WTO Punishes the US While Washington Gives More Funding to the UN

A sign of the World Trade Organization (WTO) is seen on its headquarters in Geneva on Sept. 21, 2018. (Fabrice Coffrini/AFP via Getty Images)

News Analysis

Congressional Republicans are right to question the efficacy of the COMPETES Act to confront the Chinese Communist Party (CCP).

The central focus of the currently stalled House bill is to increase domestic semiconductor production. This is essential to both easing the logistical strain currently plaguing the nation as well as ensuring the country’s military capabilities. Adequately funding the technology intensive production process is, therefore, more than a means of addressing the supply chain crisis—it is a matter of national security.

The United States is not the only country privy to this fact. China has the same considerations regarding its own national security interests. If Washington wants to truly secure the preeminence of its military and, thus, its ability to counterbalance the expanding military capabilities of China’s People’s Liberation Army (PLA), it must also be paying attention to Chinese technological developments as well.

Consider the recently introduced CCP five-year plan on the digital economy. Released on Jan. 12 by the State Council, this blueprint for expanding and consolidating state control over the digital production sector is the first of its kind released by the regime. As stated in the CCP’s ideological journal Qiushi, China will prioritize expanding semiconductors, software, and cloud computing sectors over the next five years.

Citing the General Administration of Customs, the journal states that “Chip imports were up 15.4 percent year-on-year in 2021, a figure China hopes to see decline as domestic technological capacity increases.”

An employee makes chips at a factory of Jiejie Semiconductor Company in Nantong, in eastern China's Jiangsu Province on March 17, 2021. (STR/AFP via Getty Images)

How will the CCP accomplish these goals? If historical example is any precedent, then the answer is two-fold: the state-directed flow of financial resources and predatory economic behavior. This is assuming that Beijing does not simply opt for the seizure of Taiwan and its technologically advanced industrial sector.

The CCP has direct control over the allocation of capital in the Chinese economy through state-owned enterprises; however, it also exerts significant influence on the behavior of private capital through regulatory pressure and legal requirements. See my previous article on some examples of this type of Chinese state capitalism here.

Economic expert Greg Ip has recently written about the CCP’s crackdown on Venture Capital inside of China. Beijing is asserting its power to force the latter to shift toward investment in areas currently deemed pertinent by the regime—in other words, toward chip and semiconductor production.

Yet, as Ip points out, the impact of external influences on the operation of capital almost always results in the opposite effect to the one desired: namely, muted innovation and decreased productivity. Entrepreneurialism requires free license to evolve in dynamic and unscripted ways. This is much harder in a constrained market environment like the one artificially created by Beijing.

If Venture Capital fails to produce the stated CCP goals in the allotted time frame, where then is Beijing to turn? As evidenced by previous example, China will fall back on intellectual property theft and trademark violations. Additionally, the CCP maintains stringent controls on foreign direct investment entering the country from abroad. This raises further concerns when one considers the tightening control over how capital functions in the country as mentioned above.

These moves are not indicative of drastic measures that the CCP resorts to as a result of its own failed creative initiative; rather, it represents the Chinese form of economic warfare that is an integral component of the CCP’s broader foreign policy strategy. Economic espionage and unfair competitive practices were the primary motivation behind the tariff regime originally enacted under former U.S. President Donald Trump and carried on by President Joe Biden.

The above move has been met with disapprobation by free trade absolutists. These same individuals lobbied for the admission of China to the WTO in 2001. Their argument was that Beijing would eventually outgrow its authoritarianism and become more democratic by regular interaction with Western democracies. As if liberalization could occur through the act of economic osmosis.

In reality, this argument is actually closer to CCP ideology than the tenets of liberal free trade espoused by its purported proponents. Economics as the undergirding force of all sociopolitical development belongs to Karl Marx, not Ludwig von Mises. An international system of free trade only works if every participant is abiding by the established rules.

Those who opposed China’s membership in the WTO 20 years ago were further vindicated on Jan. 27, and with them those who have supported the belief that China’s economic warfare must be handled on a bilateral basis. The WTO recently announced that China is to collect $645 million in retaliatory tariffs from the United States.

The tariff regime carried out by Washington in 2008-2012 was the result of predatory CCP economic behavior in the international market. Beijing allotted subsidies to state-owned enterprises in the production of various products for exports, engaging in its standard practice of market-manipulation and anti-competitive behavior.

The fact that the United States cannot rely on these type of multilateral institutions—including the World Trade Organization, United Nations, International Monetary Fund, etc.—to protect its national interest is because the sole purpose of these bodies is to strengthen and expand the globalist ethos upon which they were founded. This is a design feature, not a flaw.

That is because the individuals who staff these outfits and believe in that ethos often disdain electoral politics. The latter is viewed as a hindrance to effective policymaking and enlightened problem solving. Believing themselves to be the individuals in possession of the technical expertise to address the constantly adapting problems of the global community, centralization of authority is justified as a necessary step to the full prospering of the human race. It is always important to remember that this type of individual genuinely interprets the congregation of power in their own hands as an act of altruism.

Chinese leader Xi Jinping represents the ideal leader-archetype for these individuals. Not necessarily for any personality characteristics or goals of his regime, but rather in the means he possesses for achieving those ends.

Consider Xi’s own words at this year’s Davos World Economic Forum, the premier meet-up for the type of resource-wielding individual described above.

Chinese leader Xi Jinping attends the World Economic Forum in Davos on Jan. 17, 2017. (Fabrice Coffrini/AFP/Getty Images)

Pointing to the U.N. World Economic Situation and Prospects 2022 report on challenges for global economic recovery posed by the CCP virus pandemic, Xi called upon the international community to recognize an increasing need for the governance of economic globalization. It is logical to presume that there is only one logical way for this to proceed—political globalization, and hence more centralized decision making.

“Despite the countercurrents and dangerous shoals along the way, economic globalization has never and will not veer off course,” he said. According to Xi, this means that countries must understand the world as one global community, and subsequently coordinate global policy in a more systematic and coordinated way.

The United States systematically undermines its own national interest by funding globalist institutions that operate under the stewardship of individuals with this mindset. The $4 billion allotment for the U.N. climate fund (another Davos-devotee favorite premise for aggrandizing the need for centralized power) subtly incorporated into the bill under the EAGLE Act is not a random occurrence, but is rather indicative of the purposeful—if gradual push—to slowly hand power to centralized bodies of unelected officials that then turn around to dictate policy to national “partners.”

A push for national autonomy in the production of semiconductors is essential, but the Republican Study Committee congressional caucus was right to highlight the need for “tough measures like sanctions that would limit the Chinese Communist Party’s ability to subvert our nation’s institutions and steal our intellectual property.”

Members of Congress should continue to push for more concrete steps in place to counter CCP economic malevolence. A convenient place to start would be redirecting a portion—if not all—of the $4 billion for the U.N. toward this task.

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