China kept insisting it was still “a poor developing country” that needed extra protection long after it had become the world’s largest manufacturer by far. Nevertheless, the relationship worked for enough U.S. companies enough of the time that the world’s biggest incumbent superpower, America, accommodated and effectively facilitated the rise of the world’s next largest superpower, China. And together they made globalization more pervasive and the world more prosperous.
And then some changes too big to ignore set in. First, China under Xi announced a “Made in China 2025” modernization plan, promising subsidies to make China’s private and state-owned companies the world leaders in supercomputing, A.I., new materials, 3-D printing, facial-recognition software, robotics, electric cars, autonomous vehicles, 5G wireless and advanced microchips.
This was a natural move for a China aiming to leap out of the middle-income ranks and to reduce its dependency on the West for high-tech. But all these new industries compete directly with America’s best companies.
As a result, all China’s subsidies, protectionism, cheating on trade rules, forced technology transfers and stealing of intellectual property since the 1970s became a much greater threat. If the U.S. and Europe allowed China to continue operating by the same formula that it had used to grow from poverty to compete for all the industries of the future, we’d be crazy. Trump is right about that.
Where he is wrong is that trade is not like war. Unlike war, it can be a win-win proposition. Alibaba, UnionPay, Baidu and Tencent and Google, Amazon, Facebook and Visa can all win at the same time — and they have been. I’m not sure Trump understands that.
But I’m not sure Xi does, either. We have to let China win fair and square where its companies are better, but it has to be ready to lose fair and square, too. Who can say how much more prosperous Google and Amazon would be today if they had been able to operate as freely in China as Alibaba and Tencent can operate in America?
And how much money did China save — to subsidize its own companies — when its military stole the plans for Lockheed Martin’s F-35 stealth fighter and then made its own carbon copy, avoiding all the R & D costs?