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1、KEITH CRANE,TIMOTHY R.HEATH,ALEXANDRA STARK,CINDY ZHENGThe Effectiveness of U.S.Economic Policies Regarding China Pursued from 2017 to 2024Research Report10/3/24 5:47 PM10/3/24 5:47 PMFor more information on this publication,visit www.rand.org/t/RRA3055-1.About RANDThe RAND Corporation is a research
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6、eflect the opinions of its research clients and sponsors.Published by the RAND Corporation,Santa Monica,Calif.2024 RAND Corporation is a registered trademark.Library of Congress Cataloging-in-Publication Data is available for this publication.ISBN:978-1-9774-1-4090Cover:Baona/Getty Images.Limited Pr
7、int and Electronic Distribution RightsThis publication and trademark(s)contained herein are protected by law.This representation of RAND intellectual property is provided for noncommercial use only.Unauthorized posting of this publication online is prohibited;linking directly to its webpage on rand.
8、org is encouraged.Permission is required from RAND to reproduce,or reuse in another form,any of its research products for commercial purposes.For information on reprint and reuse permissions,please visit www.rand.org/pubs/permissions.iiiAbout This ReportIn this report,we examine the effectiveness of
9、 U.S.economic policies regarding China,focusing on those pursued from 2017 to 2024.We begin with a summary of two of the United States primary economic policy goals regarding China:promoting fair trade and defend-ing U.S.interests.Using this framework,we analyze the effectiveness of policies regardi
10、ng tariffs,restrictions on investment and exports,supply chain diversification,efforts to boost U.S.production and manufacturing of key products and materials,and other measures.We also examine Chinas response to these policies and assessments by the Chinese government and commentators regarding the
11、ir effects.We use the research conducted for this report to make assessments regarding the effectiveness of U.S.policies toward China related to trade,controls on technology,economic diplomacy,foreign investment,industry,and diversifica-tion of supply chains away from China.Finally,we offer recommen
12、dations for revising and implementing new economic policies toward China to better achieve U.S.policy goals.The research reported here was completed in June 2024 and underwent security review with the sponsor and the Defense Office of Prepublication and Security Review before public release.RAND Nat
13、ional Security Research DivisionThis research was conducted within theInternational Security and Defense Policy Pro-gram of the RAND National Security Research Division(NSRD),which operates the RAND National Defense Research Institute(NDRI),a federally funded research and develop-ment center(FFRDC)s
14、ponsored by the Office of the Secretary of Defense,the Joint Staff,the Unified Combatant Commands,the Navy,the Marine Corps,the defense agencies,and the defense intelligence enterprise.This research was made possible by NDRI exploratory research funding that was provided through the FFRDC contract a
15、nd approved by NDRIs primary sponsor.For more information on the RANDInternational Security and Defense Policy Program,seewww.rand.org/nsrd/isdp.AcknowledgmentsWe thank our reviewers,Logan Wright of the Rhodium Group and our RAND colleague Howard Shatz,for two very helpful reviews.We also appreciate
16、 comments from Lisa Saum-Manning and Barry Pavel,which we have incorporated into the final report.vSummaryThe Biden administration and previous U.S.presidential administrations have adopted much more restrictive policies concerning trade,investment,and flows of technology between China and the Unite
17、d States than in the past.The United States has also passed laws designed to support investment and domestic production in industries considered strategic,some of which China dominates globally.Among other goals,these policies have been adopted to(1)“de-risk”U.S.supply chains by encouraging U.S.busi
18、nesses to diversify sources of supply away from China,(2)encourage Chinese policymakers to take less aggressive stances on foreign and security policy issues on which the two countries differ,and(3)further restrict Chinas access to technologies that would enhance the capabilities of its military.Sev
19、eral years have passed since the adoption of the first of these more-restrictive measures in 2018.1 In this report,we review the results of those policies and propose recommendations.We examine policies that address the United States dependence on imports from China,support investment and production
20、 in domestic industries deemed critical for U.S.national security and technological leadership,and prevent U.S.technologies from being transferred to China through curbs on investment,prohibitions on transfers of technology,and other measures.Although adjacent,noneconomic topics related to recent U.
21、S.-China relations,such as the race to dominate frontier technologies,are compelling and interesting,we did not consider them within the bounds of this study.We also limited our study to the years 2017 to 2024 because,although U.S.-China trade tensions have waxed and waned for decades,they have rema
22、ined persistently high since 2017.We categorize U.S.policy goals into efforts to promote fairer trade and to defend U.S.economic-related interests.We define fair trade as U.S.firms obtaining market access equal to host country firms and foreign nations fully complying with the trade agreements that
23、they have signed with the United States.Fair trade also means that countries do not engage in uncompetitive practices,such as dumping or providing major state subsidies.We consider the defense of U.S.economic-related interests in terms of the expansion of exports and for-eign trade(and investment mo
24、re generally),the protection of the intellectual property of U.S.businesses,and the reduction of risks pertaining to single sources of supply.We found that U.S.economic policies achieved limited progress in promoting fair trade but a higher degree of success in defending U.S.economic-related interes
25、ts.Increases in U.S.tariffs have succeeded in reducing imports from and curbing the bilateral trade deficit with China,developments that both the Trump and Biden administrations view as resulting in fairer trade.However,U.S.policies have made little progress in ensuring fair treatment for U.S.firms
26、in China and even less in persuading the Chinese government to reduce its subsi-dies and other uncompetitive state assistance to its own manufacturers,especially exporters.1 Office of the U.S.Trade Representative,“President Trump Announces Strong Actions to Address Chinas Unfair Trade,”Executive Off
27、ice of the President,March 22,2018.The Effectiveness of U.S.Economic Policies Regarding China Pursued from 2017 to 2024viThe United States has experienced a higher degree of success in diversifying some supply chains away from China and constraining Chinese efforts to secure sensitive technologies t
28、hat could be used for commercial or military purposes.Some of these economic policies,most notably tariff increases,have come at a price,such as reduced U.S.economic growth and losses in U.S.manufacturing jobs,output,and exports.Recommendations Using our findings,we have drawn up the following recom
29、mendations to modify U.S.eco-nomic policies vis-vis China.These recommendations aim to enhance the likelihood that U.S.policies will induce the Chinese government to enact policy changes that make trade fairer and improve the United States ability to defend its economic interests.We group our recomm
