CHICAGO – Two years ago, in an attempt to end their deepening trade war, the United States and China signed an agreement in which China promised to purchase an additional $200 billion worth of US goods and services in 2020 and 2021, relative to 2017 levels. That implied a total purchase commitment of $502.4 billion over the two-year period. In the end, China bought only 57% of the US exports that it had promised to buy, or $288.8 billion, and thus purchased none of the extra $200 billion.

But this shortfall, far from being a failure, should be a cause for celebration. That is because the only way the so-called “phase one” agreement could have been fully implemented was for China to use the same non-market tools that have long bedeviled American firms trying to do business there. 

Former US President Donald Trump started the trade war in 2018 with the aim of forcing China to end its theft of US companies’ intellectual property, its subsidies for “strategic” sectors, and, more broadly, its use of non-transparent regulatory measures that harm US firms. In January 2020, after multiple rounds of reciprocal tariff hikes had battered US-China trade, the two countries reached a settlement containing the Chinese purchase commitments. 

Although the deal specified the amounts of different US products that China should buy, it did not stipulate any reduction in Chinese import tariffs or require China to make any legal and regulatory changes regarding the issues that had prompted Trump to initiate the trade war. These matters were instead to be addressed in later rounds of negotiations, presumably after China had shown its commitment to regulatory reform by meeting the purchase obligations. 

But, absent any commitment to reduce tariffs or address structural issues, China could fulfill its commitments under the phase one deal only by resorting once again to opaque regulatory measures – except this time to favor US exporters and handicap their competitors. For example, the Chinese authorities could have ordered state-owned firms to purchase American goods, or made it clear to private importers that they would benefit from doing the same in order to support “national policy.” Officials also could have ordered customs and health inspectors to favor US goods over products from other countries. 

In the short run, these measures would have increased US exports to China and benefited American firms, but their long-run cost would have been enormous. By increasing China’s reliance on non-market mechanisms to support its political and economic goals, they would have made leveling the playing field in the Chinese market an even more distant prospect. More importantly, economic coercion – even if it benefits America – is still coercion, and recalls a dark period of Chinese history when the British used similar strong-arm tactics to sell more opium to China.

Lastly, even if doubling down on state control was merely an expedient short-term tactic as part of a long-term strategy, this would hardly imply that Chinese policymakers were somehow more committed to removing state control in the future. That is like telling an alcoholic that the first step on the path to sobriety is to drink more. 

It is no surprise that China prefers an agreement that strengthens state control and, for the time being, removes US pressure to undertake structural reforms. US companies may believe that they have benefited from preferential treatment by China under the purchase agreement, which expired at the end of 2021, but they will inevitably lose when state control is once again used against them. 

Japan implemented many long-overdue structural reforms in the late 1980s and early 1990s, partly as a result of pressure from US trade negotiators. But the phase one agreement makes it unlikely that US pressure will prompt the Chinese government to undertake trade-related structural reforms. Chinese consumers and private firms will lose out as a result. 

We should thus celebrate the fact that this flawed trade deal was not fully implemented. But what should be the next step? 

There is overwhelming evidence that the main losers from higher US tariffs on imports from China are American consumers and firms that rely on Chinese inputs. Four separate studies have shown that Americans have borne almost the entire cost of these tariffs in the form of higher prices. But President Joe Biden’s decision to leave Trump’s tariffs in place raises the question of whether US trade policy has any concern for American consumers’ welfare, or is instead guided primarily by the need to bolster corporate profits. 

The Biden administration should urgently seek to redress this trade-policy imbalance by pursuing reciprocal tariff reductions with China. With US inflation having surged to a four-decade high, ending this damaging trade war as soon as possible should be a top priority.

Chang-Tai Hsieh is Professor of Economics at the University of Chicago Booth School of Business.

To read the full commentary from Project Syndicate, please click here.

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The fight for economic superiority in Asia is a critical component of this contest. But 13 months into the Biden presidency, the administration’s plan for competing in the region consists of a single 51-word paragraph. In an October statement, Biden announced he would create what he calls an “Indo-Pacific Economic Framework.” When asked now about Biden’s plans to take on China’s economy, administration officials still refer to the October description of the framework. They say they are only at the start of a months-long process to develop an Asian economic plan — but as yet, that paragraph is the closest thing to a public strategy that the White House has announced.

What is the framework exactly?

The paragraph lists a half-dozen topics where the U.S. will seek agreements with Asian nations, including on infrastructure, climate and digital technology. But so far, the White House has not released any supporting documents or held any press briefings to explain its plans, and Biden officials acknowledge they haven’t come up with specific proposals yet.

To read the full article by Politico, please click here.

