers politicians to demonstrate that they are championing jobs for their constituents. Congressmen, senators, mayors and governors campaign on this issue regularly. Why not a president campaigning in states that produce oil and gas?

Finally, while the U.S. government would not say so, this deal would also make China more dependent on the U.S. for delivery of a vital resource. Strengthening economic ties is a major stabilizing factor with benefits for both countries. Since China depends on energy delivered across U.S. Navy–owned oceans, the marginal increase in its vulnerability is insignificant.

The bottom line: Trump’s demands may be unreasonable, but they're not impossible to fulfill. If China concludes that this maneuver can pacify him and avert a trade war, we might see movement in this direction.

Graham Allison is the former director of Harvard Kennedy School’s Belfer Center for Science and International Affairs and the author of “Destined for War: Can America and China Escape Thucydides’s Trap?”

How energy deals could cut the U.S.–China trade deficit

Alaska and the American heartland have oil and natural gas to spare.

Facilities for Tesoro Refinery (R) and Agrium Nitrogen Operations and Conoco Phillips LNG (L) in Kenai, Alaska. Photo: Farah Nosh/Getty Images

World

China

Expert Voices

Energy

Politics

When President Trump demanded that China cut its $375 billion trade deficit with the U.S. by $200 billion, Chinese officials and the U.S. press shrieked. It seemed impossible. However, there&#x27;s a simple way for China to give Trump this “win”: buying $200 billion worth of American oil, as well as liquefied natural gas (LNG) from Alaska, Texas and Louisiana.The details: Alaska is estimated to have nearly $1 trillion worth of LNG that it&#x27;s eager to sell and heartland states have several trillion dollars’ worth of oil and gas reserves available for export. While there would be some delays in delivery — new production and transportation infrastructure would first have to be built — the trade deficit is measured by date of sale, so the impact would be seen right away.

China is becoming the most formidable rival America has faced, and the risk of confrontation with Russia, North Korea or Iran still looms. Authoritarians are rising, the chaotic Afghanistan exit revealed the limits of U.S. power, and the pandemic, climate change and other critical challenges continue to pose grave threats.

China is developing 500 smart cities — almost half the worldwide total, and more than 10 times North America's figure. 

Why it matters: China's smart cities signal the country's strengths not only in technology and infrastructure, but in implementation.

Details: In Canada and the U.S., smart cities face obstacles including skepticism of Big Tech, privacy concerns, outdated infrastructure, and the difficulty of aligning stakeholders.

The U.S. is developing 40 smart cities, less than 4% of the globe's total.

In the meantime, over 80 cities and counties in the U.S. are suing the FCC over new rules designed to accelerate the buildout of America's 5G infrastructure, which is expected to be the backbone of advanced internet-of-things technology.

Alphabet's Sidewalk Labs is attempting to transform a neighborhood in Toronto into "the most innovative district in the world," but hurdles including protests and lawsuits have delayed plans by 6 months, and construction hasn’t begun. 

Meanwhile, China's political system and extraordinary rate of rural-to-urban migration work together to fuel the country's full-speed advance.

China's urbanization offers opportunities to deploy advanced technologies.

China owns over 60% of the globe's 1.5 billion cellular connections that use the most promising IoT technology standard.

In Shanghai's Jing'an District, China Telecom has installed more than 500,000 sensors — on everything from fire hydrants to manholes. 

Hangzhou's smart city technologies have reportedly increased traffic speeds by 15% and reduced ambulance arrival time by 50%.

But China's sensors and cameras also create a data dragnet, offering China's surveillance state unprecedented omniscience. 

China has an estimated 200 million surveillance cameras, while the U.S. has 50 million. 

The bottom line: When it comes to building smart city infrastructure, China is at a clear advantage, as many of North America's greatest obstacles are irrelevant for the Chinese government.

Graham Allison is the Douglas Dillon Professor of Government at Harvard University, where he has taught for five decades.

China is pulling ahead of North America on smart cities

They signal China's strengths in tech, infrastructure, and implementation.

Animated illustration of a super tall skyscraper with the Chinese star elements on the side. 

