Editor’s note: This article appeared in the Italian geopolitical magazine Limes.

The preeminent foreign policy question facing the West for at least the next several decades will be what to do about China’s rise as a techno-economic, military, and foreign policy power. But as things stand, Western leaders cannot even agree on the premise of the matter. The prevailing view in much of Europe is that China is a rapidly developing country—and a large market for exports—that is being held to unfair standards by the West and the global institutions it dominates. Whereas the prevailing view in many U.S. policy circles is that China is a neo-Leninist nation seeking global hegemony through a predatory strategy of innovation mercantilism that focuses on advanced technologies and industries.

European policymakers thus downplay the idea that China is a threat, focusing instead on the commercial advantages that stem from maintaining tight trade linkages. To the extent they even acknowledge there are problems with China’s trade practices they see the World Trade Organization as the avenue for resolving them, even though the WTO has failed at every juncture to rein in Chinese innovation mercantilism as it has gathered steam, industry by industry.^[1] Moreover, many European are prone to seeing America as just as much a techno-economic challenger as China, and they are sympathetic to China’s assertions that America is equally to blame for trade tensions.

It is this point of view that explains French President Emmanuel Macron’s recent statements about his visit to Beijing. He clearly views China as just another country seeking economic and geopolitical power, no different than the United States.^[2] He does not want Europe to be a “vassal” of either China or the United States. And he wants France to sell China more Airbus planes.

Macron and other European leaders may not share the prevailing American view that China is run by an authoritarian, neo-Leninist party seeking global hegemony through predatory innovation mercantilist tactics, but they need to understand that it is because of this analysis of the situation—not a selfish desire to maintain U.S. hegemony—that the last two U.S. administrations have pushed back against China with measures such as tariffs, limits on Chinese investment in America, and selective export controls.

Yet many European leaders seem skeptical. For example, European Central Bank President Christine Lagarde recently stated, “There is clearly a competition between these large economies” (i.e., China and the U.S.), and warned that “trade should not be confrontational.”^[3] This represented a puzzling lack of awareness or concern about Chinese economic policy, which for the last two decades has been nothing if not confrontational. As the Information Technology and Innovation Foundation and others have documented, China has lived up to almost none of the commitments it made to join the WTO in 2001.^[4] The massively distortionary subsidies it showered on its solar panel industry destroyed Europe’s industry. It is doing the same in other key areas of European strength, including telecom equipment, machine tools, chemicals, high-speed rail, and increasingly aviation, autos, and biopharmaceuticals.

European leaders are dreaming if they do not believe that Chinese techno-economic policies are focused on taking global market share from the EU. And they are being obtuse by refusing to accept that U.S. efforts to challenge China protect not just America, but also Europe. Indeed, the benefits are likely greater for the EU. As the German Mercatus Center has shown, predatory Chinese policies such as intellectual property theft, forced technology transfer, massive domestic and export subsidies, closed markets, and technology standards manipulation, among others, pose a higher risk to Europe than to the United States.^[5] To take one example, does anyone believe that European car makers will be selling many cars in China a decade from now?^[6] They certainly won’t if China realizes its vision of supplanting them with its own auto industry, which is rapidly realizing, particularly in electric vehicles.^[7]

Indeed, just as the United States led the fight against Soviet expansionism, not for selfish reason, but for altruistic ones, it is now trying to do the same vis-à-vis China. That is not to say the United States has done that job perfectly, but in the absence of a willing EU partner, it has done the best it could.

U.S. policymakers realize they cannot let China become globally dominant in advanced technology industries, for that will make America, in the words of Macron, a vassal state. As part of the task of not letting China weaken U.S. advanced industries, there is a growing realization in political and policy circles that America needs an advanced-industry strategy. The Information Technology and Innovation Foundation has termed this “Hamiltonianism,” after Alexander Hamilton, the first U.S. Treasury Secretary and the intellectual champion of the view that America could not remain a natural resource colony to Britain.^[8] In his 1791 Report on Manufactures, Hamilton wrote: “To produce the desirable changes, as early as may be expedient, may therefore require the incitement and patronage of government.”^[9]

That idea is the root of America’s long tradition of national developmentalism.^[10] From its role in developing the technology for interchangeable parts in the 19th century to its more recent role in creating the Internet, the U.S. government has served as a catalyst in advanced sectors. With the end of the Cold War and the emergence in the 1980s of the neoliberal “Washington Consensus” view that free trade and free markets are sacred, that proud and effective tradition was forgotten. But Hamiltonianism is making a slow comeback in response to China’s techno-economic rise.

