One Hand Tied Behind Our Backs: Why America Must Do Much More to Curb China’s Dangerous Innovation Mercantilism

Ahead of Chinese President Xi Jinping’s visit to the United States this week, ITIF hosted an expert panel to discuss the ramifications and potential U.S. responses to China’s aggressive, mercantilist strategy of shutting American technology companies out of Chinese markets. As Nigel Cory recaps in Innovation Files, Congressman Randy Forbes (R-VA), founder and chairman of the Congressional China Caucus, provided opening remarks and outlined a common theme of the panel by explaining how China’s mercantilist strategy unfairly tilts the playing field against U.S. technology companies to such a degree that it threatens to undermine the U.S culture of innovation. Robert Atkinson summarized the changes in China’s economic development model and argued that the United States needs to move beyond the strategy of patience and passive engagement to a “constructive confrontation” strategy to hold China accountable by raising the costs of its actions. However, Derek Scissors, resident scholar at the American Enterprise Institute, didn’t think that heightened trade enforcement through the World Trade Organization, as supported by other panelists, was the right response due to the potential for such action to be hijacked by protectionist objectives. James Mulvenon, vice president of the intelligence division at Defense Group, Inc., agreed that the situation is getting worse and that a growing number of long-term U.S. and foreign expatriates are leaving China as the much hoped for transformation of China into a rule-of-law and open-market-based economy is not happening. Bill Whyman, senior managing director and head of technology strategy research at Evercore ISI, outlined that China’s intensive approach to controlling key sectors of its economy has created “synthetic markets” and a dense and interrelated set of policies that are aimed to reinforce the government’s overall objectives to promote these key sectors.