Policymakers in the United States are starting to come to grips with a stark reality—a Cold War with China—and the need for a strategy with clear objectives. The Chinese spy balloon traversing U.S. airspace and growing concerns over China’s diplomatic and potential military support for Russia’s war against Ukraine are just the latest developments galvanizing U.S. policymakers on the need for action to counter the threat from the Chinese Communist Party (CCP).
The United States’ new hardline position on China was long overdue and has caught many, including Beijing, off-guard. But it should not have. For decades, China has systematically abused the privileges that it has been accorded as a member of the free and open community of nations in its own bid for dominance. Evidence of this can be seen in China’s ongoing use of diplomatic coercion, unlawful military provocations, and, in the economic realm, the rampant theft of intellectual property, predatory trade practices, and widespread market manipulation through massive subsidies to favored industries. The use of these tactics by the Chinese Communist Party is not an accident but part of a deliberate strategy to supplant the United States as the global leader and create a regional and global order deferential to its authoritarian preferences.
To put it bluntly, America has been far too slow to rise to this challenge. The fundamental change to a competitive approach made by the Trump and Biden administrations were a start, but a comprehensive strategy that organizes and coordinates America’s considerable policy tools to achieve victory still does not exist—especially in the economic arena.
That is why we launched the China Economic and Strategy Initiative, to help develop and articulate an optimal economic strategy, one that includes objectives with clear lines of effort, to address China’s epochal economic and technological challenge to U.S. geopolitical leadership. A vital part of that process is to first understand what has already been done to counter China to identify how the United States must position itself for success going forward.
“Strategic Competition” Is Not a Strategy
The start of the Trump administration in 2017 marked a shift in the United States’ post-Cold War foreign policy focus as it sought to bring back a great power competition mindset and apply it to what the administration viewed as America’s number one threat: China. This was enshrined in strategic documents such as the 2017 National Security Strategy (NSS)—which stated that China, alongside Russia, sought to challenge “American power, influence, and interests, attempting to erode American security and prosperity”—and the 2018 National Defense Strategy (NDS), which identified China as a “strategic competitor.” The administration’s declassified U.S. Strategic Framework for the Indo-Pacific which guides the implementation of these strategies is another useful strategic baseline that future administrations can expand and implement.
The Trump administration’s policy shift was, in many ways, a hard reset of the United States’ foreign policy and national security agenda. Instead of focusing on unconstrained globalization and hunting terrorists in the Middle East, the Trump administration sought to instill a competitive spirit in the hope that it would permeate all aspects of the U.S. diplomatic, military, and economic agenda. The challenge that the Trump administration faced, however, was that the bureaucratic muscle memory and appetite for risk that the United States had developed to defeat the Soviets were all but dead, complicating the implementation of the NSS, NDS, and Strategic Framework. This ultimately limited the administration’s ability to execute the strategy it declared.
The Biden administration, in large part, has continued the Trump-era policies, with its 2022 NSS reinforcing the view that China has the “intention and increasingly, the capacity to reshape the international order in favor of one that tilts the global playing field to its benefit,” and that it remains America’s most “consequential geopolitical challenge.” But President Joe Biden has also inherited the same institutional challenges of a fractured bureaucracy unable to coordinate a China strategy. Despite the significance of two consecutive administrations maintaining the same overarching policy on China, a strategy with clear objectives and means to achieve them has failed to materialize.
The result is that the United States still finds itself reacting to China’s malign behavior rather than seizing the initiative with calculated actions working toward clear strategic objectives.
The Economy Is Ground Zero
America’s shift in sentiment on China and growing desire for an economy free from the authoritarian influence of the CCP has made the economy ground zero for competition. The Trump and Biden administrations made attempts to impose economic costs on China for its predatory economic practices and position the United States to compete both at home and abroad. Policy actions taken by both administrations centered on leveling the economic playing field, defending America’s technological advantage, and cooperating with allies and partners. But have these policies, many of which were touted as political victories, made a measurable impact on protecting the American economy and way of life?
