Peter Harrell, who advised on international economics in the Biden administration, and Nazak Nikakhtar, a former Trump official focused on China policy, delve into the future of U.S. competition strategies. They explore the bipartisan agreement on facing China and the impact of leadership on policy effectiveness. The duo also offers insights into export controls, the need for robust manufacturing, and innovative supply chain solutions. Their candid advice for future U.S. leadership highlights the importance of collaboration and strategic foresight in addressing global competition.
Effective U.S. industrial policy towards China is heavily influenced by presidential leadership, requiring clear priorities and operational strategies from the executive branch.
Bureaucratic inertia and a pro-globalization mindset create challenges for transitioning to protective measures against China's economic practices, complicating regulatory adaptations.
Building partnerships with allies is vital for competitive markets and supply chain resilience, illustrated by collaborative initiatives to counterbalance China's influence.
Deep dives
The Role of Presidential Direction in China Policy
The strategic direction of U.S. policy towards China largely hinges on presidential leadership, which determines the overarching objectives within the relationship. Different presidential administrations have showcased varying approaches, such as whether to engage in broad investment restrictions or select targets for sanctions. This decision-making process includes both top-down directives from the president and recommendations from lower-level officials based on market and geopolitical assessments. Ultimately, it is the president's responsibility to set the focus and priorities, thereby guiding the actions of various federal agencies and ensuring a cohesive approach to national policy.
Importance of Granular Policy Implementation
Effective implementation of national strategies, especially concerning China, requires detailed guidance from the executive branch, which has not always been present in recent administrations. A lack of specific operational directives often leaves federal agencies operating independently, leading to inconsistent approaches to complex issues like tech superiority and deterrents against Chinese influence. The discussion emphasizes the necessity for clear, operational strategies that delineate how to achieve significant national goals, particularly in technology and supply chain resilience. Without this granular direction, agencies operate in a reactive manner, struggling to adapt their strategies effectively.
The Challenge of Bureaucratic Resistance
U.S. federal agencies have historically been influenced by a pro-globalization mindset, making it difficult to pivot towards more protective measures against China’s economic practices. The entrenched belief that promoting trade is inherently good creates bureaucratic inertia, where adapting to a more security-focused paradigm poses a challenge. This cultural shift within the bureaucracy has led to a hesitance to fully embrace necessary changes in policy concerning trade and investment with China. Resistance also arises from external industry lobbying efforts, which complicate the regulatory landscape as industries advocate for their self-interests rather than adapting to a more cautious national focus.
Collaboration with Allies as a Strategic Necessity
Building partnerships with allies is essential for developing competitive markets and ensuring supply chain security in the face of China’s economic dominance. Recent multilateral initiatives, like the partnership between the U.S., Canada, and Finland to develop icebreakers, illustrate how collaborative efforts can pool resources and expertise to counterbalance China's influence. The integration of supply chains with allies not only enhances economic stability but also strengthens political alliances against common threats. By fostering collaborative markets, the U.S. can leverage the combined resources of its allies to create viable alternatives to Chinese goods and technologies.
Navigating Trade-offs in Economic Policy
Balancing domestic economic priorities with foreign policy objectives presents ongoing challenges, particularly in the context of U.S.-China relations. Policymakers frequently confront difficult choices between securing national interests and maintaining beneficial trade relationships with allies. Moreover, the historical context shows that previous interventions, such as tariffs and investment restrictions, have had mixed outcomes, emphasizing the need for a tailored approach that considers both short-term and long-term impacts. As the U.S. seeks to decouple from China, addressing the risks and trade-offs is vital to ensure that national security measures do not unduly hinder economic growth.
To discuss the post-election future of US competition policy, ChinaTalk interviewed Peter Harrell and Nazak Nikakhtar.
Nazak served in the Trump administration after a long career as a civil servant, where she was instrumental in shaping the Commerce Department’s work on China, first at the International Trade Administration and later leading the Bureau of Industry and Security. Peter worked in the Biden administration on the National Economic Council and National Security Council, focusing on international economics, export controls, and investment restrictions.
We discuss…
The role of the executive in setting the industrial policy agenda
Leadership shortcomings in the Biden and Trump administrations
Competition with China — bipartisan consensus, bureaucratic inertia, and strategies to stop wasting time.
Advice for America’s next president, from export controls to pharmaceutical decoupling and alliance management
Creative approaches to supply chain resilience
This is 2023 CSET report Jordan referenced (See the “Understanding the Intangibles section)
Outtro Music: Jun Mayuzumi - Black Room (Youtube Link)
