new atlanticist
May 7, 2024
America's new economic strategy to lead the world economy and compete with China
Written by Kaus Alha, Peter Harel, and Clete Willems
The world's two largest economies, the United States and China, are engaged in an unprecedented competition to shape the norms and rules of the global economic and political order. America's economic resilience and security are predicated on winning this competition. To achieve this goal, the U.S. House of Representatives Select Committee on Strategic Competition between the United States and the Communist Party of China provided a valuable bipartisan blueprint.
The task force's report, released in December with minimal fanfare, states that the United States will reset the terms of its economic relationship with the People's Republic of China (PRC) and that American capital and technology will increase China's military power and human rights abuses. U.S. technological leadership alongside allies and partners to deter and support the United States. While not perfect, this bipartisan blueprint provides a useful foundation for U.S. China policy for the next Congress and the next administration, regardless of who wins the November election.
The authors of this article come from a variety of political viewpoints, but they agree that the time has come for a comprehensive economic strategy to advance U.S. interests and thwart China's ability to harm the United States. we agree. Based on the task force's work, we offer eight principles that can inform a comprehensive strategy.
1. Be proactive, agile, and systematic.
Defense alone will not be enough for the United States to win its strategic competition with China. Economic strategy must be positive in outlook, agile in execution, and systematic in analysis. These qualities will be needed to simultaneously strengthen America's industrial base, foster innovation and new technologies, and pursue forward-looking economic policies with our partners and allies while taking necessary defense actions.
2. Get industrial policy right
Policymakers look to history and geopolitics to make smarter industrial policies that focus on strengthening the U.S. domestic manufacturing base in targeted sectors (such as semiconductors) and investing in innovation and broader industrial infrastructure and training. A two-pronged approach should be developed. Investment in research and development and a favorable tax and regulatory environment can be more effective than direct subsidies. Subsidies may be necessary in limited circumstances, but are susceptible to industry capture and extra-economic considerations.
3. Stop China's market distortion and manipulation
China has not fulfilled the commitments it made when it joined the World Trade Organization (WTO) in December 2001. This is most evident with regard to China's brazen and persistent overcapacity in electric vehicles, solar panels, steel, electric vehicles, and more. Semiconductors, pharmaceuticals, just to name a few. It would be unwise for the United States to give China the same tariffs as other WTO members. But simply stripping China of its permanent regular trading relationship status and reverting to Smoot-Hawley tariffs would be inefficient, outdated, and counterproductive. The Special Committee's report sets out a more sophisticated and effective approach by creating a new tariff section for China and updating certain WTO safeguards mechanisms. This provides a promising foundation for a more modern and coordinated trade framework with China, which will be implemented in close coordination with members of the Group of Seven (G7) and the Quadrilateral Security Dialogue. should be moved to
4. Prevent adversaries from supporting U.S. capital and technological know-how
Export control measures on semiconductors and other advanced technologies that the Biden administration and Congress have put in place to curb China's military modernization are an important start. Second, foreign investment must be vetted to prevent U.S. investors from unintentionally supporting China's military and human rights abuses. This requires a coordinated approach involving both specific entities and sectors. Additionally, the U.S. government is working with domestic and allied academic research institutions to develop principles-based, practical, and robust cross-border research to deter intellectual property theft and illicit technology transfers by China. Protocol should be addressed.
5. Work with partners and allies to pursue positive economic policies
Punitive measures such as tariffs, investment restrictions, and export controls are necessary but insufficient to win strategic competition. Proactive economic policies with partners and allies are needed to encourage the private sector in the United States and abroad to diversify critical supply chains away from China. The task force's report calls for facilitating bilateral trade negotiations with Taiwan, the United Kingdom, and Japan based on the high standards set in the U.S.-Mexico-Canada Trade Agreement. Where new free trade agreements are practically or politically difficult, the report suggests targeted agreements with trusted trading partners in areas such as health care and critical minerals. As part of this effort, a comprehensive review and modernization of the Bretton Woods institutions to better reflect geoeconomic realities is urgently needed.
