Question: Which of these statements do you believe to be true?

1. China relies on a diverse set of unfair trade practices such as currency manipulation, illegal export subsidies, intellectual property theft, and protection of its own markets to strengthen its manufacturing base and drive its export-driven growth.
2. China's economic growth and strong manufacturing base have provided it with a wealth of resources to build up and modernize its military forces.
3. China has used its superior economic strength to coerce Asian neighbors such as Japan, the Philippines, Taiwan, and Vietnam on issues ranging from trade to territorial disputes.
4. Since China joined the World Trade Organization in 2001 and gained unfettered access to American markets, the United States has lost over seventy thousand manufacturing facilities and seen its economic growth rate cut by more than half.
5. Slow economic growth and a weakening of its manufacturing base is making it increasingly difficult for the United States to maintain a military force large and modern enough to ensure its national security and fulfill its treaty obligations, particularly in Asia.
6. All of the above.

If all the above statements are indeed true—and a strong factual case has already been made in this inquiry for each—then reducing the dependence of America and its allies on “Made in China” products would seem to be an obvious policy step to improve both US national security as well as the prospects for peace in Asia. After all, such a step to “rebalance” the China trade relationship would slow China's economy and thereby its rapid military buildup. Such trade rebalancing would also provide America and its allies with both the strong growth and manufacturing base these countries need to build their own comprehensive national power. On this point, University of Chicago professor John Mearsheimer notes:

What really makes China so scary today is the fact that it has so many people, and it's also becoming an incredibly wealthy country so that our great fear is that China will turn into a giant Hong Kong. And if China has a per capita GNP that's anywhere near Hong Kong's GNP, it will be one formidable military power. So a much more attractive strategy would be to do whatever we can to slow down China's economic growth—because if it doesn't grow economically, it can't turn that wealth into military might and become a potential hegemon in Asia.1

What seems like an easy and obvious step to take in the interests of fostering peace through economic strength may, however, be far harder to do because of a variety of economic, political, and ideological obstacles.

Economically, if America were to reduce its Chinese import dependence through, say, the imposition of countervailing tariffs to offset China's unfair trade practices, there would surely be an uptick in the inflation rate. This would necessarily occur as American consumers replaced cheaper “Made in China” goods with more expensive products made in America or imported from other countries.

Beyond this inflationary effect, there is also this difficult political matter in equity: Reducing the flow of cheap, illegally subsidized “Made in China” products into American markets would hit the poorest segments of American society disproportionately hard—a prospect that at least the American Left would likely heavily criticize.

As for the role of ideology in dampening any “Not Made in China” movement, many Americans with an abiding faith in the benefits of free trade—particularly on the American Right—remain reluctant to support any policies that might be viewed as “protectionist.” However, in defense of a policy of “defensive tariffs” to fight Chinese mercantilism, US-China Commission member and Republican Dan Slane has opined:

We have a weak economy because we have allowed ourselves to get into a trade deficit with China…and until we can get control of our trade deficit and start producing our own products, we're going to have enormous economic problems in this country.2

Whether these economic, political, and ideological obstacles might ultimately be overcome in a concerted policy effort to rebalance the China trade is an open question. However, what should be clear and unequivocal is this cold Clausewitzian “war by algebra” epiphany: Whenever we buy products made in China—and by “we” I mean citizens not just in America but also in other countries now grappling with a rising China like India, Japan, the Philippines, Singapore, South Korea, and Taiwan—we as consumers are helping to finance a Chinese military buildup that may well mean to do us and our countries harm.

If we as individuals cannot collectively translate that “war by algebra” epiphany into concrete steps both at the ballot box and at the cash register to reduce our economic dependence on an authoritarian and increasingly militaristic China, then we will have only ourselves to blame when the bullets and missiles begin to fly—or when China simply takes what it wants because it can.

