- The author of this article Michael Collins feels that America is at a crossroads. There is a need to stop dealing with China as they hope they would be, and begin dealing with them as they are.
- The U.S. is in a favorable position in the struggle because China needs our consumer markets more than we need theirs.
- America is in the beginning of a cold war with China and must defend ourselves just as America did with the Soviet Union.
- Accepting the status quo like we did for 20 years is no longer an option.
- Decoupling will be a long, slow, and contentious process; but it is time to face reality and do something for the country, our citizens, and American manufacturing.
This article published in the Industry Week written by Michael Collins highlights the status of America towards China.
Made in China 2025
China’s “Made in China 2025” plan, according to U.S. Sen. Josh Hawley, is a plan that “seeks to remake the world in its own image and to bend the global economy to its will.”
The China plan describes which industries they want to dominate and which technologies they are after to achieve their goals.
The problem is that instead of investing in their own technologies, they have developed methods to acquire these technologies through forced technology transfer agreements, IP theft, and industrial espionage.
China’s version of international trade uses 14 different methods of cheating. But their primary strategies are:
Currency manipulation – China manipulates its currency to keep the U.S. dollar value high, so that Chinese companies have a 30% to 40% cost advantage.
State-owned enterprises (SOE) – China owns and subsidizes many companies that are used to target a market with low-cost products, capture market share and drive competitors out of business.
Technology theft – China knows that technology and innovation are what can make them the No. 1 manufacturer in the world, and they are prepared to get it any way they can. They use a range of illegal methods, from counterfeiting to espionage.
Technology transfer – As a condition of accessing the Chinese markets, China requires U.S. companies that build plants in China to create joint ventures with local companies—and share with them their latest technologies. This gives China easy access to advanced technologies without having to invest in the R&D.
Coalition for a Prosperous America
According to the Coalition for a Prosperous America,” between 2002 and 2018, the U.S. manufacturing sector lost 8 points of market share to imports, and import penetration in manufactured goods rose from 23% to 31% of consumption in the U.S.
This has resulted in manufacturing losses to imports in 17 out of the 19 subsectors and the loss of 5 million manufacturing jobs.
Will Negotiation Work?
President Trump has tried to negotiate with the Chinese to get them to change some of their unfair advantages.
He recently signed a Phase One agreement that attempts to get the Chinese to reduce cheating The language in the Phase One agreement that China signed agrees to criminal enforcement of trade-secret theft, corporate espionage, and counterfeiting.
But the enforcement part of the agreement is very vague and only asked that China publish an action plan explaining how it will enforce and deter violations.
So far, China has not honored the part of the agreement that agrees to buy $200 billion worth of American products.
Decoupling from China
Under these circumstances, the only practical alternative is to begin the process of decoupling from China. This process has already begun with Trump’s tariffs, which should be made permanent.
Support for decoupling has also started in Congress with Republican senators like Josh Hawley, Tom Cotton and Marco Rubio and Democratic senators Tammy Baldwin and Mark Warner.
We need a plan that shows how we can systematically decouple from China—and we should start by assessing our vulnerabilities and declare which industries and technologies are both critical and vital to national security.
The plan must also explain exactly how we will:
- Make existing tariffs permanent if all parts of the Phase One agreement are not met.
- Stop China from stealing our advanced technologies
- Support and promote “Buy American” goods.
- Create a blacklist of all Chinese companies that continue to cheat and use the customs agency to prevent their products from being imported to the U.S.
- Declare a list of technologies and products necessary for our national security and describe how they will be protected.
- Describe the incentives for American corporations to reshore their production or find better foreign vendors.
- Assess fines on all State-Owned Enterprises (SOE) that are subsidized by the Chinese government and not allow them to compete in the American economy as long as they are subsidized.
- Stop China from accessing American university research labs or contracting with American scientists on work that affects our national security.
- Stop the method of forced technology transfer of American companies manufacturing in China
Stop the 156 Chinese corporations (as of 2019) listed on the NYSE, Nasdaq and NYSE American from hiding financial information from their investors.
It goes without saying that the many American corporations will probably oppose decoupling, but they are going to be pressured to change because the politics regarding China is changing in the U.S.
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Source: Industry Week
