Chinese Prime Minister Li Keqiang attends the signing ceremony of the Regional Comprehensive Economic Partnership (RCEP) agreement following the fourth RCEP summit, held via video link on November 15, 2020. Chinese Commerce Minister Zhong Shan signed the agreement on behalf of China.
Xinhua News Agency | Xinhua News Agency | Getty Images
The biggest hole in the otherwise encouraging efforts of the Biden administration to better compete with China – a void that could undermine all other parts – is the lack of an international trade strategy.
As President Xi Jinping’s China accelerates its efforts to negotiate multilateral and bilateral trade and investment deals around the world, both Republicans and Democrats in the US have become allergic to such arrangements.
“The Chinese strongly believe in the importance of the correlation of forces, and they believe the correlation is in their favor at the moment,” said Stephen Hadley, former national security adviser to President George W. Bush. If the US fails to change that Chinese belief, it will not regain the leverage needed to deal with Beijing.
“The key missing element in changing that Chinese calculus is a trade strategy,” said Hadley, a strategy that could bring global allies together, provide US jobs and growth, and China’s escalating efforts to organize the global economy around itself. can counteract.
Former US Secretary of State Madeleine Albright once called the US the “indispensable country” of the world, but Xi now positions China as the “indispensable economy” of the world.
In 2018, 90 countries in the world traded twice as much with China as with the US. By 2019, China surpassed the US as the largest global recipient of foreign direct investment. The underlying message now is that the Chinese market is so big, the liquidity so deep and the recovery after Covid-19 so dramatic (up 18% in the first quarter) that no reasonable country can resist its embrace.
“In this era of economic globalization, openness and integration is an unstoppable historical trend,” President Xi told the Boao Forum for Asia this week. Without mentioning Washington by name, he said that “attempts to ‘erect’ or ‘unlink’ walls are contrary to the law of economics and market principles. They would harm the interests of others without benefiting themselves. . “
It is far too easy to punch holes in Xi’s statement: China remains full of market protections and state intervention at home and abroad is increasing. Intellectual property theft and cybercrime continue.
But without a modern, forward-looking trading strategy, the US is entering this global hit with one arm behind its back.
“The US and China are engaged in a strategic competition that will shape world politics this century,” Hank Paulson Jr., former US Treasury Secretary, wrote in The Wall Street Journal. “But when it comes to trade, a critical dimension of that competition, America is out of the game.”
That undermines early victories in China’s emerging Biden approach.
First, Biden has benefited from a bipartisan consensus, which is rare in Congress today, on the urgency of meeting the Chinese challenge.
Second, Biden has begun to gather friends and allies in Asia and Europe who share his concerns about China.
In March, Biden convened the first-ever leadership meeting of “the Quad,” including the US, India, Australia and Japan, set up to balance China in the region. To address China’s massive vaccination diplomacy, the countries agreed to distribute one billion doses of vaccines by 2022.
Last week, Biden welcomed Japanese Prime Minister Yoshihide Suga as the first head of government to visit Washington. Their joint statement did not mention China, but it promised “that free and democratic nations working together” could act to withstand “challenges to the free and open rules-based international order.” They also discussed securing peace in the Taiwan Strait, the first mention of Taiwan by a Japanese prime minister in a joint statement with a US president since 1969.
And for the first time ever, on March 22, the EU imposed economic sanctions on China for human rights violations in the Xinjiang Autonomous Region, along with the US, Canada and the United Kingdom.
Third, the Biden government’s $ 1.9 trillion Covid-19 stimulus plan and its pending $ 2.3 trillion in infrastructure-related investment will improve U.S. competitiveness through investment in human capital, physical infrastructure and infrastructure. advanced technology.
The problem is that the same two-pronged congressional consensus on the Chinese challenge comes with a two-pronged allergy to the kind of multilateral and bilateral trade and investment deals needed to address Beijing’s momentum.
Last November, China was one of 15 Asia-Pacific countries, accounting for 30% of global GDP, to sign the Regional Comprehensive Economic Partnership, or RCEP. It was the first free trade agreement between China and America’s allies Japan and South Korea, creating the largest trading bloc in history.
China has also expressed an interest in joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, CPTPP. That was the trade deal signed by 11 countries after the Trump administration pulled out of the effort as one of its first acts of government.
Should the RCEP deal go into effect, which is likely before January 2022, and if China is able to join the CPTPP, the international trade deal game in Asia would be largely over and China will have won.
At the same time, China is making progress on other fronts.
In January, it signed the EU-China Comprehensive Investment Agreement (CAI), much to the dismay of prospective officials from the Biden administration. (The completion of that agreement has stalled in the European Parliament due to new Chinese sanctions against the EU.)
But no matter what happens in Brussels, most European countries are eager to negotiate trade and investment deals with China, which became the EU’s largest trading partner for the first time last year.
The real problem lies in Washington’s lack of alternatives, driven by the false narrative within both sides that globalization has hurt American interests and jobs.
When the Republican Party turned into the Trump Party, it abandoned the kind of free trade policy that President Ronald Reagan embraced as “one of the key factors behind our country’s great prosperity.”
While President Barack Obama negotiated the Trans-Pacific Partnership during his presidency, presidential candidate Hillary Clinton opposed the deal in 2016 after calling it the “gold standard” just three years earlier.
“Democrats and Republicans alike are now calling for ‘a trade policy for the middle class,’” writes Adam Posen of the Peterson Institute in a compelling foreign affairs story that invalidates this approach. “In practice, this appears to mean tariffs and ‘Buy American’ programs are meant to save jobs from unfair foreign competition.”
Instead, he writes, “Washington should negotiate agreements that increase competition in the United States and raise taxes, labor and environmental standards. It is the self-deceptive withdrawal from the international economy of the past 20 years that has failed American workers, not globalization itself. “
Instead, while the Biden government has put its trade agenda on hold, China is marching forward – closing the deals and setting the standards that will shape the future.
Frederick Kempe is a best-selling author, award-winning journalist, and president and CEO of the Atlantic Council, one of the United States’ most influential think tanks on global affairs. He worked at The Wall Street Journal for over 25 years as a foreign correspondent, assistant editor and as the longest-serving editor of the European edition of the newspaper. His latest book – “Berlin 1961: Kennedy, Khrushchev and the Most Dangerous Place on Earth” – was a New York Times bestseller and has been published in more than a dozen languages. Follow him on Twitter @FredKempe and subscribe to Inflection Points here, his take a look at the top stories and trends from the past week every Saturday.
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