By Tom Cotton
Saturday,
December 11, 2021
Twenty years ago today, China joined the World Trade Organization with the promise of greater peace and prosperity for all mankind. As he championed this historic mistake, then–president Bill Clinton patronizingly said, “It is ironic, I think, that so many Americans are concerned about the impact on the world of a strong China in the 21st century.” We are now witnessing how right those Americans were.
Over the past two decades, the government of China has weaponized its nearly $17 trillion economy to wage an unrelenting economic world war that has brought pain to virtually every continent and ruin to countless communities across the globe.
Since 2001, China’s economy has grown nearly 1,200 percent, transforming from a third-rate backwater into the second-largest economy, largest exporter, and dominant industrial power in the world. The PRC today makes one-quarter of the world’s automobiles, a third of all merchant ships, 40 percent of mobile phones, 70 percent of televisions, and 96 percent of shipping containers.
More worrisome, China has gained a stranglehold over the production of many essential materials and is acquiring a dominant position in key technology areas. China manufactures more than half of the world’s steel, produces two-thirds of the active ingredients in our generic drugs, and processes 85 percent of rare-earth elements. China is also making strides in the fields of artificial intelligence and quantum computing, possesses 200 of the world’s 500 fastest supercomputers, and produces 70 percent of the world’s drones.
Through its consumption and production, China controls nearly a quarter of global trade. A stunning 70 percent of countries trade more with China than with the United States.
In many ways, China’s consumptive potential is more potent than its productive capacity. For decades China has been seen as the “market of tomorrow,” and Western firms have longingly pursued its 1.4 billion consumers. Although tomorrow never seems to arrive, and access to China’s markets remains constricted, corporations continue to treat the country with endless indulgence. Like a great anglerfish, China has lured thousands of Western firms closer and closer toward its teeth with the promise of open markets and cheap labor.
China is now an undeniable economic superpower. It has attained this status through endless dishonesty and a simple combination of lying, cheating, and stealing. The Chinese Communist Party has deployed a full array of economic weapons, including intellectual-property theft, corporate espionage, forced technology transfer, widespread product dumping, and currency manipulation.
Intellectual-property theft is China’s most blatant, lucrative, and consistent act of economic warfare. The PRC is the world’s most prolific IP thief many times over. China commits up to 80 percent of all intellectual-property theft against the United States, produces over 70 percent of all counterfeit goods shipped into our country, and is the subject of nearly half of all FBI counterintelligence cases involving economic espionage. China steals the equivalent of Arkansas’s economy in intellectual-property theft at least twice every year.
The Chinese government even uses the students that it sends to Western universities as agents of technological espionage and theft. Every year, new stories emerge of Chinese nationals stealing the crown jewels of research institutions and labs — from advanced rocketry and military stealth technology to cutting-edge business tech. The Chinese government exploits the naïveté, cowardice, and corruption of university chancellors, who are willing to stay quiet so long as China pads their pockets and funds their bloated endowments.
Those who are not actively engaged in spying or espionage on university campuses nevertheless glean important insight into American technology and innovation strategies, which gives China an important competitive edge. Our university system is, in effect, training China’s next generation of military engineers and scientists.
In the case of forced technology transfers, China substitutes extortion for robbery. In order for Western companies to gain or maintain access to the Chinese market, the CCP often forces them to work with Chinese firms and share or license out their most valuable trade secrets. Inevitably, the Chinese firms share these secrets with the government and use their knowledge to copy the Western technology and flood the global market with cheap imitations.
China also deploys its companies into the United States and Europe to acquire Western technology to bring back to the mainland. The Aviation Industry Corporation of China (AVIC), for example, spent over $3 billion from 2010 to 2018 acquiring essential aviation technology from the U.S. and Europe — which has propelled China’s development of advanced unmanned aerial vehicles, piston-engine technology, and aircraft-engine technology. AVIC just so happens to be the sole military-aircraft supplier for the People’s Liberation Army and is heavily supported by the government. Other state-backed firms linked to the Chinese military have made similar purchases in the auto sector and semiconductor industry. These are not the “free market” purchases that China pretends that they are: They are unfair anticompetitive state purchases by the Chinese government of what rightfully belongs to the West. These acquisitions are theft by another name.
