Stopping China's Mercantilism: A Doctrine of Constructive, Alliance-Backed Confrontation

Abstract

There is a growing understanding that China is an outlier when it comes to global norms and rules governing trade, investment, and economic policy, and that the unremitting and even accelerating “innovation-mercantilist” behavior on the part of the Chinese government represents a threat not only to the U.S. economy, particularly its advanced industries, but indeed to the entire global economic and trade system. The previous three U.S. administrations sought engagement and dialogue with China’s leaders, in the belief and hope that this would lead the Chinese government to retreat from its mercantilist path. It should by now be clear that this approach has failed. For, rather than reform, China has doubled down on its innovation-mercantilist strategies, seeking global dominance across a wide array of advanced industries that are key to U.S. economic and national security interests. And despite the claims of some apologists for Chinese behavior, it’s clear what the end game is: Chinese-owned companies across a range of advanced industries gaining significant global market share at the expense of American, European, Japanese, and Korean competitors. A far more proactive, whole-of-government response, in tight partnership with our allies, is needed to ensure that Chinese innovation mercantilism is contained and then rolled back and a genuine market- and rules-based global trading system restored.