Recently, the U.S. Congress has expedited its legislative process regarding China, including sensitive trade issues, investment restrictions in technology and economic sanctions. In their hearings and in media reports, hard-line legislators have been hyping up the so-called “China threat” as they seek to mobilize all resources to compete with China and limit its development and growth to a level at which it cannot challenge the United States. An increasingly divided and polarized Congress has undercut the advancement of America's domestic economic agenda, which now has bleak prospects. The body has turned its attention to areas such as trade, investment and economic sanctions against China.
On the trade front, Congress is fixated on undermining China’s trade advantage. Republicans in both chambers are pushing for passage of the China Trade Relations Act, which proposes to reduce U.S.-China trade and economic relations to pre-2001 levels. And bipartisan opposition threatens to overturn a presidential decision to grant China most-favored nation status. Republican Senator Mitt Romney has introduced the Ending China’s Developing Nation Status Act, which seeks to change China’s treatment as a developing country. The bill would block the economic treatment and influence China has gained as a developing country.
In addition, Congress is promoting the China Exchange Rate Transparency Act, which requires U.S. officials working at the IMF to advocate for more transparency and disclosure of China’s exchange rate policies; and the China Currency Responsibility Act, which requires the Secretary of the Treasury to oppose increasing the weight of the yuan in the Special Drawing Rights basket, apparently to offset the negative impact of additional tariffs on U.S. exports through devaluation of the Chinese currency.
On investment, Congress is intent on hindering U.S. technology spillover by disrupting U.S.-China investment flows. Congress has pushed for reforms through the Committee on Foreign Investment in the United States (CFUIS) to tighten scrutiny on Chinese investment in the U.S. that could gain access to sensitive and emerging U.S. technologies. Congress has also pushed for legislation on U.S. investment restrictions in China. Meanwhile, it has also called for new provisions regulating U.S. outbound investment in the America COMPETES Act of 2022, convening a commission on manufacturing integrity to review outbound investments that have the potential to transfer key capabilities to rival countries, and to block outflows of U.S. technology from U.S. companies through investments in China.
In addition, Congress has interfered with state and local governments' investment cooperation with China. Representative Andrew Beeler slammed Michigan for allowing investment by the Ningde Times to set up a battery manufacturing plant there, arguing that “Michigan taxpayers should not fund the Communist Party of China to expand its destructive influence in the United States.”
Congress also pushed the Foreign Hostile Forces Risk Management Act and the Promoting Agricultural Safeguards and Safety Act, which would require local governments to halt Chinese investment in agricultural land and agricultural related projects, extending investment restrictions to the once less-sensitive agricultural sector.
As far as economic sanctions are concerned, Congress tends to legalize and prolong existing economic sanctions against China. It passed the Protecting American Intellectual Property Act, which requires the government annually to identify the individuals and companies involved in the theft of important U.S. secrets from which they have benefited, and has encouraged blocking-and-freezing measures, export bans, loan bans, procurement bans and other measures when they are perceived as infringing upon intellectual property rights.
The president of the United States used to have considerable discretion on sanctions. But as things stand now, when Congress deems it necessary to impose long-term sanctions on a particular country or to prolong existing sanctions, it sets things in motion through the legislative process. This makes it difficult for the president to change or revoke sanctions and to adjust his response in light of the evolving situation, hence prolonging sanctions.
The current legislation targeting China that’s being promoted by Congress means that the major transformation of U.S. economic and trade policy toward China has bipartisan support, and the U.S. has crossed the Rubicon by institutionalizing and codifying the policy pivot. Congress is edging closer to the driver’s seat in steering U.S. competition against China. But the politicization of economic issues, compounded by the lack of professional economic and technical experience, can hardly bring real benefits to U.S. businesses. On the contrary, it puts the already fragile China-U.S. economic and trade relations under further strain.
First, this has led to U.S. economic and trade policies involving China to be swayed by short-term calculations. A new McCarthyism has taken hold in Congress. Akin to the McCarthyism of the 1950s, it inspires bluffing and fear-mongering to harvest political gains. What members of Congress say and do shapes the American public’s perception of China. A Pew Research Center poll shows that Americans view China more negatively in 2020, with 79 percent of adults holding a negative view, compared with 76 percent in 2021 and rising to 82 percent in 2022. They see China as a competitor or adversary rather than a partner, and China’s strength and influence as a threat to the U.S.
In short, the more assertive Congress is against China, the more popular its negative stance becomes. Different factions seek to out-tough each other on China to gain public support without regard for the economic toll it causes. The deviation from free market rules means higher costs for U.S. businesses and harm inflicted on U.S. industry.
Second, it leads to an even more punitive and inflexible U.S. trade and economic policy toward China. The trade and investment restrictions and economic sanctions codified through legislation will be difficult to change or revoke and will lead to two serious consequences. First, as Congress lacks the professional intellectual resources and experience to manage complex trade, investment and sanctions programs in a targeted and timely way, its policymaking lacks flexibility and feasibility in practice. Second, despite the goodwill of President Joe Biden during the China-U.S. Summit, the U.S. has become more hard-line at the policy level, and that could derail the opportunity for dialogue and further limit the U.S. administration’s leeway to adjust its policies toward China. Ultimately, this will result in more saber-rattling that tips policy toward competition over coexistence, which is neither tenable nor efficient.
Third, it will intensify ideological confrontation and mount pressure on third-party countries to take sides. The Republicans have established a Select Committee on China in the House of Representatives. Its chair, Mike Gallagher, said the committee will focus on “ideological warfare.” To prevent allies from getting too close to China, the U.S. has repeatedly reminded them of China’s “dismal human rights situation, disregard for international law and expansionist actions in Asia-Pacific waters,” urged “like-minded” countries to take similar economic and trade measures and reinforced U.S. allies’ perceived supply chain risks and vulnerability. This not only increases pressure on third-party countries to take sides but also creates more regulatory barriers to cross-border flows and opens a Pandora’s box of protectionist intervention.