At its core, contemporary Hamiltonianism is about ensuring that the United States stays ahead of China in advanced industries, especially dual-use industries that enable national power. It is about helping advanced enterprises in the United States gain global market share through legitimate innovation and industrial policies, while at the same time working to limit the damage China seeks to impose to all advanced economies through its economic predation. The recent CHIPS and Science Act, which included funding for semiconductor factories known as “fabs,” was a step in that process, as were the Trump and Biden administration’s semiconductor export controls. However, to be clear, there is little support in U.S. policy circles for complete “decoupling” from China. The United States mostly wants what EU President Von Der Layen’s recently spoke of as “de-risking.”^[11]

However, for Hamiltonianism to become the dominant techno-economic doctrine, it needs to replace the neoliberal economic creed that holds the free market and free trade sacred. Under the neoliberal doctrine, the most important task for policy is to remove market “distortions,” because proponents believe free markets maximize economic welfare. This is why they denigrate industrial policy and believe there is little difference between computer chips and potato chips.^[12] Whereas, Hamiltonian economics recognizes that innovation-based sectors are more strategically important, and that they underperform in the absence of smart government policies.^[13]

Similarly, neoliberals are so wedded to a pure ideal of “free trade” that they fail to recognize there is a problem when trade becomes a one-sided arrangement in which America is largely open and fair, and China is closed and unfair, which hurts both the U.S. and global economies.^[14] By contrast, Hamiltonianism holds that failure to confront foreign economic predation leads to domestic firm deaths and global innovation lags.

An array of avoidable and catastrophic failures in the U.S. economy have seriously challenged the neoliberal paradigm, including the hollowing out of America’s manufacturing sector, the rise in income inequality, the 2009 financial crisis, and China’s meteoric growth in a host of advanced industries. As such, while many continue to defend neoliberalism, they are likely on the losing end of history.

With neoliberalism on its back feet, Hamiltonianism is one of three main contenders to replace it. One of the rival camps is Trumpian national protectionism, which holds that the United States does not need to be deeply engaged in global markets and that protecting national markets is the way to go, either with tariffs or with “Buy America” provisions. This is a popular view in some quarters for political reasons, but for an array of practical ones, it cannot be a viable replacement for neoliberalism.

The other contender is best understood as green-equity industrial policy, which seeks to achieve an array of social policy goals through industrial policy.^[15] Most U.S. progressive organizations seek to move beyond the liberal post-New Deal consensus in which the government helped advance social goals through taxes, spending, and regulation and instead use industrial policies to force companies to implement their top two goals: reducing greenhouse gases and achieving social equity. As one progressive author notes: “On the left, the visions [of industrial policy] today focus on how to transition to an egalitarian post-carbon social democracy.”^[16] This is unfortunately where much of EU industrial policy is now, seeking to advance social goals, rather than tech-economic competition goals.^[17]

Progressive industrial policy ignores both China and the very idea of industrial competitiveness. Many U.S. followers even support helping China because their allegiances lie with the global proletariat rather than their fellow Americans, per se.^[18] And with their intensive focus on race and identity, many progressives attack anyone who advocates challenging China as racist.^[19] Like Trumpian national protectionists, progressives reject globalization, seeking a self-sufficient “made in America” ideal. It is this force, more than responding to the China challenge, that animates the Biden administration’s “Buy America” efforts and similar restrictions in the Inflation Reduction Act (IRA).