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The Biden administration is being accused of being soft on China, primarily by Republican senators running for president and looking for an issue. This is an easy issue to demagogue, but that can lead to policy mistakes that will actually harm our security. This is typified by the argument over how best to control semiconductor exports. The core problem is that for the chip companies, China is both the biggest threat and the best customer. China clearly plans to become a world-class competitor in this sector, which in the long term poses an existential threat to the U.S. industry, not to mention the challenge that it will pose to our national security should China develop independent capabilities equal to or better than ours. At the same time, while exports of cutting-edge products are restricted, older, lower-level chips are not, and they provide an important source of revenue for U.S. companies—revenue they need to produce the next generation of chips that our own national security will depend on. This has been a carefully constructed balancing act over multiple administrations. Action in Congress threatens to upset it via amendments that were initially proposed to the EAGLE Act—the House China bill—and defeated there in committee. Now it appears some of them may be resuscitated in the Senate.

A particularly complicated one is the foreign direct product rule, which the Biden administration has retained from the Trump administration. It created a license requirement for items—primarily chips—that are foreign products directly produced by U.S. equipment and software. It was aimed at Huawei, but now there are calls to expand it and make it standard U.S. policy. That would create a significant disincentive to buy those items, which would make the chip shortage even worse than it already is. It would also be a significant expansion of the extraterritorial reach of U.S. law that goes after the very countries we want to cooperate with us on export controls, like Japan and South Korea. It would also push research and development offshore as foreign companies try to avoid the reach of our law—exactly the opposite of what the administration is trying to accomplish.

Equally problematic are proposals intended to take us back to the Cold War days when we controlled entire classes of items rather than the case-by-case approach that examines specific end users, which we have used since the Clinton administration. If, for example, Congress compels the administration to treat semiconductors as a “foundational” technology and impose broader controls on them, including re-controlling older chips, it would starve the U.S. industry of revenue, set back our own development of next-generation chips, and compromise our security.

Instead, the challenge is what it has always been—to navigate the fine line between too little control, where technology leaks out to our adversaries, and too much control, which undermines U.S. industries’ ability to innovate and “run faster” than the competition. Table-pounding from Congress does not make that any easier.

The administration’s approach so far seems thoughtful—to retain but not expand the tools developed in the last administration, such as the direct product rule and the military end-use/end-user definition, which have enabled them to control foreign production based on U.S. technology more effectively and to reach out more actively to our allies and partners who make comparable products and try to get them on the same page. In both these areas they are focusing more on the technology for making semiconductors than on the chips themselves, which is the right approach because it makes it more difficult for China to develop competing capabilities. Sweeping efforts to broadly control chips will do more harm to our own industry than to China. Working with allies will also be more effective than simply relying on the extraterritorial aspects of U.S. law; an advantage in this case is that there are not many other competitive manufacturers, and they are in countries that share our concerns.

Congress should also remember that the administration’s wisest action so far has been to focus on the “running faster” part of the equation—making sure our own industries are equipped to stay ahead of their competitors. We should not expect more from export controls than they can deliver. They play a critical role in our national security, but they cannot substitute for a sound technology policy that helps our industries grow and prosper. I hope senators keep that in mind as they take up the annual defense authorization and reject ill-considered amendments that would compromise our security by kneecapping our high-tech industries. Their efforts would be better spent passing the CHIPS Act, which was passed by the Senate but has been languishing for months since then.

William Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C. 

To read the full commentary from the Center for Strategic and International Studies, please click here.

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Biden wants no distraction to obstruct the extremely close and highly contested congressional votes on the two bills, which together portend new outlays of at least US$3 trillion over 10 years. The progressive wing of the Democratic party, led by Congresswoman Alexandria Ocasio-Cortez, is ready to defeat any presidential pursuit of conventional trade policy, namely lowering barriers to promote two-way trade. According to the far-left, trade liberalisation enriches corporations and impoverishes workers. It delivers no net benefit to Americans.

Progressives argue that trade policy should restrict commerce to promote labour rights abroad and gender and ethnic equality in countries that discriminate. It should uplift marginalised communities, deliver climate and environmental goals, and above all raise living standards for US workers. Biden can’t possibly agree with this bloated agenda, but he doesn’t want to risk progressive opposition to his core spending bills.

Observers might conclude that, come early 2022 when the spending bills have either passed or failed, Biden might spend his time on trade policy. But by that time, mid-term election prospects will dominate White House thinking. Past experience and current polls heavily favour the Republican Party to capture the House of Representatives in November 2022, and possibly the Senate (where party alignment is now tied). But Biden is far from resigned to his statistical fate. Trade policy will thus become a pawn to the fortunes of the next election.

Today’s Republican Party — unlike the party of previous post-war Republican presidents — has embraced Trump’s love of tariffs and fear of China. Trump’s top trade lieutenant, former ambassador Robert Lighthizer, just restated both themes with gusto in The Economist. Thus, any initiative that opens US markets will be blasted in the November election as a sign that Biden is selling out America. This is a debate he wants to avoid.

Balanced against these negative forces is one positive consideration: the foreign policy dimension of a more engaging US trade policy. This is where Trade Ambassador Katherine Tai enters the drama. She is a master of rhetoric who soothes foreign ears while not alarming progressive Democrats or protectionist Republicans. Three-quarters of Tai’s actions are Lighthizer’s policies with softer edges and a smiling face. Trump’s ‘national security’ tariffs on steel and aluminium are still in place, but they have just been converted to a tariff-rate quota for EU exports — with much the same impact on elevated US prices but paying off European steel producers with the quota rent.

