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Jon Talton: For America and China, breaking up is hard to do

Jon Talton, The Seattle Times on

Published in Business News

And this is just a consequence of the trade war, not the pandemic. China has been criticized by both political parties for lack of transparency about COVID-19, which apparently began there.

Some of this is political. Seeking to deflect criticism of the Trump administration's deadly incompetence in handling the pandemic, Republicans put out a 57-page strategy memo to brand Democrats as soft on China.

This gambit counts on short attention spans by the electorate. Trump repeatedly praised Chinese President Xi Jinping and China's handling of the pandemic in January and February. This was before he labeled COVID-19 the "China virus" and turned on the World Health Organization, blaming it for softness on China.

American politics also has a long history of presidential contenders calling for measures to "get tough on China" for unfair trade practices and human-rights violations. Once in office, they revert to U.S. policy since the Nixon administration, seeking to manage China's peaceful rise. The hope: A prosperous China would become more democratic and join the U.S.-led, rules-based liberal world order.

That hasn't happened. And more people than Trump have pondered Plan B, especially after the pandemic showed how dependent America was on China for masks and certain vital drugs.

This past November, the National Bureau of Asian Research, a think tank with offices in Seattle and the other Washington, published a report on how partial disengagement might look.

 

It recommended a strategy that would achieve a cease-fire in the destructive tariff war; slow the transfer of critical technologies to China and increase defensive measures to counter Chinese sabotage, disruption and surveillance; invest in U.S. innovation, education and technology, and strengthen relationships with close allies. The latter sounds like the Trans-Pacific Partnership, which Trump abandoned.

Under the status quo, China benefits from an open American market while keeping much of its market closed. Partial disengagement, as defined by the think tank, would use these measures to "apply significant pressure on China to improve its behavior while helping to protect the core of at least a partial rules-based liberal economic order."

Others are proposing a much more radical decoupling via a national industrial strategy. This would include requirements for domestic production and controls on U.S. exports. As Sen. Marco Rubio told The New York Times in April, "There comes a point where, as a nation, we have to ask ourselves what are the critical goods that you must retain the ability to make even if it's not the most efficient outcome. I think that's now right before us."

Yet decoupling would be difficult. Companies such as Apple, Google and Microsoft might gradually shift some hardware production to India, Thailand or Vietnam. This is a diversification strategy and looks smart in theory. But they won't find China's large ecosystem of established factories and experienced, tech-trained workers.

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