Sachs: US badmouthing of more competitive China imprudent

 Flags of China and US are displayed on a printed circuit board with semiconductor chips, in this illustration picture taken February 17, 2023.

Photo credit: Reuters

The latest campaign of the United States against China is the charge that the Asian country has excess capacity in a range of manufactured goods and so should restrain its exports.

The truth is simpler. China and other East Asian countries are the low-cost producers of a range of high-quality industrial products that the world urgently needs: Solar modules, electric vehicles, wind turbines, efficient batteries, 5G and more. Since the US lags behind China in these sectors, Washington is badmouthing it, characterising China’s success as some kind of bad behaviour.

The US approach to China is based on a mix of arrogance, nastiness and naivete.  Arrogance in that the US runs the world, so how dare China have such economic success! Nastiness in that the US is actively out to hinder China’s progress. Naivete in believing that the rest of the world will actually subscribe to the propaganda.

The arrogance was spelled out  by Ambassador Robert Blackwill and Ashley Tellis in a March 2015 publication for the Council on Foreign Relations. They wrote: “Since its founding, the United States has consistently pursued a grand strategy focused on acquiring and maintaining preeminent power over various rivals, first on the North American continent, then in the Western hemisphere, and finally globally....

“Because the American effort to 'integrate' China into the liberal international order has now generated new threats to US primacy in Asia–and could eventually result in a consequential challenge to American power globally—Washington needs a new grand strategy toward China that centres on balancing the rise of Chinese power rather than continuing to assist its ascendancy.”

Plainly put, America’s aim is to be Number 1. America’s “grand strategy” is not peace, sustainable development or wellbeing but hegemony—which automatically pits it against other major powers in a zero-sum struggle. For American strategists, international cooperation is naïve since the US goal is dominance. But it's a vain and ultimately doomed objective. After all, the US has 335 million people while China has 1.4 billion. How is the US to remain dominant when China is four times more populous?

The American answer implicitly is to keep China in relative poverty with a GDP no more than a quarter of the US level. But rest assured that China will not be hegemon either. China’s share of world output will peak at around 20 per cent, and it will face significant challenges of a declining and ageing population in the 21st century.

The nasty part of the US strategy follows its misguided attempt to be global hegemon. The US goal is to slow, if not derail, China’s economic success. Blackwill and Tellis spelt out the game plan in their article. The US tactics include: Trying to cut China out of trade agreements; trying to cut China out from high-tech goods, such as advanced semiconductors; surrounding China militarily on the Asian rimlands; and forging new military alliances in Asia.

President Obama started the process by trying to negotiate the Trans-Pacific Partnership, based on the absurd idea of creating a US-Asia trading arrangement that excluded China despite the latter being the largest trade partner of most or all of the other Asian countries. It was a dumb idea and it, mercifully, failed.

President Trump was more direct. He hit China over the head with a spate of unilateral tariff increases that plainly and brazenly violated the WTO. To sustain this protectionism, the US simply walked away from WTO enforcement mechanisms, to the extent of paralysing the WTO appellate procedures.

President Biden not only kept Trump’s tariffs in place but also doubled down on them, legislating new layers of protectionism (for example in the Inflation Reduction Act) and technology export bans, notably on advanced semiconductors.

Both Trump and Biden went after Huawei, China’s very innovative and extremely efficient private-sector producer of advanced digital technologies, including 5G and several cutting-edge digital industry platforms.

America’s “success” is to have partly closed off its market to China’s highly competitive, low-cost, high-quality goods. China’s exports to the US markets not only stopped growing but actually went into decline. US imports from China fell from 2.6 per cent of its GDP in 2018 to 1.6 per cenr in 2023. Yet this has raised prices to US consumers and companies and brought no joy to American workers. The US manufacturing workforce, at around 13 million workers, is only slightly higher than in 2017 and remains far lower than before the 2008 Great Recession.

We also learnt something quite astounding—but actually par for the course—recently, when Reuters revealed that Trump had tasked the CIA with spreading malicious gossip about China in the social media, including the badmouthing of China’s Belt and Road Initiative (BRI) . When you can’t beat 'em honestly, beat 'em dishonestly. The American way—Alas!

So, the US wants Europe to also partly close its markets to China’s goods. Since China’s productive capacity continues to rise, there is, indeed, an artificially created “excess capacity” in China, because the US has locked out Chinese goods. Now, the US is warning China against selling elsewhere!

Here’s a vastly better and more honest approach. First, the US should acknowledge that it fell far behind China (including Taiwan), Korea and Japan in many areas of advanced manufacturing not because of nefariousness of the East Asian countries but because it lost its way when it came to fostering green and 5G technologies.

While the US has been clinging to the continued expansion of fossil fuel production, a real policy dead-end in a world that needs to decarbonise by mid-century, China has been preparing for the zero-carbon energy. Thus, China leads the world in solar, wind, fourth-generation nuclear, EV and many other technologies.

Secondly, China does not have an “excess capacity”; it is producing what the world actually urgently needs to bring about environmental sustainability and economic development. The apparent glut is the result not only of US protectionism but also insufficient financing for sustainable development of the emerging economies. The world doesn’t need less of China’s output; it needs more finance to speed the energy transition and to end poverty.

Thirdly, the US should be cooperating with China, not fighting it, on global sustainable development. BRI, for example, is a highly innovative and important policy to promote sustainable development in the emerging economies. Washington should be partnering with China, Korea, Japan and others in a cooperative policy to promote more investments in green and digital technologies in the emerging economies worldwide. That’s the kind of win-win policy that should replace America’s destructive—and self-destructive—machinations for hegemony.

Prof. Sachs, an economist and public policy analyst, is a professor and director of the Center for Sustainable Development at Columbia University and president of the UN Sustainable Development Solutions Network.