Last week, during a conference by the Economic Policy Institute (ironically hosted on Zoom), Senator Bob Casey (D-PA) gave a clinic on how to deal with China. It was like a half-hour TED Talk.
“We are in a competition with a Communist government. That’s the reason why our companies and our workers face challenges; it is not because we were out-hustled and outlasted, as some in DC contend. It is because that China competition has explicit state backing,” Casey said during EPI’s web event titled Promoting a New China Policy That Invests in America. “They restrict our access to their market and they have stolen our IP. Some argue that China builds things faster and better. You have all heard that narrative. But the structures they build are not built to last,” he said, a disrespecting nod towards numerous leaders from the U.S. to Canada to Europe who often highlights how China gets things done, almost jealous we don’t do it the same way.
“Non-market economies like China are working to recreate the global economic system in a manner that advances their communist, mercantilist system at the expense of American workers,” he said, highlighting reports from EPI and the millions of manufacturing jobs lost to offshoring to China. He also mentioned the McKinsey Global Institute report on manufacturing’s importance to economic security and societal cohesion, a report CPA highlighted last week.
Casey said that the U.S. needs “a sustained and coordinated strategy” to address the threat posed by the China model. He said that the U.S. should work with allies to execute it, adding that many of them faced the same problems and the same punishments for going against the CCP. Australia, for example, is having a trade spat with China due to Australia’s comments about the plight of Uyghur Muslims living in captivity in Xinjiang in what Beijing says is part of their war on terrorism.
He advocated for closer-knit supply chains across the advanced democracies and other friendly nations that “support fair competition…and address the ways countries and companies exploit the global economic system to take advantage of workers.”
This is all narrative pushback.
Biden is now facing some of it himself from the likes of Politico media pundits. They think things like this are good for equity and inclusion:
“The larger point is no matter how Biden decides to sell his climate policies, jobs should not be the main goal of those policies. An infrastructure bill that dramatically expanded renewable energy and electric vehicles in America would help fix the climate even if it created jobs in China.”
We disagree, and we believe Sen. Casey is well-positioned to make that argument to media influencers who are going in the opposite direction. He is good at making his point and he knows the issues.
DC think tanks like the Peterson Institute for International Economics are also worried that Biden is being a bit too Trump-lite for their liking. They don’t like Biden’s insular policies, like Buy American procurement, and prefer the way things were prior to 2016.
They believe things like:
“The U.S. government has not been pursuing openness and integration over the last two decades. To the contrary, it has increasingly insulated the economy from foreign competition, while the rest of the world has continued to open up and integrate. Protecting manufacturing jobs benefits only a small percentage of the workforce, while imposing substantial costs on the rest.”
It’s not a question of “opening up,” per se. If all of southeast Asia had zero tariffs and we had zero tariffs for all of southeast Asia, would you make your widget in Harrisburg for $20 an hour, or Hanoi, where a dollar goes light-years further than a dollar investment here thanks to the Vietnamese Dong being worth less than half a penny? We already know the answer to that question.
The CCP dictates everything that enters its market. And it runs a pernicious oversupply of key components in the supply chain, whether its automotive parts, solar cells for solar panel manufacturing, or metals.
Despite its entry into the World Trade Organization 20 years ago, China has maintained — and in some instances even increased — its subsidies to its steel producers, aluminum, and other critical supply chain items helping them capture the market through predatory pricing and state-directed investment, Casey said.
“We are now seeing the same playbook with emerging technologies like semiconductors, biotech, and robotics,” he said. China is close to becoming the indispensable producer of robotics, either through its own brands, or through Asian companies manufacturing in mainland China, or through European companies China has acquired.
“In Pennsylvania, we suffered record manufacturing job losses over the last generation. But job losses alone provide little insight into the family and community trauma that have ravaged so many small towns in my state and across the country,” he said. “We need to work with our allies to prevent the Chinese government from stealing our future, either by stealing our IP, manipulating their currency, or by pushing our manufacturers out of business by dumping cheap products in our country.”
The U.S. Treasury does not consider China a currency manipulator.
Casey has to know that garnering support from the big multinationals, be it Tesla or Apple, will not be easy. “China entices multinationals with the promise of subsidies and cheap labor only to steal industrial secrets and to drive competitors out of business” with cheaper produced models,” he said.
During his opening monologue last week, Casey called for maintaining the Section 232 and Section 301 tariffs. He said TPP “was a mistake,” and that Buy American legislation needed to be stronger with improved country of origin rules. If American manufacturers do not make a particular item, we should be “buying it from our allies.”
He also touched upon one of Biden’s cornerstone policies: climate change. CPA has warned that the U.S. risks outsourcing pollution if we are going to over-regulate certain industries at home while pushing big multinationals at the top of the food chain to source their goods from countries with weaker environmental standards.
“We need to understand that if we are reducing pollution across supply chains, it is a hallow endeavor if workers are exploited in the process,” he said.
One way to exploit those workers would be to close their factories or stop ordering things from them in order to buy the same, or similar products, in countries less interested in climate change. In regard to Biden’s Buy Clean framework, he recommended a tiered approach and said that countries in the third or fourth tier, such as non-market economies and human rights violators, would be “barred from eligibility in a Buy Clean framework.”
“When forced labor is the floor, no worker can compete,” Casey said. “Forced labor is a major part of the China agenda.”
However, such an exclusion would be particularly interesting given it would literally cut China’s wind and solar out of the American market. China accounts for around 80% of the U.S. solar panel market. China’s biggest wind producer, Goldwind, is headquartered in Xinjiang.
Casey said that the International Trade Commission was also considering non-tariff barriers in China, such as extra-territorial censorship against companies that run afoul of Beijing policies. This has been most evident in issues related to Xinjiang detention centers for Uyghurs, and the Hong Kong protests pre-pandemic.
He continually referred to China as a non-market economy and said that we should treat non-market economies — and the companies that call it home – differently than market economies. He touted his now six-year-old Market Economies Sourcing Act (S. 4008) to rewrite the book on government procurement from foreign contractors, among other supply chain concerns.
“Fairtrade” was another rallying cry. And while this has been a topic for discussion for at least 20 years now, we believe the climate has changed to make a strong critique of globalization more than an election-year talking point, or as mere fundraising topics for NGOs.
“Fair competition starts by firms being able to make it in America, and are not disadvantaged by large multinational corporations,“ Casey said, without expanding further. “They ship jobs and production offshore,” he added. “Countries that cheat on trade like China must be held to account.”
EPI President Thea Lee said there will never be a strong manufacturing-led recovery post-pandemic if “we are part of a global economy where workers rights are trampled and where American corporations are taking advantage of lax labor rights and protections around the world.”