Washington Considers Ways to Deny China Economic Advantages

Commentary Long before the recent rise in tensions, Washington had already edged toward more open economic warfare with China. Several bills have been circulating in Congress–most with bilateral support—limiting American sourcing in China, constraining American investments in Chinese firms, or circumscribing both activities. In addition, the White House has indicated that it is considering executive orders along these lines. If things reach such a point, all might offer ways to punish China for leaning too far in Russia’s direction, though such efforts would not hurt China as much as some proponents think. These efforts would constitute an unprecedented expansion of government oversight in American economic activity. They would affect both importing and investing. It would take too much space to itemize all the bills now circulating in Congress and orders contemplated by the White House. Still, they are grouped into two sorts: those that focus on reducing supply chain vulnerabilities to China and those that would limit American support, primarily through finance, of Chinese technological innovation and military advantage. Some time ago, legislation passed limits on how much American investment can get involved in activities that would enhance the abilities of the Chinese military, though to accomplish this properly would require much broader strictures than now exist. Militaries across the globe have long shown an ability to weaponize any technological advance, however seemingly harmless on its face. The most prominent proposal currently circulating in Congress is a piece of legislation supported by Sens. Bob Casey (D-Pa.) and John Cornyn (R-Texas). This bill would focus mostly on American supply chains in China, screening business ventures to limit Chinese influence on American needs. The bill has recently received support from a group of Democrats in the House of Representatives. Elsewhere in Congress, Reps. Rosa DeLauro (D-Conn.) and Bill Pascrell (D-N.J.) have pushed legislation limiting investment monies to China. At the same time, some in the Senate would expand the Casey-Cornyn legislation to authorize a federal commission to screen U.S.-based investments in China, especially in critical industries such as health care, energy, and defense. The Biden White House has, in this matter, embraced much of what former President Donald Trump had initiated. Administration spokespeople have talked about executive orders that would screen American funding for Chinese startups and technology firms. Other orders would greatly expand the already existing strictures put in place by Trump in 2020 to stop investments going into some 30 Chinese firms aligned with the People’s Liberation Army. President Donald Trump signs trade sanctions against China in the Diplomatic Reception Room of the White House in Washington on March 22, 2018. (Mandel Ngan/AFP/Getty Images) The Biden White House has also talked about issuing orders to extend government oversight, much like the legislative proposals circulating in Congress, of American supply chains in China and American lending to Chinese firms. So far, the president has refrained from endorsing any of the proposed bills going around Congress, though both the Commerce Department and the Treasury have made clear that they are talking to the proposers. It hardly needs saying that corporate America will oppose any of these measures. In fact, the U.S. Chamber of Commerce has lobbied actively against the Casey-Cornyn supply chain bill for over a year. Such lobbying killed a similar bill in 2018. Several other corporate interests have indicated that the bill would affect some 43 percent of all American investments in China and have gotten sympathetic lawmakers to describe the bill as entirely “too broad.” These interests have argued further that the proposal to use the Office of the U.S. Trade Representative for the screening would overtax its available resources. Still, the anti-China sentiment in Washington is strong that the U.S.-China Economic Security Review Commission has declared this sort of legislation a “fait accompli,” with the only question concerning “how extensive” it will be. Of the two focuses involved, those close to the politics suggest that the investment screening is more likely to make headway than the supply chain screening. There are, after all, already precedents on the investment side but not on the supply chain side. There is some irony in this mix of likelihoods. The supply chain is where the United States is most vulnerable to disruption and where legislation could have the most significant impact on the Chinese economy. Investment limitations are more likely to keep Americans out than to slow Chinese technological advances, which, history shows, have a way of finding fertile economies no matter how much other powers try to limit access to them. Views expressed in this article are the opinions of the author and do not necessarily reflect t

Washington Considers Ways to Deny China Economic Advantages

Commentary

Long before the recent rise in tensions, Washington had already edged toward more open economic warfare with China.

