Getting lost on China: Congress offers cheap talk

Getting lost on China: Congress offers cheap talk
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China is the most important global challenge to the United States. We’re botching it. Congress is only part of this problem and, to their credit, many members from both parties want meaningful responses to China’s predatory economic behavior, human rights repression, and international aggressiveness. But the process has produced long bills that are largely political statements, with only a few useful elements. They should be scrapped, in favor of much shorter documents with a small number of powerful actions.

Already passed by the Senate, the United States Innovation and Competition Act (USICA) started as a welcome boost to research funding. Barriers to Chinese acquisition of that research were proposed, correctly. But the final version of the bill is a 2,376-page monster, 2,000 pages of which could disappear with no loss to anything except the amount of empty rhetoric.

One component of USICA is an initially separate bill titled the Strategic Competition Act. At least four-fifths of its 435 pages also could disappear with no impact. The ratio of fluff to content is worse in the House equivalent, known as the (470-page) Eagle Act. Setting priorities and taking costly action on China is difficult, even a bit scary. It’s much less stressful to announce a vague “sense of Congress” on dozens of issues, hiding the fact that Congress isn’t doing anything about them.

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There are two costs to taking the easy road here: 1) failing to do nearly enough now and 2) probably failing to do nearly enough later. On the latter, pro-China industries such as finance see these bills, if passed, as an opportunity to declare the China fight won thanks to American “toughness.” The actual outcome would be the opposite. A year from now, it will be harder to pass legislation because of the midterm elections. And if midterms result in split control of Congress, it may be harder to act in 2023. 

That would open the door to years more of China harming U.S. interests. Despite concerns about loss of jobs, loss of technology, repression in Xinjiang, future aggression in Taiwan, violations of U.S. law, and so on, American investment in China almost certainly exceeds $1 trillion and is rising. An “almost” is needed because the Department of the Treasury pretends the tiny Cayman Islands are the top recipient of American funds, obscuring the true amount going to China. The first step in fixing an addiction is admitting to it. 

There are members of Congress, again from both parties, who want to keep American investors from supporting Communist Party General Secretary Xi Jinping’s agenda. But none of the giant bills moved in the Senate or the House take any action to do so — thousands of pages to improve American competitiveness against China, and none considers that the U.S. is funding Chinese competitiveness.

Like investment, technological advance can span economics, security and politics. In the USICA, the Senate recognizes this and attempts to both advance American technology and protect it from China. But no penalties are given for Americans ignoring the protections, much less for Chinese recipients of illegally acquired research. And the House research bills have almost no protections. Beijing will pilfer American technological progress, then subsidize its firms to drive American companies out of business. Again. 

Supply chains are a third element of Sino-American competition crossing issue lines. The COVID-19 pandemic provided overwhelming incentive to limit Chinese participation. The USICA funds new semiconductor factories here but allows China in the supply chain for the plants. A supply chain provision copies the Biden and Trump administrations in doing nothing of consequence and the new American jobs could be hostage to Beijing. The Eagle Act offers $15 million to help companies move out of China, when $15 billion would be a start.

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China’s rise definitely can be stopped, but the U.S. is not doing our part. There are multiple good ideas available which have lost out, so far, to posturing. China must be progressively, but entirely, cut out of supply chains that Congress deems critical. Severe punishments must be put into law and enforced for theft of U.S. research and trade secrets. American investment should not be allowed to support criminal entities or those helping to undermine our interests and values.

These steps and others require only a few bills, only a few pages long. And they don’t all have to be adopted and implemented immediately. What is needed immediately is willingness to take action that changes the Sino-American relationship. Otherwise we’ll be talking about all the same ugly problems in 2024. 

Derek M. Scissors is a senior fellow at the American Enterprise Institute, where he focuses on Asia economic relations. He is chief economist of the China Beige Book and author of the China Investment Global Tracker.