A Renewed China Strategy

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With all the noise frequently coming out of Washington, D.C., it’s sometimes hard to know fact from fiction. One issue, however, has Democrats, Republicans, and Independents equally concerned. That issue is the rising competitive economic threat of China.

China is an economic threat to the U.S. for multiple reasons.  First, despite their arguments otherwise, China is a trade cheat and has been for quite some time. The nation routinely steals America’s intellectual property, conducts cyberattacks on American companies, and floods our markets with goods made using cheap labor. Second, make no mistake about it, their business leaders are competitive, industrious, and hard-working. With a country of 1.3 billion people, they can draw from a pool of talent that rivals the size of our entire population. Yet the good news is that working families are now aware of what Washington elites have already learned: China is beginning to gain the upper hand on us, and if we’re not willing to fight and innovate like hell, they may very well get ahead.

Now, there’s no need for doomsday prophecies. Yes, China is America’s biggest trade adversary. But given our history, resolve, and our own pool of innovators, we are well-positioned to win this fight. We have the greatest minds in the world right here at home, and a national spirit that is second to none. China is a matter of serious concern, but I still believe that if we’re smart in our approach, China may yet become our biggest trade opportunity. The steps we take in the coming years will set the global economic landscape for decades to come. 

About a quarter of all manufacturing jobs lost in America between 1990 to 2007 came from China’s increasing trade presence and low labor costs. As a result, some have argued that the wisest course forward means aggressively focusing on preserving American steel, slapping tariffs on China’s goods, and working outside the World Trade Organization (WTO) to put pressure on China to “play by the rules.” While these frustrations are understandable, escalating a trade war alone will not work. History has shown us time and time again what economists take as fact: tariffs simply create more problems than they solve.

Here’s an example: in the last few years, America slapped tariffs on Chinese steel. This made Chinese steel, which is usually cheaper than US steel, relatively more expensive. So, whether they bought Chinese or American, US soybean farmers had to pay more for their equipment, thus raising the prices of their soybeans. These raised prices were passed on to soybean buyers and consumers lost.  Also, historically, America has been the primary supplier of soybeans to China, which has been a massive market for soy-based products. But after the steel tariffs, America become a secondary supplier of soybeans to China because, when U.S. soybeans prices increased, this created an opportunity for China’s own soybean producers to undercut and replace U.S. supplies. And un-ringing this bell will not be easy. Even if we were to remove the steel tariffs tomorrow, the low cost and scale of China’s current soybean production makes it nearly impossible for American farmers to now compete. What’s worse, China has even begun exporting soybeans to other countries, creating more competition for American-grown soy beans in every corner of the globe.

It’s difficult to accept, but this is a problem we created for ourselves. When the US government enacted tariffs, China’s market shifted on a dime. The only people hurt by these policies were our own soybean suppliers and consumers. Before the trade war, the United States approached China with “soft pressure.” While this did not work completely, it did yield more results than the tariffs. There is no question that America needs to take a firm and balanced stance to protect fair trade and American intellectual property. But the, “bull in a China shop” approach leaves the bull on his back, while the “all bark, no bite” approach suggests we are not willing to defend our interests. We must be consistent, smart, and practicable with China, or they will outmaneuver us.

Here is the silver lining: China is desperately trying to corner the renewable energy market and position themselves as the global leader in renewables. They’re producing solar panels, wind turbines, and new energy technology with increasing urgency because the global market is changing swiftly. The US and China are the largest markets for electric vehicles(eVs) and Europe recently produced more energy from renewable sources than non-renewable sources.  Even though Chinese eV companies like NIO , BYD and Li Auto are generating stock market buzz, America’s renewable tech is better developed. We attract, train and retain some of the greatest engineers, scientists, designers and craftsmen in the world. We have companies such as Tesla, General Motors and Chevrolet producing the majority of electric Vehicles in the U.S.

And with the right national approach, leadership and regulations, we can use the renewables market as our second and most consequential moon-landing. With a focused, and unified national effort, we can save our country from the economic risk of fossil fuel dependence while at the same time beat China in the race to become the world’s energy supplier. In other words, two competitive birds, one renewable energy stone.

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