Secretary Antony J. Blinken At McCain Institute’s 2024 Sedona Forum Keynote Conversation with Senator Mitt Romney

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QUESTION: All right, it’s very short. You talked about Israel and Palestine, Saudi Arabia being such a key U.S. ally there. What do you see with China, Taiwan, India, Japan kind of doing the same (inaudible)? What efforts (inaudible)? What are the complications that you’re running into trying to overcome the China threat and the Russian threat to European allies?

SECRETARY BLINKEN: Maybe that’s a great segue. Did we need a segue?

SENATOR ROMNEY: There you go, go ahead. Yeah, please.

SECRETARY BLINKEN: All right. Well, just a few things to say here. First, with China, just before we were in the Middle East we were in China. And about a little less than a year ago, I took a trip at a time when we had been very disengaged. And I think that one of the things that President Biden believes is that we have an obligation to try to manage this relationship responsibly. We’re in an intense competition with China, and of course, for Americans there’s nothing wrong with competition as long as it’s fair. Hopefully it actually brings out the best in us. But it is a real competition.

But we also have a profound interest in making sure that competition doesn’t veer into conflict, and that actually starts with engagement. And so we really began a process of re-engagement with our eyes wide open, and a number of my colleagues followed. And then, of course, most important, President Biden and President Xi met at the end of the year in San Francisco on the margins of the APEC meeting.

And what we’ve tried to do, first and foremost, is to re-establish regular dialogue at all levels. One of the most important pieces of this was re-establishing military-to-military communications, because the quickest way to get into an unintended conflict is not to have those conversations happen. That’s been fully restored. We look for areas where we might actually cooperate where it happens to be in our mutual interest to do that – and I’ll come back to this in a second because we found a couple. But mostly, it’s so important because you want to be able to be extremely clear, extremely direct, extremely explicit about your differences and your intentions. And we have a world of differences, but it’s better to be talking about them directly than it is to remain disengaged.

And so what I found, including in this most recent trip, was that we’re able to engage on those differences in a very clear way. It’s not that we resolve them, but at least we might have a better understanding of each other’s intentions, and that’s important.

Second, something else has changed, and this is something that we’ve talked about a lot and that the senator has been an extraordinary leader on in the Senate. The relationship with China, as I said, is – for us is arguably the most consequential, maybe the most complex. And I think it’s very hard to put it on a bumper sticker. I said competition a moment ago – that’s probably the closest we have to a defining word – but there’s also contestation. And there are some areas where we cooperate, because, again, it’s in our mutual interest to do so.

In each of those areas, what makes the most sense for us is to be able to approach China from a position of strength, and that’s the biggest difference, I think, that we’ve seen ion the last few years, because we came in with the proposition that we needed to do two things in order to be able to engage China from a position of strength. One was to make investments in ourselves, and you’ve seen that with infrastructure, you’ve seen that with the CHIPS and Science Act – and by the way, we have an extraordinary partner in Arizona State University for CHIPS and Science. That’s been a remarkable thing to see. You see it with other work that we’ve been – that’s been done, including on a bipartisan basis with Congress, which is also a nice thing to see these days.

The flip side of the coin is the part that I’m in part responsible for, and that’s alignment with our allies and our partners. From where I sit right now, we have a greater convergence with key partners in Europe, in Asia, and even beyond, on how to approach China. And I can tell you that it’s something that our counterparts in Beijing know, notice, don’t particularly appreciate, but it’s a very powerful reality.

If you’re dealing with China on economic issues where you have a real difference, as we do in so many areas, if it’s the United States alone, we’re what, 20, 25 percent of GDP. If we have alignment, convergence, with European partners, Asian partners, it might be 50, 55, 60 percent of GDP. That’s a very heavy weight and much harder for China to ignore. So that’s what I’m seeing right now, and it’s making a difference.

Last thing on this. I mentioned that it makes sense, where we can, to cooperate if it advances an interest. So right now, the biggest killer of Americans aged 18 to 45 – not guns, not car accidents, not cancer – it’s fentanyl. Every single community in this country has been affected by it. Forty percent of Americans know someone who has died from an opioid overdose. That’s the impact. And of course, we know that a big part of the problem, of course, has to be solved here at home, as we’re doing by investing a lot in awareness, in treatment, in prevention, law enforcement.

But the other big side of the equation is supply. And how this works, as everyone knows, is you’ve got the ingredients that go into making a synthetic opioid, chemicals that may be made halfway around the world – in this case, in China – and made for perfectly legal reasons, but then get diverted into a criminal enterprise and into the synthesis of fentanyl, comes into the country, kills our friends and neighbors.

So China’s a critical actor in this. And we have put – been putting a lot of pressure on China to take action against some of the enterprises in China that are engaged in producing these chemicals and then illicitly transferring them to use in making fentanyl. But usually, you have a chance at getting even more done if you can find a way to do it cooperatively. So the President spent hours with President Xi on this and made clear our determination, one way or another, to get to the bottom of this, and also shared that what we’re seeing around the world is – a problem for which we’ve been the canary in the coal mine is now manifesting itself in so many other places.