The fact that the American Iron and Steel Institute and the United Steel Workers both applauded the deal tells all you need to know: it’s still managed trade. Likewise, the Boeing–Airbus dispute was temporarily resolved by taking retaliatory tariffs off the table and asking the aircraft giants to reach a standstill agreement.

Trump’s 25 per cent tariffs on imports from China persist with the narrowest opening for exclusions to rescue distressed US firms that depend on Chinese intermediate goods. Perhaps the most significant change from Lighthizer’s playbook was Ambassador Tai’s upbeat speech, on 13 October in Geneva, concluding with this declaration: ‘we all recognise the importance of the WTO, and we all want it to succeed’. During his tenure, Lighthizer never visited the WTO.

At the same time, Ambassador Tai does not recognise that reducing US barriers to trade actually benefits the US economy, especially when coupled with lower barriers abroad. Almost every speech Tai delivers on trade is laced with the phrase ‘worker centric’, which in practice means a sympathetic ear to anti-dumping duty, countervailing duty, and safeguard ‘trade remedies’, plus no lowering of barriers on steel imports without assent from the United Steel Workers, and no reform of the Jones Act, which ensures sky-high coastal shipping costs.

Tai has even expressed scepticism over the Indo-Pacific digital agreement proposed by Australia, fearing it would help the tech giants. Instead, her emphasis is on labour practices abroad, exemplified by her support of fast-tracking cases involving Mexican union elections, her insistence on provisions against forced labour in the struggling fishery subsidies agreement and new restrictions on imports from Xinjiang.

Tai’s engagement in WTO negotiations will be limited to subjects that provoke no domestic opposition, for example a Joint Statement Initiative on E-commerce that, for other reasons, is dead in the water. Meanwhile, Tai has linked the revival of the WTO’s dispute settlement system to meaningful negotiations, a chicken-and-egg formula given US reluctance to make trade-liberalising concessions.

Will the scenery change after US mid-term elections in November 2022? The brightest prospect might be a US application to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). But if Democrats lose the House of Representatives, there is little chance that Republicans will renew the Trade Promotion Authority (TPA).

Without TPA, congressional procedures would kill a CPTPP bid. China’s application to join CPTPP creates strong geopolitical reasons for US membership, but perhaps not enough to overcome congressional resistance. Quite likely, US membership will remain a project in waiting for the president elected in 2024 — even if Biden follows the pattern set by Obama and opens negotiations after the mid-term elections.

Gary Clyde Hufbauer is a Non-Resident Senior Fellow at the Peterson Institute of International Economics.

To read the full commentary from the East Asia Forum, please click here.

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China is exporting digital authoritarianism around the world, yet the debate over how to best counter its efforts to export surveillance tools has largely focused on telecommunication technologies, like those central to the human rights abuses against the Uyghur population in Xinjiang. In fact, investing in telecommunications infrastructure is only one aspect of the way in which the Chinese government is using digital technologies to centralize power.  

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Articles and commentaries on that subject have begun to pop up, largely due to Covid-19, supply chain blockages and backlogs, and, probably most important in the United States, growing concerns about the security implications of trade with China. The Wall Street Journal dealt with this issue as recently as last week (October 21). The issue does not seem to be a decline of trade—which appears to be coming back rather nicely as the world recovers from the pandemic—but a decline of global supply chains.

That trend was noticeable not only before Covid but before Trump. Companies were shortening supply chains in order to be closer to their customers and less exposed to the vagaries of shipping costs, increasingly uncertain weather, and political disturbances, among others. It is also likely to continue, at least for a time. Port backlogs have dramatically illustrated the problems associated with trans-oceanic supply chains, and uncertainties in doing business with China have continued to grow.

Perhaps more important for the long term, company supply chain managers have learned that in addition to price, quality, and delivery—their usual staples—they now have to consider resiliency, and that increasingly means redundancy. Simply put, we ran out of things at the height of Covid and don’t want that to happen again, and we have also witnessed China’s “weaponization” of trade—cutting off imports from countries that have upset them for unrelated reasons. Australia has been the most recent victim, but it is not the only one, and U.S. companies do not want to be next in line if they make a comment about Hong Kong or Xinjiang that Beijing finds objectionable. Throw in the Biden administration’s concerns about supply chain security in critical technology sectors—see its four sectoral studies published last June—and you can see the handwriting on the wall. Companies are under pressure to shorten their supply chains, move them out of China, and develop redundant sources of supply, with at least one of them preferably in the United States.

Economists will say, correctly, that this is not economically optimal. Changes cost time and money, and the new supply chains will probably be less efficient and productive than the old ones. The U.S. government will point out, also correctly, that there are other factors to consider besides cost, and for the time being, the pendulum is swinging in the government’s direction.