On this critical point, former US-China Commission member Pat Mulloy explains why an American reliance merely on a military pivot to Asia may be a huge misstep:

Now the president says we have to pivot toward Asia. Why? Because we have a rising China. Well, why is China rising so rapidly? It's because we're running massive imbalances of trade and rapidly transferring our investment and technology. So as their capabilities are strengthening, ours are weakening. So then we say okay, let's [militarily] pivot to Asia to reassure our allies because of this rising China. Well, wouldn't it make more sense to simply rebalance our trading relationship with China and not continue to have American consumers feed China's rise? That would be the truly smart way to pivot toward Asia.³

As to how America may actually execute that kind of more nuanced and economically oriented pivot, Mulloy's colleague on the US-China Commission Michael Wessel makes this argument on behalf of establishing a “China Policy Czar” within the upper echelons of the American government:

First of all, we have to get serious. There is really no one in charge in the US government looking at US-China relations. To date, everything has been viewed simply as an opportunity to sell to a billion consumers under the assumption that China has similar interests to us in terms of being a good stakeholder in the world economy. However, I think we've seen over the last 10 or 20 years that China has very different interests and wants to promote those interests to the exclusion of others. That's their right, but the question is whether we are going to challenge that. So first of all, we need to put somebody in charge who looks at both the economic and national security implications of the US-China relationship and recognizes that they are inextricably intertwined. For example, if you allow China to manipulate its currency, they're going to build up budget reserves and then they can use that money to go out and buy whatever weapon systems they need to defeat us. And we've seen that year after year after year.4

While rebalancing the trade relationship with China is certainly one of the most direct routes to both strengthening the economies of the United States and its allies in Asia while simultaneously weakening the ability of China to finance its war machine, such a trade rebalancing is certainly not the only “peace through economic strength” strategy America might pursue.

A second policy lever to pull—one, however, that is as politically contentious as that of trade rebalancing—is that of tax reform. Such reform is particularly critical for the United States, which presently has the highest corporate tax rate in the world. The practical effect of this high corporate tax rate is to literally push American manufacturers and American jobs offshore. There is a very simple reason for this: Any company that takes its factories and jobs off American shores gets an immediate tax cut through the ability to evade the higher American corporate tax.

Still a third possible policy initiative would be to dramatically increase the protection of the kinds of military and private-sector intellectual property now being plundered with regularity by China—up to, and including, a “zero tolerance” policy on the theft of both economic and military secrets by China.

Of course, one of the most direct routes to retaining American intellectual property would be for the US government to crack down on China's illegal policy of forcing American companies operating in China to turn over their technology. This forced technology transfer is a crystal-clear violation of the World Trade Organization rules, but even the biggest of the American corporations that have been victims of such technology blackmail have been reluctant to protest for fear of being excluded from the Chinese market. However, as Commissioner Slane notes on this key contributor to comprehensive national power:

You cannot have a superior military force without superior technology. So when you have [American] companies like Boeing and General Electric transferring technology to the Chinese, you put yourself at an enormous disadvantage because what makes us such a powerful global power is our technology and our innovation and our weapon systems that are far superior to any other country in the world.5

Finally, there is the prickly matter of rebuilding—or more likely restructuring—an education system that, at least in America, is currently in disarray all the way from K through 12 to the student-debt-ridden halls of higher education. Clearly, for any nation to succeed it must train its children well for the jobs of the future—without burdening them with a crushing debt, and while education reform is clearly well beyond the scope of this detective story, this is a status quo likewise in urgent need of urgent care.

In thinking most broadly about all of these possible pathways to economic strength—and therefore enhanced comprehensive national power and improved deterrence—the common thread that runs through them all is the need for political consensus on any requisite changes. This is a topic we will return to in our final chapter. In the meantime, let's move now to the military side of the “peace through strength” equation—but not before allowing former US Assistant Secretary of Defense Kurt Campbell and Dean Cheng of the Heritage Foundation to have this chapter's eerily similar last words. Says Campbell:

People often ask me what's the most important thing that the United States can do to sustain its leadership on the global stage; and people think sometimes that [thing] is about how to do this sort of military move or how to engage in this region. I will tell you the most important thing is to get our own domestic house in order.6

Echoes Dean Cheng:

Well, the first and foremost thing we need to be doing is getting our own economic house in order. All else follows from that. If we do not get our own economic house in order, if we don't reduce our debt, we will not have the ability to match China. And more than anything else, this is within our power. This is something that the American people and the American government can do, and Beijing can do nothing about it.⁷