First, we should capitalize on the concerns of other trading countries. The EU, Japan, Australia and others share our concerns and have criticized China for unfair trade practices, especially industrial subsidies and forced technology transfer. They also seek to address non-market-oriented practices that lead to global overcapacity in commodities such as steel. The U.S. should mobilize like-minded countries to develop stronger World Trade Organization (WTO) rules to prohibit these practices.
Second, we should abandon the administration’s evisceration of the WTO dispute settlement process. We had a pretty good record of winning cases against China (e.g., intellectual property protection, Value Added Tax refunds, electronic payment services) but because we repeatedly lost cases over arcane anti-dumping regulations, we threw the entire dispute settlement mechanism overboard. Crippling the entire system is short-sighted. When we win, China has to comply with the rules, otherwise we can retaliate and use tariffs or other punitive measures legally. Instead, the administration imposes illegal unilateral tariffs on China which makes the U.S. the violator
Third, we should take steps, preferably in parallel with the EU, Japan and others, to protect critical technological and security assets from takeovers by Chinese state-supported actors. The Europeans are contemplating new rules and procedures to protect their national champions from Chinese takeovers during a period of low stock prices. In 2018, we tightened Committee on Foreign Investment in the United States (CFIUS) scrutiny of sensitive foreign investments. A coordinated approach with others would be even more effective.
Finally, we should work closely with our allies to develop joint international standards in new technologies to counter China’s efforts to impose their own standards. China has increased its activity in international organizations, notably the International Telecommunications Union and the International Organization for Standards. The EU has proposed cooperation with the U.S. in setting new technology standards (e.g., 5G, robotics and AI) as a counter to Chinese efforts to set global standards. Our trading partners would willingly work with us if we made the effort.
As many of our trading partners say, “The only thing worse than U.S. leadership is the absence of U.S. leadership.” We need to correct that absence with smart leadership and allies.
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