Think tank: Time to selectively cut U.S.-China economic ties

by WorldTribune Staff, January 18, 2019

Enough with the “endless talks and handshakes,” it is time to “untie the American economy from China,” a pair of analysts for a U.S.-based think tank wrote.

In its 2017 national security strategy document, the Trump administration referred to China as a “revisionist” power attempting to reorder international politics to suit its interests, Derek Scissors and Daniel Blumenthal of the American Enterprise Institute noted in a Jan. 14 analysis.

Under supreme leader Xi Jinping, China has moved to a defense industrial policy that translates in English to ‘civil-military fusion.’ / Reuters

“It’s difficult to think otherwise given Beijing’s military buildup, its attempts to undermine American influence and power, its retaliations against American allies such as Canada, and its economic actions.”

“After years of unsuccessful talks and handshake deals with Beijing, the United States should change course and begin cutting some of its economic ties with China. Such a separation would stop intellectual property theft, cut off an important source of support to the People’s Liberation Army and hold companies that are involved in Chinese human rights abuses accountable.”

The analysts said that “even if American exports to China fell by half, it would be the equivalent of less than one-half of 1 percent of gross domestic product. The cost of reducing Chinese imports is harder to assess, but there are multiple countries that can substitute for China-based production, none of them strategic rivals and trade predators.”

China’s “rampant theft of intellectual property” has done massive harm to the U.S. economy, the analysts note. Then there is “the requirement that American companies that want to do business” in China “hand over their technology. These actions threaten America’s comparative advantage in innovation and its military edge.”

“Even uncoerced foreign investment in technology can strengthen the Chinese military-industrial complex, especially since the Communist Party has moved, since President Xi Jinping took office in 2012, to a defense industrial policy that translates in English to ‘civil-military fusion.’ In practice, many Chinese and foreign ‘civilian’ companies serve as de facto suppliers for the Chinese Army and its technological-industrial base. Residents and visitors are subject to constant visual surveillance, and a nascent ‘social credit program’ in which disobedience to party dictates is reflected in credit scores, which could affect everything from home purchases to job opportunities. These forms of social control often use technology developed by Western companies.”

The U.S. “should make major adjustments to its economic relationship with China,” the analysts wrote. “Comprehensive tariffs, which harm American consumers and workers unnecessarily, are not the right reaction. But neither are admonishments to ‘just let the market work.’ ”

The analysis continues: “Rather than across-the-board tariffs, Chinese companies receiving stolen or coerced intellectual property should not be allowed to do business with firms in America or, with our allies’ cooperation, in Europe and Japan. The United States should also intervene to halt foreign investment in any technology that assists the Chinese Army or contributes to internal repression and limit the access to global markets of any Chinese company that is tied to human rights abuses and army modernization.

“While the United States must act unilaterally if necessary, the cooperation of allies such as Japan, Germany and Britain would make these steps more effective. Such countries have their own interests in China. Imposing sanctions in the name of national security on the European Union and China, as the Trump administration has threatened, would unwisely give them common cause.”

The efforts of previous administrations “to assert America’s influence against China, such as the discarded Trans-Pacific Partnership, did not push back effectively on Chinese economic aggression. Working with allies to directly address China’s malfeasance would,” the analysts wrote.

Trump “has demonstrated some good instincts on China,” the analysts note, but “must not be distracted by the next round of Beijing’s false economic promises. Protecting innovation from Chinese attack makes the United States stronger. Hindering the Chinese security apparatus makes external aggression and internal repression more costly for Beijing.”

China, the analysts conclude, “is our only major trade partner that is also a strategic rival, and we should treat it differently from friendly countries with whom we have disputes.”

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