Not a Hard Break—Hard Decisions

At Foreign Affairs Oren Cass and Gabriela Rodriguez argue for the U. S. making a “hard break” from China:

When welcomed into the international community in the late 1990s, China was still a developing nation. Its GDP was roughly one-tenth of the United States’ GDP, and in 1999, it was still one of the world’s poorest countries per capita, ranked between Sri Lanka and Guyana. U.S. leaders across the political spectrum were confident that by encouraging China’s integration into the global economy, they could ensure that the country would become a constructive participant in a U.S.-led world order. U.S. President Bill Clinton spoke for many when he declared that China’s accession to the World Trade Organization was about “more than our economic interests; it is clearly in our larger national interest.”

It has not turned out that way. Instead, China has rapidly become—by some measures— the world’s largest economy and a powerful counterweight to U.S. influence. Its state-controlled economy and increasingly authoritarian leadership have subverted U.S. investment, supply chains, and institutions. Beijing’s efforts to use global integration to enhance Chinese power and harm U.S. interests have proliferated. The Chinese government has leveraged market access to force technology transfers from U.S. firms including Westinghouse, General Electric, and Microsoft. It has dominated global markets by flooding them with subsidized goods, including solar panels, and it has forced the National Basketball Association and its players into humiliating silence on Chinese human rights abuses.

The fundamental problem is that the United States’ free-market economy is incompatible with a Chinese state-controlled one. U.S. liberty and democracy are antithetical to the authoritarianism of the Chinese Communist Party. The United States must break from China or else become irrevocably corrupted by it.

Here’s what they mean by “hard break”:

U.S. law must, then, address the challenge of preventing CCP control over U.S. investors in China and investments in the United States. Washington should prohibit capital flows, technologies transfers, and economic partnerships between the United States and China by default.

and the balance of the article details the changes in law required to accomplish that.

The only real criticism of their plan I would raise is that I don’t think that the authors understand what is meant by “reserve currency”. That explains much of the discrepancy in the balance of trade between the two countries.

You might think that those of us who’ve been arguing for the last 50 years that a close relationship between the United States and China did not serve the national interests of the United States and that the steps we were taking would not produce the results their proponents anticipated would find a change of view on the part of those who not so long ago were making conventional free trade agreements in favor of all of those steps gratifying but, sadly, that’s not the case.

At this point I think that the repercussions of the “hard break” they describe would have effects they, once again, do not anticipate. What I think we have before us are some hard decisions.

For example, do we really believe that one country should not invade another? There are few clearer examples than China’s 60 year occupation of Tibet. Should we not be supporting the Tibetans overthrowing Chinese rule in Tibet?

And how about Chinese threatening of its neighbors? Should we not be taking more kinetic steps to oppose those?

Do we actually believe in environmental, safety, and labor standards? If so we should impose Pigouvian taxes in the amount of the competitive advantage that Chinese products have due not just to differences between their laws and ours but between Chinese enforcement of their laws. China actually has tougher environmental standards than we do. They just don’t necessarily enforce them. They don’t have an independent judiciary.

As I’ve said before I am more concerned about us than about the Chinese. I think we need to start doing what is actually in the U. S. national interest. That will be the hardest decision of all.