Several bills have been circulating in Congress–most with bilateral support—limiting American sourcing in China, constraining American investments in Chinese firms, or circumscribing both activities. In addition, the White House has indicated that it is considering executive orders along these lines.

If things reach such a point, all might offer ways to punish China for leaning too far in Russia’s direction, though such efforts would not hurt China as much as some proponents think.

These efforts would constitute an unprecedented expansion of government oversight in American economic activity. They would affect both importing and investing. It would take too much space to itemize all the bills now circulating in Congress and orders contemplated by the White House.

Still, they are grouped into two sorts: those that focus on reducing supply chain vulnerabilities to China and those that would limit American support, primarily through finance, of Chinese technological innovation and military advantage.

Some time ago, legislation passed limits on how much American investment can get involved in activities that would enhance the abilities of the Chinese military, though to accomplish this properly would require much broader strictures than now exist. Militaries across the globe have long shown an ability to weaponize any technological advance, however seemingly harmless on its face.

The most prominent proposal currently circulating in Congress is a piece of legislation supported by Sens. Bob Casey (D-Pa.) and John Cornyn (R-Texas). This bill would focus mostly on American supply chains in China, screening business ventures to limit Chinese influence on American needs. The bill has recently received support from a group of Democrats in the House of Representatives.

Elsewhere in Congress, Reps. Rosa DeLauro (D-Conn.) and Bill Pascrell (D-N.J.) have pushed legislation limiting investment monies to China. At the same time, some in the Senate would expand the Casey-Cornyn legislation to authorize a federal commission to screen U.S.-based investments in China, especially in critical industries such as health care, energy, and defense.

The Biden White House has, in this matter, embraced much of what former President Donald Trump had initiated. Administration spokespeople have talked about executive orders that would screen American funding for Chinese startups and technology firms. Other orders would greatly expand the already existing strictures put in place by Trump in 2020 to stop investments going into some 30 Chinese firms aligned with the People’s Liberation Army.

Trump signs tariffs
President Donald Trump signs trade sanctions against China in the Diplomatic Reception Room of the White House in Washington on March 22, 2018. (Mandel Ngan/AFP/Getty Images)

The Biden White House has also talked about issuing orders to extend government oversight, much like the legislative proposals circulating in Congress, of American supply chains in China and American lending to Chinese firms. So far, the president has refrained from endorsing any of the proposed bills going around Congress, though both the Commerce Department and the Treasury have made clear that they are talking to the proposers.

It hardly needs saying that corporate America will oppose any of these measures. In fact, the U.S. Chamber of Commerce has lobbied actively against the Casey-Cornyn supply chain bill for over a year. Such lobbying killed a similar bill in 2018. Several other corporate interests have indicated that the bill would affect some 43 percent of all American investments in China and have gotten sympathetic lawmakers to describe the bill as entirely “too broad.”

These interests have argued further that the proposal to use the Office of the U.S. Trade Representative for the screening would overtax its available resources. Still, the anti-China sentiment in Washington is strong that the U.S.-China Economic Security Review Commission has declared this sort of legislation a “fait accompli,” with the only question concerning “how extensive” it will be.

Of the two focuses involved, those close to the politics suggest that the investment screening is more likely to make headway than the supply chain screening. There are, after all, already precedents on the investment side but not on the supply chain side.

There is some irony in this mix of likelihoods. The supply chain is where the United States is most vulnerable to disruption and where legislation could have the most significant impact on the Chinese economy.

Investment limitations are more likely to keep Americans out than to slow Chinese technological advances, which, history shows, have a way of finding fertile economies no matter how much other powers try to limit access to them.

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.


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Milton Ezrati is a contributing editor at The National Interest, an affiliate of the Center for the Study of Human Capital at the University at Buffalo (SUNY), and chief economist for Vested, a New York-based communications firm. Before joining Vested, he served as chief market strategist and economist for Lord, Abbett & Co. He also writes frequently for City Journal and blogs regularly for Forbes. His latest book is "Thirty Tomorrows: The Next Three Decades of Globalization, Demographics, and How We Will Live."