Despite all that, it’s not time to write globalization’s obituary. The main reason is that the tools that enabled it have not changed. In a nutshell, enormous reductions in transportation and communication costs over the past 50 years as well as the dramatic growth of digitization in the economy have made it both possible and profitable to disaggregate the production process into its many pieces and search out the best producers for each piece, regardless of where in the world they are, and construct a product globally. This is why, for example, it is quicker and cheaper to move car parts like axle assemblies or engines around to multiple locations, adding something at each stop, than it is to ship all the parts to Detroit and assemble the entire car there.

These developments have, to use Richard Baldwin’s term, “unbundled” technology, or know-how, from production, enabling the development of supply chains that mesh high technology (U.S. intellectual property, for example) with low-wage economies to produce an unbeatable combination. This is not an unalloyed good thing, as progressives have complained, and I will no doubt talk about that in a future column. Today, however, the issue is not whether it is good or bad but whether it is going away. And the answer to that is no, it is not. The enabling tools remain and the economic logic remains. We cannot “uninvent” them.

Still, that calls to mind the popular cliché: “two steps forward, one step back.” We are in the middle of taking one step back, and the questions are how big a step it will be and how long it will last. This doesn’t happen very often. The last time began in 1913 when global trade peaked, and that level was not reached again until 1970, thanks to two world wars and a depression. If we can avoid disasters like those, then perhaps this time the step backward will be smaller and shorter.

William Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C.

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The Biden administration has not clearly decided how extensive it wants the U.S.-China economic relationship to be. Its June 2021 study on supply chains identified risks from overdependence on China, but did not lay out a clear solution. During her recent speech at CSIS, U.S. Trade Representative Katherine Tai said that she opposed “decoupling” from China and instead preferred a “recoupling” of the economies that was fairer and more in line with U.S. interests. Commerce Secretary Gina Raimondo has also pushed back against calls for decoupling, yet said that an important goal should be to slow Chinese innovation, which implies less connectivity, particularly in advanced technology sectors. Their comments highlight a critical question the United States and its allies must answer: How can they smartly chart a middle path between outright decoupling and unconditional engagement?

For an initial answer to this question, the autonomous vehicle (AV) sector might offer some guidance. It is an excellent critical case to consider the larger issues because of its multifaceted significance. The AV sector portends a revolution in transportation and lifestyles; it is composed of an array of technologies that draw on extensive research and development (R&D) and require advanced manufacturing abilities; the collection, analysis, and storage of its data present challenges to privacy and national security; and it utilizes some dual-use technologies that could aid U.S. adversaries if they fell into the wrong hands.

Beyond the general risks are recent warnings from successes in other parts of China’s automobile industry. China has far and away the world’s largest electric vehicle (EV) market. In the first eight months of 2021, it sold 1.7 million EVs, accounting for almost 11 percent of all auto sales. By contrast, even with a recent surge in EV sales in the United States, the total market in 2020 was slightly under 300,000 vehicles, accounting for 8.7 percent of total sales. China’s CATL is now the world’s largest EV battery producer, and the country’s auto firms are starting to export to Europe and Asia and invest abroad as well. As documented in a 2020 CSIS report, Chinese state support for the EV sector is mammoth, meaning that China’s state-fueled EV industry could distort every corner of the global industry, threatening competitors in the United States and elsewhere.

It is no huge leap to think that some of the same dynamics could play out in AV, and if so, it might make sense for the United States and others to take preemptive action and start mitigating risks now by severing the Chinese and U.S connections in the sector. If there is any industry where the United States should consider decoupling from China, AV would be a top candidate.

But that would be a huge mistake, as it actually would make the United States worse off—not just its economy, but potentially its national security as well. Instead, an approach of careful connectivity—that extends China’s dependence on the West while mitigating the worst risks for the United States—is the best way to move forward.

The Chinese Challenge

China’s AV sector has been advancing rapidly and doing so in a way that is certainly discriminatory, as it is shaped by China’s desire to favor domestic producers and reduce its dependence on foreign technology. Although the large majority of Chinese industry participants are private firms, the heavy hand of the state is everywhere.

China issued broad plans for intelligent and connected vehicles in 2017 and 2018. Since then it has provided substantial state support via subsidies and government guidance funds for companies to carry out R&D, testing, and manufacturing and provide related services, such as robo-taxis. Although there have been severe restrictions on road testing due to safety concerns, regulations in early 2021 expanded approval for such activity. According to the Ministry of Industry and Information Technology (MIIT), testing is permitted in 27 provinces, including 16 test demonstration zones, covering over 3,500 kilometers of road. So far over 700 entities have received licenses for testing, and they have collectively driven over seven million kilometers. Also in early 2021 China issued a blueprint for technology standards for the sector, setting a goal of having major standards in place by 2025 and a complete set of standards by 2035. And most recently, in August, the Cyber Administration of China issued new data security draft rules.

Having received the positive signals that AV is a high-priority sector, in addition to pure AV firms (such as Pony.ai), others have also jumped in: traditional automakers (SAIC), new upstarts (NIO and Byton), internet firms (Baidu, Alibaba, and Tencent), driving services companies (Didi), telecom hardware makers (Huawei), and even smartphone makers (Xiaomi). The Baidu-led Apollo coalition originally dominated, but a slew of other consortia and individual firms are investing in every layer of the industry, including advanced components (such as semiconductors and LiDAR), entire vehicles, infrastructure, and services.

