The Foreign Service Journal, July-August 2019

42 JULY-AUGUST 2019 | THE FOREIGN SERVICE JOURNAL areas. For example, China and Russia argue for cyber sovereignty and the right of the state to control cross-border data flows. The United States and the European Union both reject those views. Taken together, these and other drivers have fueled a new consensus in Washington that China is not just a strategic competitor, but very possibly our major long-term adversary. America’s long-standing “engagement” policy is now widely viewed as being of little use for its own sake. Nobody is arguing against dialogue. But nearly everybody is arguing that the results of U.S.-China dialogue and engagement have been poor. Underlying tensions will persist beyond any single issue between our countries, such as trade, because the problems we face, and our divergence of views—even in the economic area— are broad. Unless these broader and deeper issues are addressed, we are in for a long winter in U.S.-China relations. Economics, for Example Let’s take economics. The United States played the decisive role in facilitating China’s entry into the World Trade Organiza- tion. Yet 18 years later, China still hasn’t opened its economy to foreign competition. It retains joint venture requirements and ownership limits. And it uses technical standards, subsidies, licensing procedures and regulations as nontariff barriers to trade and investment. This is simply unacceptable. It is why the Trump administration has argued for change and modernization of the WTO system. And I agree. But it also helps explain why so many influential voices in America now argue for a “decoupling” of the two economies. This negative view of China unites politicians from both left and right who agree on nothing else. Trade with China has hurt some American workers. And they have expressed their grievances at the ballot box. So, while many attribute this shift to the Trump administration, I do not. What we are now seeing will likely endure for some time within the American policy establishment. China is viewed— by a growing consensus—not just as a strategic challenge to America, but as a country whose rise has come at our expense. In this environment, it would be helpful if the U.S.-China rela- tionship had more advocates. That it does not reflects another failure. In large part because China has been slow to open its econ- omy since it joined WTO, the American business community has turned from advocate to skeptic, and even opponent of past U.S. policies toward China. American business doesn’t want a tariff war, but it does want a more aggressive approach from our government. Even though many American businesses continue to prosper in China, a growing number of firms have given up hope that the playing field will ever be level. Some have accepted the Faustian bargain of maximizing today’s earnings per share while operating under restrictions that jeopardize their future competitiveness. But that doesn’t mean they’re happy about it. Nor does it mean they aren’t acutely aware of the risks—or thinking harder than ever before about how to diversify their risks away from, and beyond, China. The Risks Are Real That brings us to the risks. Sadly, I think the risks of a new age of disruption are considerable. For 40 years, the U.S.-China relationship has been characterized by the integration of goods, capital, technology and people. And over these years, economic integration between the two countries was supposed to mitigate security competition. But an intellectually honest appraisal must now admit that the reverse is taking place. And economic ten- sions are reaching a breaking point. After 40 years of integration, a surprising number of political and thought leaders on both sides advocate policies that could forcibly de-integrate the two countries across all four of these baskets. The integration of trade in goods could come undone— as supply chains are broken, especially for sensitive technology. Integration through cross-border capital flows will come under greater pressure as restrictions on Chinese investment take hold across big sectors in the United States. Indeed, if this trend continues, integration of global innova- tion ecosystems may well collapse as a result of mutual efforts by the United States and China to exclude one another. Mean- while, the integration of people, especially the brightest young students, could stall—as Washington potentially bans Chinese students from studying whole categories of science and engi- neering subjects. These and other drivers have fueled a new consensus in Washington that China is not just a strategic competitor, but very possibly our major long-term adversary.