All Talk, No Action On China

Authored by Derek Scissors via RealClear Wire,

It might be easy to embrace recent warnings against a bellicose bipartisan consensus in Washington regarding China. But the real peril is that the true China consensus — which includes Democrats and Republicans, the administration and Congress — is to do nothing but talk, especially if action comes at a price.

Last month gave us a perfect example. February was full of anti-China speeches: Republican-run congressional hearings, Democratic-run hearings, and Biden administration revelations. In the end though, nothing of substance happened, nor is it likely to happen.

There is no standing up to the People’s Republic of China without costs. It has the world’s second largest economy as well as its second most powerful military. It is led by a dictator-for-life who intentionally hearkens back to a man who caused mass starvation. Winning even a peaceful contest would require sacrifices. Deterring Xi Jinping by preparing for conflict requires more. As sacrifice is not appealing to most American politicians, they instead spout rhetoric while hoping for a contest of convenience.

The administration’s actions include the Department of Commerce calling for tens of billions of dollars to vastly boost domestic semiconductor production, prioritizing it as a vital national interest. Given the PRC’s intent to globally dominate low-end chips, Commerce appears correct. But challenging as this goal is, Commerce is diluting its plan by also asking for better day care as part of the package. This, of course, is a counter-incentive for companies willing to build in the U.S. It creates an opposite effect to what was originally intended.

The administration has treated supply chains similarly, stirring in political priorities such as promoting green energy output without specific plans to secure green energy supply chains. While it is no surprise that political actors would use China as cover for executing domestic policies, it means far less gets done. Export controls on semiconductors were announced to great fanfare last October, with promises of more to come. Yet five months later, we don’t even have the final regulations.

Concerning licensing permissions, Commerce has gone from terrible to mediocre under the Biden administration. Last year, it accepted 70% of applications to export controlled items to the PRC. Not exactly tight restrictions, but still a substantial improvement over the Trump Commerce Department’s performance, during a supposed “trade war,” where the number may have been over 90%. 

Part of the blame is with Congress. Being placed on Commerce’s “Entity List,” which imposes license requirements on foreign individuals, entities, or governments, requires just a license application. Yet many members of Congress have pretended for years that this is a blacklist preventing designated foreign firms from receiving American technology. In fact, tens of billions of dollars’-worth in licenses have been granted to these firms, most of whom were also eligible for American investment. The Entity List has always been fraudulent, and Congress willingly plays along.

Will the new House Select Committee on China mean more effective legislation? Doubtful. Members within the Select Committee are genuinely concerned with the economic and military risks China poses, and they have allies elsewhere in Congress. But the Select Committee has no official jurisdiction — it can only talk, not act. This is an ideal outcome for those who want to appear politically strong while having no obligation at all to back up their words.

The Financial Services Committee, possibly the most important House committee, held a China hearing in early February. According to its Republican chairman and Republican-called witnesses, the top China threat is the U.S. responding in any serious way to China. Their conclusion: The U.S. should face up to the PRC’s military buildup, its domestic and international repression, and its economic predation by continuing to invest freely in the PRC.

With this “pressure” from some Republicans, the Biden administration does not feel compelled to truly compete. An executive order to address the more than $1 trillion the U.S. has invested in the PRC is many months overdue. Even if issued, it may prove an almost entirely empty action. 

Other consequences to inaction are looming. China continues to steal intellectual property (IP), subsidize production that uses the IP, and drive advanced American companies out of business. It will also spread repression and more intensely target Taiwan. Politicians who take this seriously must propose policies that involve some pain, because that is what’s required for the U.S. to win. Politicians who don’t take the PRC seriously are easy to spot. They’ll be pushing some domestic agenda unrelated to China, tilting at windmills, and, above all, talking.

Derek Scissors is a senior fellow at the American Enterprise Institute. He is also the chief economist of the China Beige Book. The views expressed are the author’s own.