30、endations under policies related to trade,controls on technology,economic diplo-macy,foreign investment,industry,and diversification of supply chains away from China.Trade The U.S.government should maintain higher tariffs on imports of goods from China(1)of which China is the dominant supplier and t
31、hat the Departments of Defense and Commerce consider key technologies and(2)that could undermine U.S.industries con-sidered critical to U.S.economic or national security.To maintain the overall competitiveness of U.S.manufacturing and to benefit U.S.con-sumers,the U.S.Trade Representative should off
32、er to negotiate reductions of U.S.tariffs on nonsensitive imports of consumer goods and manufacturing inputs from China in exchange for reductions in Chinese tariffs on U.S.goods.The U.S.Trade Representative should enter negotiations to join the Comprehensive and Progressive Agreement for Trans-Paci
33、fic Partnership(CPTPP).Membership in the CPTPP would better achieve U.S.economic policy goals than the Indo-Pacific Economic Framework for Prosperity.It would substantially reduce tariffs faced by U.S.exporters,eliminating the advantages that U.S.trade competitors,such as Japan and South Korea,enjoy
34、 because of duty-free access to the other members of the CPTPP.Controls on Technology Congress should increase funding for the Bureau of Industry and Security and the Com-mittee on Foreign Investment in the United States to ensure they have adequate capacity to review proposed items for export contr
35、ols and proposed investments,respectively.Because exchanges involving government research laboratories and other government-to-government exchanges have been so one-sided,the U.S.government should continue Summaryviito decline official exchanges between U.S.government agencies and their Chinese coun
36、-terparts involving applied technologies.The White House should organize a formal committee to coordinate economic policy toward China across U.S.government agencies.The U.S.Department of State should ensure that U.S.embassies,especially those located in allied and partner countries,work closely wit
37、h the China House to coordinate with allies and partners when implementing new export controls or other economic policies vis-vis China.The U.S.government should continue to permit academic collaboration and exchanges with China involving basic research.It should instruct the appropriate officials i
38、n the State Department and the Department of Homeland Security to ensure that Chinese academics are able to obtain U.S.visas quickly and easily and,once a visa is granted,are able to enter the United States without interference.Economic Diplomacy China prefers secretive bilateral state-dominated tra
39、de agreements with lower income countries.The State Department should instruct U.S.embassies in countries contem-plating entering into these types of agreements to highlight the costs of Chinas approach to their foreign commercial and diplomatic counterparts.The State Department should work with all
40、ies to offer technical advice to countries contemplating taking on loans and investments from China to ensure that the proposed project is financially viable,does not increase the countrys overall debt burden,is envi-ronmentally sound,and primarily employs local rather than Chinese workers.Foreign I
41、nvestment In meetings with the Chinese government,companies,and investors,U.S.govern-ment officials should make it clear that Chinese foreign direct investments that do not threaten U.S.national security continue to be welcome in the United States.The United States should continue to press China to
42、treat U.S.and other foreign compa-nies operating in China the same way it treats domestic Chinese companies.Industry Government subsidies for investments and operating costs of favored industries have frequently led to overcapacity and inefficiency.To forestall these outcomes,the U.S.government shou
43、ld confine future subsidies to industries that have clear implications for U.S.national security and for which China is the predominant supplier.The U.S.government should cease providing subsidies to companies in sectors that are not vital The Effectiveness of U.S.Economic Policies Regarding China P
44、ursued from 2017 to 2024viiifor U.S.national security and in which Chinese firms have a clear comparative advan-tage,such as solar cells.The National Science Foundation and the Departments of Energy and Defense should increase funding on research and development regarding alternatives to critical mi
45、ner-als,technologies that lower consumption of these minerals,and recycling technologies for these minerals.Diversification of Supply Chains The Department of Commerce should set up an office responsible for strategic planning for critical materials and products important for national security.The p
46、roposed office would coordinate policy for the entire supply chain,identifying choke points where investments are needed to ensure that the United States is not reliant on China.The Departments of State and Commerce should work through the Minerals Supply Partnership to coordinate programs with part
47、ner countries to develop alternative sources of supply for critical materials.ixContentsAbout This Report.iiiSummary.vFigures and Tables.xiCHAPTER 1Introduction.1Background:Developments in U.S.-China Economic Relations.2Goals of U.S.Economic Measures Regarding China.5Approach and Methodology.8Report
48、 Outline.9CHAPTER 2Effectiveness of U.S.Policies to Achieve Fairer Trade with China.11Tariffs .11Economic Costs of the Tariffs .16Proposed Changes to International Trade Rules and Norms.19Industrial Policies.22Conclusion.22CHAPTER 3Effectiveness of U.S.Economic Policies to Defend U.S.Interests.25Res
49、trictions on Chinas Direct Foreign Investment in the United States.25Case Studies of Five Key Products and Materials.27Conclusion.54CHAPTER 4Chinas Response.57Chinas Development Goals.57Official Response:Manage Tensions,Respond Tit for Tat.62Chinese Commentators Admit Damage but Argue the United Sta
50、tes Is Suffering Worse.66Conclusion.68CHAPTER 5Overall Assessment and Recommendations.69Trade and Investment .69Controls on Technology.70Conclusion.71Recommendations.72The Effectiveness of U.S.Economic Policies Regarding China Pursued from 2017 to 2024xAPPENDIXESA.Comparison of U.S.and Chinese Stati
51、stics on Bilateral Trade and Investment.77B.Timeline of U.S.Economic Measures Related to Competition with China.81C.Timeline of Chinese Economic Policy Changes Following New U.S.Economic PolicyMeasures vis-vis China.85Abbreviations .87References.89xiFigures and TablesFigures 2.1 U.S.-China Bilateral
52、 Trade in Goods 20122023.13 2.2 Chinas Share of Total U.S.Imports,by Commodity Group.15 3.1 Flows of Foreign Direct Investment Between China and the United States.26 5.1 Percent Changes in U.S.-China Trade and Foreign Direct Investment Between 2017and 2023.70 A.1 U.S.-China Trade as Reported by Both
53、 Countries.78 A.2 Flows of Foreign Direct Investment Between China and the United States.79Tables 1.1 Goals and Sub-Objectives of U.S.Economic Policies vis-vis China.6 2.1 Timeline of U.S.and Chinese Tariffs.12 2.2 Assessment of U.S.Policies to Promote Fair Trade.23 3.1 Top Ten Global Polysilicon Ma
54、nufacturing Companies,by Output in 2022.29 3.2 Top Global Producers of Raw Lithium in 2022 and 2023.34 3.3 2023 Global Natural Graphite Mine Production and Reserves.44 3.4 Global Rare Earth Mine Production and Reserves in 2023.45 3.5 Imports and Exports of Semiconductors,by Country in 2022.49 3.6 As
55、sessment of U.S.Economic Policies to Defend U.S.Interests.54 5.1 Effectiveness of U.S.Economic Policies Toward China.72 B.1 Timeline of U.S.Economic Measures Related to Competition with China.82 C.1 Timeline of Chinese Economic Policy Changes Following New U.S.Economic Policy Measures vis-vis China.