The criminal enterprises that have saturated our market, they’re trying to make markets in Europe, in Asia, in Latin America. And we said to the Chinese: there’s going to be a huge demand signal on you to lead on this, to act responsibly. Well, one way or another, they heard the message, and we now have, at least in its early days, cooperation that we didn’t have before, with China putting out new regulations, China actually taking down some of the companies engaged in the illicit production of the precursors or transfer of these precursors, and establishing a working group together where we’re working through this problem.

Now, again, they have their own reasons for doing this, and unless it’s sustained and unless we see certain other actions taken, it won’t produce the results that we need, but at least it’s a start. So I shared all of that – and sorry for going on – just because I think it’s important to see the relationship in its – in 360 degrees, and all of that with eyes wide open, because this competition is not going anywhere for a long time. If we’re approaching it from a position of strength, we’ll do very, very well.

SENATOR ROMNEY: The Secretary has been kind enough to listen to me on the topic of China, invited me to come by his office and spend some time. And given the fact that my real career was in the world of business, I sort of look at China from a business standpoint and believe that if I were crafting a strategy for a country or a company, I would look at China and say: Brilliant, what an extraordinary job; you don’t have to live by our rules, our regulations, our antitrust laws, and you’ve done everything that a good robber baron would do in this country at the turn of the century, 1800s to the 1900s. And I wonder if we’ve figured out kind of how to deal with this, how to confront it, because their ability to mount a military – they spend about as much on their military each year as we do. According to our Intelligence Community, they spend about $800 billion a year. AEI says $810 billion, all right, but that’s about – that’s close to where we are. We’re 850. And so – and they’re buying a lot more equipment than we are.

So, but their ability to spend that is a function of an extraordinary economy. And even though it’s not as big as ours, they generate massive cash that allows them to make this kind of investment. They’re – and then around the world, the Belt and Road, spent a trillion dollars. We don’t spend a trillion dollars on ourselves. They spend it around the world. And one of the things they did, they – not following the Sherman Antitrust Act – they said we’re going to take over one industry after the other. They had 5 percent of the world steel business; now they have 54 percent of the world’s steel business. They’ve taken over the aluminum business. They’ve taken over the nickel business. They’ve taken over rail cars. They’ve taken over buses. Just boom, boom, boom, boom, one after the other.

And they keep it going. And when you – by the way, monopolies – you make a lot of money with a monopoly, and you drive the American businesses and the Western businesses out of business. And then more – I don’t know how many years ago, they said, you know what, the world is going to go towards the electric world – solar panels, batteries. So while we’re sitting around thinking about what kind of batteries we ought to have and so – they’re going around the world buying up the mines and processing for nickel and cobalt and lithium. They basically have a dominant position in the major ingredients that go into batteries and solar panels.

So as we go into a electric economy, guess who’s going to lead it? We’re going to have a new OPEC, by the way, but only member of this OPEC: China. All right. And we’ve sat and watched them do this. And then their cars come along. Do you know what a Chinese electric car costs? Eleven thousand dollars. Why is that? Well, because they’re getting the batteries where the country made a trillion dollar investment to dominate all of the raw materials in the creation of these batteries, so their companies are able to get batteries for a fraction of the cost. By the way, the battery is the biggest single component in the cost of an electric car, so of course their cars cost half as much as ours, or less.

How do we deal with this? And the Secretary has – has described a strategy which has three major principles: invest, align with our allies around the world, and compete. But do we need to align more to get – to say to China you can’t keep doing this? You can’t keep taking over industry after industry and bankrupting our industries, dominating the raw materials we need, not selling them to us at the same price you’re selling to your own people. You can’t have access to – what do we do? How do we deal with this economic juggernaut that I think is brilliant but shouldn’t – they shouldn’t be allowed to do it and still – and have access to our market. I believe in free markets, but you can’t have a free market if one person is not playing by the rules of free markets. So how do we deal with this? How do we say enough already?

Sorry about that. I know that was more of a speech than it was a question. (Laughter.) But I couldn’t resist. (Laughter.)

SECRETARY BLINKEN: Well, you’ve been extraordinarily eloquent about this for a long time, and I think it’s exactly right. Because what we have fundamentally in the economic relationship with China has not only with us but with countries around the world is a total lack of reciprocity. And that’s unsustainable. It was one thing when China first got into the WTO, and given where it was in its development, okay, some allowances reasonably could be made. But we’re now 20-plus years later and China is exactly as you’ve described it and where it is.

And I think what we’re hearing – again, not just here in the United States but from so many of our partners around the world – is no, enough, we can’t do this anymore, we won’t do this anymore. And again, it’s the – when you bring all of that together it is, I believe, a lot harder for China to ignore. So we spend a lot of time working with our allies and partners on taking this common approach and making sure that Beijing is hearing in stereo what it’s been hearing from us. And I believe that this is the way to get change.