6. Winning the transition to a green economy
The path to a green economy hinges entirely on geopolitical and geoeconomic competition between the United States and China. The United States will leverage its substantial advantages over China in traditional and renewable energy and technology to address the pressing energy security needs of partner nations while also leading to a reliable energy transition toward a greener economy. should be provided to partner countries.
To ensure energy supply chain security and maintain energy independence, the United States should aggressively pursue sectoral agreements and mineral security partnerships recommended by the task force's report. Moreover, the United States should remain wary of engaging in climate change with China without legitimate reciprocity and unwittingly reinforcing China's declared intentions to monopolize and control future green industries. We must avoid encouraging them.
7. Setting trends in standards for the digital economy
As the world's largest digital economy, the United States has a responsibility to articulate rules, norms, and practices for digital governance, including artificial intelligence, that prioritize Western values ​​over Chinese models of censorship and control. The United States needs to lead in digital standards to maintain its dominance in technology and financial markets.
8. Modernize U.S. policies, tools, and institutions
Unlike national defense and foreign affairs, there is no specific US lead agency that will engage in and win economic competition with China. The economic policies, instruments, and institutions involved in this endeavor are diverse, often inconsistent, and often inadequate in both effectiveness and efficiency. The bottom line is that U.S. institutions are ill-prepared for complex economic competition with China. The United States has a wide range of challenges to face, from the Goldwater-Nichols Act of 1986 to strengthen the military's chain of command after problems surfaced during military operations in Iran and Grenada, to post-9/11. There is a long history of modernizing government tools to cope. Federal intelligence and law enforcement reform. Similar efforts are needed to improve U.S. economic diplomacy, coordination, and engagement.
Winning against China in economic competition requires commitment and commitment from the entire nation. It requires a comprehensive, nuanced, and customized strategy that utilizes all the versatile tools in your toolbox, not just the proverbial hammer and scalpel. The task force has served the nation well by clearly identifying China as an adversary and rival, and has come up with a useful framework that includes practical recommendations to strengthen national economic security. The report marks a useful transition from the first chapter of prioritizing industrial policy and tariff measures to the second chapter of working with allies and partners to win in global markets.
Domestic prosperity depends on America's leadership in the global economy. Now is the time to develop and implement a new economic strategy for the United States to maintain that lead.
Kaush Arha is a non-resident senior fellow at the Atlantic Council's Global China Hub and previously served as a senior advisor for global strategic engagement at USAID and Blue Dot Network's G7 Sherpa during the Trump administration.
Peter Harrell is a non-resident senior fellow at the Carnegie Endowment for International Peace and served as senior director for international economic affairs in the Biden administration, jointly appointed by the National Security Council and the National Economic Council.
Cleet Willems is a nonresident senior fellow at the Atlantic Council's Center for Geoeconomics and previously served as deputy assistant to the president for international economic affairs and deputy director of the National Economic Council in the Trump administration.
References
Thursday, February 1, 2024
Why 2024 will be a critical year for forward-looking economic policy
Economics by Nicole Goldin
As geopolitics casts a shadow over the global economy, leaders aim to build resilience, drive inclusive growth, and promote stability and security. His three events in January have already shown that these Positive Economic Policy (PES) approaches are clearly working this year.
Wednesday, September 20, 2023
The US, EU and UK need a common approach to national economic strategy. Let's start here.
Reporting by Kimberly Donovan, Maia Nikoladze, Nicole Goldin, Murgunk Busari, Sara Bauerle Dansman, Ambuj Sahu and Daniel McDowell
The economic national strategy landscape is becoming more complex as transatlantic partners increasingly leverage tools to counter transnational threats. There is a growing need to understand how, when and by whom these tools are used, and their intended and actual impact around the world.
Related experts: Kaush Arha and Clete R. Willems
Image: A worker welds on a factory floor in Columbus, Ohio, USA on March 26, 2024.Reuters/Carlos Barria