56、861CHAPTER 1IntroductionAfter China began its economic reforms in 1979,the United States pursued policies designed to bring China into international institutions governing trade and foreign investment.In the following decades,U.S.-China trade relations expanded rapidly.By the 2000s,China became the
57、largest source of U.S.imports and one of the United States top four trading partners,along with Canada,the European Union(EU),and Mexico.The surge in trade and invest-ment often contributed to contentious economic relations.In the 1990s and early 2000s,the United States imposed tariffs on Chinese su
58、bsidized exports that supplanted U.S.produc-tion,criticized Beijing for placing restrictions on the activities of U.S.companies that wished to invest in China,and denounced Chinas theft of U.S.intellectual property.China,for its part,complained about U.S.controls on exports of technologies,constrain
59、ts on imports from China,and efforts to curb purchases of Chinese products and technologies on the part of U.S.friends and allies.1U.S.Presidents Donald Trump and Joe Biden have adopted considerably more-restrictive policies concerning trade,investment,and technology flows between the two countries
60、than their predecessors.Regarding China as a formidable economic competitor,the United States has passed laws,such as the Inflation Reduction Act,2 designed to support research and development(R&D)and increase investment and domestic production in key industries,including some in which China is domi
61、nant or threatens to become so.Increases in tariffs on Chinese goods have been adopted to“de-risk”U.S.supply chains by encouraging U.S.busi-nesses to diversify their sources of supply away from China.3 Other policies have aimed to curtail Chinese efforts to coerce neighboring countries through econo
62、mic punishments.Still others have sought to restrict Chinas access to technologies that could enhance the capabili-ties of its military.41 Karen M.Sutter,U.S.-China Trade Relations,Congressional Research Service,IF11284,September 27,2023.2 Public Law 117-169,Inflation Reduction Act of 2022,August 16
63、,2022.3 White House,“President Biden Takes Action to Protect American Workers and Businesses from Chinas Unfair Trade Practices,”May 14,2024a.4 Bureau of Industry and Security,“Commerce Implements New Export Controls on Advanced Comput-ing and Semiconductor Manufacturing Items to the Peoples Republi
64、c of China(PRC),”press release,U.S.Department of Commerce,October 7,2022a.The Effectiveness of U.S.Economic Policies Regarding China Pursued from 2017 to 20242Several years have passed since March 2018,when the Trump administration sharply raised tariffs on Chinese imports and adopted other more-res
65、trictive economic policy mea-sures.5 Given the importance of trade and investment to the livelihood of Americans,under-standing the effectiveness of these measures is important.With this study,we sought to answer the following questions:Since 2017,how effective have U.S.economic policies toward Chin
66、a been?What are the costs of these policies to the United States?How can the U.S.government modify these policies to make them more effective?Background:Developments in U.S.-China Economic RelationsThe normalization of U.S.-China relations in 1979 inaugurated a relaxation of Cold War tensions and th
67、e beginning of robust economic relations.Under President Bill Clinton,the United States regarded China as an important trade partner.Despite persistent differences over such issues as Taiwan,human rights,and Tibet,the U.S.and Chinese governments emphasized the benefits of trade and maintained relati
68、vely stable relations.Clintons succes-sor,President George W.Bush,also emphasized trade,helping China accede to the World Trade Organization(WTO)in December 2001.6Over time,Chinas increasing economic and military power heightened concerns in Washington.President Barack Obama oversaw a transition in
69、U.S.policy in which more-adversarial views of China competed with a policy emphasis on economic cooperation.For example,Obama sometimes called China an“adversary”even as his first Secretary of State,Hillary Clinton,emphasized cooperation.7After taking office in January 2017,Trump completed the trans
70、ition to a more adver-sarial U.S.policy toward China.The 2017 National Security Strategy described China as“challenging American power,influence,and interests”and accused China of seeking to“erode American security and prosperity”and“make economies less free and less fair.”8 Among its top goals,the
71、strategy called for the“promotion of American prosperity.”9 In his announcement of the 2017 National Security Strategy,Trump asserted that“economic secu-5 Office of the U.S.Trade Representative,“President Trump Announces Strong Actions to Address Chinas Unfair Trade,”Executive Office of the Presiden
72、t,March 22,2018.6 Ramon H.Myers,Michel C.Oksenberg,and David Shambaugh,eds.,Making China Policy:Lessons from the Bush and Clinton Administrations,Rowman&Littlefield,2001.7 Josh Rogin,“Obama Contradicts Clinton,Calls China an Adversary,”Foreign Policy,October 22,2012.8 White House,National Security S
73、trategy of the United States of America,December 2017,p.2.9 White House,2017,p.4.Introduction3rity is national security”and listed“economic vitality,growth,and prosperity as absolutely necessary for U.S.power and influence.”10The Trump administration published its United States Strategic Approach to
74、 the Peoples Republic of China report in early 2020,providing more details about its policy.The document described two objectives of the new“competitive”approach.The first aimed to improve the resilience of U.S.institutions,alliances,and partnerships,and the second sought to compel China to cease or
75、 reduce actions harmful to the interests of the United States and its allies and partners.The document criticized many of Chinas economic practices,including subsidies,a“mercantilist approach to trade and investment,”and forced technology transfers.11An increasing concern about U.S.manufacturing spu
76、rred a reconsideration of U.S trade policieseven though U.S.industrial output hit an all-time high in 2018.12 The Trump administration withdrew from numerous international accords,which it judged inadequately served U.S.interests,including the Trans-Pacific Partnership(TPP).Trump also reviewed and r
77、enegotiated various trade agreements,including the North American Free Trade Agree-ment(NAFTA),which was replaced by the U.S.-Mexico-Canada Agreement,and the U.S.-Korea Free Trade Agreement.13As part of his effort to revise trade agreements,Trump sought to renegotiate trade with Beijing.One of his m
78、ajor policy goals was to reduce the large bilateral trade deficit.He also sought to increase employment in U.S.manufacturing and compel the Chinese government to stop unfair practices,such as heavily subsidizing exporters and investments in favored industries that resulted in global overcapacity.Aft
