President Joe Biden has identified China as the main international competitive challenge America faces, but his administration appears distracted and lacks credible policy.
Since 2000, China’s R&D spending has grown 16% per year and will likely exceed US spending by 2025. The goal is to match or surpass the West in artificial intelligence, microprocessors , computers, electric vehicles and other critical technologies.
US government support for R&D as a percentage of gross domestic product has been declining for more than a decade. A bipartisan majority in the Senate recently passed a $ 250 billion bill to fix the problem and provide $ 52 billion to boost semiconductor production.
However, the House administration and leadership are concerned about the bipartisan infrastructure bill and the US $ 3.5 trillion family plan. The proposed new taxes will not generate enough revenue to fully fund the expansion of Medicare, universal preschool education, the child tax credit, free community college and other new initiatives.
The reduction in new spending is likely to be accompanied by fewer new taxes. The federal deficit will skyrocket, leaving Democrats with not enough resources to match Chinese President Xi Jinping on industrial policies.
China’s rapidly growing navy is challenging US dominance in the South Pacific. The United States’ trade deficit with China continues to swell, helping to fund Beijing’s Belt and Road Initiative, which influences purchases as far as Eastern Europe and Latin America.
The US fleet needs to be strengthened and reoriented towards smaller, more agile and unmanned ships. This is unaffordable, with defense spending falling from 4.7% of GDP in 2010 to less than 3% in the Biden budget, and the Navy faces the decommissioning of large surface vessels before new, more agile vessels are put in place. at the water.
If China invades Taiwan, the United States will not be able to defend it.
In Afghanistan, the United States abandoned huge deposits of lithium, the essential resource of modern batteries, to a potential Chinese capture. Taiwan is home to the world’s largest electronic chip foundry, Taiwan Semiconductor Manufacturing Co TSM,
This developing situation would have been similar to President Ronald Reagan handing over control of Middle Eastern oil to the Soviet Union.
The Senate Armed Services Committee added $ 25 billion to the Biden administration’s annual military budget request, but on the House side, 27 members sent a letter to Armed Services Committee Chairman Adam Smith demanding let the committee drop this addition – it gave in.
Defense Secretary Lloyd Austin, a seasoned ground war general, has so far failed to define a strategy for the Pacific, and this vacuum in administrative policy is reflected in trade.
U.S. Trade Representative KatherineTai is not interested in new trade deals – although demands in the Pacific may make Taiwan an exception – and she has repeatedly stated that trade policy must be pro-union and pro-union. middle class.
She hijacked Japan’s requests to join the Trans-Pacific Partnership. This is a terribly critical mistake.
China has applied for membership in the TPP. These negotiations alone could anticipate US options of forming a stronger economic alliance in the Pacific to complement US efforts to strengthen military cooperation with the allies.
The story repeats itself
Much of China’s economic success was made possible by joining the World Trade Organization in 2001. Next, cheating on the rules, extracting technology from Western companies seeking to enter the market and stealing intellectual property, and establish the dispute settlement mechanism.
Tai has not defined a strategy to reform the WTO.
Tai embraced the essence of President Donald Trump’s high tariffs on China. For many reasons, including Beijing’s intransigence and infighting within its administration, these have yielded disappointing results.
The story repeats itself. Treasury Secretary Janet Yellen says these tariffs hurt consumers, while Tai says they provide leverage. At least Yellen and Tai should clarify their talking points.
Austin and Tai came to their posts with an impressive track record of implementing military and trade policies for their superiors, but neither wrote or said much about a broad strategy for the Pacific.
For example, how exactly should American forces be reconfigured in the Pacific and what would the displacement of resources from the Middle East entail? How should the WTO and regional trade agreements be reconfigured to deal with China’s mercantilist practices? And what should the United States offer its Asian allies, if not the TPP, to withstand the gravity of the Chinese market?
Austin and Tai show a disturbing lack of ideas and vision, but have undertaken extensive reviews of defense policy and trade.
If there’s one thing I’ve learned in nearly half a century in Washington, when high-level politicians are over their heads, they order top-down political reviews. It’s Lloyd Austin and Katherine Tai and Joe Biden.
Peter Morici is an economist and professor emeritus of commerce at the University of Maryland, and a national columnist.
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