The Biden administration is backsliding toward the naive globalism that characterized American policy toward China at the start of this century. In April, Secretary of the Treasury Janet Yellen delivered a perplexingly anachronistic speech at Johns Hopkins University, in which she envisioned “a growing China that plays by the rules” and fosters “rising demand for U.S. products and services and more dynamic U.S. industries.” One week later, National Security Advisor Jake Sullivan took the stage at the Brookings Institution to announce the administration’s strategy of “de-risking and diversifying, not decoupling,” in which a “small yard and high fence” would safeguard a narrow set of critical military technologies while otherwise permitting commerce to flourish.
But the China challenge is not only, or even primarily, one of national security. The fundamental problem is that America’s free-market economy is incompatible with China’s state-controlled one, and American democracy is incompatible with the CCP’s authoritarianism. Even were China to disarm tomorrow, credibly forswearing any aspirations beyond its borders, its influence as an economic actor would remain deeply corrosive to American liberty and prosperity.
“Free markets, free trade: pick one.”
Asking American firms and workers to compete with their Chinese counterparts grants CCP policymakers the power to shape American capital allocations and labor-market conditions from the far side of the Pacific. Allowing Chinese firms to access American capital markets subjects the American people’s savings to the whims of CCP regulators and leaves American financiers complicit in human-rights abuses, while allowing Chinese capital access to American firms puts corporations under the control of a foreign government. And the more distortion China introduces on behalf of its producers, the greater the pressure on the U.S. government to respond in kind. Free markets, free trade: pick one.