OPINION:
The question Beijing is currently grappling with is how much Washington will push during the remainder of President Biden’s term to reduce U.S. reliance on China’s supply chain while strengthening its own.
Since 2018, the United States has struggled to contain China’s industrial rise. Reducing U.S. dependence on China’s supply chain is now an established U.S. policy, which Washington has adopted to maintain the upper hand in its superpower rivalry with Beijing. In 2023, the U.S. will continue to pursue plans to strengthen its supply chain, limit China’s supply chain, and calibrate trade relations to limit high-end technology exports to China while seeking to diversify trading partners in low- to mid-end industries where the U.S. is overly dependent on China.
In this sense, the U.S. is pursuing a restrictive trade policy toward China that, at first glance, is neither a complete rejection of nor a full engagement with Beijing. It is this awareness that has prompted Chinese President Xi Jinping to quickly overcome the economic lethargy caused by the pandemic and to seek alternative markets.
Since Mr. Biden assumed the presidency in 2021, the U.S. has undergone a policy shift on trade with China. During former President Donald Trump’s tenure, the focus was on introducing restrictive measures to contain China in the short term. The Biden administration has broadened the scope of the policy to include measures to improve manufacturing and supply chain competitiveness in order to better protect politically sensitive industries critical to U.S. national security. The administration is simultaneously pushing for a trusted supply network from its allies worldwide.
Current U.S. policy has the following elements: It seeks to prevent China from developing its supply chain through export controls, telecommunications and electronic licensing systems, visa bans, investment restrictions, and sanctions. It denies China access to technology and intellectual property in critical industries through new laws and mechanisms. The Foreign Investment Risk Review Modernization Act and the Export Control Reform Initiative are examples. The logic is that a technological gap will constrain China’s development capabilities.
Concurrently, the U.S. has raised tariffs and introduced other trade measures to increase China’s manufacturing costs and thus curb its industrial growth. In particular, the U.S. has targeted products included in the “Made in China 2025” strategic initiative (such as industrial robots and machinery, semiconductors and engines) to prevent China from dominating the high-tech sector in the future.
Washington has also introduced legislation aiming to increase the resilience of the U.S. supply chain for semiconductors, pharmaceuticals, large-capacity batteries, and key minerals and materials from China.
In recent years, the Biden administration has unveiled a new infrastructure strategy that prioritizes investments in new energy, information technology facilities, and human capital to address both soft and hard infrastructure to enhance national competitiveness. The government also provided subsidies, tax breaks, and import and export quotas to help American companies. The idea was to strengthen the production of semiconductors in America and accelerate the development of foundational technologies such as electric vehicles, appliances, and defense systems to strengthen the U.S. supply chain and expedite future industrial development.
To counter China’s friendly posturing toward countries in the Indo-Pacific, Africa, Latin America and Central Asia, Washington has also accelerated efforts to strengthen economic cooperation with its allies to diversify its supply chain. In addition to establishing credible supply chains and coordinating technical specifications and standards with partners, it has also established a framework with partners for the joint procurement and inventory of key raw materials.
Last May, Mr. Biden visited Japan and South Korea to accelerate the buildout of semiconductor supply chains, forge cooperation with Japan to strengthen semiconductor and advanced battery supply chains and work with South Korea on early warning systems to detect supply chain disruptions.
In his first overseas visits since the start of the COVID-19 pandemic in late 2019, President Xi also sought trade agreements with allies and even ASEAN member states. It would be wrong to ignore China’s own flexibility and competitiveness.
The United States should further enhance its own competitiveness and global leadership by providing maximum protection to politically sensitive industries that are critical to the national security of the U.S. and its partners. Washington should adopt a more comprehensive national economic strategy to ensure sufficient material supplies for strategic industries and implement a national infrastructure policy that provides financial support for research and development to restore U.S. technological leadership in key industries. The U.S. should encourage closer coordination between the domestic supply and demand sides through direct subsidies, tax deductions and exemptions, import/export quotas, and standards that favor American companies.
And the U.S. should make “cross-border manufacturing” along the U.S.-Mexico border a top priority to revitalize American manufacturing and improve supply chain security. This is a “one stone, many birds” approach: First, it will allow U.S. companies to continue to benefit from cheap labor and reduced logistics costs. Second, it will help alleviate the problem of illegal immigration from Latin American countries by allowing migrants to work in cross-border manufacturing, thus strengthening America’s backyard and laying the groundwork for a trade or economic bloc in the region. This could be accomplished by introducing legislation such as the U.S. Manufacturing Revitalization Act and the Supply Chain Security Act.
• Jianli Yang is founder and president of Citizen Power Initiatives for China and the author of “For Us, the Living: A Journey to Shine the Light on Truth.”
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