Against this backdrop, Hamiltonianism is gaining intellectual and political ground as China advances technologically and economically and gets bolder in buying off and intimidating other nations into aligning with it. Senators such as Tammy Baldwin (D-WI), Chris Coons (D-DE), John Cornyn (R-TX), Jerry Moran (R-KS), Chuck Schumer (D-NY), Marco Rubio (R-FL), J.D. Vance (R-OH), Todd Young (R-IN) and Mark Warner (D-VA), to name a few, have all championed Hamiltonian-style legislation.

Hamiltonianism is not just about using government to directly support advanced-industry development, it also seeks to intervene internationally to advance U.S. techno-economic goals. Throughout the post-World War II era, the United States made an idealistic calculation in conducting foreign policy that sacrificing its short-term economic interests to shape the global geopolitical order in the West’s image would accrue to everyone’s advantage. Indeed, foreign techno-economic policy in the Cold War was simple: America had a foe, the Soviet Union. The United States wanted other countries to align with it against the Soviets, and so U.S. policy regularly sacrificed domestic economic development interests to advance U.S. foreign policy goals. One-sided trade deals, unilateral export controls, and robust aid to spur foreign economic development in nations like Japan, Korea and Taiwan were used in pursuit of the overarching Cold War goal. The view was that the U.S. economy and technology system were so superior that policy could afford to trade away some of that advantage.

When the Cold War ended, many policy thinkers envisioned a new “end-of-history” era where almost everyone—with the exception of a few rogue states—was to be America’s friend, because we stood for freedom, democracy and prosperity. The inevitable path forward pointed to total global integration.^[20]

Alas, Xi Jinping has other plans: to dominate the world economically, technologically, diplomatically, and perhaps militarily. Now every time the United States makes a sacrifice in the global marketplace it cedes ground to China. As such the neoliberal, Washington consensus status quo can no longer work. As the Information Technology and Innovation Technology has showed in its “Hamilton Index of Advanced-Industry Performance,” the United States now has less advanced-industry output (e.g., semiconductors, machinery, aerospace, pharmaceuticals) as a share of GDP than the global average and more than 25 percent less than China.^[21] Leaving out Germany, the rest of the EU-28 is even worse off; it is 33 percent less concentrated in advanced industries than the global average on a size-adjusted basis. The reality is that U.S. (and European) techno-economic power is severely diminished in the wake of U.S. free-market lassitude and China’s embrace of unfair advanced industry strategies. Now that power must be rebuilt and nurtured, and no longer traded away for foreign policy goals.

That will require embracing a Hamiltonian foreign policy that puts U.S. (and allied) economic interests first, including pressuring allies to choose between the United States and China, which the Biden administration as so far refused to do. As Secretary of State Blinken stated: “This is not about forcing countries to choose. It’s about giving them a choice.”^[22] The problem is most countries and regions, especially Europe, will make the choice to “have their cake and eat it too.” Europe wants the best of both worlds: access to American markets and strategic and military aid, and access to Chinese investment and markets. European leaders’ view is to let America “pay any price and bear any burden” in the fight for global freedom—as long as the EU gets to keep selling BMWs to China.

They speak of the importance of a strong transatlantic alliance while at the same time unfairly deploying digital sovereignty protectionism against U.S. technology firms—restricting data flows, imposing discriminatory digital taxes, enacting a protectionist cybersecurity scheme, pursuing overly aggressive antitrust enforcement, and otherwise discriminating against U.S. technology products and services.^[23] And all the while, the EU continues do anything it can to sell more cars, machinery, planes, and electrical equipment to China.

During the Trump administration, officials from the EU and its member nations were happy to see the United States impose tariffs and other restrictions on China knowing it would both slow China’s mercantilist growth and bring retaliation against U.S. firms. A win-win. Rather than stepping up to support America in this task with measures of its own, the EU took advantage to further its own sales and investment in China. It was not because Airbus makes better planes that Boeing delivered just eight airplanes to China in recent years while Airbus delivered more than one hundred [in what period?], it was because of Chinese commercial retaliation against America.^[24] EU officials must have been jumping for joy.

