I want to thank the Carnegie Endowment and Institut Montaigne for the opportunity to provide my thoughts on how the United States and Europe can address the global economic challenges posed by China.
The U.S. and the EU comprise one of largest trading relationships in the world. Our joint approach to China impacts not only our citizens, but also the populations of other nations whose economic fates are tied to ours. In order to determine how we move forward, I find it’s helpful to review how we arrived at our present circumstances. The narrative of economic turbulence with China began decades ago.
Our reflection can start around the post-World War II establishment of the global economic architecture in 1948. That year, the General Agreement on Tariffs and Trade, the first major effort at global trade liberalization was enacted. Its original 23 members included some European nations, and both the U.S. and China.
The same year, the U.S. government passed the Marshall Plan for European recovery from the devastation of war. Its pledge of $15 billion in financial assistance was from the Americans, but the commitment to rebuild the transatlantic order came from both the U.S. and its Western European beneficiaries.
Secretary of State George Marshall outlined the vision in a speech he gave at Harvard University in 1947 before the enactment of the recovery plan. He said, “It is logical that the United States should do whatever it is able to do to assist in the return of normal economic health in the world, without which there can be no political stability and no assured peace.”
During the same time period, China was facing ongoing political turmoil of its own with a civil war resulting ultimately in the 1949 creation of the communist controlled People’s Republic of China, largely as we know it today. As Europe was rebuilding, and the post war American economy began to flourish, economic contacts with the PRC were limited.
By the 1970s, when economy of the PRC grew, both the U.S. and European nations began to evaluate the need for commercial ties. However, each was also aware of the prevalent human rights abuses.
Turning back to the Marshall Plan, its purpose, as he said in the Harvard speech was “the revival of a working economy in the world so as to permit the emergence of political and social conditions in which free institutions can exist.”
Free institutions have existed and have sought to create a world of global commerce where members liberalize trade and importantly, adhere to the rules.
We saw the PRC initiate conversations to join the GATT. Perhaps its disputes with both EU member states and the U.S. were its motivations to join. By 1986, it had gained observer status and began a 15-year process to accede to GATT and eventually its successor the World Trade Organization. According to the WTO, the PRC was “to better integrate in the world economy and offer a more predictable environment for trade and foreign investment in accordance with WTO rules.”
In other words, the PRC spent the almost two decades leading to its 2001 entry into the WTO assuring other members that it would adapt its domestic economic practices to adhere to global rules of trade. However, both the U.S. and the EU have observed the PRC claim the benefits, yet, violate the rules of the international trading community. We have seen profound infringement onto the sovereignty of other nations in the form of sovereign debt traps among other practices. The people of the PRC have no political freedoms, no human rights and are subject to unconscionable abuses at the hands of government.
I return to Secretary Marshall’s 1947 Harvard address, in which he concludes, “Furthermore, governments, political parties or groups which seek to perpetuate human misery in order to profit therefrom politically or otherwise, will encounter the opposition of the United States.” This sentiment reflects our present thinking as well as the shared values of the transatlantic community.
Over the last few decades, we have sought to engage in continued dialogues with the PRC about its role among the members of the global economic community and the idea that its transition to a market-based economy might also lead to more freedoms. But the Chinese Communist Party has made clear its intent to engage in economic espionage threatening not just commerce, but also the security of nations.
The Trump Administration’s National Security Strategy states that Economic Security is National Security. The theft of intellectual property, sensitive technologies and artificial intelligence from American and European companies are not just commercial breaches, they are strategic threats which we must address together.
We have shifted the conversation from one of a dialogue that was not taken seriously to one of actions that will be taken seriously. We expect that commitments made to gain access to our market will be commitments kept.
This has been the basis of our pending agreement with the PRC in which we emphasize a level playing field for our companies including intellectual property protections, transparent practices and market access.
We have prioritized international efforts to expose the significant risks posed by untrusted vendors such as Huawei and ZTE utilizing Fifth Generation (5G) technology to undermine our intelligence apparatus, yet another area where the interests of the U.S. and the EU are mutual.
Our team is advocating for the use of trusted vendors as alternatives to a system in which Chinese companies can be required, under PRC law, to either disclose or disrupt information transmitted over their systems. The trusted vendor network is part of our counter to the One Belt One Road Initiative and the PRC surveillance state. It reflects transatlantic values and provides a necessary alternative for countries which are seeking to do business on commercial terms, not to surrender their sovereignty.
Especially now, as we recover from a global pandemic and technology supports our health, our livelihoods and our security, we need confidence that the platforms we use will not undermine us as individuals and as nations.
To protect human rights, the Trump Administration has taken concrete action by sanctioning Chinese officials for the atrocities in the PRC. We have also issued a business advisory to caution companies about supply chain links to forced labor in Xinjiang. The EU has a history of sanctioning PRC human rights violations dating back to Tiananmen Square.
The Administration has also imposed sanctions and condemned the actions of the Chinese communist part in Hong Kong, which has been example of how free societies flourish. We know the region is no longer autonomous and the draconian National Security Law further destroys any liberty the people of Hong Kong have had. We are not alone in this condemnation. The UK and other nations have done so as well. Our common ideals should enable us to address these atrocities.
In personal conversations with my European counterparts, I have found that even when our methods vary, our objectives remain the same. We want our citizens to live in a world where the rule of law and fundamental human rights are respected, where innovation leads to better lives and not government control, where economic freedom is the foundation of free societies. This is what we wanted to see from the PRC over the last several decades. We have, in fact, seen the reverse.
The stakes are not just escalating, they have reached an existential plateau where it is incumbent upon America and European Union member states to again channel the spirt of the Marshall Plan.
As our current Secretary Mike Pompeo said in December 2018 to a European audience, “In the finest traditions of our great democracy, we are rallying the noble nations of the world to build a new liberal order that prevents war and achieves greater prosperity for us all.”