At AEI today, Republican presidential candidate Nikki Haley gave a speech on the Future of US-China Policy, and in that context said some things about issues related to trade and investment with China.
First up, like many other people these days, she wants to revisit the decision to let China in the WTO:
China became a member of the World Trade Organization in 2001. This proved to be a fateful decision. America brought China into the WTO. Democrats and Republicans supported it. At the time, and for more than a decade after, there was a bipartisan consensus that this was all reward and no risk. Our leaders told us it would bring China into the modern economy and open its huge market to the world. They said it would make China more free, open and democratic, that China would become more like us.
I understand why this dream was appealing. We saw it happen with Japan after World War II. And then again with one Asian country after another. From South Korea to Singapore, they moved into the company of free and open nations. But not China. This American assumption proved disastrously false.
Our thinking neglected the role of communist ideology. The Chinese Communist Party didn't want to be like us. It still doesn't. China grew stronger by taking advantage of our open markets, but it also grew less free.
I found her reference to "for more than a decade after" useful, although not in the way she intended, because actions during that decade may have contributed to the U.S.-China trade problems we see today. If we had spent that decade focusing on China's integration into the world economy rather than getting caught up in the War on Terror, we might be in a better situation today. (Or it might have all come apart even sooner -- who knows! But I suspect it's the former.)
Next, she gives a mixed review of Trump's trade/China policies:
President Donald Trump deserves credit for upending this bipartisan consensus. He made both parties take off their blinders. Despite the divisions in our politics today, both parties are now more clear eyed about the Chinese threat that has been there for a very long time. That's a good thing. But being clear eyed is just not enough. It's not the same as having the right solutions and the necessary determination to protect America. President Trump was almost singularly focused on our trade relationship with China. He was right about [the] trade abuses. It was and still is a critical issue. But Trump did too little about the rest of the Chinese threat.
He did not put us on a stronger military foothold in Asia. He did not stop the flow of American technology and investment into the Chinese military. He did not effectively rally our allies against the Chinese threat. Even the trade deal he signed came up short when China predictably failed to live up to its commitments.
The question I'd like to put to all the presidential candidates is: How well do you think the Section 301 tariffs imposed by Trump (and continued by Biden) are doing to change China's trade practices, and would you suggest any alternatives?
Switching to investment, she says:
China treats our homeland like its personal playground. In recent years, Chinese investors have bought nearly 400,000 acres of land in our country. That's twice the size of New York City. We aren't just talking about any old property. China has bought miles of farms near sensitive military facilities. And China has taken a majority control of agricultural industries. This must end. The line between Chinese investors and the Chinese Communist Party is exceptionally thin. The national security risk is too great. We must prevent China from buying more land and force it to sell what it already has.
400,000 is a big number and sounds like a lot of land! But it's actually very little, both in comparison to what other countries own and in general.
On permanent normal trade relations, other politicians want to revoke it for China as a general matter, but Haley has a narrower suggestion here:
China is also behind the fentanyl crisis that's killing tens of thousands of Americans every year. Chinese companies make nearly all of the precursor chemicals that Mexican cartels turn into fentanyl. China cannot plead innocence here. It knows exactly what it's doing by putting these chemicals into the hands of the cartels. We've tried sanctions, but they're not working. We must ratchet up the pressure. As President I will push Congress to revoke permanent normal trade relations until the flow of fentanyl ends. If China wants to start normal trade again, it will stop killing Americans.
This is not a trade policy point, but I don't understand the fentanyl crisis very well. If China put a stop to selling those precursor chemicals, would people just get them from somewhere else?
Haley then lays out the following trade and security concerns:
That brings me to the second big policy shift. In addition to protecting our homeland, we must protect our economy. I'm a firm believer in economic freedom. But it has long been recognized that not all trade with trading partners is the same. The father of capitalism, Adam Smith, wrote in The Wealth of Nations that Great Britain's interest in preserving naval supremacy was more important than free trade in the maritime sector. Defense, he wrote, is of much more importance than opulence.
The challenge today is that national security is affected by almost every part of our relationship with China. No one understands that better than the Chinese. They have desperately pursued American investment and innovation, precisely to strengthen their military. American companies are banned from selling military hardware and services to China. But they still sell billions of dollars worth of goods to the Chinese market. We must look at these sales through a national security lens. Much of its military application simply slips through the cracks of US law. But Chinese law requires US companies to transfer technology to Chinese companies as part of the price of doing business on Chinese soil. This cannot continue. US businesses must recognize the threats to themselves and to our American security. Beijing's focus on military fusion demands it. China already steals up to $600 billion of American intellectual property every year. Our loss is the Chinese military's gain. Advanced technology is especially important. Right now our federal government keeps a detailed list of the most sensitive technologies that are dangerous to export. But it's not a blacklist. We still let companies send this tech to China. They just have to file the right application. It happens all the time. In 2022, the Biden Administration approved 70% of licenses for export in controlled technology to China. Think about it. We must end the export of sensitive technology to China, full stop.
And relatedly, she also lays out the following technology/investment/security concerns:
And we must keep China away from our biggest breakthroughs and cutting edge companies. We know Beijing wants to beat America in artificial intelligence, quantum computing and a host of other advanced technologies. We also know that American innovation is still the best in the world. The Communist Party knows that too. Their approach is basically, if you can't beat them, then buy them or steal it. We should block any Chinese purchase of an American company specializing in advanced technology. No more exports and no more acquisitions period. For that matter, we should have no more investments that undermine America. China can't buy certain technologies from American companies. But Americans can still invest in Chinese companies developing those same technologies. Talk about a loophole. It's a massive one. By one estimate. US portfolio investment in China rose $800 billion between 2017 and 2020 alone. Not all this money is funding military and technology breakthroughs, but much of it is. China's using our federally invested pensions to leapfrog America. The American people deserve better. I will protect our investors and our national security. No more investments in any company that helps the Chinese military or support the Chinese [Communist] Party, period.
Along the same lines as the speech, Haley said the following in a WSJ piece from yesterday entitled "My Plan to Confront the Chinese Threat":
Chinese investors have bought nearly 400,000 acres of American land, much of it near military bases. I’ll do everything in my power to prevent China from buying any more land and force it to sell what it already owns.
...
• Protect our economy. I’m a firm believer in economic freedom. But I also agree with Adam Smith that defense “is of much more importance than opulence.” National security is affected by almost every part of our relationship with China. Beijing knows it and uses American investment and innovation to strengthen its military.
American companies sell billions of dollars worth of goods in the Chinese market, much of it with military application. China also forces technology transfer and steals up to $600 billion of American intellectual property every year. I will push American businesses to leave China as completely as possible.
Advanced technology is especially important. The U.S. Commerce Department keeps a detailed list of the most sensitive technologies that are dangerous to export, but companies can still send them to China. In 2022 the Biden administration approved 70% of licenses for exporting controlled technology to China. I will end these exports.
