This week I am going to follow up on three previous columns with some further comments. These are not corrections, exactly, but additional thoughts that have occurred to me since the columns were published, sometimes as a result of subsequent events.
The first one is Secretary Raimondo’s visit to China in late August this year. I have no new insights to add about the trip specifically, but in thinking about the mixed messages the Chinese have been sending, it dawned on me, belatedly, that the United States is doing pretty much the same thing, and the lack of honesty in the relationship may be making things worse.
In my column I referred to the difference between what China’s Ministry of Foreign Commerce was saying and what its Ministry of State Security was doing. The message from the former was that American businesspeople and their money are welcome in China, while the actions from the latter include harassment and raids on Western companies and refusals to let foreigners leave the country. The difference between what they say and what they do is stark.
It now occurs to me that the United States also has a gap between what it says and what it does. Our officials say they do not want to contain China, that we are not decoupling, and that we want to have a normal and constructive trade relationship. At the same time, we are imposing export controls and forthcoming investment restrictions that are clearly intended to prevent further Chinese progress in key technology sectors. On export controls, the United States has drawn technical lines (for example, 14 nanometers) and constructed a network of controls designed to make sure the Chinese cannot cross it.
In today’s column, I’ll defer commenting on whether that is a wise policy or whether it will succeed. My point is that what we are doing is different from what we are saying, and if the Chinese are smart, they will pay more attention to the former than the latter, just as we are doing with them. There is no trade rule against hypocrisy, but I can’t help but think if both sides were honest about their intentions, we might have a healthier dialogue.
The second follow-up relates to export controls, where the arrival of a new Huawei phone apparently carrying an advanced seven-nanometer chip has complicated the debate and produced demands from Congress for new sanctions. There is much more to come on this, including a more definitive assessment of the provenance and architecture of the phone and its chips and on whether production can be scaled up.
At this early point, new controls or sanctions would be based on ignorance and should be approached cautiously. Those demanding tougher export controls need to figure out what, if any, laws or rules have been broken, and who has broken them. In the export control world, controls are placed on exporters, and the “crime” is exporting without a valid license. The recipient may be the actual bad guy, but he is not the person who broke the rules and exported the item. Additional sanctions against the Chinese buyer may also be appropriate. In the Huawei case, it appears that the chip in question was made by the Semiconductor Manufacturing International Corporation, a partially state-owned Chinese company, using older, previously exported manufacturing equipment. The facts may ultimately show that someone did cheat, but in the absence of actual evidence, the United States should not rush to judgment. This episode is another reminder, first, that we should avoid the hubris of assuming that China cannot match U.S. technology skills, and any Chinese technology breakthrough is the result of their (or our) cheating and not their own innovation; and second, what many of us warned last October—that U.S. controls would accelerate China’s plans to develop its own indigenous path to technology leadership in semiconductors.
The third follow-up is to last week’s column on unions. First, the New York Times has produced a timely chart showing the correlation between rising income inequality and declining union membership and notes that much of the narrowing of the gap occurred during a period when strikes were far more common than they are today.
Now that the autoworkers’ strike has begun, it is also worth noting that part of the decline in union membership is related to the continued decline in manufacturing jobs over the past 40 years. Currently only 16 percent of union members in the private sector work in manufacturing, but there remains a mystique about manufacturing – making something physical – that captures public attention. It certainly has President Biden’s attention, as he often speaks about the importance of manufacturing. The dilemma for manufacturing unions is that the United States is making more stuff than ever but with fewer workers, largely as a result of technology improvements. That makes growing their membership—which I believe should by their primary objective—all the more difficult.
William Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C.