ADAM STAHL AND BRADLEY A. THAYER
With the Biden administration’s first calendar year coming to an end, efforts to curb China’s pernicious behavior have borne little fruit. In the past few months, the People’s Liberation Army (PLA) has increased its military capabilities and aggressive behavior. The PLA’s activities include increasingly provocative actions toward Taiwan, the successful testing of a hypersonic missile — which Joint Chiefs of Staff Chairman Mark Milley called a “near-Sputnik moment” for the U.S. — and construction of military bases around the world, including locations in the United Arab Emirates and now, reportedly, Equatorial Guinea.
There has been no shortage of Beijing’s pervasive and unauthorized data collection efforts, widespread intellectual property theft and currency manipulation, among other indiscretions. These are acute reminders that the Chinese Communist Party’s path to replace the United States as the world’s leading power is accelerating — and it can be traced in considerable degree to China’s admission to the World Trade Organization (WTO) 20 years ago this month. Understanding the sources and U.S. foreign policy missteps that enabled China’s autocratic rise can offer fertile lessons when calibrating current and future postures. Beijing’s WTO admission and its unchecked non-market practices that precipitated its rise offer insights into the present Sino-American relationship, and important lessons to be heeded.
Global leaders — most significantly Presidents Bill Clinton and George W. Bush — hailed Beijing’s entry into the WTO as a transformative event orienting China toward becoming a responsible member of the international trade community.
There was reason to be hopeful. With nearly 15 years of tough negotiations and extensive commitments, Beijing had accepted some of the most stringent conditions of any nominee in WTO history — which included extensive domestic reforms focused on fostering a more transparent, fair and competitive Chinese market. Removing tariffs on Chinese imports, loosening state control over business affairs, and fortifying judicial and financial institutions charged with upholding business practices, such as intellectual property (IP) infringement, were key to this transition.
But China’s market transition faced headwinds, further exacerbated by wavering U.S. commitments, distracted by Middle Eastern wars and subsequent aversions to costly global undertakings following the 2008 global recession.
However, despite vastly expanded market access through the WTO, Chinese officials often conditioned market entry with disclosure of sensitive IP and hardened barriers for international companies. The rampant IP theft, cheap labor, state-sponsored subsidization, and forced technology transfer had devastating impacts on the U.S. and the global economy. In 2019, reports estimated China’s theft of American IP at $600 billion annually, constituting nearly 3 percent of U.S. GDP that year.
The 2012 arrival of Chinese President Xi Jinping, who understood how Beijing’s trade tactics could be expanded to catalyze its military modernization, launched the infamous Belt & Road Initiative (BRI). The massive global infrastructure financing and development project involved nearly 140 countries and 30 international organizations, offering a justifiable reason to deepen global economic and security linkages to house the PLA’s burgeoning naval and air fleets throughout Africa, the Middle East and South America.
Absent global resistance, offshoot initiatives, such as the “Digital Silk Road” and “Belt and Road Space Information Corridor,” provided an opportune conduit to pilfer, develop and proliferate China’s dual-purposed, or “civil-military fusion,” technologies. These include telecommunications systems (e.g., Huawei), port construction, and technological innovation that could serve both economic and security aims. Despite Chinese Communist Party assurances that projects were peaceful and non-military in nature, China’s defense expenditures grew virtually 900 percent from 1999 to 2019. Domestic legislation, including China’s 2016 National Defense Transportation Law, even mandated that BRI projects be configurable with PLA requirements.
Today, China’s non-market practices are worse than ever. Xi continues to adopt global measures that tighten reliance on Beijing and disadvantage the global military and commercial community. Accordingly, 20 years on, China’s WTO accession offers key insights for the Biden administration to heed.
First, Biden must learn from the mistakes made by his predecessors. This includes resisting urges to table tough talk in exchange for wins on environmental cooperation. Keen to avoid escalation or action disruptive to the global trade configuration, Bush and Obama chose to articulate misgivings quietly and move to bilateral “low-hanging fruit” in other spheres. By skirting tough topics, China’s economic indiscretions have now metastasized into an existential threat to U.S. competitiveness and national security.
Second, the United States must draw clear and easily enforceable “red lines” in the trade space and not waiver in protecting those principles. Washington does not have to be provocative or bombastic in its approach but must be resolute in safeguarding the commercial rules of the road and broader rules-based order, even if detrimental financially.
In the wake of supply chain strong-arming stemming from COVID-19, the United States must work with the clearly articulated “rules of war” in the trade and public health spaces. This includes export controls on select rare earth minerals needed to produce weapons and advanced technology; embargoes; or malicious cyber-scanning of our critical infrastructure.
The same is true for systematic genocide and forced labor against China’s minorities, including the Uyghurs and other Muslims in Xinjiang. Given how entwined the U.S. and China are in the banking, retail and technology sectors, it will not be easy, but it requires swift, decisive U.S. government leadership. Undoubtedly, this will necessitate a whole-of-society response at the expense of company, corporate or academic profit.
Third, Washington must maintain policy continuity on China, regardless of changing political tides and foreign policy currents. Few topics in Washington are safe from the hyper-political environment. Despite some nuanced matters, China has occupied this sacred space. Both parties must resist the temptation of using Beijing as a political football.
Lastly, although the WTO has been ill-equipped to stem the China threat, the body must be overhauled, not abandoned. The United States still derives tremendous economic and strategic benefit from WTO membership. Washington must work multilaterally to expand the aperture and penalties involving IP infringements and unsanctioned technology transfers.
Given Xi’s interest in leveraging illicit economic behavior for nation-state propagation, the overly narrow, commercially focused WTO cannot be the only tool to ensure the stability of the international trade regime, but it must be able to hold China to account for its abusive practices, gross human rights abuses and use of coerced labor. Most importantly, trade cannot be divorced from U.S. power to safeguard the WTO in the years to come.
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