Mon, Sep 09, 2019 - Page 6 News List

Walter Lohman On Taiwan: You can be a China-hawk and also a believer in economic freedom

2) The BUILD Act signed into law in just last year combines government business support and financing services into one new wholly-owned government corporation, the IDFC. Most notably, the act doubles to US$60 billion the liability available for government loans, guarantees, and investment insurance, and permits the government to take minority equity positions alongside private investors. The purpose is to leverage the American private sector into places of strategic importance that would not otherwise attract investment.

This is like “mom and apple pie” to American geopoliticians. There is virtually no dissent among them. Yet, nowhere in the statute is the word “China” even mentioned. Moreover, the BUILD Act’s biggest selling point is that it costs nothing because it does not spend money; it just incurs liabilities. This is dubious. If the purpose of the BUILD Act is to compete with China, the IDFC is going to have to compete in riskier places. It’s very likely, therefore, that it’s either going to throw good dollars after bad yuan or just add gravy to company bids in areas of little strategic importance. This, in a world full of private credit options.

3) The third example, action taken against leading Chinese tech companies like Huawei (華為) and ZTE (中興), is more complicated. The US government is absolutely right to ban genuine security threats from its procurement processes. It is right to prevent these same companies from participating in the buildout of the nation’s 5G network, as well, if it has good reason to suspect a serious threat to its communications network. And it is right, for security reasons, to control American exports to these same companies. That’s what export controls are all about.

It has to be kept in mind, however, that these moves all come at a cost to Americans — in the availability of market-enabling telecommunications technology and in domestic economic impact. The US should stay open to the possibility of a compromise that can fully address security concerns while minimizing consequences for American businesses and consumers. Technology changes. US policy should be prepared to change with it.

Look, there is no question that China and the US are competitors. Any doubt about this should have been resolved many years ago. However, when the Administration and Congress bring economics into the strategic competition, they tread on ground that should be left to individuals. Those who think the US must restructure its own economy by government fiat because that’s what the Chinese do should have the courage of their convictions. The contradictions inherent in “market socialism” will condemn China to chronic underperformance, unless and until it resumes reform. In the meantime, the US can push back — much harder than in the past — in the specific areas where its interests and values are implicated. We don’t need to jeopardize our own economic freedom to do that.

Walter Lohman is director of the Heritage Foundation’s Asian Studies Center.

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