The View | Washington’s new China narrative is meant to reassure the world economy

In recent remarks, the US Treasury secretary and national security adviser have described US export controls targeting Chinese tech sector as narrow in scope

Washington seems to understand that overly broad restrictions in the name of national security will hurt the global economy and provoke Beijing

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US National Security Adviser Jake Sullivan speaks at a press briefing at the White House in Washington on April 24. Sullivan has denied that Washington is imposing a technological blockade on China; instead, he says Washington is targeting “a narrow slice” of advanced technologies. Photo: AP

Published: 3:00am, 8 May 2023

Two competing agendas are currently vying to shape the United States’ domestic and foreign economic policies. One agenda is inward-looking, focusing on the creation of an inclusive, resilient, prosperous and sustainable American economy. The other focuses on geopolitics and on maintaining US primacy over China. The future of the world economy depends on the outcome of this conflict and whether these opposing priorities can coexist.

US President Joe Biden’s administration represents a radical departure from previous Democratic administrations, pursuing ambitious industrial policies to revive domestic manufacturing and facilitate the green transition. It has also adopted a tougher stance on China than any previous administration, including former president Donald Trump’s, treating the Chinese regime as an adversary and imposing export and investment controls on critical technologies.

Until recently, however, the Biden administration did not articulate a coherent vision that combines these various elements and reassures other countries, including China, that its economic strategy is not centred on confrontation, unilateralism and protectionism. But recent remarks by US Treasury Secretary Janet Yellen and National Security Adviser Jake Sullivan indicate that the administration is now taking steps to address this issue, potentially signalling the emergence of a new Washington consensus.

The administration’s approach to the world economy reflects a broader intellectual shift. Senior US policymakers now believe that the post-1990 model of globalisation, which prioritised free trade and free markets over national security, climate change and the economic security of the middle class, has undermined the socioeconomic foundations of healthy democracies.

In his remarks, Sullivan laid out the five pillars of the administration’s international economic agenda, which he called “a foreign policy for the middle class”. The first pillar is a “modern American industrial strategy” that aims to catalyse private investment in sectors deemed critical to US prosperity and security. The second involves working to ensure that US allies adopt similar policies to improve “capacity, resilience and inclusiveness”.

Third, the US will move away from traditional trade deals that focus on market access and embrace “new international economic partnerships” that address global challenges such as climate change, digital security, job creation and corporate tax competition. And the US will seek to generate trillions of dollars in investments in emerging economies and provide aid to countries facing debt distress.