The recent U.S.-China mini summit in Alaska brought to mind Wyatt Earp and the Clanton brothers. But instead of lead flying, it was insults. The U.S. delegation lambasted China’s oppressive actions in Hong Kong and Xinjiang, saber-rattling against Taiwan, cyberattacks on the U.S. and economic coercion toward allies — all which threaten global stability.
China retorted that the U.S. has a crumbling democracy, a poor record regarding human rights and a foreign policy based on force and financial threats. The message: China believes that the balance of power has shifted in its favor over the past 10 years, and they intend to firmly safeguard national security and technology developments.
“It is increasingly difficult to argue that we don’t know what China wants,” said one senior administration official. “They are playing for keeps.”
A major problem is that the U.S. has ceded much of its manufacturing base to China, putting us in a precarious position vulnerable to coercion and foreign interference, said Jacob Helberg, senior advisor at Stanford’s Program on Geopolitics and Technology. His paper, “In the New Cold War, Deindustrialization Means Disarmament” published in Foreign Policy, noted that China has withheld medical-equipment shipments during the pandemic, hacked U.S. firms to acquire trade secrets, subsidizes its own companies and restricts foreign competition. These incidents reflect the power China wields through control of manufacturing capacity and supply chains.
However, Chinese security threats offer the chance to rethink the U.S. economy. The question today is not whether America can bring back manufacturing jobs, said Helberg, but whether America can afford not to.
Reindustrialization will require a collaborative, public/private effort to determine which critical goods must be produced domestically, which can safely be sourced from allies, and which can still be imported from the global market. The U.S. must create a “minimum viable industrial capacity” to not simply meet national emergencies, but to wage long-term competition. One focus could be production of high-performance microprocessors, indispensable for everything from robotics and AI development to electrohydraulic controls and Industrial IoT.
To counter China’s dominance in global manufacturing, we also need more skilled industrial workers —currently a significant business challenge. Washington must invest in specialized training and apprenticeships for employees in vital industries, said Helberg, to fill these new, high-paying jobs. We also need to boost funding for higher education and graduate more scientists and engineers, and offer more STEM H-1B visas.
Another idea involves making substantial investments in new innovation hubs patterned after successes like Silicon Valley. Geographically concentrated hubs, say for fluid power in Milwaukee, would attract talented individuals from around the world to the industry’s manufacturing and engineering center of gravity. This clustering of specialized expertise fosters industry networks and institutional knowledge to help companies solve problems more quickly and speed innovation.
Likewise, many experts suggest that the government should forge research consortia that bring together private firms to reduce duplication and increase economies of scale by collaborating on early-stage research — much like the CCEFP but on a larger scale — while continuing to compete at final product development. Focused R&D spending would blunt Beijing’s “Made in China 2025” ambitions for dominance in artificial intelligence, robotics, aerospace equipment and mobile machinery.
Some have floated the idea of a free-trade bloc that preserves efficiency and competition while helping global companies lessen their dependence on the Chinese market. The U.K., for example, has proposed a 10-nation democratic coalition that will collaboratively create alternatives to Chinese 5G technology.
Politicians and industry leaders have long assumed deindustrialization was inevitable. The coronavirus pandemic has brought to the forefront the result of decades of industrial decline, said Helberg. Neglecting to address it now would be a costly strategic mistake.