The U.S. Has Mismanaged China Policy for 20 Years. Time to Fix It.

Article by Scott Paul, President, Alliance for American Manufacturing

Twenty years ago, when China joined the World Trade Organization, the arguments in favor of its admission were presented to the American public as so obviously correct that it would be foolish not to accept them.

China’s entry would open a huge market where which foreign companies could sell, argued our elected officials, and the benefits would accrue to everyone—including in China, where the authoritarian state and centrally planned economy would liberalize. And, for good measure, this change was presented as inevitable. If we didn’t approve the deal, the Washington Post editorial board argued, others would, to our disadvantage. Just think of the money to be made.

It’s pat nowadays to point out that our political elites got China wrong. But the occasion calls for it.

Twenty years later, and in large part due to its WTO membership, China is extraordinarily wealthier but only marginally more open to foreign competition. Huge swaths of its economy remain directed by the state. The majority of its people are arguably less free than before, while some religious minorities face cultural obliteration or even worse. With wealth has come increased confidence; Beijing regularly mixes trade with diplomacy and bullies corporations and foreign governments alike into silence over credible allegations of its internal human rights abuses.

Yes, the gates opened and American corporations rushed to sell in the Chinese market. But they also brought their manufacturing with them to take advantage of a huge, impoverished and exploited workforce. Millions of American factory workers were laid off as a result; still more lost work to intense import competition. They have been rewarded for their loss of reliable middle-class incomes with marginally cheaper prices at big box stores stocked with products that aren’t made here. In 2021, Walmarts and Dollar Generals dot the landscape formerly occupied by thriving factories.

There are certainly more rosy ways to summarize the past 20 years of China’s rise, but none are truer than this one.

Every American president in the 21st century has misread China and failed to develop a cohesive policy, starting with Bill Clinton, who argued “the more China liberalizes its economy, the more fully it will liberate the potential of its people.” Their approaches have in turn been too permissive and disengaged (Bush), too naïve (Obama) and then too recalcitrant (Trump) to effect legitimate change in the behavior of the Chinese state, which used its unique version of authoritarian state capitalism to accrue power.

This is the great challenge Joe Biden now faces. It isn’t a problem du jour, like whether to diplomatically boycott the winter Olympics in Beijing because of human rights concerns. It’s much grander, and it’s two-fold. The first part is getting our political leadership to let go of the notion that we can shape China into the form we want via economic policy. Wealth has not made it liberalize.

The second part is acting accordingly. Like it or not, this is a great-power competition, and we need to prepare ourselves for it. The new infrastructure law, the Build Back Better Act and the competitiveness bill passed by the U.S. Senate in June all include sensible policies and good first steps. This infusion of new investment into the economy will help American industry recapture lost market share and bolster industries vital to our future. And the Buy America rules attached to the infrastructure spending are a great way to grow back a domestic manufacturing footprint.

But all of that will be for naught if we don’t pair domestic investment with an appropriate trade policy. That means keeping many of the tariffs on Chinese imports and restrictions on certain types of Chinese investment put into place by the last administration.

It also means allying with other democracies to hold the Chinese government to account for its systematic abuse of the world’s trading rules, and imposing offsetting costs for its carbon-intensive production. If we want to compete with China in emerging industries, we must have domestic and foreign policies that complement rather than compete with each other.

A change in U.S. policy won’t erase decades of missteps on China. But getting that policy right will be a major step in the right direction. It has been 20 years, and it’s time.

Scott Paul is president of the Alliance for American Manufacturing.

The views expressed in this article are the writer’s own.