China’s leadership has become even more brazen, adopting an unprecedented legal tactic that charges Western victims of intellectual-property theft a million dollars a week unless they drop IP cases against Chinese firms and submit to corrupt Chinese courts to adjudicate their claims. This isn’t the action of a moderating nation; it is the action of an increasingly aggressive nation. The CCP has robbed countless Western entrepreneurs, business leaders, and scientists of their life’s work in order to advance in the technological arms race — and they intend to rob countless more.
The CCP also uses its subsidized industries to devastate foreign competitors. The Chinese steel and aluminum industries illustrate this point. Between 2000 and 2017, Chinese production of crude steel went from 15 percent of the global total to 50 percent of global production. In the same period in the United States, 64 percent of raw steel producers were wiped out, 50 percent of basic oxygen furnaces were shut down or idled, and 35 percent of all steelworkers lost their jobs. This disaster wasn’t due to some innate Chinese competitive advantage; it was due to extensive Chinese subsidies and purposeful “overcapacity.” In 2018, the U.S. Commerce Department determined that continued importation of subsidized Chinese steel was “not economically sustainable” and threatened to “impair national security.”
Similarly, between 2001 and 2016, China’s primary unwrought-aluminum production skyrocketed tenfold, increasing from 13 percent to 54 percent of global production. From 2014 to 2015, a glut in the international aluminum market created by the Chinese caused prices to plummet by nearly 30 percent. As a result, smelters and factories around the world idled or closed.
China has run the same playbook again and again: Flood foreign markets with cheap subsidized products, wipe out competitors, and then spike prices. After destroying and relocating much of the world’s pharmaceutical industry through illegal collusion, price-fixing, and product-dumping, Chinese firms significantly raised prices for drugs. In the case of vitamin C, Chinese firms took over the industry and then raised the price of the vitamin by 600 percent.
China augments its product-dumping by illegally devaluing its currency. A lower exchange rate gives an artificial advantage to a nation’s exporters — something that China has exploited to the furthest extent possible. In 2018, in order to overcome U.S. tariffs, China devalued its currency by at least 8 percent. While the Treasury Department subsequently listed China as a currency manipulator in 2019, China has been reaping the rewards of devaluation for decades.
In recent years, China’s economic aggression has become more overt, transitioning from Deng Xiaoping’s quiet connivance to Xi Jinping’s heavy-handed antagonism. As the world wakes up to the threat posed by China, the Chinese government has responded by further weaponizing its market.
In 2019, Beijing threatened to cut off the United States’ supply of rare earths and during the pandemic threatened to restrict our supply of essential medicines. One of China’s official propaganda papers published an article asserting that if China exercised its leverage and cut off pharmaceuticals, “the United States would sink into the hell of a novel coronavirus epidemic.” In 2010, China made good on similar threats when it temporarily cut off Japan from rare-earth elements, disrupting the country’s electronics industry.
Other aggressive tactics have been used against our allies to boot. In response to Canada’s 2018 arrest of Huawei CFO Meng Wanzhou, China not only took Canadian diplomats hostage but also massively curtailed imports of Canadian pork and canola products, which are critical to Canadian farmers. Canadian exports to China plummeted 16 percent thanks to these restrictions, costing Canadian producers billions of dollars. Last year, when Australia pushed for an independent investigation into the origins of Covid-19, China similarly hammered Australian producers. China blocked imports of Australian cotton and beef, imposed an 80 percent tariff on barley, restricted tourism to Australia, and opened an official trade investigation into Australian wine.
When the European Union imposed largely symbolic sanctions for the CCP’s genocide in Xinjiang, China retaliated by sanctioning five members of the European Parliament, more than two dozen EU ambassadors, and several EU-aligned think tanks. This reaction was seen as so excessive that it has all but scuttled negotiations for an EU–China trade deal.
China has engaged in bold shakedown tactics on behalf of its national champions, as well, threatening to withhold a trade deal from Denmark in 2019 and threatening to restrict trade with the Netherlands in 2020 unless they accommodated Huawei and SMIC. These are the actions of an imperialist communist power, not a free-market nation.
However, all of these actions pale in comparison to the imperial ambitions of Xi Jinping’s flagship Belt and Road Initiative (BRI). This massive infrastructure initiative already includes projects in over 130 nations and is expected to cost $1 trillion — the equivalent of seven Marshall Plans, in today’s dollars.