79、er several rounds of talks with Chinese officials proved fruitless,the Trump administration increased U.S.tariffs on Chinese goods in March 2018,citing unfair Chinese trade practices and the theft of U.S.intellectual prop-erty.14 Beijing retaliated by raising tariffs on U.S.products.Trump followed t
80、he first tariff increases with a series of measures to dramatically increase tariffs on a wide variety of addi-tional Chinese goods.15In addition to the trade war,the United States increased restrictions on Chinese invest-ment in the United States,especially in sectors featuring technology that coul
81、d threaten U.S.national security.The Committee on Foreign Investment in the United States(CFIUS)originally formed in 1975 to regulate the flow of investments from members of the Organiza-10 Jim Garamone,“Trump Announces New Whole-of-Government National Security Strategy,”U.S.Department of Defense,De
82、cember 18,2017.11 White House,United States Strategic Approach to the Peoples Republic of China,May 20,2020.12 Federal Reserve Economic Data,“Industrial Production:Total Index,”interactive graph,Federal Reserve Bank of St.Louis,last updated July 17,2024b.13 Paul Wiseman,“Trump Trade Policies:4 Years
83、 of High Drama.Little Results,”Associated Press,Octo-ber 27,2020.14 Office of the U.S.Trade Representative,2018.15 Andres B.Schwarzenberg and Keigh E.Hammond,U.S.-China Tariff Actions by the Numbers,Congres-sional Research Service,R45949,October 9,2019.The Effectiveness of U.S.Economic Policies Rega
84、rding China Pursued from 2017 to 20244tion of the Petroleum Exporting Countries(OPEC)in the United Statesis an interagency committee that oversees the national security implications of any foreign direct investment(FDI).Through its review process,CFIUS has prevented Chinese firms from acquiring U.S.
85、companies that might have implications for U.S.national security.16 In August 2018,Chinese efforts to acquire U.S.companies,especially in high-technology sectors,faced further hur-dles with the passage of the Foreign Investment Risk Review Modernization Act(FIRRMA),which extended CFIUSs authority to
86、 review proposed and consummated foreign compa-nies investments in critical and emerging technologies.The U.S.government also prohib-ited investments by U.S.companies and individuals in Chinese companies affiliated with the Peoples Liberation Army.Trump strengthened the prohibitions in the Fiscal Ye
87、ar 2021 National Defense Authorization Act and related executive orders.17Under Biden,the U.S.government has continued to view China as a great power rival and potent economic threat.The 2022 National Security Strategy characterized China as a“com-petitor”that had“both the intent to reshape the inte
88、rnational order and.the economic,diplomatic,military,and technological power to advance that objective.”The National Secu-rity Strategy criticized“autocratic governments,”including China,for“abusing the global economic order.”It included a section that discussed measures to“advance the interests of
89、American workers,”which cited such goals as revitalizing manufacturing,ensuring fair treatment for U.S.companies abroad,and shaping international trade rules and norms to ensure fair trade.18In a 2022 speech,Secretary of State Antony Blinken elaborated on the Biden administra-tions China policy.Blin
90、ken criticized Beijing for“undermining”international laws,agree-ments,principles,and institutions.He characterized the U.S.strategy in three words:“invest,align,compete.”He explained that invest referred to strengthening the“foundations”of U.S.national power,such as the United States democratic gove
91、rnance and its ability to innovate technologically.He explained that alignment referred to actions in common purpose with U.S.allies and partners.And he explained that compete referred to actions to“defend our interests”from harmful acts by China.In an example of Bidens China policy,Blinken noted th
92、at the U.S.government had launched the Indo-Pacific Economic Framework for Prosperity(IPEF),a set of regional economic agreements that address such issues as the digital econ-omy,supply chains,clean energy,infrastructure,fair treatment for U.S.companies abroad,and corruption.He added that other rele
93、vant policies include measures to strengthen export controls,protect academic research,bolster cyber defenses,and reduce risks to U.S.supply 16 Zhang Qingyan,Steven Croley,Xu Hui,and Peng Yi,“CFIUS and Chinese Investments in the United StatesA Closed Door?”trans.by David Blumental,Steven Croley,and
94、Xu Hui,Latham&Watkins,article reprint(No.2352)from Financial Times,June 4,2018.17 Humeyra Pamuk,Alexandra Alper,and Idrees Ali,“Trump Bans U.S.Investments in Companies Linked to Chinese Military,”Reuters,November 13,2020.18 White House,National Security Strategy,October 2022c.Introduction5chains.19
95、On November 16,2023,the United States and its partners signed three of the four IPEF-related agreements.20Treasury Secretary Janet Yellen defined the U.S.economic approach to China in terms of ensuring the national security interests of the United States and its allies and promoting human rights,fai
96、r competition with China,and cooperation on global challenges,such as climate change.Yellen explained that the first category involves using economic levers to protect U.S.interests and values.For the second category,Yellen stated that the United States intends to“partner with its allies to respond
97、to Chinas unfair economic practices”while continuing to invest in its own economy and advancing the United States“vision for an open,fair,and rules-based global economic order.”21 In pursuit of these goals,in 2022,the State Department established an Office of China Coordination to coordinate informa
98、tion-sharing and policy with U.S.allies and partners on issues related to China.22In sum,U.S.economic policies toward China have become much more antagonistic since 2017.As Chinas economic power has grown and its interests have diverged from those of the United States,Washington has shifted its emph
99、asis from cooperation to competition.Under Trump and Biden,the U.S.government designated China as a competitor and emphasized economics as a critical domain of competition.U.S.policy statements make clear that U.S.policy toward China also involves building up key U.S.and allied industries in which C
100、hina currently or prospectively holds dominant positions,strengthening international rules and norms favored by Washington,and persuading China to halt practices that harm U.S.eco-nomic sectors.Goals of U.S.Economic Measures Regarding ChinaOur evaluation of the effectiveness of U.S.economic policies
101、 from 2017 to 2024 regarding China begins with a review of the specific goals that the policies aim to achieve.The Biden and Trump administrations share the view that the United States must compete economically with China.Employing the rhetoric of“America First,”Trump emphasized fair deals and pledg
102、ed to defend U.S.interests.The Biden administration added an emphasis on coordinat-19 Antony J.Blinken,“The Administrations Approach to the Peoples Republic of China,”speech delivered at George Washington University,U.S.Department of State,May 26,2022.20 Those agreements were the IPEF Supply Chain A
