A key government commission has a few ideas. Nineteen, to be exact.
Director of National Intelligence John Ratcliffe is out with a new op-ed in the Wall Street Journal about the threat China poses to the United States.
He does not mince words:
Beijing is preparing for an open-ended period of confrontation with the U.S. Washington should also be prepared. Leaders must work across partisan divides to understand the threat, speak about it openly, and take action to address it.
This is our once-in-a-generation challenge.
Ratcliffe isn’t just out there spewing empty rhetoric, either.
He writes that he’s shifting internal resources to “increase the focus on China” and provides several examples of the way in which China’s government threatens U.S. interests, including actively stealing intellectual property of U.S. companies and using it to run those companies out of business; stealing research and development secrets at top U.S. institutions, including universities like Harvard; stealing U.S. defense technology; suppressing content and engaging in massive disinformation campaigns, including those that target Members of Congress and congressional aides; and setting a goal “to dominate the U.S. and the rest of the planet economically, militarily and technologically.”
Of course, U.S. manufacturers and workers are already well aware of much of what Ratcliffe outlines in his piece.
China’s government has been stealing trade secrets from U.S. companies for years now, and it regularly engages in unfair trade practices in order to weaken U.S. industries and capture market share. As we’ve outlined many times in this space, it’s clear that China’s ultimate goal is to dominate the global economy, from old school industries like steel and aluminum to public transportation to next generation technologies like 5G and electric vehicles.
But what can be done about it?
Enter the U.S.-China Economic and Security Review Commission.
Created by Congress in 2000, the commission is charged with monitoring, investigating and submitting to Congress an annual report examining the national security implications of the trade and economic relationship between the United States and China.
Just this week, the commission unveiled that annual report, and they too are sounding the alarm about the threat China poses to the United States. Here’s a quick excerpt:
“Left unchecked, the [People’s Republic of China] will continue building a new global order anathema to the interests and values that have underpinned unprecedented economic growth and stability among nations in the post-Cold War era. The past 20 years are littered with the [Chinese Communist Party’s] broken promises. In China’s intended new order, there is little reason to believe CCP promises of ‘win-win’ solutions, mutual respect, and peaceful coexistence.”
O.K., so, how is everybody feeling right now?!?
While figuring out how best to take on China’s government, the Chinese Communist Party and the Chinese military appears quite daunting — a once-in-a-generation challenge, Ratcliffe called it — it’s worth pointing out that the U.S.-China Commission has been at this for two decades now. They’re well aware of what we’re up against, and what needs to happen now.
So what specifically does the commission recommend? There are 19 ideas.
Given the challenges acquiring PPE and other supplies during the ongoing COVID-19 pandemic, it shouldn’t be much of a surprise that the commission recommends establishing a “Manhattan Project”-like effort to ensure access to adequate supplies of domestically made drugs and medical equipment.
Commissioners also urge the adoption of the “principle of reciprocity as foundational in all legislation bearing on U.S.-China relations,” from allowing journalists to operate “without undue restriction” to issues like market access and regulatory parity. They also want to establish an inter-agency committee to coordinate technology efforts across the government, private sector, academia and more to push priorities at the global institutions that set technology standards – and, critically, ensuring that China isn’t setting the standards.
While all of the commission’s recommendations are worth reading (as is the report, which is around 600 pages long) there were two recommendations that, while not maybe as newsy as the ones above, stood out to us as of particular importance to manufacturers.
First, the commission recommends expanding the authority of the Federal Trade Commission (FTC) to “monitor and take foreign government subsidies into account in premerger notification processes.”
This is particularly important as China looks to expand its influence via its “state champions,” companies that are considered state-owned, controlled or supported and receive a variety of subsidies from the government. There’s growing concern that China is aiming to acquire struggling U.S. companies, particularly during the ongoing COVID-19 pandemic. That not only would allow China to seize market share, but also could heighten national and economic security threats.
The commission recommends that the FTC develop a process to determine the extent that proposed transactions are supported via foreign subsidies, which include grants, loans, below-market loans, loan guarantees, tax concessions, government procurement policies and a whole range of other government support. If the FTC finds that foreign subsidies have facilitated the transaction, the agency could propose a remedy or just ban it altogether.
Second, the commission recommends requiring the presidential administration, when sanctioning an entity of China for “actions contrary to the economic and national security interests of the United States or for violations of human rights,” to not only sanction a subsidiary, but the parent company as well.
This would give sanctions more teeth, something that could be particularly important in upcoming years as the United States looks to hold China accountable for everything from unfair trade practices to human rights violations, including the ongoing cultural genocide of the Uyghurs.
As we note above, the entire report is worth a read (there’s also an executive summary, which may be a little easier to get through). One thing the commission makes clear – and something that is reinforced by Ratcliffe’s warning in the Wall Street Journal – is that the days of hoping that China becomes a friendly player on the global stage are over.
Through its actions over the past two decades, China’s government has made its ambitions quite clear. Now it’s time for the United States to respond accordingly, and we hope the incoming Biden administration will make doing so a top priority.