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Trend Letter: January 2007 [Briefings Publications]

Spotlight Interview by Hope Katz Gibbs
Volume 26, Number 1
Trend Letter


Peter Navarro is a business professor at the University of California, Irvine’s Paul Merage School of Business, and in addition to The Coming China Wars, has written bestseller “If It’s Raining in Brazil, Buy Starbucks,” and an audio lecture course, “Big Picture Investing: How, When, and Why the Stock Market Moves.” A 1972 graduate of Tufts University, Navarro served in the Peace Corps in Thailand from 1973 to 1976 He received a master’s in public administration from the Kennedy School of Government in 1979 and a doctorate in economics from Harvard University in 1986.

Trend Letter: You say the rapid and often chaotic industrialization of China, the world’s most populous country, has put it on a collision course with the rest of the world. Explain what you mean.

Peter Navarro: Although most Americans don’t realize it, we’re currently in a war with China over everything from decent jobs, livable wages and leading-edge technologies to strategic resources such as oil, copper and steel. Eventually, we’ll be fighting for the most basic of all needs-bread, water and air.

Part of the problem is that American consumers know and love China right now because it is making it easy for us to buy fancy toys at cheap prices. We couldn’t be happier walking out of Wal-Mart with bags filled with cheap, high- quality running shoes; inexpensive DVD players; and affordable HDTVs. But most of us are unaware that China is causing energy; environmental; political; and, in some cases, military shocks around the world. The truth is that there’s a dark side to saving money. It won’t be long before we pay a big price for all our “cheap” stuff.

TL: That sounds depressing. Tell our readers what you think is the key economic driving forces that make China different from other low-wage countries.

Navarro: China’s workforce is better educated and far more disciplined than that of any other country. Other drivers include minimal worker health and safety regulations; lax environmental regulations and enforcement; supercharged foreign direct investment; “network clustering,” a highly efficient form of industrial organization; and an elaborate, government- sanctioned system of counterfeiting and piracy. But only one of China’s economic initiatives—industrial network clustering—is legitimate from the perspective of a global economic system that is supposed to be based on free and fair trade.

TL: You also believe that China is the epicenter of the counterfeit boom.

Navarro: Yes. And while it’s difficult to feel [empathetic] when successful companies like Nike or Disney are the victims of piracy, a Robin Hood attitude misses something very big: Counterfeiting and piracy can be extremely dangerous when drugs and safety products like brakes and smoke detectors are unreliable. Counterfeiting will destroy all semblances of the global intellectual property law protections that are vital to sustain and spur continued world innovation.

TL: In your book, you mention that the stakes are even higher when counterfeiting spills over into the international drug trade.

Navarro: Well, if we think the Mafia is tough in America, they are angels compared to the unholy triangle of Triad gangsters, international smugglers and corrupt Communist Party officials in China. They have taken over a “factory floor” for so-called precursor chemicals used to produce all four of the world’s major hard drugs-cocaine, heroin, methamphetamine and Ecstasy.

TL: Talk about the environmental impact China is having on the world. In your book, you cite rapid industrialization and lax environmental controls, and you share the fact that 16 of the world’s 20 dirtiest cities are in China. How will that affect the United States?

Navarro: Many parts of China are filthy, and the damage caused by their lax environmental laws is spewing beyond the country’s porous borders. Dust storms from China are already blanketing Korea and Japan, and what is worse for the United States is that this thick brown asphyxiating dust, called Chinese “chog,” is hitchhiking along the jet
stream and descending on Los Angeles and Vancouver.

TL: You explain in the book that increasingly the Chinese people are becoming ill. It’s not surprising, really.

Navarro: Actually, it’s tragic. Environmental pollution is proving to be an all-too-deadly catalyst for an explosion of a myriad of cancers and an epidemic of respiratory and heart disease among the Chinese people. And that rapid rise in ill health is coming precisely when China’s once-vaunted health care system has totally unraveled under the weight of its ongoing privatization of social services and sweeping economic reforms. Also coming is an HIV/AIDS epidemic that many experts believe will become the worst in the world.

TL: You paint a pretty grim picture. And what is even more concerning is the fictional news release that’s in the introduction to your book. Dated Oct. 25, 2012, in it you say the Chinese government will dump U.S. assets on Wall Street, causing stock and bond prices to plummet, gold prices to soar to $1,000 an ounce and a global depression to take hold. What can be done to keep that doomsday scenario from unfolding?

Navarro: The policy prescriptions are obvious, but I fear the United States lacks the political will to enforce them. Far too many of our politicians do not have the courage to embrace either fiscal restraint or monetary responsibility. Instead of living within our means, the politicians have coupled large and chronic budget deficits with ultra “easy money” policies to keep American consumers and voters happy—or at least pacified.

What we need to do is keep China from acquiring ever-larger amounts of U.S. securities, because that gives them the ability to destabilize U.S. financial markets and plunge the United States into recession.

We also need to adopt a “zero-tolerance” policy toward intellectual property theft and set minimum environmental, health and safety standards in every multinational and bilateral trade agreement. We need to end our addiction to oil, reduce military and political conflict in the Middle East, and slow the process of global warning.

TL: Do these goals seem too lofty?

Navarro: Unbelievably, there are signs of progress. But naïve Westerners need to watch carefully what China does rather than listen to what it says. For the sake of the world’s children, I hope for a better understanding of the complexities of the economic origins of the coming China wars. And I pray that by educating business leaders and U.S. citizens, we will come to a peaceful resolution.

Copyright by Briefings Publishing Group, a division of Douglas Publications, LLC. All rights reserved. Reproduction of these issue samples in whole or in part without permission is prohibited. For more information, visit www.briefings.com.


"I get by with a little help from my friends," says Hope, who gives special thanks to:

• MICHAEL GIBBS, website illustration and design: www.michaelgibbs.com
• MAX KUKOY, website development: www.maxwebworks.com
• STEVE BARRETT, portrait of Hope on Bio page: www.stevebarrettphotography.com

Contact HOPE KATZ GIBBS by phone [703-346-6975] or email.