Outcompeting China: A Roadmap for the U.S. by CLARK PACKARD It has become conventional wisdom around the into commercial networks, and massive industrial Beltway that the United States and China are on a subsidies. Together, the United States argues, these collision course — a new “cold war.” The new cold policies make it unfair and burdensome for American warriors on both sides of the aisle argue that trade and firms to compete in China. These are legitimate investment with China have enriched a brutal regime complaints, and a response from Washington was and made the United States much too vulnerable to necessary. the whims of Beijing. Though a flawed analogy, the Next, tariffs — the president’s preferred tool — chorus has grown louder as the are unlikely to fundamentally United States tries to control transform Beijing’s economic the outbreak of a pandemic that model and have hamstrung originated in China. It is clear the U.S. economy. Numerous that tensions between Beijing and economic studies confirm Washington are rising. But rather that American consumers, than decoupling the two largest not Chinese exporters, are economies in the world, there is paying the tariffs, despite the a smarter approach to confronting president’s repeated statements legitimate problems posed by to the contrary. Even after the China’s economic model. “Phase One” detente signed by As a preliminary matter, it is the United States and China in important to note that China does January, the president’s tariffs engage in repressive human rights cover about $350 billion worth practices and has effectively of imports from China with annexed Hong Kong through its an average rate of almost 20 Clark Packard recently enacted national security percent, more than six times law. The United States should higher than when the trade war confront these policies with began. The tariffs have been Rather than decoupling narrowly tailored sanctions and costly; it is estimated the tariffs the two largest economies cost the typical household visas for Hong Kong residents. Broad-based trade, investment more than $830 in 2019 and in the world, there is and immigration restrictions caused 300,000 job losses. a smarter approach to are unlikely to improve China’s In 2019, U.S. manufacturing confronting legitimate behavior while undermining the slipped into a recession despite long-term competitiveness of the a strong economy overall and problems posed by United States. tariffs were partially to China’s economic model. the A nuanced understanding blame. Likewise, a recent study of the economic fault lines that estimates that the trade war with exist — beyond the president’s China cost American companies obsession with China’s bilateral up to $1.7 trillion in lost market trade surplus with the United capitalization. It belies common States — is imperative if Washington is going to sense to think that weakening ourselves with outdated outcompete Beijing. The crux of the United States’ tariffs will strengthen our position vis-a-vis China. complaints about China’s economic model revolve So if the United States has legitimate complaints around the abuse of intellectual property, the transfer of about Chinese trade practices but tariffs are unlikely to technology from American firms to Chinese firms as a change those practices, what should policymakers do? condition of doing business in China, cyber intrusions 24
RIPON FORUM October 2020