Just as Hamilton attacked Britain’s unfair trade practices in the 18th century, today’s Hamiltonians focus on limiting adversaries such as China from gaining competitive advantage in key industries, especially when they use of unfair and predatory trade and economic policies to do so. The Hamiltonian vision for foreign economic policy is simple: America should treat other nations based on whether they behave like friends, acquaintances, or foes.

Friends would not only join with America in addressing the China techno-economic challenge but also limit anti-U.S. economic and technology policies. Friends would cooperate on export controls, share commercial counterintelligence, work to limit and prosecute Chinese intellectual property theft, restrict imports of Chinese products made through unfair trade practices, limit Chinese research investment in domestic universities, stop most Chinese inward foreign direct investment, and cooperate to counter China’s belt-and-road initiatives.

Friends would share responsibilities but also benefit from opportunities in return. Friends would not be subject to “Buy America” requirements. Friends could participate in joint technology projects and other partnerships. Friends could cooperate on joint supply-chain initiatives. Friends would be on a list of countries approved for inward investment. Friends would cooperate on technical standards issues. Friends would participate in new, robust 21st century trade agreements, including open cross-border data flows. Friends would be countries in which the U.S. government can make industrial investments to produce certain products that support national defense requirements, including microelectronics and medical supplies.^[25] Friends would also be part of a new system of “collective resilience,” which would threaten to jointly cut off China’s access to vital goods whenever Beijing acts against any single member.^[26]

Acquaintances would be those nations that refuse to choose sides while maintaining mercantilist policies toward the United States. They would receive less than full access to the U.S. market and limited cooperation on techno-economic issues. They would be subject to mirror taxes if they levy discriminatory digital services taxes on U.S. firms.^[27] Companies in these countries would have limited ability to transfer U.S. citizens’ data into their territories if they refuse to allow their citizens’ data to be transferred to the United States.

Finally, foes would be nations whose interests are antithetical to the free world’s interests. They would be subject to limited trade and investment, limited cooperation, and countermeasures to limit their ability to grow by carrying out unfair practices.

This kind of framework is critical for the simple reason that to counter China’s global advance America can neither go it alone nor trade away U.S. economic and trade interests for other foreign policy goals.

Given the rising geopolitical and techno-economic challenges from China, a number of nations would likely choose friendship—Japan, for example. The Japanese government recently agreed ban certain semiconductor sales to China to support the Biden administration’s efforts.^[28] The government is also seeking to move Japanese companies’ production out of China. It is boosting its defense budgets, and it has made commitments to side with Taiwan in the case of an invasion from mainland China. Commonwealth countries, including Canada, the United Kingdom, and Australia, also likely would want to be friends.

But it’s not clear what the EU would choose. While some EU member nations, especially those in Eastern Europe, would likely choose “friendship,” it’s likely many others, especially France and Germany, and the EU as a bloc, would be unwilling to do what it takes to be a friend, given that some, like Macron, believe they are American vassals. Because so many EU leaders still hold onto the first view of China—that it is simply a developing nation and a victim of U.S. aggression—they are loathe to give up the short-term economic benefits of staying on Xi Jinping’s good side. EU Council President Charles Michel reflected this when he stated in response to Macron’s visit to China:

Perhaps after another decade of experiencing China’s techno-industrial predation, the EU might come around to the U.S. view, but by then it will likely be too late for many member states’ economies.

What China is and it wants is the most important global policy question of our era—more important even than climate change, which will ultimately be solved by further technological breakthroughs that make clean energy as affordable as fossil fuels.^[30] As long as Europe sees China as a normal country, not as a neo-Leninist aspiring global hegemon, it’s unlikely it will join American efforts to keep China from becoming the world’s apex superpower. Europe can only hope that it can create a stronger and more self-sufficient economy in the face of Chinese techno-economic predation, and pray that the CCP either implodes or becomes a benevolent hegemon. But all three are unlikely outcomes absent a change in view.

Absent a massive political upheaval in the United States, Hamiltonian efforts to win the techno-economic battle with China are likely to continue and increase in intensity. Europe can either join in this important cause or can try to become its own superpower, as Macron wants. Good luck with that.

Endnotes