There is far from a level playing field in China. Foreign companies face a phalanx of restrictions with regard to conducting R&D; testing, collecting and using mapping data; and offering value-added services. They also have to worry about having their intellectual property (IP) stolen and their employees poached by local competitors. Meanwhile, Chinese companies who can obtain licenses are able to test their autonomous vehicles on U.S. roads, where they scoop up data on every mile they cover. Chinese AV companies have attracted substantial U.S. venture capital. Pony.ai and AV trucking firm TuSimple are two of a number of Chinese companies refining their technology in collaboration with U.S. tech firms and investors.

The Risks Are Too Great . . . to Decouple

Given China’s ambitious state-led push, its clear effort to build a free-standing AV sector, and the potential risks from Chinese AVs collecting data in the United States, the decoupling option would seem to make a lot of sense. The United States could outright order U.S. companies, as well as those from elsewhere who use U.S. equipment in their own production, to stop selling their components and AV-enabled cars in China, force Chinese companies off U.S. roads, and require U.S. investors to divest from Chinese firms. One day this option may make sense, but based on where things stand now and the likely trajectory of the industry, doing so would likely have a host of negative consequences for the U.S. auto industry, including the various players in AV, and potentially spur China’s technological independence down the road.

Instead, the United States and its allies should use their place in the AV ecosystem to maintain their dominance over Chinese competitors, while simultaneously reducing the risks that come from being interconnected. Why? Because the United States is far ahead of China because of, not in spite of being connected.

Chinese AV companies have improved gradually over the past five years, but they are no match for their Western counterparts. The best place to compare them head-to-head is how their cars operate on the road. No one has successfully rolled out genuine autonomy where occupants can take their hands off the wheel and doze off into space (what is known as Level 4 automation) or where there is no steering wheel at all (Level 5). But on account of their more advanced algorithms, greater testing and data collection, and other technological progress, U.S. firms—among them Waymo, Cruise, and Tesla—have created far more advanced drive-assistance systems than their Chinese counterparts.

California publishes highly detailed data from AV companies who test on their roads. In 2020 Baidu had 4 vehicles on the road compared to 228 for Cruise and 148 for Waymo. U.S.-based AVs travel many more miles than their typical Chinese competitors without any need for human intervention. In 2020 Waymo testing vehicles required interventions once every 29,900 miles and Cruise every 28,500 miles. They were far ahead of Chinese rivals Pony.ai (10,700 miles) and WeRide (6,500 miles). The Chinese have improved over past years but are still far behind. Chinese AV companies occasionally publish videos of their testing in China, which provide a visual take of their abilities. Arcfox, which has developed an AV system in cooperation with Huawei, recently shared a video in which the driver had to intervene multiple times within a few minutes, in part because Chinese roads are so unpredictable. In China, “edge” cases—unusual circumstances that should occur infrequently—are all too common.

But the rubber really meets the road in the underlying technology, where the United States and its allies are even further ahead. Perhaps the most important component of AV systems is highly advanced artificial intelligence chips that collect and process data about the vehicle’s surrounding environment. U.S. chip firm Nvidia dominates the market for graphic processing unit (GPU) chips that perform these functions. Nvidia is a supplier to just about every AV maker in the world, including in China. There are a few Chinese upstarts in this space, such as Iluvatar CoreX and Biren Technology, but they are still significantly behind Nvidia in terms of basic technology and the breadth of the ecosystem they can support. And more importantly, their chips are built on the foundation of Nvidia’s CUDA architecture, meaning that it would be extremely difficult for them to elevate themselves to the top of the technology hierarchy. CUDA has a similar dominant status as Qualcomm’s CDMA (code division multiple access) technology for mobile telephony, Microsoft’s Windows in desktop computing, and Google’s Android in smartphones.

Technological decoupling would temporarily set back China’s AV dreams, but it would also set the nation on a course to eventually build an alternative architecture, one it could not only sell at home but disseminate among friendly countries elsewhere around the world. While the United States is ahead and China operates in a state of dependence, it makes little sense to push the Chinese to pursue a totally different, independent path.

Discontinuing those commercial relationships would also quickly mean a reduction in sales for Nvidia and other Western AV producers that have a massive customer base in China. It could also result in car makers such as GM, Ford, and Tesla facing greater restrictions on the full range of their business in China, far and away the world’s largest auto market. Reduced sales means less profits and funds for R&D as well as likely cutbacks in employees across their production facilities, including in the United States.

In short, outright decoupling would be a path to a smaller, less dominant U.S. AV sector, the exact opposite outcome U.S. policymakers ought to be pursuing.

A Smarter Approach

A better strategy would combine three elements: promotion, protection, and standard building.