Advancing America’s Economic Interests
A core part of former President Donald Trump’s campaign bid in 2016 focused on advancing America’s economic interests by rolling back China’s unfair trade practices that have undermined the American economy and workforce. In 2018, the Trump administration took its first major action by imposing Section 301 tariffs on $50 billion of Chinese goods that have benefited from the theft of U.S. intellectual property and China’s unfair industrial practices, in addition to imposing Section 232 tariffs on steel and aluminum imports to combat China’s “dumping” of products in the United States. The Trump administration, in response to China’s tariff retaliation, expanded Section 301 tariffs that at one point reached a 2019 high of $370 billion across numerous sectors.
President Biden, despite vowing to remove U.S. tariffs, has left more than $300 billion worth of tariffs on Chinese goods under Section 301, reinforced its commitment to Section 232 steel and aluminum tariffs on China, and even extended Section 201 tariffs put in place in 2018 on Chinese solar components to protect American solar manufacturers.
The Trump administration also sought to negotiate a more open Chinese market, a process that culminated in the U.S.-China Economic and Trade Agreement, otherwise known as the Phase One Deal, that was signed in 2020. The Phase One Deal sought to level the playing field with structural reforms to China’s economic and trade regime and reduce the trade deficit by obligating China to make additional purchases of at least $200 billion in U.S. goods across a range of sectors in a two-year period—an agreement that Beijing has failed to honor. The Phase One Deal, however, was significant in that China signed the deal without the removal of any U.S. tariffs, implicitly accepting the U.S. charge of malign economic behavior. It also allowed the United States to unilaterally seek remedies if China was not living up to its end of the deal.
The overall impact of these policies on the goal of leveling the economic playing field with China, however, is questionable. While tariffs modestly shifted some supply chains away from China to other regional partners and the Phase One Trade deal brought China to the negotiating table, these actions appear to have a limited effect on trade. The new 2022 trade statistics support this trend, as the U.S.-China bilateral goods trade hit a new record at more than $690 billion with Chinese imports still outpacing U.S. exports. While the Section 301 tariffs sent a serious message to Beijing and the rest of the world that the U.S. would not accept business as usual, it also could have been the catalyst to implement a consistent approach to deal with China’s rampant intellectual property theft and a clear violation of U.S. laws. But that did not happen.
Defending America’s Technological Advantage
The Trump and Biden administrations both rightfully identified the need to protect America’s technological advantage to ensure the United States is not aiding China’s military modernization and surveillance state network. The Trump administration’s move to reform the United States’ inbound investment screening process in 2018 with the Foreign Investment Risk Review Modernization Act (FIRRMA) expanded the ability of the Committee on Foreign Investment in the United States (CFIUS) under the Treasury Department to screen transactions for potential threats to national security. The Administration’s 2019 Executive Order on Securing the Information and Communications Technology and Services Supply Chain (ICTS) also gave Commerce a powerful tool to screen information technology transactions from identified foreign adversaries, including China, that could impact U.S. national security. The impact of both FIRRMA and ICTS, however, is minimal at best due to lagging implementation and the absence of clear policy guidance on cases involving China at the Treasury and Commerce Departments.
The Trump Administration’s modernization of the United States’ outdated export control regime with the 2018 Export Controls Reform Act (ECRA) also directly gave the President greater authority to control dual-use exports and emerging technologies that could be applied to China’s military-industrial complex. The Department of Defense’s creation of the Communist Chinese Military Companies List (CCMC) in 2020 and the subsequent executive order banning investment in CCMC companies could potentially be a blow to China’s military-industrial complex. However, the Biden administration’s transfer of authority for this policy to the Department of Treasury in June 2021 dulled its impact by reducing the scope of the companies to be sanctioned. It has also failed to update the list for over a year.
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