103、greement,the Clean Economy Agreement,and the Fair Economy Agreement(White House,“In San Francisco,President Biden and 13 Partners Announce Key Outcomes to Fuel Inclusive,Sustainable Growth as Part of the Indo-Pacific Economic Framework for Pros-perity,”fact sheet,November 16,2023b).Negotiations on t
104、he trade agreement of the IPEF continue.21 Janet L.Yellen,“Remarks by Secretary of the Treasury Janet L.Yellen on the U.S.-China Economic Rela-tionship at John Hopkins School of Advanced International Studies,”U.S.Department of the Treasury,April 20,2023.22 Nahal Toosi and Phelim Kine,“Biden Launche
105、s China House to Counter Beijings Growing Clout,”Politico,December 16,2022.The Effectiveness of U.S.Economic Policies Regarding China Pursued from 2017 to 20246ing with allies and partners but otherwise maintained the focus on fairer trade agreements and the defense of U.S.interests.The speeches by
106、Secretaries Blinken and Yellen have empha-sized the overall goal of achieving fair competition with China so that each side benefits.Per the explanations offered by both senior officials,this involves measures to defend U.S.interests and enhance fair economic competition that brings benefits to both
107、 sides,which we shorten to promote fair trade.We will use these two categories(“defend U.S.interests”and“promote fair trade”)as our main categories for evaluating the effectiveness of U.S.economic policies toward China(Table 1.1).We have adopted the definition of fair trade by the U.S.Department of
108、Commerces Inter-national Trade Administration for this report.Per the International Trade Administration,fair trade occurs when U.S.firms and workers obtain market access equal to host country firms and when foreign nations fully comply with the trade agreements that they have signed with the United
109、 States.Fair trade occurs when countries do not engage in uncompetitive practices,such as dumping or providing major state subsidies.23 For the broader goal of pro-moting fair trade,we add the following sub-objectives:Ensure the same access in China for U.S.products as the United States provides Chi
110、nese products.Reduce imports from China and the bilateral trade deficit.Shape international trade rules and norms.23 International Trade Administration,“Ensuring Fair Trade,”webpage,U.S.Department of Commerce,undated.TABLE 1.1Goals and Sub-Objectives of U.S.Economic Policies vis-vis ChinaGoalSub-Obj
111、ectivesSample PoliciesPromote fair trade Reduce bilateral trade deficit Shape international trade rules and norms Build up U.S.manufacturing,especially in sectors in which China dominates Secure fair treatment for U.S.companies in China Reduce unfair Chinese trade practices Tariffs Efforts to make t
112、rade rules and norms more equitable Investment subsidiesDefend U.S.interests Reduce excessive dependence on Chinese suppliers Control transfer of key technologies Tariffs Investment controls Controls on semiconductor exports Controls on exports of critical technologies Industrial policies Export lic
113、ensing requirements Addition of specific Chinese companies to the Entity ListSOURCES:Contains information from Blinken,2022,and Yellen,2023.Introduction7 Secure the same treatment for U.S.and other foreign companies in China as Chinese companies receive.Reduce unfair Chinese trade practices,especial
114、ly regarding subsidies and restrictions on access by U.S.companies to Chinese markets.These sub-objectives are evident in the economic policy goals outlined by the Trump and Biden administrations.One of the policy goals laid out in Yellens 2023 speech was ensuring the same access in China for U.S.pr
115、oducts as the United States provides Chinese products.Yellen stated that China“imposes numerous barriers to market access for American firms that do not exist for Chinese businesses in the United States”and called on China to end such restrictions to ensure“healthy economic competition.”24 Reducing
116、the bilateral trade deficit was listed as a policy goal in statements by Trump;similarly,the Biden administra-tion hailed the reduction of the bilateral trade deficit as progress toward the goal of fair trade practices.25 Secretary Blinkens 2022 speech referenced the policy goal of shaping interna-t
117、ional trade rules and norms when he called for“reforming the rules-based international order”to“make sure that it represents the interests,the values,and the hopes of all nations.”26 The sub-objective of securing the same treatment for U.S.and other foreign companies in China as Chinese companies re
118、ceive was also listed in the speech by Secretary Yellen when she criticized Chinas mistreatment of U.S.and foreign companies and called for fair treat-ment to enable“healthy competition.”Finally,reducing unfair Chinese trade practices was a sub-objective also listed in the Yellen speech,in which she
119、 criticized state subsidies and other unfair trade practices.She stated that the U.S.government will“take coordinated actions with our allies and partners”to counter“Chinas unfair economic practices.”27To achieve the goal of promoting fair trade,the U.S.government has not only raised tar-iffs on goo
120、ds imported from China but also adopted industrial policies,such as the Creating Helpful Incentives to Produce Semiconductors(CHIPS)and Science Act in 2022,to support domestic R&D and manufacturing of advanced semiconductors in the United States.The Inflation Reduction Act(IRA)of 2022 includes provi
121、sions to invest in the domestic clean energy sector.The Bipartisan Infrastructure Bill also provides subsidies to companies to manufacture green technologies.Although these measures also have domestic political and other rationales,they are simultaneously seen as a means of leveling the playing fiel
122、d against Chinas substantial subsidized investments in its semiconductor and clean energy industries.Other relevant policies include efforts to shape the terms of international trade in a manner that defines fair trade practices,set internationally agreed labor and environmen-tal standards for trade
123、d goods,set internationally agreed rules for digital trade,and protect 24 Yellen,2023.25 White House,2024a;Keith Bradsher,“China Is Set to Take a Hard Line on Trumps Trade Demands,”New York Times,April 30,2018.26 Blinken,2022.27 Yellen,2023.The Effectiveness of U.S.Economic Policies Regarding China
124、Pursued from 2017 to 20248intellectual property.Obama advanced the TPP with similar goals in mind.But after Trump withdrew,Biden subsequently put forward the IPEF,which sought more-modest goals and omitted some of the TPPs more-contentious provisions for market access to the United States.Although t
125、he U.S.government has signed the Supply Chain Agreement,the Clean Economy Agreement,and the Fair Economy Agreement,28 it had not signed the agreement related to trade(in the IPEF)as of April 2024.29Under the category of“defend U.S.interests,”we add the following sub-objectives:(1)diversify supplies