Cities

Smart cities

Technology

China is developing <a class="gtmContentClick" data-vars-link-text="500" data-vars-click-url="https://urldefense.proofpoint.com/v2/url?u=https-3A__www2.deloitte.com_content_dam_Deloitte_cn_Documents_public-2Dsector_deloitte-2Dcn-2Dps-2Dsuper-2Dsmart-2Dcity-2Den-2D180629.pdf&amp;d=DwMFaQ&amp;c=WO-RGvefibhHBZq3fL85hQ&amp;r=R5A0M1IlsY0JZrSjXJBmas2hcYbpi2sHsAhpgsQeC3k&amp;m=BsvNugmzwmEXtsKaX7NhSwqo8i7ksDsxeIlp9M6XYnY&amp;s=SfUixWUSyZ9Rw91Q09ariyzhr488V2ZM_derQUqTPCc&amp;e=" data-vars-content-id="323f39f8-f67b-4d85-b09f-2fdc2710cea4" data-vars-headline="China is pulling ahead of North America on smart cities" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://urldefense.proofpoint.com/v2/url?u=https-3A__www2.deloitte.com_content_dam_Deloitte_cn_Documents_public-2Dsector_deloitte-2Dcn-2Dps-2Dsuper-2Dsmart-2Dcity-2Den-2D180629.pdf&amp;d=DwMFaQ&amp;c=WO-RGvefibhHBZq3fL85hQ&amp;r=R5A0M1IlsY0JZrSjXJBmas2hcYbpi2sHsAhpgsQeC3k&amp;m=BsvNugmzwmEXtsKaX7NhSwqo8i7ksDsxeIlp9M6XYnY&amp;s=SfUixWUSyZ9Rw91Q09ariyzhr488V2ZM_derQUqTPCc&amp;e=" target="_blank">500</a> smart cities — almost half the worldwide total, and more than 10 times North America&#x27;s <a class="gtmContentClick" data-vars-link-text="figure" data-vars-click-url="https://urldefense.proofpoint.com/v2/url?u=https-3A__www2.deloitte.com_content_dam_Deloitte_cn_Documents_public-2Dsector_deloitte-2Dcn-2Dps-2Dsuper-2Dsmart-2Dcity-2Den-2D180629.pdf&amp;d=DwMFaQ&amp;c=WO-RGvefibhHBZq3fL85hQ&amp;r=R5A0M1IlsY0JZrSjXJBmas2hcYbpi2sHsAhpgsQeC3k&amp;m=BsvNugmzwmEXtsKaX7NhSwqo8i7ksDsxeIlp9M6XYnY&amp;s=SfUixWUSyZ9Rw91Q09ariyzhr488V2ZM_derQUqTPCc&amp;e=" data-vars-content-id="323f39f8-f67b-4d85-b09f-2fdc2710cea4" data-vars-headline="China is pulling ahead of North America on smart cities" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://urldefense.proofpoint.com/v2/url?u=https-3A__www2.deloitte.com_content_dam_Deloitte_cn_Documents_public-2Dsector_deloitte-2Dcn-2Dps-2Dsuper-2Dsmart-2Dcity-2Den-2D180629.pdf&amp;d=DwMFaQ&amp;c=WO-RGvefibhHBZq3fL85hQ&amp;r=R5A0M1IlsY0JZrSjXJBmas2hcYbpi2sHsAhpgsQeC3k&amp;m=BsvNugmzwmEXtsKaX7NhSwqo8i7ksDsxeIlp9M6XYnY&amp;s=SfUixWUSyZ9Rw91Q09ariyzhr488V2ZM_derQUqTPCc&amp;e=" target="_blank">figure</a>. Why it matters: China&#x27;s smart cities signal the country&#x27;s strengths not only in technology and infrastructure, but in implementation.

After a record economic expansion, the coronavirus pandemic sent the U.S. economy into a recession as unemployment soared to staggering heights. The country now faces urgent questions about how much stimulus is needed for reeling consumers and businesses, and what a recovery might look like.

Economy & Business

 The U.S.-directed arrest of Huawei CFO Meng Wanzhou in Canada sounds an alarm for the increasingly contentious dynamic between China and the U.S.

Why it matters: When it comes to 5G, Huawei is the fastest horse in a thinning race, with potential to gain a monopoly in the next decade. But the U.S. has now launched a global campaign against the company without a serious domestic alternative for 5G infrastructure.

Background: The largest supplier of telecommunications and internet equipment globally, Huawei sells more smartphones than Apple, employs twice as many people as Google, and leads the world in 5G technology development.

Of the top 4 telecoms equipment brands, 2 are Chinese and none are American. 

Although Huawei is banned from U.S. 5G networks, rural American markets often depend on the company’s equipment. 

The arrest comes on the heels of a broader U.S. effort to undermine Huawei's influence, in the form of a lobbying campaign to persuade other governments — including those of Germany, Italy and Japan — to drop the firm, offering potential payment as an incentive. As U.S.-China ties grow increasingly strained, the Trump administration may consider a stricter ban on the company.