Federal agencies and state governments need to facilitate the continued development of the AV sector, providing support for R&D, manufacturing, infrastructure, and expanding consumer demand (with rebates and other incentives). Making progress on rolling out fifth-generation (5G) cellular technology will also support the AV industry and ancillary services. Much work needs to be done so that 5G networks are ubiquitous, stable, and secure. Although the frequency of accidents is low, it needs to be even lower to ensure the safety of passengers and pedestrians, and the insurance industry and regulators need to build systems that appropriately allocate responsibility and protect consumers. Finally, regulations to ensure protection of the data collected about the cars, their passengers, and their surroundings need to be instituted. The sector will only grow if consumers believe their interests are first and foremost in the minds of companies and regulators.

At the same time, the United States needs to mitigate risks from being part of a global industry in which Chinese firms are advancing and the Chinese government is expanding its control over companies at home and acting aggressively abroad. The United States needs to have a fuller grasp of U.S. industry’s cooperation with Chinese counterparts in China. The best way to do that is through more regular consultations between U.S. industry and government about their overseas investments and supply chain challenges; that would be a better route than extending the mandate of the Committee on Foreign Investment in the United States (CFIUS) to include outward U.S. investment, which would likely end up being overly expansive and eliminate valuable commercial activities that pose little risk to the United States.

The main way to restrict potentially worrisome technology flows is through more vigorous use of export controls. The Commerce Department may need to add certain kinds of advanced semiconductor technology to its Commerce Control List and place more Chinese entities on its Entity List. Doing so may result in restrictions on sharing certain technologies, but an equally important utility would be to approve sales but then have a means to better monitor their sales and the behavior of licensed end users. There is a low likelihood that Chinese-related AV companies are collecting sensitive data during normal testing while on U.S. roads, but that risk should be more fully evaluated, followed by the adoption of rules regarding data collection, storage, and transfer. A substantial portion of Nvidia’s AV-related chips are fabricated by TSMC in Taiwan; it may make sense to prioritize the diversification of their manufacturing given the downward trajectory of PRC-Taiwan relations and the growing possibility of a conflict that could result in major shortages and loss of technological leadership. And lastly, long before China starts selling AVs in the United States, regulators need to consider the effects on U.S. producers and those from other market economies as well as the potential risks to personal data.

The final element in a smart strategy involves expanded efforts by the United States and its allies to set international standards for AV. In addition to the process to promote sustainable mobility for AVs occurring through the United Nations Economic Commission for Europe (UNECE), top priority should be placed on international venues such as the International Organization for Standardization (ISO), the International Telecommunication Union (ITU), 3GPP, SAE International, and the Autonomous Vehicle Computing Consortium. Moreover, Washington should consult with its allies in Europe (through the U.S.-EU Trade and Technology Council) and Asia on the whole range of AV issues, including on standards. Finally, the United States and others should continue to jointly press China for access and fair treatment in China’s domestic standards bodies. Very simply, standards leadership is central to industry leadership.

If the United States adopts this group of policies, its AV sector will stay on the right road and maintain its position ahead of China. And if the United States can successfully pursue this approach in AV, then it arguably can do so in a wide range of other sectors where it seeks to maintain its advantage against growing Chinese competition.

Scott Kennedy is senior adviser and Trustee Chair in Chinese Business and Economics at the Center for Strategic and International Studies. He is finishing a report, Beyond Decoupling: Maintaining America’s High-Tech Advantages over China.

To read the full commentary from the Center for Strategic and International Studies, please click here.

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Tai spelled out four efforts as “the starting point” for “realigning our trade policies with China.” The first is to enforce the Phase One deal negotiated under Trump, part of which included a number of commitments from China to purchase various American goods. As Chad Bown from the Peterson Institute for International Economics has comprehensively detailed, China has fallen short of those commitments. The second is to expand the exclusion process for U.S. businesses that have been impacted by the tariffs levied by the Trump administration, many of which are still in place. In fact, as Bown notes, “the United States retains tariffs imposed by President Trump covering over $135 billion—or 93 percent—of imports of intermediate inputs from China.” As my colleague Scott Lincicome has also detailed, these tariffs have hurt the U.S. economy, and have had little impact on the Chinese economy. Furthermore, the exclusion process has been fraught with challenges, including inconsistencies in documenting exclusion requests—a finding by the Government Accountability Office. Despite these problems, Tai seems to be embracing these Trump era policies fully, which is certainly a cause for concern.

