It's Not Realistic to Cut US-China Economic Ties; We Should Compete and Win Instead
by Will Hurd on August 26, 2019 at 12:04 PM
All Americans should be concerned about the potential for China to replace the United States as the most important economy in the world. We face a potential future where Mandarin and the yuan, not English and the dollar, dominate the global economy, and the U.S. government is pursuing the wrong strategy to prevent this reality.
Over the past two decades as a former CIA officer, partner in an international strategic consulting firm and now member of Congress on the House Permanent Select Committee on Intelligence, I’ve seen how the Chinese government has threatened global supply chains, stolen American intellectual property and economically bullied smaller countries. Instead of pursuing a 19th century tit-for-tat tariff war, which is a self-imposed sales tax on American consumers, we should be collaborating with our allies to out-innovate China.
Decoupling from China
A common mistake in Washington is thinking about U.S.-China competition through a Cold War mentality that views Beijing as an adversary that we can contain and isolate like the Soviet Union. The United States and China are economically intertwined in a way that America and the Soviet Union never were and that America and Russia are not today. Regardless of presidential tweets saying that "we don't need China" andthatU.S. companies should find alternative markets, decoupling from China in the global economy is simply unrealistic and would be in neither country’s interest.
Meeting the unique challenge of facing head-to-head economic competition with an authoritarian regime that will one day surpass the United States as the world’s largest economy requires a new approach to ensure American competitiveness and protect our interests. We are not fighting a Cold War but a New War. And it is an economic competition we can win.
The first step in fighting this New War is to focus on trade policies that incentivize structural changes in China’s economy and its treatment of foreign companies and investors. The examples of Chinese economic misbehavior are too vast to list here, but the American consumer shouldn’t have to pay for Middle Kingdom misdeeds through tariffs. Instead of a tax on American consumers and businesses, we should have a policy of reciprocity.
If American companies and investors are unable to do something in China, then Chinese companies and investors should be unable to do those same things here. If American venture capital firms can’t invest in Chinese artificial intelligence companies, then Chinese capital shouldn’t be allowed in the American artificial intelligence (AI) industry. If U.S. software companies operating in China must turn over their source code to the Chinese government, then Chinese software companies will have to reciprocate in America.
Strengthen US economic networks
Another step necessary to be successful in this New War is to build a coalition to counter the Chinese government’s growing global influence. Strengthening North American supply chains will bolster advanced manufacturing in the Western Hemisphere, providing an alternative to China. Immediately ratifying the United States-Mexico-Canada Agreement to bring NAFTA into the 21st century would provide a framework for attracting advanced manufacturing and technology production to places like San Antonio, Toronto and Monterrey — not Shanghai, Shenzhen and Beijing. We should take similar steps to strengthen economic ties and global supply chains with other countries in the region, such as Vietnam, which are wary of an aggressive China.
Old battle lines in this New War will still exist, like Hong Kong, Taiwan and human rights abuses, but the new line of conflict is advanced technology — artificial intelligence, 5G, the Internet of Things and aerospace engineering. China was clear about its intentions back in 2015 when it released the Made in China plan. By the year 2049, when China celebrates 100 years of communist rule, it is planning to be the world’s leader in advanced technology and manufacturing.
The United States and our allies will not prevent countries from doing business with Chinese companies like Huawei on the basis of security concerns alone, though there are a number of them. We must provide an alternative service or product that is better, more secure and less costly. We need to respond by out-innovating our opponent. Close cooperation between the government and the private sector will be essential to win this competition.
Instead of stifling innovation through onerous regulations or talking about breaking up great American companies that will be necessary to win this New War with Beijing, Washington should work on things like a national strategy to coordinate efforts across government, academia and the private sector to advance research, development and adoption of AI. Creating a national strategy would better prioritize limited government resources and more rapidly advance American AI technology.
Our workers need new skills
Washington should also be working to streamline legal immigration so that America continues to be the beneficiary of the decades long “brain drain” of the rest of the world. Today, there are more than 1 million international students studying in the United States, including more than 360,000 from China. The best and brightest from around the world are being educated here, and we need an immigration system that allows more of them to stay, particularly in the fields of science, technology, engineering and math. If the Chinese want to steal our secrets, we should be stealing their engineers and scientists.
While we are attracting global talent, we must prepare our American workforce to meet the challenges of a 21st century economy and long-term competition with China. We simply do not have enough people to fill jobs in technology and advanced manufacturing. To continue to be the world leader in innovation, we have to retrain and "reskill" our workforce over time and prepare our kids for jobs that don’t even exist today.
To ensure that the free world continues to set the rules of the road in the global economy, America and its allies must work together to continue to be the world’s centers of innovation and technological advancement. By moving past Cold War-era thinking and implementing 21st century solutions to this New War, the United States can remain the world’s most important economy and continue to create opportunity for Americans and millions around the world.