126、of critical materials and goods to reduce U.S.dependence on China and(2)control the export of sensitive technologies to China that could be used for military or commercial purposes.The first sub-objective was taken from Yellens speech,which high-lighted a“strategy”of“friendshoring”(i.e.,developing a
127、lternative sources of supply for criti-cal materials)and“creating redundancies in our critical supply chains with a large number of trading partners”to mitigate“vulnerabilities that can lead to supply disruptions.”30 The second is derived from both the Yellen and Blinken speeches,which emphasized th
128、is sub-objective as part of the broader goal of defending U.S.interests.31Export controls and restrictions on Chinese direct investment in the United States are a central component of defending U.S.national and economic security.Additionally,the U.S.government has employed a wide variety of other ec
129、onomic tools to achieve its policy goals regarding China.These tools have included extensive use of tariffs;export controls aimed at specific entities,such as Huawei,and products,such as semiconductors;law enforcement measures to prevent the transfer of intellectual property;and other measures.32App
130、roach and MethodologyThis research was undertaken to provide the U.S.government with recommendations on how to better devise and implement trade,investment,and industrial policies regarding China.To bound the study,we limited our analysis to the economic dimension.This dimension pri-marily includes
131、policies to address the United States dependence on imports from China and reduce the bilateral trade deficit,to support investment and production in domestic indus-tries deemed critical for U.S.national security and technological leadership,and to protect U.S.technologies from being transferred to
132、China through curbs on Chinese investment in the United States,exports of technology,and other measures.Although there are compelling 28 White House,2023b.29 Demetri Sevastopulo and Alex Rogers,“Joe Biden Halts Plan for Indo-Pacific Trade Deal After Opposi-tion from Democrats,”Financial Times,Novemb
133、er 14,2023.30 Yellen,2023.31 Yellen,2023;Blinken,2022.32 Elizabeth Rosenberg,Peter Harrell,and Ashley Feng,A New Arsenal for Competition:Coercive Economic Measures in the U.S.-China Relationship,Center for a New American Security,April 24,2020.Introduction9and interesting adjacent noneconomic topics
134、,such as the race to dominate frontier technolo-gies,we did not consider these topics within the bounds of this study.We also bound the study to the time frame of 2017 to early 2024 because,although they have waxed and waned for decades,U.S.-China trade tensions have remained persistently high since
135、 2017.We mainly relied on primary sources of quantitative economic data on U.S.-China eco-nomic activity and on qualitative information gathered from a variety of studies,news reports,and policy reports.We also assess the role of other countries,especially friends and allies,with regard to the likel
136、y success of achieving U.S.economic policy goals vis-vis China.Other countries play an especially important role in enacting measures to con-strain Chinas efforts to dominate markets for critical goods and materials.We also reviewed Chinese-language policy documents and commentary to understand Chin
137、ese assessments and perspectives on Chinas economic relationship with the United States.Report OutlineIn Chapter 2,we focus on measures associated with the overarching goal of promoting fair trade.We analyze outcome metrics,such as changes in bilateral flows of exports and imports.We consider the ef
138、fect of Chinese retaliatory measures and the ways that U.S.economic mea-sures have affected living standards and job opportunities for Americans.In Chapter 3,we examine measures related to the goal of defending U.S.interests.Although there is some overlap with the former category,we focus primarily
139、on the effects of restrictions on Chinese investment in the U.S.technology sector.For a more thorough analysis,we study the effects of U.S.restrictions on five sectors involving critical minerals or key technologies.We also evaluate U.S.efforts to encourage diversification of suppliers to reduce U.S
140、.dependence on China.In Chapter 4,we review Chinas response.To provide context,we first examine Chinas economic situation and development goals.We then look at the short-and longer-term poli-cies articulated by Beijing in response to recent U.S.economic policies.In the final chapter,we provide an ov
141、erall assessment of the effects of these policies on China and conclude with some recommendations as to how U.S.policies might be adjusted to be more effective.We base our suggestions on what has appeared to work and what has been less successful,drawing on the economic analyses and the assessment o
142、f changes in Chinese policies.11CHAPTER 2Effectiveness of U.S.Policies to Achieve Fairer Trade with ChinaIn this chapter,we assess the effectiveness of U.S.measures to bolster“fair trade”with China.This goal was implied in the Trump administrations policy statements and official speeches and explici
143、tly identified as a key goal of the Biden administrations economic policies regard-ing China.We examine the effectiveness of U.S.policies to reduce unfair competition from Chinese imports,overall U.S.imports from China,and the bilateral trade deficit shape international trade rules and norms invest
144、in U.S.manufacturing,especially sectors in which China dominates secure fair treatment for U.S.(and other foreign)companies in China curtail unfair Chinese trade practices.TariffsAs noted in Chapter 1,the U.S.government raised tariff rates in 2018 on a wide variety of goods,many of which specificall
145、y targeted China.Average U.S.tariffs on imports from China rose from 2.6 percent prior to the first tariff increase to 17.5 percent on September 1,2019,the last time tariffs were raised.Table 2.1 shows the dates and magnitudes of these increases and the value of the imports the tariffs affected.The
146、table also shows the increases in tariffs that China imposed in response to the actions by the United States.China increased its aver-age tariff rate on its imports from the United States from 6.2 percent before the United States began to raise tariff rates to 16.4 percent in September 2019.1Changes
147、 in Trade Flows Following the Increases in TariffsFigure 2.1 shows data from the U.S.Census Bureau on trade between China and the United States.The figure shows that,by 2023,U.S.imports from China had fallen to$427.2 billion,1 Eddy Bekkers and Sofia Schroeter,An Economic Analysis of the US-China Tra
148、de Conflict,Staff Working Paper ERSD-2020-04,Economic Research and Statistics Division,World Trade Organization,March 19,2020.The Effectiveness of U.S.Economic Policies Regarding China Pursued from 2017 to 202412a decline of 15.4 percent compared with 2017.Figure 2.1 also shows that U.S.imports from