The third effort outlined by Tai, to raise “broader policy concerns with Beijing” on its “state-centered and non-market trade practices,” acknowledges a missing piece of the original Phase One deal. The negotiations should have addressed longstanding complaints on China’s trade practices, but instead, the Trump administration took a mercantilist approach that seemed to rely on China’s state-centric model it claimed was the problem to begin with. Forcing Beijing to purchase American goods was never going to solve structural issues in China’s trade policy, but to get a quick win, Tai’s predecessor, Amb. Robert Lighthizer, settled for a deal that made it look like we were getting something from China, even if it wasn’t the exact thing we needed to get. Instead of calling Lighthizer’s deal a failure, however, Tai doubled down on the approach, saying during the Q&A: “I don’t think it’s fair to say that I’ve characterized the previous administration’s efforts as failed. What I would say is that that hasn’t gotten us to where we need to go.” But the Phase One deal did not get us “where we need to go” for two key reasons. First, it didn’t include a discussion on the most critical concerns, such as China’s state-owned enterprises. Second, (and perhaps most importantly), “the entire deal rested on China’s willingness to fulfill its commitments” and lacked an effective enforcement mechanism, as noted by my colleague Scott Lincicome. The structure of the deal essentially destined it to fail. That Tai shies away from calling this a failure is puzzling, but at the very least she has acknowledged that the deal did not achieve any progress on key outcomes of concern.

The final effort Tai outlines is to “to work with allies to shape the rules for fair trade in the 21st century.” Now, this sounds a whole lot warmer and fuzzier than anything Lighthizer would have said, but the remarks were missing details of how exactly we would engage with our allies on China. This is not necessarily a bad thing, as the United States and the European Union recently met under the auspices of the Transatlantic Trade and Technology Council to “coordinate approaches to key global technology, economic, and trade issues; and to deepen transatlantic trade and economic relations, basing policies on shared democratic values.” These discussions are still new, and there are still plenty of issues that need to be smoothed over with the EU (I’m looking at you Section 232 steel and aluminum tariffs!), but it is a good place to start. The key question is whether this engagement with allies will be genuine and collaborative, or if it will resort back to the bullying tactics played by the Trump administration. This change in tone could also simply be cover for protectionist actions on trade remedies, labor and environmental regulations, which would bode ill for repairing transatlantic ties. On this, we will have to wait and see.

While the United States tries to regain its footing again after four years of tumultuous trade policy by tweet, it is important for the trade policy community to get the conversation going again about pragmatic ways forward. This will not be easy, particularly when the rhetoric being used by the current administration so closely echoes that of the last. But we need to move beyond domestic signaling and worries about the midterm congressional elections and towards an honest discussion of how to preserve and strengthen a global trading system that includes China.

There are reasons for trepidation, however. The departure of Mark Wu, a senior advisor on China at USTR, is a significant loss on the China portfolio. And while trade wonks all made jokes on Twitter about Tai’s remark that she had not seen Chad Bown’s “scorecard” on China’s Phase One purchase commitments, this is a notable oversight. Tai must reach out to the trade community broadly—not just some Democratic interests. These discussions should also be grounded in evidence, not rhetoric. If the administration is truly committed to bringing the country back together, then it cannot simply dust off the previous administration’s policies and repackage them as their own. Tai’s speech wasn’t the final word on U.S. trade policy towards China, but if the administration fails to engage with allies and experts soon, we risk a continuation of the unsuccessful unilateralism of the Trump years.

Inu Manak is a research fellow at the Cato Institute. She is an expert in international political economy, with a specialization in international trade policy and law.

To read the full commentary from the Cato Institute, please click here.

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The CPTPP is what was left of the original U.S.-led 12 nation deal the Trans-pacific Partnership (TPP) that was a priority under Presidents Bush and Obama, but which President Trump pulled the U.S. out of in his first week in office.

Since the APEC CEO Summit in November last year, China had indicated its interest in joining CPTPP. Yet, this apparent interest was greeted with skepticism around China’s ability to undertake the economic reforms required to meet the high CPTPP standards, such as more competition for state-owned enterprises, freer flows of data across borders, and curbs on China’s industrial subsidies.

Yet, it is increasingly clear that China’s request to join CPTPP needs to be taken seriously and may happen sooner than expected. For one, China is the largest export market for nine of the current 11 CPTPP countries. Second, it may be less difficult than generally thought for China to meet many CPTPP standards. China could also lean into to the agreements broad exceptions to justify non-compliance. Where China has justified trade restrictions as being about national security, there is also a very broad national security carve out that China could rely on.

Second, in order for many developing countries such as Vietnam to join the agreement, full compliance with various rules needed to be delayed as these governments undertook domestic reforms. This sets the precedence for China to argue that where it is unable to meet CPTPP standards today, similar flexibilities should be extended to China and not delay it becoming a party to the agreement.

A key question for many governments will be whether they can be convinced of China’s eventual compliance with the CPTPP. The Australian trade minister when asked about China joining the CPTPP noted the need for China to demonstrate a track record of compliance with trade agreements. This speaks not only to China’s recent restrictions on Australia’s exports that are inconsistent with the China-Australia FTA, but also well-documented ways China has avoided its WTO commitments.

The announcement by the U.K. earlier this year of its interest to join the CPTPP likely hastened China’s decision to join. In part as U.K. membership in CPTPP would be another bulwark and hurdle to China joining, and it is harder for CPTPP governments to seriously negotiate U.K. accession, and to then not do the same for China. Taiwan’s request this week to also join the CPTPP will complicate the accession process, as China will oppose Taiwan joining as being at odds with its One-China policy.

So now the U.S. is faced with a flipped script—as China readies to join the CPTPP, it is left on the outside, still unsure how to show leadership on trade in the Indo-Pacific.

