Republican Senator Tom Cotton recently released an 80-page report to guide the U.S. into decoupling from China and win the economic war. The report foresees a cold war with China, which Cotton believes America can win. However, this will require structural changes in the United States.
“The urgent task for policymakers is to disentangle our economies, encourage strategic partners to do the same, and build new capabilities in America… The costs of targeted decoupling with China pale in comparison to the costs of passivity. We cannot watch as America becomes less prosperous and cedes its position to a totalitarian power dedicated to bending the world to its will. Americans must act decisively to avoid this fate,” the report warns.
Cotton’s report covers three major areas.
Targeted decoupling: An effective China decoupling strategy needs to restore domestic manufacturing capacity in critical fields, retain dominance of the U.S. dollar, slow down China’s growth, and maintain an advantage over China in critical areas. Cotton identified eight sectors to focus on – investment, entertainment, higher education, semiconductors, telecom (including 5G), medicine and medical equipment, rare earths, critical minerals, and AI and Quantum science.
Cotton wants the U.S. administration to apply import duties on Chinese companies that practice anti-competitive policies, restrict export controls on advanced technology for Chinese end-users, and terminate China’s Permanent Normal Trade Relations status. He also recommends expanding the Treasury Department’s Office of Foreign Assets Control’s powers to aid in its sanctions campaign against China.
Mitigating decoupling costs: Cotton admits that decoupling from China will involve substantial upfront costs and risks. To minimize these disturbances, he advises the government to enter into trade agreements that prioritize American exports and jobs. Furthermore, wrest international institutions from China’s control or establish new ones with like-minded partners. Moreover, deepen American’s science and tech talent pool, raise investment in R&D to Cold War levels and ensure that American research does not flow back to the communist nation.
Changes in federal leadership: The senator points out that the American government failed to fight China economically before 2017. Insufficient attention was given to the country’s declining industrial base, and excessive dependence was laid on foreign supply chains. Cotton wants the administration to empower the Commerce Department to help in the restoration of U.S. manufacturing, establishing an agency to oversee the security of America’s research enterprise, and so on.
Another central area where China poses a threat to America is Taiwan, a democratically-governed island. Having strong relations with Taiwan is crucial in maintaining American presence and influence in East Asia and Southeast Asia. China has threatened to annex Taiwan militarily should it not agree to peaceful unification.
Though the report did not address Taiwan’s independence, Senator Cotton recently called for Washington to send a crystal-clear message to the Chinese regime that it is entirely behind the island nation. “I think the time has come to be clear: Replace strategic ambiguity with strategic clarity that the United States will come to the aid of Taiwan if China was to forcefully invade Taiwan or otherwise change the status quo across the [Taiwan] Strait,” he said in a statement.
The report did note Taiwan’s importance in securing America’s technology supply chain. Taiwan accounts for 22 percent of cutting-edge semiconductor wafer fabrication capacity. Many of the chips necessary for the American weapons system are manufactured in Taiwan, making it essential that Washington protect the country from Chinese aggression. Taiwan was also mentioned in the report as a source of highly talented researchers in the tech sector.