How to Counter the CCP’s Economic Coercion

A woman walks by the flagship store of clothing brand H&M at a shopping area in Beijing, China, on March 25, 2021. (Kevin Frayer/Getty Images)

Commentary

The H&M boycott instigated by the Chinese Communist Party (CCP) caught the world’s attention, but it was only one of the many instruments of economic coercion. In fact, the global economic damage caused by the CCP’s rapid rise as the world’s second largest economy has long been seriously underestimated—whether consciously or unconsciously. How to effectively deal with the CCP’s economic coercion has already become a great challenge for the world. This is a big topic, but I will only discuss two aspects of the issue.

Understanding the CCP’s Nature

First, an accurate and in-depth understanding of the CCP regime’s characteristics based on universal values is needed.

It is well known that behind any judgment we make, we apply a value system. The Chinese economy is different in nature than those of the United States and the West or even the other developing countries. The disparity is reflected in China’s abnormal economic and political systems, which the international community has long ignored. More and more people began to realize the seriousness of the problem when China claimed that it is a “developing country“ in the World Trade Organization (WTO).

Why is the Chinese economy different from foreign economies? The difference stems from the ideology of the CCP. In 2013, an internal CCP document circulated online with regards to the “seven topics to avoid”: universal values, freedom of the press, civil society, civil rights, the aristocracy and bourgeoisie, judicial independence, and the CCP’s past mistakes. In fact, this mandate is directly related to China’s economic operation and its order.

The extent and nature of the CCP’s control over the Chinese economy is far beyond the grasp of Western society.

(From L to R) U.S. President Donald Trump, Japan's PM Shinzo Abe, Chinese leader Xi Jinping, WTO Director-General Roberto Azevedo, and Australia's PM Scott Morrison attend a meeting on the digital economy at the G20 Summit in Osaka on June 28, 2019. (Jacques Witt/AFP via Getty Images)

Due to its unique ideology, economics is only one way the CCP achieves its ultimate goal. The CCP has already weaponized the economy. As anyone can see, the CCP often engages in activities that harm others; yet are not good for itself either. For example, its current economic sanctions on Australia.

Such an approach would be unthinkable for a normal country, but is the norm for the CCP. Therefore, policy analysis will often fail to understand the major foreign economic policies of the CCP because it doesn’t take the CCP’s ideology into consideration.

In short, the international community must adhere to universal values when countering the economic coercion of the CCP, because universal values not only constitute the moral basis for the normal operation of the economy, but are also the ideological nemesis of the CCP. Abandoning universal values will only lead oneself to degrade in the same manner as the CCP, and be unable to escape its clutches in the end.

The world has long been a global village. In dealing with the CCP, only the principles of “fairness and reciprocity” and the approach of “distrust and verify” proposed by the Trump administration can effectively avoid being exploited by it.

Countering the CCP’s Threat

At the recent high-level talks between China and the United States in Alaska, Yang Jiechi, the top diplomat of the CCP, openly challenged the U.S.-led international order, which was established after World War II.

The United States and the West should use all levels of government and society such as the private sector and academia to counter the CCP.

One big challenge is to address the CCP’s exploitation of the World Trade Organization (WTO) and its loopholes. The international community must make a major breakthrough in this regard; otherwise the CCP will either divide and disintegrate its opponents or shamelessly stall for time.

“This is the time to get tough on China and their behavior in the global trading system, but also modernize the WTO. In many ways it’s stuck in the 1990s,” said Liz Truss, the British international trade secretary who chaired a meeting of G7 trade ministers on March 31. Truss also noted, “Fundamentally, our like-minded democracies need to win the battle for the soul of global trade.”

Regional economic integration is another focus. The United States and the West should push the “non-market country clause,” Article 32.10 of the United States-Mexico-Canada Trade Agreement (USMCA) signed in 2018, which stipulates that if any member of the Agreement reaches a free-trade agreement with a “non-market economy,” the other members can withdraw after six months and set up their own bilateral trade pacts. This clause is undoubtedly targeting China, isolating the communist country in the global trade pattern.

The deformed national economic system, structure, and policy of the CCP should be considered an important issue in bilateral negotiations to resolutely counter its economic coercion. Trade and economic relations are interdependent. The CCP always takes advantage of this dependence in its economic coercion to achieve political purposes, even when it relies on its rival economically. Such a practice should never be tolerated.