149、 China in 2023 were at their lowest level since 2012.The decline in imports from China was especially sharp in 2023,when they fell 20.3 percent compared with 2022.U.S.imports from China first fell in 2019,the year following the increases in U.S.tariffs on Chinese goods.However,during the coronavirus
150、 disease 2019(COVID-19)pandemic in 2021 and 2022,U.S.consumers sharply increased expenditures on imported goods,including from China.In addition to the decline in the value of U.S.imports from China,Chinas share in total U.S.imports has fallen.According to U.S.trade statistics,Chinas share of total
151、U.S.imports peaked in 2017 at 21.6 percent but fell to 13.9 percent in 2023,a decline of 7.7 percentage points.Most of this decline has been captured by Mexico and East and Southeast Asia.The share of U.S.imports from Cambodia,Singapore,South Korea,Taiwan,Thailand,and Viet-nam rose 4.7 percentage po
152、ints between 2017 and 2023,and Mexicos share rose 2.1 percent-age points for a total of 6.8 percentage points compared with the decline in Chinas share of total U.S.imports of 7.7 percentage points.2 Some of the increases in U.S.market share by these countries reflect the transfer of some Chinese ma
153、nufacturing operations to those 2 U.S.Census Bureau,“Trade in Goods with China,”dataset,undated-a.TABLE 2.1Timeline of U.S.and Chinese TariffsUnited StatesChinaDateAverage TariffRate(%)Value of Imports from Preceding Year Affected by the Increased Tariffs($billions)Average TariffRate(%)Value of Impo
154、rts from Preceding Year Affected by the Increased Tariffs($billions)January 1,20182.66.2March 23,20183.60April 2,20182.76.62.97July 6,20184.333.4011.142.52August 23,201814.3114.11September 24,20188.8198.8713.853.39June 1,201914.515.352.85September 1,201917.5130.1516.428.67December 15,201916.0161.881
155、6.444.80Cumulative total487.35113.59SOURCE:Features data from Bekkers and Schroeter,2020.NOTE:Adding the totals for both the United States and China exceeds the reported cumulative total for two reasons.One,the base years for the row entries differ:For some entries,the previous year is 2017,for othe
156、rs 2018.Two,there is some overlap in terms of the volume of affected imports because the same categories of imports were targeted for different interventions.Effectiveness of U.S.Policies to Achieve Fairer Trade with China13countries to avoid tariffs.3 In these instances,the share of Chinese inputs
157、in the final product remains high because some companies continue to import inputs from their Chinese sup-pliers for assembly in plants in Mexico and in East and Southeast Asian countries.However,some of these shifts were the result of U.S.companies attempting to diversify their supply chains by shi
158、fting imports to countries other than China.4Changes in U.S.Exports to ChinaIn contrast to U.S.imports from China,U.S.exports rose between 2017 and 2023,going from$130 billion to$147.8 billion,an increase of 13.7 percent.However,total U.S.exports rose even faster over this periodby 30.5 percentso th
159、e share of total U.S.exports going to China fell from 8.4 percent in 2017 to 7.3 percent in 2023,a decline of 1.1 percentage points.As trade relations deteriorated,China and the United States agreed to engage in negotia-tions over the tariffs.In January 2020,the United States and China concluded a p
160、hase one trade agreement that required structural reforms and other changes to economic and trade 3 Flora Haberkorn,Trang Hoang,Gordon Lewis,Carter Mix,and Dylan Moore,“Global Trade Patterns in the Wake of the 20182019 U.S.-China Tariff Hikes,”Board of Governors of the Federal Reserve System,April 1
161、2,2024.4 Haberkorn et al.,2024.FIGURE 2.1U.S.-China Bilateral Trade in Goods 2012202340020040006006002024 U.S.$billionsYear20020122013SOURCE:Data are from U.S.Census Bureau,undated-a.2014201620172018201920202021202220152023YearU.S.imports from ChinaU.S.exports to ChinaBilateral trade balanceThe Effe
162、ctiveness of U.S.Economic Policies Regarding China Pursued from 2017 to 202414regimes regarding intellectual property,technology transfer,and other topics.Under this agreement,China was to increase imports of goods from the United States above their 2017 levelby$63.9 billion in 2020 and$98.2 billion
163、 in 2021.5 These targets were not achieved.Part of the reason for the failure of the agreement owed to conflicting U.S.policy objectives and unrealistic expectations.6 Some senior administration officials were most interested in reducing imports from China.Others were more focused on increasing U.S.
164、exports.7 What-ever the reason,China did not increase imports from the United States to the extent prom-ised.In 2020,U.S.exports of goods to China were$5.4 billion less than in 2017.In 2021,China imported$21 billion more than it had in 2017,falling far short of the promised$98.2 billion.Changes in t
165、he Balance of Trade Import competition from China between 1990 and 2007 contributed to an estimated decline of 1,530,000 manufacturing jobs in the United States,one-quarter of the aggregate decline in U.S.manufacturing employment over that period.8 Not surprisingly,the magnitude of Chi-nese imports
166、and the bilateral trade deficit are seen as politically negative indicators of the economic relationship.One of the Trump administrations goals for the tariff increases was to reduce the United States bilateral trade deficit with China.As can be seen in Figure 2.1,the United States bilateral trade d
167、eficit with China in 2023 had fallen to$279 billion compared with$375 billion in 2017.The bilateral trade deficit as a share of the United States overall deficit fell from 47 percent in 2017 to 26 percent in 2023.The decline in the deficit with China took place during a period when the overall U.S.t
168、rade deficit increased significantly from$420 billion in 2017 to$823 billion in 2023.However,in both China and the United States,employment in manufacturing has been declining because of productivity gains.China lost 21.2 million manufacturing and construc-tion jobs between 2012 and 2022,10 percent
169、of total jobs in these sectors.9 After falling by one-third between 2000 and 2010,U.S.manufacturing employment rose 7 percent between 5 Economic and Trade Agreement Between the Government of the United States and the Government of the Peoples Republic of China,signed at Washington,D.C.,January 15,20
170、20.6 Chad P.Bown,“Anatomy of a Flop:Why Trumps US-China Phase One Trade Deal Fell Short,”Peterson Institute for International Economics,February 8,2021.7 This debate has been described as between those who favor“de-risking”economic relations with China and those who favor“decoupling.”For discussions
171、 of these two views,see Emily Benson and Gloria Sicilia,“A Closer Look at De-Risking,”Center for Strategic and International Studies,December 20,2023;Alex Capri,“China Decoupling Versus De-Risking:Whats the Difference?”Hinrich Foundation,December 12,2023;Damien Cave,“How Decoupling from China Became
172、 De-Risking,”New York Times,May 20,2023;and Agathe Demarais,“What Does De-Risking Actually Mean?”Foreign Policy,August 23,2023.8 David H.Autor,David Dorn,and Gordon H.Hanson,“The China Syndrome:Local Labor Market Effects of Import Competition in the United States,”American Economic Review,Vol.103,No
