WASHINGTON—China is flouting global rules and norms governing trade and economic policy, threatening the U.S. economy and its advanced-technology industries, as well as the entire global economy, said Robert D. Atkinson, president of the Information Technology and Innovation Foundation (ITIF), in testimony today before the U.S. House Foreign Affairs Subcommittee on Asia and the Pacific. It’s time for a new response to China’s “innovation mercantilism” that moves beyond passive dialogue and toward constructive, alliance-backed confrontation, Atkinson urged. U.S. policymakers should lead an international coalition that pressures the Chinese government to stop rigging markets and start competing on fair terms.
“Previous U.S. administrations sought engagement and dialogue with China’s leaders in the hope that it would compel China to give up on its mercantilist policies. But that hasn’t worked,” argued Atkinson, who leads the top-ranked U.S. science- and tech-policy think tank in North America. “Rather than reform, China has doubled down on its unfair, mercantilist strategies and is now seeking global dominance in a wide array of advanced industries that are key to U.S. economic and national security interests. It’s time for a new approach.”
“Any effort to confront China needs to involve a strong and unified coalition, because China is no longer as dependent as it used to be on the U.S. economy—and countries like Australia, Canada, Germany, Japan, and the United Kingdom have all been hurt by China’s mercantilism, too. By working together, we can show China it has no good options other than modifying its unfair industrial strategy.”
Atkinson explained there is an important difference between losing commodity-based, low-skilled industries to China, as happened in the 2000s, and being challenged for leadership in advanced, technology-based industries, as we are seeing now. When the United States loses its advantage in these advanced industries, it is especially harmful, because they pay about 75 percent more than average U.S. wages. It is also detrimental to U.S. national security and the defense industrial base because U.S. defense leadership is not based principally on America’s size or budget, but on its technological prowess, said Atkinson.
Atkinson’s testimony detailed how China has positioned itself as the main economic rival for the United States through a mercantilist strategy that hinges on both defensive protectionism and offensive efforts to dominate a wide array of advanced-technology industries, including semiconductors. Its tactics include stealing competitors’ intellectual property, making market access contingent on handing over proprietary technologies, lavishly subsidizing Chinese technology enterprises, and more.
Atkinson recommended that Congress and the Trump administration take a two-pronged approach to confronting China: First, U.S. policymakers should work with other nations to limit China’s ability to access the most important technologies and roll back China’s broader unfair mercantilist practices, including subsidies for domestic firms. Second, the United States must develop and implement its own strategy to bolster its competitiveness in advanced industries.
“Implementing a strategic, measured, and respectful approach with China will not only level the playing field so American companies can effectively compete with Chinese companies there and around the world, but also help restore faith in the integrity of the global trading system. Pairing that with a national innovation strategy will help ensure that U.S. technology firms maintain global market share, securing not just good U.S. jobs, but U.S. defense capabilities.”
Read written testimony.
