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Project Syndicate: The U.S. has crossed a line in declaring economic war on China

CAMBRIDGE, Mass. (Project Syndicate)—At the Communist Party of China’s 20th National Congress last month, the country’s one-man rule under Xi Jinping became fully entrenched. Though communist China has never been a democracy, its post-Mao leaders kept their ears to the ground, paid attention to voices from below, and thus were able to reverse failing policies before they became disastrous.

Xi’s centralization of power represents a different approach, and it does not bode well for how the country will deal with its mounting problems—the tanking economy, the costly zero-COVID policies, growing human-rights abuses, and political repression.

“ So, to be clear, China is a threat not because it undermines any fundamental U.S. security interests, but because it will want to exercise influence over the rules of the global political and economic order as it gets richer and more powerful. ”

President Biden met Chinese leader Xi Jinping ahead of a G-20 summit in Indonesia, in their first face-to-face talks since Biden became president. WSJ’s Andrew Restuccia reports on how the U.S. and China are looking to ease tensions after House Speaker Nancy Pelosi’s August visit to Taiwan. Photo: Kevin Lamarque/Reuters

Economic war on China

President Joe Biden has significantly added to these challenges by launching what Edward Luce of the Financial Times has appropriately called “a full-blown economic war on China.” Just before the Party Congress, the U.S. announced a vast array of new restrictions on the sale of advanced technologies to Chinese firms. As Luce notes, Biden has gone much further than his predecessor, Donald Trump, who had targeted individual companies such as Huawei. The new measures are astounding in their ambition, aiming at nothing less than preventing China’s rise as a high-tech power.

The U.S. already controls some of the most critical nodes of the global semiconductor supply chain, including “chokepoints” such as advanced chip research and design. As Gregory C. Allen of the Center for Strategic and International Studies puts it, the new measures entail “an unprecedented degree of U.S. government intervention to not only preserve chokepoint control but also begin a new U.S. policy of actively strangling large segments of the Chinese technology industry—strangling with an intent to kill.”

As Allen explains, the Biden strategy has four interrelated parts, targeting all levels of the supply chain. The goals are to deny the Chinese artificial-intelligence industry’s access to high-end chips; prevent China from designing and producing AI chips at home by restricting access to U.S. chip design software and U.S.-built semiconductor manufacturing equipment; and block Chinese production of its own semiconductor manufacturing equipment by barring supplies of U.S. components.

What is the threat?

The approach is motivated by the Biden administration’s view, on which there is broad bipartisan agreement, that China poses a significant threat to the U.S. But a threat to what? Here is how Biden expresses it in the preface to his recently released National Security Strategy: “The People’s Republic of China harbors the intention and, increasingly, the capacity to reshape the international order in favor of one that tilts the global playing field to its benefit.”

So, to be clear, China is a threat not because it undermines any fundamental U.S. security interests, but because it will want to exercise influence over the rules of the global political and economic order as it gets richer and more powerful.

Meanwhile, “the U.S. remains committed to managing the competition between our countries responsibly,” which really means that the U.S. wants to remain the unchallenged force in shaping global rules in technology, cybersecurity, trade, and economics.

By responding this way, the Biden administration is doubling down on U.S. primacy instead of accommodating the realities of a post-unipolar world. As the new export controls make clear, the U.S. has given up on distinguishing between technologies that directly help the Chinese military (and hence might pose a threat to U.S. allies) and commercial technologies (which might produce economic benefits not just for China but for others as well, including American firms).

Those arguing that it is impossible to separate military from commercial applications have won.

Dangerous escalation

The U.S. has now crossed a line. Such a broad-brush approach raises significant dangers of its own—even if it can be partly justified by the intertwined nature of China’s commercial and military sectors. Correctly viewing the new U.S. restrictions as an aggressive escalation, China will find ways to retaliate, raising tensions and further heightening mutual fears.

Great powers (and indeed all countries) look out for their interests and protect their national security, taking countermeasures against other powers as necessary. But as Stephen M. Walt and I have argued, a secure, prosperous, and stable world order requires that these responses be well calibrated. That means they must be clearly linked to the damage inflicted by the other side’s policies and intended solely to mitigate those policies’ negative effects.

Responses should not be pursued for the express purpose of punishing the other side or weakening it in the long run. Biden’s export controls on high-tech do not pass this test.

Ignoring other concerns

The new U.S. approach toward China also creates other blind spots. The National Security Strategy emphasizes “shared challenges,” such as climate change and global public health, where cooperation with China will be critical. But it does not acknowledge that pursuing an economic war against China undermines trust and the prospects of cooperation in those other areas.

Rachel Koning Beals: Biden, Xi pledge renewed cooperation on climate as world pressures two top polluters

It also distorts the domestic economic agenda by elevating the objective of outcompeting China over worthier goals. Investing in highly capital- and skill-intensive semiconductor supply chains—on which U.S. industrial policy currently focuses—is just about the costliest way of creating good jobs in the U.S. economy for those who most need them.

To be sure, the Chinese government is not an innocent victim. It has become increasingly aggressive in projecting its economic and military power, though its actions have mostly been confined to its own neighborhood. Despite previous assurances, China has militarized some of the artificial islands it built in the South China Sea. It imposed economic sanctions on Australia when that country called for an investigation into COVID-19’s origins.

Related: Biden says he doesn’t see ‘imminent attempt’ by China to invade Taiwan

And its human-rights violations at home certainly do warrant condemnation by democratic countries.

Jeopardizing peace and prosperity

The trouble with hyper-globalization was that we let big banks and international corporations write the rules of the world economy. It is good that we are now moving away from that approach, given how damaging it was to our social fabric.

We have the opportunity to shape a better globalization.

Unfortunately, the great powers seem to have chosen a different, even worse path. They are now handing the keys to the global economy to their national-security establishments, jeopardizing both global peace and prosperity.

Dani Rodrik, professor of international political economy at Harvard Kennedy School, is president of the International Economic Association and the author of “Straight Talk on Trade: Ideas for a Sane World Economy” (Princeton University Press, 2017).

This commentary was published with permission of Project SyndicateDon’t Let Geopolitics Kill the World Economy

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