The whole speech is good. 

I don’t agree with it all but these are troubling times.

I have highlighted the part that really hits home with me.

Remarks by Henry M. Paulson, Jr., on the United States and China at a Crossroads – Paulson Institute:

Meanwhile, the integration of people, especially the brightest young students, could also stall — as Washington potentially bans Chinese students from studying whole categories of science and engineering subjects.

If all this persists—across all four baskets of goods, capital, technology, and people—I fear that big parts of the global economy will ultimately be closed off to the free flow of investment and trade.

And that is why I now see the prospect of an Economic Iron Curtain—one that throws up new walls on each side and unmakes the global economy, as we have known it.

Now, as a practical matter, rather than an aspirational one, China still relies a lot on global capital, trade, investment, and foreign know-how.

And so the most strident calls for “decoupling” are actually coming from the United States and, to a lesser extent, from Europe, not from China.

But here’s the problem for those in my country who advocate a US-China “divorce”:

“Decoupling” is easier when you’re actually a couple.

But the United States and China are not, in fact, a couple. There are more than two players here. And the rest of Asia, in particular, gets a vote.

So the US can try to divorce China by restricting flows of goods, capital, technology, and people. But what if others, especially in Asia don’t want to follow suit?

Many years of working in and around Asia have taught me this:

I do not believe that any country in Asia can afford to divorce China, or even wishes to.

That is a function of their geography, of economic gravity, and of the strategic reality they live with each and every day.

It is true that many governments and businesses around the world share Washington’s current concerns. And sometimes, these governments and businesses are pursuing similar policy and business choices, particularly with regard to investment screening for national security risk, which is being bolstered in a number of countries, especially in Western Europe.

But let us not presume this also means that everyone, including America’s closest allies, is ready to “divorce” China, as some in Washington would now have it.

On the contrary, no country, in my view, will “divorce” a major nation that remains, even amid a slowdown, among the world’s fastest growing major economies.

So in its effort to isolate China, the United States risks isolating itself.

Consider what would happen, for instance, if multinational companies decided that they should be headquartered somewhere else — still aiming to ride the wave of a growing Chinese economy but in a country less hostile to their doing business with Beijing.

Hosting scores of leading, best-in-class multinational corporations is among America’s greatest competitive strengths. And it is one that America now risks surrendering — if it cannot get right its links with the world’s fastest-growing economies, including China’s.

Frankly, de-integration is inevitable, and even necessary, in some areas—not least to protect our national security.

But it is decidedly not in America’s interest to attempt this across the board.

Divorce doesn’t work well for global businesses.

And the same could be said for the trade policies that drive companies and countries away.

This is exactly what worries me about the new clause Washington inserted into the recent US-Mexico-Canada trade agreement, which aims to short-circuit or even veto efforts by America’s partners to open China’s market through their own trade negotiations.

Why would Asian countries, which are negotiating the Regional Comprehensive Economic Partnership, among a group of 16 that includes China, walk away from their negotiation at the behest of the country that pulled out of the Trans-Pacific Partnership?

I presume they will not.

So instead of pursuing a carefully calibrated de-integration—focused on sensitive and critical areas—the US seems instead to be flirting with a comprehensive de-integration.

And through initiatives like that new trade clause, Washington now strikes many people as attempting to disrupt all aspects of China’s external economic relationships.

This risks setting Washington up for a new round of battles with its allies and partners—the very partners it needs to help alter Chinese behavior.

And this, Ladies and Gentlemen, is what I mean by American “self-isolation.”