Dec 3, 2018

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1 big thing: Tough-on-China, mainstream edition

Illustration: Sarah Grillo/Axios

As President Trump enters a tough new phase in his hardline offensive against China, he now has allies he lacked in his other high-profile attacks on the status quo — the establishment.

Unlike his attacks on NAFTA, immigrants, climate science and Obamacare — which triggered denunciation by critics in and outside the U.S. — Trump finds himself in the embrace, if conditional, of mainstream experts when it comes to China.

What's happening: It's not that Trump has moved to the center, nor that the establishment has embraced his America First mantra. Rather, in the U.S., Europe and elsewhere, senior China hands argue simply that Trump's instincts are right on this one. "I think Trump has a strange animal insight about these things. He has a keen nose for being taken," Orville Schell, director of the Center on U.S.-China Relations at the Asia Society, tells Axios.

  • The shift of mainstream opinion comes as Trump emerges from the weekend G20 summit with a 90-day stand-down agreement with Chinese leader Xi Jinping. The two leaders agreed to attempt to work out their policy differences by March 31, and meanwhile observe a timeout on higher U.S. tariffs due to take effect Jan. 1.
  • If the two sides stay with their current agendas, getting to an actual deal will be hard. In remarks yesterday and today, Beijing made no mention of U.S. demands for a halt to the theft and forced transfer of U.S. technology to China, and the U.S. omitted any talk of reducing tariffs, which is a Chinese demand.
  • But U.S. officials say China had agreed to immediately lift a 40% tariff on U.S. car imports and allow U.S. companies to own the majority of Chinese firms, write Reuters' David Lawder and Jeff Mason.

There is skepticism given the long history of unsuccessful U.S. attempts to move China on its policies, going back to the Truman administration. Last Thursday, a group consisting of senior Asia experts from the U.S. and across Europe released a Hoover Institution report explicitly distancing themselves from those prior efforts. They did not brand them wrong-headed, but said it's time to get tougher.

"The Chinese respect firmness and exploit the lack of it," Winston Lord, a former U.S. ambassador to Beijing and one of the most respected American experts on China, said at a presentation of the report in Washington on Thursday.

  • A main problem is a long-standing Chinese effort to influence the West, the group said. John Garnaut, former adviser to former Australian Prime Minister Malcolm Turnbull, says that in Australia, "all the major [political] parties were at threat of being dependent on Chinese money. That dependency had to be broken." A new law controls the cash flow, he said.
  • The same goes with Chinese cash to U.S. universities and think tanks, says Larry Diamond, a professor at Stanford University. "The lure of money is just overwhelming," he says. "I cannot emphasize this enough, from the standpoint of universities in general and what I have found in terms of the prospect of funding for think tanks and in Hollywood."

A primary worry: A miscalculation that results in a trade tiff spiraling into war. That is where the establishment departs from Trump.

  • Sulmaan Khan, a professor at Tufts and the author of "Haunted by Chaos: China's Grand Strategy from Mao Zedong to Xi Jinping," tells Axios that the Trump administration contains "hotheads," and because of that "the risk of miscalculation goes up."
  • "The historical phenomenon of a rising versus established power is greatly exacerbated by having two dangerous leaders in our capitals," Lord says.
  • Trump "scared us to death when he won. He still scares us to death," says Schell.

Go deeper: Watch a presentation of the Hoover Institution report (video)

2. For bosses, big is out, small is in

Illustration: Rebecca Zisser/Axios

3M CEO Michael Roman wants shareholders to think of the company as anything but a conglomerate, even though it operates in a dozen industries and makes everything from Post-it notes to oil and gas pipeline coatings.

Which is to say that, like the heads of a lot of other industrial giants, Roman understands that big is now out and small is in.

Writes Axios' Courtenay Brown: Industrial conglomerates were formed in the post-WWII era after a new bout of antitrust crackdowns encouraged them to grow by buying up companies in totally different industries. But by the 1990s, most began slimming down, and now, the best-known remaining industrial conglomerates are determined either to shrink (General Electric) or shake off the conglomerate label (3M).

"It's a stigma to be called a conglomerate. It makes you sound confused," says Jerry Davis, professor of management at the University of Michigan, who wrote a 1994 research paper about the decline of conglomerates. "It's the ADHD of the corporate world."

So big companies are attempting to rebrand themselves:

  • United Technologies announced last week that it will split into three separate public companies.
  • At 3M's investor event in November, Roman said, "[What] makes us not a conglomerate [is that 3M is] a clearly focused enterprise [that owns] a unique value differentiator that is really leveraged broadly in the company."
  • In 2016, Danaher CEO Thomas Joyce told analysts: "We're not huge fans of the term conglomerate for a lot of reasons in terms of what is implied." Danaher later spun off its industrial tools and dental businesses.

But, but, but: While we're witnessing a decades-in-the-making end for industrial giants, the conglomerate concept is not entirely dead.

"A lot of Silicon Valley firms — Amazon, Google, Facebook — they really are conglomerates," Davis says. "And yet at some level you can see what the coherence is. Industrial conglomerates don't have any advantage in applying its technology to a bunch of different industries. What's different is the information technology gives you an advantage."

3. More news from Pangaea
Data: Global plate boundary evolution and kinematics since the late Paleozoic; Map: Lazaro Gamio/Axios

ExxonMobil's play offshore from Guyana in South America's northeast keeps swelling — this morning, the company said it's at 5 billion barrels, 25% more than it reported just three months ago.

What's happening: The story goes back to 2006, when explorers discovered a big oil reserve offshore from Ghana, on Africa's west coast. That ignited an industry frenzy. Recalling the breakup of Pangaea, the ancient supercontinent, drillers knew that if there was oil in Ghana, it might also be found near South America's east coast, which until 200 million years ago was fused to Africa.

The result: Exxon's massive find in offshore Guyana.

What's next: Exxon is on a Pangaea tear. In October, the company announced an exploration spree in Brazil, Namibia, South Africa, Mauritania — and, again, Ghana, all of it tied to a respect for the estimable geology of the former supercontinent.

Go deeper:

The wild geological treasure hunt in Nova Scotia

Obama thwarts the fanatical explorers of Pangaea

4. Worthy of your time

Illustration: Sarah Grillo/Axios

How Microsoft became again the most valuable company (Jay Greene — WSJ)

Facebook vs. democracy (Felix Salmon — Axios)

Germany's big AI plan (Janosch Delcker — Politico)

Mastering evolution — gene-edited babies (Anjana Ahuja, Nicolle Liu, Louise Lucas — FT)

Owning silicon (The Economist)

5. 1 friendly thing: Pleasant rodents

Nice companion. Photo: Toshifumi Kitamura/AFP/Getty

You might catch a friendly capybara squiring a few squirrel monkeys around on its back, or just hanging out in a tub, taking a bath with a puppy.

Such is the agreeable life of this 2-foot-tall rodent, pictured above in Japan taking a soothing shower, writes Alan Taylor in a picture story over at The Atlantic.

Other animals just like being around the pleasant capybaras, which seem to make friends with almost anyone, including birds, deer — and people. Take a look at the photos.