Should China succeed in joining CPTPP, this will foreclose the U.S. rejoining the agreement. The U.S. then having to negotiate with China to join the CPTPP is an irony that would be too much to bear. Indeed, re-engagement by the U.S. on trade in the Indo-Pacific region will require the U.S. to start the process again. However, after Trump’s withdrawal from CPTPP, getting other governments to agree to again make high standard trade commitments with the U.S. will be a big lift. In addition, with China party to CPTPP, the economic impact on China of a new U.S.-led trade agreement that excluded China would be significantly diminished. Indeed, China joining CPTPP will for the foreseeable future undercut the effectiveness of U.S. trade policy as a tool for achieving U.S. strategic goals with respect to China.

As President Biden made clear in his speech to the U.N. General Assembly this week, the U.S. needs to lead a collation of countries to counter China’s strategic challenges. To do this, the U.S. will need to continuously show up, lead and demonstrate consistency of purpose. This will require a renewed economic engagement strategy for the Indo-Pacific. The U.S. no longer has the luxury of spending precious political capital getting other countries to join a major international economic initiative like CPTPP and then decide to withdraw because it makes for good domestic politics. Leaving CPTPP was costly and China’s decision to join CPTPP has raised the stakes even higher.

Joshua Meltzer is a senior fellow in the Global Economy and Development program at the Brookings Institution.

To read the full commentary from the Brookings Institution, please click here.

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The first is an external development: China’s application to join the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP). This is the latest step in what has been a significant evolution in Chinese thinking. They began by regarding the original Trans-Pacific Partnership (TPP) as an American plot aimed at them. Their attitude began to change as the likelihood of an agreement being reached increased and they realized how it would affect them. In short, China figured out that when it came to tariff-free zones, it was better to be inside the tent than outside if it wanted to sell to the other countries inside. Otherwise, its companies would vote with their feet and move inside the tent on their own.

While that may be the economic rationale for joining, politics may be more important. From that perspective it was a brilliant move, at least for the short term, because it allows China to portray itself as pro-trade, pro-multilateral agreement, and pro-trade law while at the same time reminding everybody that the United States has no Asian economic policy. In short, China is demonstrating leadership, and we are . . . just watching.

In the long run, however, this could play out differently. Nobody who has followed CPTPP thinks China would qualify to join without major changes in its economic system that it has long refused to make. So, the negotiations will go on—and they will take a long time. China has three choices: make the changes it will be asked to make, promise to make them and then ignore its promises, or pressure the other CPTPP members into lowering their standards. Right now, I’m betting on door number three, but the outcome could be more complicated than people think. By applying to join, China is handing leverage to the other members, some of whom are already victims of Chinese bullying. So, for example, will Canada veto Chinese membership because two of its citizens remain in Chinese prisons without justification, or will it make a deal to support membership in return for their release? You can ask the same question about Australia.

That means if the United States thinks China’s application is dead on arrival, it could be in for a rude surprise. Unfortunately, the one thing that is clear is that the United States is once again reacting rather than leading and therefore letting China determine the course of events in Asia.

In contrast, there is some thought that rumors the administration may start a new Section 301 investigation of Chinese subsidies indicate a policy is beginning to appear, but I am not persuaded. It is more likely that this is simply a clever way of kicking the can and postponing any action. Section 301 investigations can take up to a year, which means the administration is just buying time. By holding out hope that the investigation could lead to either more tariffs or fewer tariffs, the administration manages to keep both sides quiet without actually doing anything. And, since anything the president does will inevitably be criticized by Republican China hawks as dangerous and inadequate, this gives administration officials another year to dodge that bullet. Of course, they may not get away with it, since the expiration of Trump’s phase one agreement next February will likely force them to come up with something before then, but it still buys them several more months.

More indicative of the trend of the relationship was the call between the two presidents that the United States initiated. One report indicated that Biden proposed a summit between the two leaders, and Xi did not respond. Other reports denied that, but no agreement on a summit was announced. There are multiple explanations for that, the simplest one being Covid-related. Xi has not left China since the pandemic began, and it is rumored that he will join the G20 meeting next month remotely. However, it should also be viewed in the context of recent Chinese statements objecting strenuously to U.S. actions related to China’s human rights violations and the message conveyed to former secretary of state Kerry when he visited China to discuss climate that all these issues were linked, and he should not expect China to cooperate on one while the United States was not cooperating on the others.

This is a typical Chinese approach when the United States talks about human rights. For us it is a moral principle; for them it is an attack on the Communist Party’s control of the country. Past U.S. presidents have learned that if they persist, they will accomplish nothing with China, and they usually stop talking about it. It remains to be seen whether Biden will follow the same path, which is not noble but pragmatic.

Either way, the call is a reminder that the U.S.-China relationship is not in good shape and is getting worse. The other two events are reminders that the United States still does not have a China policy and does not seem in a hurry to develop one.

William Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C. 

To read the full commentary from the Center for Strategic and International Studies, please click here.

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