Now, we have the immediate problem – and I think Secretary Yellen was here this morning, so I don’t know if she talked about this, but she has been intensely focused on this. She was in China just before I was. By the way, she is very famous in China – chopstick ability. (Laughter.) When I was there – oh, you work with Secretary Yellen?

SENATOR ROMNEY: They test you on the chopsticks.

SECRETARY BLINKEN: Yeah, they do a little bit. It’s good. Janet’s really got it down. (Laughter.)

But the President is intensely focused on overcapacity right now, because we’ve been through this before. We had what some called the China shock in the years after it got into the WTO and did exactly what you’ve described – flooded our market with certain products, pushed our companies out of business, devastated some communities – and we can’t have that again. The President will not have that again.

So a big part of my visit as well following Secretary Yellen was to help our counterparts in Beijing understand that we are making major investments in ourselves, including bringing good, strong manufacturing jobs back to the United States, and we were not going to allow our markets to be flooded with underpriced products that would drive our folks out of business. And the cases you point to in particular – solar panels, electric vehicle batteries – China right now is producing in some cases double the entire global demand for those products, and it’s trying to work itself out of its own economic challenges at this moment by exporting, but exporting in unfair ways.

I had this conversation with my Chinese counterpart, the Foreign Minister Wang Yi, and he said wait a minute, capitalist economies – they work on comparative advantage. I said that’s absolutely right. But there’s one thing to say comparative advantage, there’s another thing to say unfair advantage, and that’s what we’re focused on changing.

SENATOR ROMNEY: Help me get a sense of what – how they’re doing around the world geopolitically. I hear stories. I’m sure each of the people here have heard one or the other stories about how China is all over Africa, China is all over Latin America, it’s all over the Caribbean, that everywhere you turn the Chinese here, the Chinese there. And yet in their own neighborhood they seem not to be doing so well, with the Philippines and the Vietnamese and the South Koreans and the Japanese and the Australians. I mean, they seem to have badly misjudged what’s happening right around them. Are they doing really well in Africa and Latin America and the Caribbean or – I mean, sort of how are they doing geopolitically?

SECRETARY BLINKEN: I think there are a few things going on. First, of course, as you mentioned earlier and as you mentioned a few minutes ago, they’ve been engaged for a long period of time in their Belt and Road program making major investments in different parts of the world. It’s had real successes over time in terms of positioning them economically and positioning them strategically. The two things are, I think, very much married.

But we’ve also seen two things. The way that these investments have been made in many cases – not all cases, but in many cases – piling countries with debt, bringing in workers from China to take on the jobs instead of having local workers take them on, building things to substandards, bringing, shall we say, a disregard for workers and the environment with it – that also begins to have an effect. So I think countries appreciate the magnitude of the investment. They appreciate the rapidity with which China is able to act, something that is not our forte – but I want to come back to that in a second. But then there is often a price to be paid later.

Now, I think China is trying to adjust because it’s getting – it’s gotten pushback as people start to realize some of what these investments mean. The other challenge that it has is it actually has less money to invest in this moment because it has its own economic challenges. But we’re also not standing still, and you mentioned the imperative of critical minerals and the building blocks of the 21st century economy. We put together something called the Mineral Security Partnership, where we’ve gotten now more than 14 countries to work together, to look together, and potentially to invest together around the world in projects to make sure that we can build our own resilient supply chains and not be dependent on any one part of the world, whether it’s China or anyone else.

And we now have several dozen projects that are either moving forward or that we’re actively looking at. And ultimately, our competitive advantage in this area is the private sector. We’re never going to compete with China on a state-to-state level, dollar for dollar. That’s not the nature of our system. Our system is making sure that – and one of my jobs, one of the State Department’s jobs, is to try to make sure that we are helping open the terrain for American investment, for American business. And that’s exactly what we’ve got the tools of government focused on now in ways that we haven’t before. Development Finance Corporation, other parts of the government, are focused on trying to be more effective, to serve as guarantors or as catalysts for the private sector.

But the critical difference is doing it with other countries. The President put together something at the – with the with the G7 countries, the Partnership for Global Investment and Infrastructure, and it’s the same basic idea. Any of us acting alone, it’s going to be hard to match what China’s doing. When we can work collectively, marshal our resources, or, as necessary, have some of us active in one place, others in another, that’s the way I think you get at dealing with some of the advantages that China’s shown in recent years.

Pacific Islands are a really good example of this. China covers a lot of ground in the Pacific islands, maybe more ground that we can cover ourselves, although we’ve made a major investment there. The President’s had two summit meetings with all the Pacific Island leaders at the White House. But when we’re working in cooperation and collaboration with Australia, with New Zealand, with Korea, with Japan, with India, we cover a lot of ground. You’re seeing that play out. You’re seeing that play out with undersea cables. You’re seeing that play out in our ability to help deliver some of the things that people in those countries want.

And the last thing is this. In diplomacy, it is often more effective to say to a country: We’re not asking you to choose; we want to give you a better choice, and then you make up your mind. So our responsibility is putting together that better choice.

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Source: U.S. Department of State

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