Partial disengagement based on democratic characteristics: A new era of US-China economic relations
The U.S.-China relationship is at a critical and pivotal juncture. The current pandemic provides direct evidence that our economic relationship with China is in need of a comprehensive evaluation and long-term strategy that is reflective of U.S. and Western values. This includes unwavering respect for the rule of law, freedom of expression and religion, and market-based principles that support fair trade, reciprocity, and a level playing field.
China must acknowledge that the free and open world made great efforts to ensure their acceptance to the WTO in 2001, with the expectation that the Middle Kingdom would adhere to international laws and a rules-based system. Due to WTO membership, China’s economy grew from its Reform and Opening Up program by benefiting from significant foreign investment and valuable American-led best practices and technology know-how.
It cannot be denied that China successfully utilized the benefits of WTO membership to lift an estimated 800 million people out of poverty and earn an average annual GDP growth of 9 percent. Ultimately becoming the second largest economy in the world.
More recently, thanks in part to the tireless advocacy efforts of the U.S. business community, China passed a new Foreign Investment Law. They established IP courts and fostered a better environment for U.S. companies to operate. However, these accomplishments are toothless if China continues to refuse adherence to the letter and spirit of the law.
Although this issue has long plagued the trade community, President Trump skillfully maneuvered this problem into mainstream conversation. He ushered in a new era of U.S. relations with China. We reached a milestone in January, when the U.S. and China signed the Phase 1 trade deal. It featured advances in key areas such as IP protection, technology transfer, financial services, and commitments for the Chinese to buy significant amounts of U.S. agriculture products as well as other goods and services.
While there is still opportunity for improvement, this agreement moved the conversation in the right direction, and efforts on both sides should be commended.
It must be noted that the origin of this deal, a U.S. Section 301 investigation, was based on China’s consistent disregard of the rules, including extensive market access barriers, rampant IP theft, predatory forced technology transfer policies, and market distorting subsidies driven by an authoritarian and opaque political system.
This system, driven ultimately by the Chinese Communist Party (CCP), embraces policies rooted in a statist, mercantilist-Leninist approach which reflects Xi Jinping’s aggressive consolidation of individual power. Since 2012, Xi’s heavy hand has significantly eroded CCP’s traditional governance structure of collective leadership, known as jiti lingdao.
This major transition of leadership and governance has ushered in a new era of “strongman politics” featuring a strict top-down leadership, which was largely responsible for intensifying the initial outbreak and coverup of COVID-19 from Wuhan.
The ideals dictated in Zhongnanhai, Beijing’s power hub, promote repression, censorship, non-market principles, and belligerent international expansionism. They run counter to U.S. and Western values of a free, market-driven economic relationship.
Despite this, China is deeply entrenched in the global economy and is American’s largest goods trading partner. A total decoupling is not the answer. It would disrupt the global financial system. We cannot go back to the status quo that guided the U.S.-China commercial relationship for the past 40 years.
This next evolution must be managed in a sober, clear-eyed manner and implemented on an approach of partial disengagement based on democratic characteristics.
A five-part approach, inspired in part by a National Bureau of Asian Research report by Charles Boustany and Aaron Friedberg, would enable the U.S. and China to coexist and maintain a robust trade and investment relationship, while drawing new lines in the sand that establish American values and security.
First, the U.S. should honor the full scope of the Phase 1 agreement despite the erosion of the U.S.-China political relationship.
Second, the U.S. needs to consolidate a new agenda of robust policies that constrict outward flow of sensitive technologies to China, while reevaluating inward flows of China goods such as medicines and medical supplies in exchange for reconsidering tariffs on non-sensitive goods and services.
Third, the U.S. government, in conjunction with the private sector, must undertake an unprecedented national industrial strategy to invest in innovation, technology, infrastructure, and bridge the rural-urban divide. Legislative policies should focus on a top-down buildout of a 5G infrastructure, smart national privacy laws that enable AI platforms to flourish, and the development of a Rural Commercial Service to steer international foreign direct investment in our rural communities and promote trade.
Fourth, the U.S. must quickly pivot to strengthen trade and investment relationships and information sharing with key allies. We should also work with our allies to reform key multilateral institutions such as the WTO, that feature potential U.S. leadership. Advancing initiatives such as the Blue Dot Network will help accelerate responsible and sustainable growth throughout Africa, Southeast Asia and Latin America.
Fifth, the U.S. must deploy a unified, whole-of-government approach to develop a long-term economic relationship with China. The establishment of a new Cabinet-level official to implement strategic U.S.-China policy will enable us to coordinate among federal agencies, Congress, and the private sector.
A stable U.S.-China relationship is critical to the overall security of the world. Presently, China is the largest driver of global growth and holds approximately one trillion dollars of U.S. government debt. History has shown that isolating rising powers will only embolden the dark sides of nationalism and economic seclusion.
Partial economic disengagement, with managed national and international cooperation rooted in democratic values, is the best path forward. We will no longer turn a blind eye to abandoned commitments of past decades. We must constantly evaluate this relationship, monitor its progress, make necessary corrections, and demand accountability. With over $200 billion dollars at stake, countless jobs in the balance, and the future of the two largest economies in turmoil, America must lead so that the world can follow.
Carol Miller, a Republican, represents West Virginia’s 3rd District.
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