Commentary on Political Economy

Thursday 16 November 2023


Biden Plies Xi for a Fentanyl Deal Beijing Can’t Deliver


An example of the former is the grand bargain the two sides have struck concerning fentanyl. China for years has been a major producer of this dangerous synthetic opioid and the chemicals used to make it. Previous efforts to enlist Chinese aid in cracking down on fentanyl-related trade have failed as Beijing never fully delivered on its promises.

Maybe this time will be the charm, although probably not. Mr. Xi committed to throttle production of some of the chemicals used to make fentanyl. It’s not yet clear what Mr. Biden gave Mr. Xi in return, but the U.S. had been widely expected to lift sanctions on a state-security organ accused of oppressing Muslim Uyghurs to secure an agreement on drugs.

Don’t expect this to be a breakthrough on fentanyl. The problem isn’t that Mr. Xi is orchestrating some sort of cunning plan to addict Americans to deadly narcotics. It’s practically the opposite. To the extent Beijing sees strategic merit in allowing this trade to continue, it’s probably because Communist Party leaders are making a perverse virtue out of necessity. They can’t stop this drug trade, so they may as well try to make some advantage of it.

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Fentanyl is churned out by a Chinese pharmaceutical industry composed of thousands of minimally regulated private-sector companies. These companies do what every other private-sector company does in every other industry in China: whatever they can get away with. Which is a lot in a country where the Communist Party exercises substantially less centralized control than one would expect.

In many ways, Beijing’s interests align with Washington’s on the drug trade. Mr. Xi doesn’t benefit from tolerating an enormous black market beyond the party’s control. The corruption that accompanies this behavior is a political threat to a party that understands graft is a major vulnerability in the eyes of the Chinese public. Nor is Beijing likely to welcome the large financial flows that come with drug trafficking, or the alleged participation of Chinese banks in money laundering for cartels.

Yet Mr. Xi probably finds himself powerless to shut down the drug trade. Doing so would disrupt pharma and chemicals industries with an enormous legitimate side and the jobs and tax revenue that brings. He isn’t averse to an anticorruption drive now and then, especially if it helps him consolidate power by eliminating rivals, but one wonders if he’s ready to poke this particular bear.

Observers have noted that Mr. Xi’s enthusiasm for counternarcotics cooperation with Washington has waned as Sino-U.S. relations have chilled in recent years. Surely there is an element of causation here, but also a lot of correlation. China’s economy has sputtered badly since 2020 as the property market implodes, foreign investment and trade slow, and unemployment (especially among youth) soars. That would explain why Mr. Xi seems unwilling to create for himself the political-economy migraine that would come with a fentanyl crackdown at the behest of an unfriendly Washington.

None of which morally excuses Mr. Xi’s inaction on the drug plague afflicting America, but rather suggests that his acquiescence to this state of affairs could as easily be a sign of weakness as of strength. So why was Washington reportedly ready to offer a major concession on sanctions in exchange for a promise Mr. Xi might already want to fulfill but likely can’t?

Especially when left unresolved are items on which Mr. Xi can act and chooses to do so in a way that provokes the U.S. Chief among these are Beijing’s threatening posture toward Taiwan and the menace China increasingly poses to freedom of navigation in the South China Sea.

Mr. Xi doesn’t control China’s vast web of wildcat pharma firms, but he does control the military. That, combined with America’s strategic and economic interests in containing China’s territorial ambitions in Asia, makes these matters the only things worth talking about at a summit between a Chinese leader and a U.S. president. In this area Mr. Biden this week secured a resumption of military-to-military communication between the U.S. and China, which helps but is only a modest step given the scale of the challenge.

Restraining Chinese military ambitions becomes primarily a matter of American deterrence, meaning the thoughtful dangling of carrots and swinging of sticks. Those carrots and sticks aren’t available if they’ve been wasted securing Mr. Xi’s agreement to measures he’ll struggle to deliver anyway. If we’re going to have more of these summits—again, not a bad thing in principle—next time let’s try to do the reverse.

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