President Donald Trump’s planned meeting with Chinese President Xi Jinping at the G-20 summit, June 28-29, has created optimism that a deal to restore normal commercial relations may be possible.
However, without extensive changes in Chinese policy and law — and tough enforcement provisions — any deal will prove a hollow victory and put our national security at risk.
Beijing’s formula for modernization flaunts western rules for international competition it agreed to accept when it joined the World Trade Organization and which also required changes in its domestic statutes.
China uses opaque tactics to limit imports of products it can make domestically, refuses to reform a judicial system that is biased against foreign intellectual property rights and orchestrates consumer boycotts against foreign companies — like Samsung — to gain advantage in foreign policy disputes unrelated to commercial considerations.
It promotes domestic production and exports through huge subsidies, pressures foreign investors to cede valuable intellectual property and steals technology through brazen state-sponsored industrial espionage.
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China’s 2001 WTO accession agreement was supposed to deal with most of those practices, but President Xi has taken the country in another direction and cultivated a culture that makes an acceptable trade agreement terribly difficult.
Compliance with WTO expectations of behavior would have required Communist Party leaders to encourage rising young members and private entrepreneurs to embrace western norms of honesty and transparency in dealing with foreigners and respect for their intellectual property. Instead, thanks to the internationally dispersed nature of developments in artificial intelligence and the difficulties of firewalling U.S. and allies’ sophisticated software essential to the design, production and delivery of goods and services, the Chinese kleptocracy poses an existential threat to western democratic capitalism.
Owing to size, China’s increasing capabilities in artificial intelligence if everything China invents is respected by western law and business conduct but what the West invents can be stolen by Chinese entrepreneurs and military with impunity mean the West could easily fall under Beijing’s yoke as Greece’s civilization fell to Rome.
Contempt for foreign property rights is deeply embedded in Chinese political and business norms and values, and the real negotiating partners — China’s deep-state bureaucracy and state-owned enterprises, military and private business chieftains — are not at the table and President Xi cannot likely deliver them.
In 2015, China signed an agreement to end state-sponsored industrial espionage. Beijing simply redirected its endeavors toward more vulnerable targets in Asia and Europe and then, when President Barack Obama left office, resumed stealing American intellectual property.
Beijing has announced a $50 billion list of U.S. goods for possible tariff hikes in a spiraling technology dispute with Washington. (April 4th, 2018)
The Justice Department indicted, for example, officials of Chinese cybersecurity firm Boyusec for hacking Moody’s Analytics, Siemens AG and U.S. global positioning system developer Trimble Inc., but too many Chinese businesses, their executives and state sponsors are beyond the effective jurisdiction of American courts.
Too much of the texts of WTO agreements pertain to practices that are quickly becoming ancient playing fields of competition — manufacturing major appliances, motor vehicles, merchant banking and motion pictures. Any government with a big enough checkbook can foster an industry in one of those.
The real competition is in super computing, space exploration and artificial intelligence that will deliver both commercial and military dominance by mid-century. Those offer possibilities for explosive growth akin to the spread of mass production and automation in the 20th Century.
The same kinds of artificial intelligence that permit smartphones and facial recognition to track web surfing and personal movements to generate targeted advertisements and for police to anticipate criminal acts, could enable the Chinese and Russian militaries to anticipate the tactics and neutralize the effectiveness of the U.S. Navy and Air Force and ultimately destroy American civic institutions and markets — if we let either vault into the lead.
China supplements trade policies and commercial espionage with well-financed national strategies to accomplish dominance in super computing, space exploration and artificial intelligence by 2030. It’s ludicrous to believe American negotiators can smother those ambitions with treaties that Beijing will violate at first opportunity.
It’s time to join the commercial war on China — for real. If China won’t commit to real reforms, impose across the board tariffs that compel balanced trade with China by auctioning quotas that limit imports to the value of exports to China. And finance aggressive national strategies in advanced computing, space exploration and artificial intelligence that ensure national survival.
All those require higher prices for apparel and appliances at Walmart and Best Buy and higher taxes, but national survival has no price too high.
Peter Morici is an economist and business professor at the University of Maryland, and a national columnist. He tweets @pmorici1
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