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The US Senate Considers China's Economic Coercion  

 
 

It may come as a surprise to the international community that the U.S. political divide could these days be bridged in agreement on any issue whatsoever.  However, the July 24 hearing of the Senate Foreign Relations Committee’s Subcommittee on East Asia, the Pacific, and International Cybersecurity Policy suggests that there is great promise for bipartisan agreement on, and response to, China’s increasingly aggressive economic and military behavior around the world.

The hearing, the first of three on the subject of “The China Challenge,” heard testimony from two Asia and China policy specialists tied to two highly dissimilar think tanks in Washington, D.C.: the American Enterprise Institute (AEI),  generally regarded as a conservative think tank, and the Center for a New American Security (CNAS), which is led and staffed largely by Obama-era policy analysts. Dan Blumenthal, Resident Fellow in Asian, Defense, and Security at AEI, and Ely Ratner,Vice President and Director of Studies at CNAS, were the two speakers.

What is astonishing, and yet reassuring, is how strikingly similar their characterizations of China threat level were. Naturally, think tanks stress their independence from political interests, but the reality is that most slant toward and support the goals of one major political party or the other. In this case, however, agreement on Chinese coercive and predatory economic practices was shared by both analysts despite their different backgrounds.

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Both sets of written testimony, as well as the video of the hearing, can be found online here.

This hearing took place in the context of bipartisan legislation primarily designed to meet the challenges posed by China. In April of this year, the chairman of the Subcommittee, Republican Senator Cory Gardner of Colorado, and the ranking member, Democratic Senator Ed Markey of Massachusetts, introduced the Asia Reassurance Initiative Act (ARIA), which (according to a press release) “is designed to serve as a policy framework to enhance U.S. leadership in the Indo-Pacific region and to demonstrate a commitment to a free and open Indo-Pacific and the rules-based international order.”

At the hearing, Gardner’s opening remarks were direct and straightforward.  “How,” he asked, “should the U.S. respond to the challenge of a rising China that seeks to upend and supplant the U.S.-led liberal world order?”

Ely Ratner testified that the United States and China are “now locked in a high-stakes geopolitical competition,” and that “there is no more consequential issue today in U.S. foreign policy.” He stated that the United States “is losing this competition.”  The only way out, Ratner continued, is to “enhance U.S. competitiveness” and make this goal the “the central aim of U.S. strategy.”

Dan Blumenthal, approaching the issue from a different perspective, stated:

The era of reform and opening in China is over. It’s been long over. It’s been over probably for 10 years.  China is back to being run by state-owned enterprises [SOEs] that are related to the Party. The private sector is diminishing. That provides the Chinese state with a lot more control over economic coercive policies.

Blumenthal also stated that “some of the economic policies we don’t like here in the United States are not necessarily coercive. They are predatory. It has to do with the mass subsidization of Chinese state-owned enterprises (SOEs) that make it uncompetitive for U.S. and other firms to compete with them.”

He added that aside from the “outright theft” of IP and trade secrets, China’s economic coercion is manifested in “the targeting of specific businessmen and businesses in order to do Chinese bidding,” citing pressure from Chinese leadership on American and European business leaders in China to “go back home and lobby against any policies, whether you like them or not, that he [Xi Jinping] doesn’t see in [China’s] interest.”

Xi Jinping himself, Blumenthal testified, “is statist.”  The Chinese system as a whole “is set up to be predatory.”

Ratner, when asked by Markey where the United States stands in the trade war, was equally direct in his testimony:

I think we are 20 years into this trade war, so this is not something that Donald Trump started, it’s something that China started decades ago.

I don’t agree with all the ways that the Trump administration is dealing with this problem, but I do think that they should be commended for highlighting it.

Business as usual is not going to work.

Ratner continued, “China is going to use its economic clout to achieve its geopolitical aims, which include dividing American alliances.”

Senator Todd Young, directing his remarks to Ely Ratner, asked, “You seem to be making a simple argument. We’re in a high stakes competition with China. China doesn’t accept this rules-based international order we had hoped to welcome them into back in 2000. The legitimacy of that order and the institutions that were stood up is not respected by China. China instead respects power. We as a nation have insufficient leverage.  What we lack is a comprehensive strategy.  Is that a fair summary?”

Ratner agreed readily, “Yes.”

But in response to Senator Jeff Merkley’s question, “Are they eating our lunch?” Ratner stated, “The reason we are losing is because we are not competing. I think if we start competing we’ll be fine.”

In a point of departure between the two analysts, however, the role of the Trans-Pacific Partnership (TPP) as a mechanism for controlling China’s coercive and predatory practices is seen differently. Ratner stated that he believes using TPP and other agreements is “a no-brainer.” But Blumenthal differed:

Free trade agreements do nothing on Chinese coercive practices. TPP is gone. It’s becoming an excuse. We have to take on Chinese coercive practices directly in ways that hurt the CCP. We have enormous leverage over China. China is dependent on the US consumer. The Chinese economy is stagnating.

I hope we don’t go into a full trade war, because they will lose.  They export more than they do.

Ratner agreed with Blumenthal that “the retaliatory tools are ones that we should think about.”

Bipartisan agreement and leadership on a major foreign policy issue might not be what either domestic or international observers would expect at this point in America’s political life. Agreement on substantive issues about the nature of a major foreign challenge and how to address it, coming from different arms of the policy establishment in Washington, is rare. It appears, however, that China may have finally drawn enough notice to itself in both political and policy circles in the United States to engender a mostly unified reaction and response to the China challenge.

The United States may not particularly welcome the challenge, but it would certainly embrace an issue of national strategic importance around which Americans of all persuasions could rally and agree.

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