China’s commitment to become ‘carbon neutral’ by 2060 has excited environmentalists but it should be seen as part of China’s strategy to become the world’s economic and military hegemon.
Carbon neutrality by a date as remote as 2060 will not constrain the ambitions of the Chinese Communist Party (CCP) in the slightest.
It is time to admit that the policy of economic engagement with China has failed. Optimists used to argue that embracing China in the world economy, especially by admitting it to WTO membership in 2001, would lead the Chinese people to demand democracy. The remarkable naivety of our leaders is captured in a speech given by President Clinton in 2000:
‘By joining the WTO, China is not simply agreeing to import more of our products; it is agreeing to import one of democracy’s most cherished values: economic freedom. The more China liberalises its economy, the more fully it will liberate the potential of its people… And when individuals have the power, not just to dream but to realise their dreams, they will demand a greater say.’
No serious commentator would say that now. On the contrary, a growing literature shows that the exact opposite has happened. Participation in the world economy has entrenched the power of the CCP and made its brand of authoritarian dictatorship appear more attractive to the unwary.
China joined the WTO as a non-market economy and membership was not only expected to lead to pressure for democracy, it was also anticipated that China would become a market economy within 15 years by 2016. It has done no such thing and it turns out that the rules of the WTO are ill suited to coping with a major economy acting in a spirit of undiluted mercantilism.
A study by Daron Acemoglu of the Massachusetts Institute of Technology (MIT) and others concluded that trade with China caused significant job losses in the USA between 1999 and 2011. Counting direct and consequential job losses they estimated that about 985,000 jobs were lost in manufacturing and 1.98 million in the whole economy. They also tried to assess the overall impact on localities by studying ‘commuting zones’ and estimated that total job losses between 1999 and 2011 had been closer to 2.37 million. Three of the authors also examined local job losses more closely. David Autor (MIT), David Dorn (University of Zurich) and Gordon Hanson (University of California) found that a decade after the ‘China shock’ wages were depressed and employment was still reduced. Exposed workers experienced great job churning and reduced lifetime earnings.
More voices are starting to ask whether the time has come for liberal-democracies to disengage. Some focus on human rights abuse, notably of the Uighurs, and would like to see Magnitsky-style sanctions applied to CCP leaders; while others call for varying degrees of economic disengagement, including the discouragement of investment in China by American companies.
Partial disengagement is being advocated by researchers at the American Enterprise Institute (AEI), notably China expert, Derek Scissors. He urges policymakers to document subsidies provided by the People’s Republic of China (PRC) and take countervailing measures under WTO rules, rigorously regulate Chinese investment in America, and move or keep supply chains out of China.
He accepts that decoupling will have costs. Some prices will be higher, returns on investment in China will be lower, and there will be lost sales. But he contends that these losses are very small compared with what he calls the costs of Chinese economic predation. Subsidies and dumping provide lower prices in the short run but if rival suppliers are eliminated prices will soon go up.
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September 30, 2020 at 03:33AM