China has pursued a series of financially and practically unsound projects that have no hope of reaping suitable returns on investment for their host countries. In some cases, this appears to be the result of greed on the part of China and imprudence on the part of the host nation. In other cases, BRI projects are transparent examples of Chinese debt-trap diplomacy. In Sri Lanka, China gave over $1 billion in high-interest-rate loans for the barely used — but strategically located — Hambantota Port. It also helped finance a $210 million airport that ultimately averaged only seven passengers a day. When Sri Lanka predictably couldn’t pay back its debt, China demanded a 99-year-lease of the port — and got it.
Similarly, Uganda borrowed $200 million from China in 2015 to finance an expansion of its only international airport. Multiple predatory conditions were attached to the loan agreement, including potential forfeiture of the airport if the Ugandan government did not pay back the loan. Many fear that China may soon acquire this valuable asset.
China has also financed the poorly functioning Belgrade–Budapest rail line. The Belgrade station has been called “the greatest transportation disaster” in the history of the city, and it is estimated that the project will take 2,500 years to make a profit, not accounting for maintenance fees. Similarly, in its first BRI project in Europe, China sent Montenegro’s debt from 63 to 80 percent of GDP for a road that will never justify the cost. China’s highest-profile rail project in Eastern Africa has been labeled a “railway to nowhere.”
These projects are made even worse for host nations by the fact that the materials used for construction are usually made in China; most of the workers, similarly, are Chinese. In the case of a railway through Laos, China is bringing 20,000 to 50,000 of its own workers for the project, while only 7,000 Laotians will be hired. This kind of raw deal is all too familiar to African and South American workers, who are consistently cut out of infrastructure projects in their own nations. These self-dealing arrangements neutralize many of the benefits of infrastructure projects, which normally teach workers valuable skills and boost domestic employment.
Adding insult to injury, China’s BRI projects have been plagued by complaints that they are low quality and deteriorate easily. One central Asian official observed that the Chinese “are great at building to the budget you have. But ten or 15 years later, you have to rebuild everything.” It is debatable whether this is due to incompetence or unscrupulous scheming by China to maintain recurring clients.
Although BRI projects regularly devolve into boondoggles, Chinese lenders still get paid, tens of thousands of its workers get jobs, and countless Chinese companies, operating at overcapacity, get an outlet for their products. In some cases, these projects also have key strategic goals of establishing land-based trade routes that circumvent U.S.-policed sea lanes, extending the influence of national champions such as Huawei, engendering dependence from critically located nations, or gaining control of vital resources such as rare earths and fresh water.
China gets wealth and influence from the BRI, while host nations get crushing debt and sub-par infrastructure. This is the furthest thing from partnership and cooperation — it is parasitism and exploitation on a grand scale and yet another example of Chinese economic warfare.
The victims of Chinese aggression can be found throughout the world. In America, they can be found in a thousand hollowed-out industrial towns and working-class neighborhoods and in the morgues of communities ravaged by the opioid crisis. Boarded-up warehouses and empty factories stand as the solemn monuments to China’s entry into the World Trade Organization. December 11, 2001, lives in infamy as the day that the Western world made one of the gravest economic mistakes in history.
Congress can begin to rectify its extraordinary error in judgment by immediately terminating China’s permanent-normal-trade-relations status. This special trade status paved the way for China’s ascension to the World Trade Organization 20 years ago; revoking it is the first step to restoring our defenses.
The rest of the Western world must join with the United States to put extraordinary pressure on the Chinese government. All of our nations empowered this monstrous regime, and we must all band together to end its economic world war. China’s BRI projects must be rejected and terminated, economic dependence on China’s critical technologies and materials must be ended, and painful sanctions and tariffs must be applied until China ceases its illegal economic behavior and horrific human-rights offenses. The United States and Western allies must also dramatically restrict the export of critical technology and capital to China — we must not sell the Chinese communists the rope with which to hang us. This campaign will not be quick, easy, or painless, but it is necessary. We must wage an economic long war that strips China of its economic privileges and vaunted power, or else risk being plundered and surpassed.
The CCP is a band of economic criminals that must be locked out of the international-trading order. Justice, fairness, and conscience demand it.
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