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A Better Way to Deal With Beijing

Robert B. Zoellick
 

Donald Trump, the transactional president, is wagering his China policy on a raft of tariffs he says will lead to a big trade deal. Mr. Trump manufactures crises, and people feel relieved when he pulls back. But the reality of U.S.-China relations requires a different approach.

U.S. attitudes toward China reflect a convergence of six complaints. First, Americans object to China’s lack of reciprocity for trade and investment. The U.S. wants China to lower tariffs, protect intellectual property, stop forced transfers of technology, ban currency manipulation, and equalize business and investment opportunities. Second, the U.S. worries that China’s state capitalism creates unfair competition. This complaint extends beyond subsidies; many Americans believe that the whole system of state direction by the Communist Party conflicts with the model of market economies. Third, the U.S. suspects the “China 2025” plan aims to dominate the technologies of the future. Fourth, Washington wants to know the purpose behind Beijing’s Belt and Road initiative. It might be geopolitical, an outlet for excess capacity, a development scheme or some combination. Fifth, Xi Jinping has abandoned Deng Xiaoping’s adage of “bide your time, hide your strength” in favor of openly exercising China’s power. Finally, Americans, who generally expect technology will be liberating, find China’s use of technology to spy on and control society to be chilling. And the camps for a million Uighurs look inhumane.

Mr. Trump has focused on the U.S. trade deficit with China. His tariffs are a mismatch with the six complaints. A single effort or a trade war won’t remake U.S.-Chinese relations. If it means avoiding escalating tariffs, most U.S. businesses would be content with gains on the first issue of market access, some discipline on subsidies, and better intellectual-property protection. American farmers want China to purchase their grains and meats.

Mr. Trump’s protectionist confederates, such as Steve Bannon, recognize that no deal can address all six problems. They want a permanent confrontation, a decoupling of economies, and a new Cold War.

There is an alternative. In 2005, I urged China to become a “responsible stakeholder” in the international systems that helped it overcome poverty and develop rapidly. I observed that the decadeslong effort to integrate China into the international order — the International Monetary Fund, the World Bank, the World Trade Organization, the United Nations Security Council and other institutions — had succeeded. The next challenge, I argued, was China’s behavior, not its place in the structure.

Americans shouldn’t be shocked that China seeks to tilt the international system to its advantage. All countries do so. While working within the current arrangement, China will also use Belt and Road and new institutions to create options for itself. The U.S. should work with its friends around the world to outcompete China and set enforceable global rules. The U.S. can complain about China, but should also offer its own attractive ideas. One thing is certain: The U.S. won’t succeed if it abandons the field.

Changes in technology, business models and economic development require new rules and standards in areas as varied as services, data, currency manipulation, transparency and anticorruption, health and safety, the environment, and core labor standards. The Trans-Pacific Partnership — which Mr. Trump abandoned — took up that challenge. It would have provided China with an incentive to improve its behavior. If the U.S. signed up again, other countries would join and the region would gain leverage with China.

China isn’t a monolith. Reformers recognize that the discipline imposed by adherence to international norms can help China fulfill its own interests. For example, China’s state-owned enterprises have used too much capital inefficiently and generated poor returns at the expense of China’s private sector. If the U.S. organized international pressure on Beijing to liberalize investment rules, minimize state owned enterprises and reduce subsidies, the Chinese would see the benefits. Chinese innovators need better protection for their intellectual-property rights as well.

Mr. Trump will probably strike a deal with China to avoid economic mayhem and crow that it’s the greatest agreement ever. A deal that opens up trade would be useful, but the U.S. needs a multifront strategy and continuing engagement with China, not a single transaction. America should coordinate with partners — including reformers in China — to change China’s behavior. In the past China agreed to and carried out policies that served mutual interests on nonproliferation, exchange rates, the global financial crisis, the global current-account deficit, trade, the environment, Security Council votes and dangers to regional security.

Finally, President Trump has foolishly dropped America’s best card in the contest for international standing: the case for freedom and human rights. Ronald Reagan recognized that communist governments have deep insecurities about their legitimacy. The U.S. can negotiate and cooperate even as it carries the standard of liberty. America’s power stems from ideas, not tariffs.

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