In addition, the CCP is also good at economic infiltration and technological theft. There must be corresponding countermeasures for these activities, such as enhanced national security review of major economic activities related to China, anti-theft and intellectual property protection. In this regard, the U.S.-China trade war and negotiations initiated by the Trump administration have set a successful precedent.

The so-called China model, a state-controlled market that violates the principles of a free, law-based market economy, is a major danger to the world economy. For instance, the CCP’s “Made in China 2025” plan has sparked widespread opposition. On March 31, the Office of the United States Trade Representative (USTR) released a 570-page 2021 National Trade Estimate Report, which included more than 30 pages on China.

“China’s state-led approach to the economy and trade makes it the world’s leading offender in creating non-economic capacity, as evidenced by the severe and persistent excess capacity situations in several industries, including steel, aluminum, and solar, among others,” USTR said in a statement.

A recent meeting of G7 trade ministers also issued a joint statement against “harmful industrial subsidies”—a reference to the CCP.

Employees work on an automobile air conditioning production line at a factory in Yantai in China's eastern Shandong Province on May 15, 2019. (STR/AFP via Getty Images)

It is important to improve the international standards of products as the basis of a global unified market. That is to say, in addition to quality standards, product standards must also incorporate environmental and human rights standards to support sustainable economic development, social justice, and harmony. It’s important to make it clear to the CCP that it must adhere to international product standards if it wants to avoid decoupling. For instance, the latest H&M boycott, also known as the Xinjiang cotton ban, was prompted by the Better Cotton Initiative (BCI) and other international brands’ campaigns against large-scale human rights abuses in Xinjiang.

It is also crucial to strengthen export control over strategic science and technology, dual-use technologies, military weapons and equipment, and strategic materials. In 1949, the United States led the establishment of the Coordinating Committee for Multilateral Export Controls (CoCom), an informal international organization that imposes embargoes and trade restrictions on socialist regimes. The Committee was not open to the outside world and had no treaties.

Following the end of the Cold War, the dissolution of CoCom was officially announced on March 31, 1994. The list of prohibited items it formulated was subsequently adopted by the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies signed by 33 states on May 12, 1996. However, the Wassenaar Arrangement, formally established in July 1996, is a very loose organization. The 42 member states can decide on their own measures and ways to implement export control by referring to the common control principles and lists, and approve their own export licenses. This freedom was exploited by the CCP.

In 2018, the CCP’s Science and Technology Daily made an inventory of 35 underdeveloped key technologies and a list of more than 60 core technologies not yet under its control, indicating that the CCP is lagging behind in a number of technological and industrial fields.

Therefore, it is high time to fix those loopholes to prevent the CCP from stealing technology.

When foreign companies in China are infringed or bullied by the CCP, their home countries should actively help them. For instance, when the CCP provides huge subsidies to some industries and companies, an international company in the same industry would be outcompeted.

The solar energy industry is another example. Chinese companies have basically crushed European and American companies. There is no doubt that Chinese companies have worked hard and made good progress, but the support of the CCP is absolutely essential to their success. To give another example, Huawei’s position in 5G and the international telecommunications equipment industry today is not without the explicit and implicit support of the CCP regime.

In addition to unfair competition through subsidies, forced technology transfer and cyber theft are also serious issues faced by companies that do business with China. In these cases, it is difficult for a single enterprise to compete with the CCP. It must have the support of the home country. The need for support from home countries goes far beyond the traditional anti-dumping and anti-subsidy measures to resolve trade conflicts. It requires home countries to develop a unified policy toward the CCP, in the same way that the United States fought the Soviet Union during the Cold War.

Conclusion

China expert Cheng Xiaonong points out that since the beginning of economic globalization in the 1970s, China became the “world’s factory” under the autocracy of the CCP, which has a global ambition. As a result, economic globalization fell into the trap of the CCP, which uses economic globalization as a tool to control other countries politically and economically.

The United States and the international community must pay attention to this problem. They need to strategically curb the CCP’s manipulation of economic globalization. It will then be hard for the CCP’s economic coercion to have any effect.

Wang He has master’s degrees in law and history, with a focus on the international communist movement. He was a university lecturer and an executive of a large private company in China. He was imprisoned in China twice for his beliefs. Wang lives in North America now and has published commentaries on China’s current affairs and politics since 2017.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.