AT&T execs have said Huawei was 70% cheaper than competing suppliers. Excluding the Chinese giant amounts to a tax on domestic telecoms that will cost the biggest players billions.

For a quarter of rural wireless carriers, dropping Huawei would incur tens of millions in switching costs. And it would take a decade to implement the change.

What's next: The U.S. now has to decide what it's willing to do to prevent a company with tight ties to China's NSA-equivalent from owning the network that delivers 5G to Americans. If Huawei is able to deliver 5G to other nations years before and for a cheaper price than U.S. alternatives, few, if any, countries will wait.

Graham Allison is the former director of Harvard Kennedy School’s Belfer Center for Science and International Affairs.

Huawei arrest marks escalation in the U.S.–China fight over 5G

Excluding the Chinese giant could cost U.S. telecom companies billions.

A sign calling for the release of Huawei Technologies Chief Financial Officer Meng Wanzhou is seen outside at British Columbia Superior Courts following her December 1 arrest in Canada 

A sign calling for the release of Huawei CFO Meng Wanzhou outside the British Columbia Superior Courts in Vancouver, on Dec. 10. Photo: Jason Redmond/AFP via Getty Images

Huawei

Business

Big Tech

The U.S.-directed arrest of Huawei CFO Meng Wanzhou in Canada sounds an alarm for the increasingly contentious dynamic between China and the U.S.Why it matters: When it comes to 5G, Huawei is the fastest horse in a thinning race, with potential to gain a monopoly in the next decade. But the U.S. has now launched a global campaign against the company without a serious domestic alternative for 5G infrastructure.

From the Valley to D.C., Big Tech players like Facebook, Google and Amazon are under more scrutiny than ever as new technology develops and privacy and antitrust concerns grow in lockstep with companies’ ambitions.

Five days after Trump moved to cut off American components to Chinese telecoms giant Huawei, President Xi Jinping responded with a subtle threat to strangle America’s supplies of rare earths — the natural elements used in everything from computers to satellites.

The big picture: Xi’s threat demonstrates how the rivalry between a rising China and a ruling U.S. spreads from trade to technology to supply chains, touching every aspect of bilateral relations. The conflict risks massive spillover costs to the global economy.

Details: Rare earths are the 17 elements that separate the 21st century from the 20th, and China supplies 80% of them. Although the U.S. government has called them "essential" to the military, America has only 1 rare earths mine, which is partially Chinese-owned and sends its output to China for processing.

Between the lines: Trump may have hoped his Huawei order would force Beijing’s hand, but Xi can’t tolerate a hit to such a prominent firm.

On Monday, Xi toured a Chinese company specializing in rare earths. Notably by his side: Liu He, Beijing’s chief trade negotiator.

If China throttles supplies to America (or its manufacturing chains), production could halt for gadgets from iPhones to F-35s.

Flashback: After Japan detained a Chinese captain who sailed into disputed territory in 2010, Beijing hit Tokyo with conventional diplomatic and economic sticks. Japan refused to release him, but then China squeezed its exports of rare earths and Tokyo folded just two days later.

What to watch: If Trump completes his attack on Huawei, Xi could retaliate against U.S. tech titans that rely on rare earths, such as Tesla and Apple.

Xi's latest leverage: U.S. imports of Chinese rare-earth elements

They're used in everything from smartphones to airplanes.

construction equipment behind a mound of soil

Soil containing various rare earths in Lianyungang, China. Photo: STR/AFP/Getty Images

Minerals

Five days after Trump moved to cut off American components to Chinese telecoms giant Huawei, President Xi Jinping responded with a subtle threat to strangle America’s supplies of rare earths — the natural elements used in everything from computers to satellites.The big picture: Xi’s threat demonstrates how the rivalry between a rising China and a ruling U.S. spreads from trade to technology to supply chains, touching every aspect of bilateral relations. The conflict risks massive spillover costs to the global economy.

President Biden has made the COVID-19 crisis and a post-Trump return to national unity and traditional democratic ideals his top priorities. From vaccinations to stimulus to schools, Biden is seeking bipartisan compromise while showing a willingness to use executive authority and bare Democratic majorities in the U.S. House and Senate to implement his policies. Republican leaders are navigating deep party divisions over if and how to move beyond former President Trump.

Graham Allison

Stories

China is pulling ahead of North America on smart cities

Xi's latest leverage: U.S. imports of Chinese rare-earth elements

Huawei arrest marks escalation in the U.S.–China fight over 5G

How energy deals could cut the U.S.–China trade deficit