The U.S.’s China Strategy Needs New Tools

Trump’s tariffs also didn’t achieve their domestic objectives. For example, he failed to resurrect the U.S. steel industryandinjured manufacturers downstream in the process. In addition, Trump’s nontransparent and undisciplined use of Section 232 risks its legitimacy in future national security crises. His actions under the same authority against Canada, Mexico, the European Union and Japan strained credulity.

The U.S. needs to implement a multifaceted strategy to combat Chinese coercion, Schneider and Talbot write. This strategy should be based on the following elements:

·  Success depends on a strong domestic foundation. Biden appears to be heading in this direction based on his executive orders expanding Buy America provisions and ordering a review of supply chains for critical products.

·  To succeed in the 21st century, a comprehensive approach will require reinvesting in government capacity by creating a modernized Reconstruction Finance Corporation to expand public investment and new federal hiring procedures to attract leading talent with deep sectoral expertise to civil service.

·  Biden should work with Congress to reform Section 232. Congress ought to tweak the authority to enable policymakers to impose retaliatory tariffs in response to coercive trade practices that target allies when those actions also threaten U.S. national security interests.

·  The U.S. certainly does not hold the same relative international weight as it did at the end of the Cold War. But the expanded Section 232 could help the U.S. build a coalition of the willing to bolster the impact of its norm-enforcing actions. The new Section 232 should be linked to congressionally authorized, rule-based assistance programs for American firms and workers caught in the geoeconomic crossfire.

·  Biden should focus on rebuilding political consensus during his moratorium on new trade agreements by launching a presidential commission modeled on the “Williams Commission.” The commission should study creative solutions to address the macroeconomic roots of the U.S. trade deficit, including currency intervention disciplines, mechanisms to counter China’s suppression of domestic demand and proposals to tax capital inflows.

·  Biden should consider launching a program of mutual defense trade pacts to protect countries like Australia, Chile and South Korea from Chinese predatory trade behavior.

·  NATO-like defense trade pacts triggering automatic snapback tariffs punishing the Chinese government for flagrant behavior could have a deterrent effect while reassuring allies of America’s commitment to them.

Schneider and Talbot conclude:

The Biden administration can show Xi that the U.S. means business by enhancing support for strategic domestic industries like semiconductors and demonstrating a renewed commitment to our allies in times of international pressure. With the current leadership in Beijing, an overhaul of China’s economic policy is unlikely to occur absent a definitive demonstration that its strategy is futile and too expensive. 

But that’s not going to happen anytime soon. And until that time comes, U.S. policymakers should be prepared to adapt to a system with tightening plurilateral rules while semipermanent retaliatory measures become the new normal. To do any less would be to repeat the mistakes of a past generation of policymakers, extending deference to China’s development to a far greater degree than it deserves.