173、.6,October 2013.9 National Bureau of Statistics of China,China Statistical Yearbook 2023,2023,Table 4.2,“Number of Employed Persons at Year-End by Three Strata of Industry.”Effectiveness of U.S.Policies to Achieve Fairer Trade with China152012 and 2022,10 in the same period when Chinas manufacturing
174、 labor force declined and the bilateral trade deficit surged.11Changes in the Composition of Imports from ChinaThe diversification of U.S.trade away from China to other countries becomes clearer by examining changes in the sources of U.S.imports by product categories.Three major prod-uct categories
175、account for over two-thirds of U.S.imports from China:machinery and elec-tronics,textiles and footwear,and chemicals,plastics,and leather products.12 Chinas share of U.S.total imports in these three categories declined between 2017 and 2023(see Figure 2.2).As with all categories of products imported
176、 from China,declines have been concentrated among those goods subject to increased tariffs.1310Federal Reserve Economic Data,“All Employees,Manufacturing,”interactive graph,Federal Reserve Bank of St.Louis,last updated July 15,2024a.11Chapter 4 provides more information on Chinas changing economic s
177、ituation.12Machinery and electronics(harmonized system HS categories 84 and 85),textiles and footwear(HS categories 50 through 67),and chemicals,plastics,and leather(HS categories 28 through 43).13Haberkorn et al.,2024.FIGURE 2.2Chinas Share of Total U.S.Imports,by Commodity Group10354030015545Perce
178、ntage2025TotalTextiles andfootwearMachinery andelectronicsSOURCES:Features information from U.S.Census Bureau,“USA Trade Online,”data tool,undated-b;and Bureau of Industry and Security,“Archive:Statistical Analysis of Trade with China,”statistical reports from 20142021,U.S.Department of Commerce,und
179、ated.NOTE:Aggregates from the Bureau of Industry and Security and those computed from USA Trade Online differed slightly,by less than 1 percent.20172023Chemicals,plastics,and leatherThe Effectiveness of U.S.Economic Policies Regarding China Pursued from 2017 to 202416Competitor countries have displa
180、ced imports from China in part because of the increases in tariffs.Initially,imports from China that faced competition from other countries imports(i.e.,ones that are perfect or very close substitutes)lost more market share than products for which China was the sole provider,such as iPhones.For exam
181、ple,Chinas share of U.S.tex-tile and footwear importswhich are labor-intensive,less sophisticated productsfell from 39 percent in 2017 to 27 percent in 2023.However,between 2017 and 2023,even Chinas share of U.S.machinery and electronics importsproducts for which Chinese manufacturers have proprieta
182、ry technologies and specialized productsfell from 36 percent to 22 percent.14 In 2023,imports from China in every notable commodity group registered a decline in com-parison with 2022.This decline in Chinas share of total U.S.imports reflects transfers of some operations by non-Chinese companies out
183、 of China to reduce risks from escalating U.S.-China tensions.For example,Apple has relocated some iPhone assembly to India as part of its efforts to diver-sify its global production away from China.15 Prior to 2018,60 percent of all Chinese exports to the United States were made by factories owned
184、by non-Chinese firms;in the computer and electronics sector,68 percent of Chinese exports to the United States were manufactured by non-Chinese firms.16 However,2023 seems to have marked a turning point.The sharp decline in imports from China across so many product categorieswhich occurred during th
185、e five years following the imposition of higher U.S.tariffs in 2018 and 2019suggests that U.S.importers have substantially shifted supply chains out of China to other countries.U.S.imports from China have continued to fall in 2024,although at a slower pace2.5 percent through April 2024.17Economic Co
186、sts of the Tariffs Since 2017,several U.S.government policy goals based on increasing tariffs on Chinese imports have been achieved:The value of imports and the share of Chinese imports in total U.S.imports have fallen,as has the bilateral trade deficit.These shifts in trade with China have,however,
187、inflicted economic costs on both China and the United States.In this section,we review estimates of those costs.14 Aggregate import figures from China were taken from Bureau of Industry and Security,undated.Sta-tistics for trade with the world and more-detailed commodity imports from China were take
188、n from U.S.Census Bureau,undated-b.Aggregates from the Bureau of Industry and Security and those computed from USA Trade Online differed slightly,by less than 1 percent.15 Irene Benedicto,“Why Apple Is Manufacturing the iPhone 15 in India,”Forbes,August 17,2023.16 Mary E.Lovely and Yang Liang,“Trump
189、 Tariffs Primarily Hit Multinational Supply Chains,Harm US Technology Competitiveness,”Policy Brief 18-12,Petersen Institute for International Economics,May 2018.17 U.S.Census Bureau,undated-b.Effectiveness of U.S.Policies to Achieve Fairer Trade with China17Costs to ChinaSeveral studies have attemp
190、ted to estimate or project the cost of the 2018 tariff increases.In World Economic Outlook,October 2019,the International Monetary Fund(IMF)estimated a prospective cost to China of 0.3 to 0.4 percent of its 2019 gross domestic product(GDP)and sustained losses of 0.2 percent of GDP from the combined
191、effects of U.S.tariff increases and Chinas retaliatory increases.18 In current dollars,those losses would have been approximately$60 billion in 2019 and$36 billion in 2023.Economists Eddy Bekkers and Sofia Schroeter similarly estimated that the increases in Chinese and U.S.tariffs may reduce Chinese
192、 GDP by 0.2 percent per year on an ongoing basis.19In a 2021 paper,Davin Chor and Bingjing Li used high-frequency data on nighttime illu-mination in certain Chinese localities and tied those data to measures of trade exposure at those locations based on the Chinese exporters located there.The trade
193、exposure measure was constructed from the geocoordinates of the Chinese firms.20 By exploiting within-grid variations over time and controlling for grid-specific contemporaneous trends,they found that each percentage point increase in exposure to higher U.S.tariffs was associated with a 0.59 percent
194、 reduction in night-time luminosity in regions where Chinese firms that are major U.S.exporters reside.They combined that finding with correlations between night-time illumination and economic output to estimate the economic costs of the tariffs.They inferred that 2.5 percent of Chinas total populat
195、ionthose who live in the grids that bore the largest U.S.tariff shocksexperienced a 2.52 percent decrease in income per capita and a 1.62 percent decline in manufacturing employment relative to unaffected grids.They did not find significant effects from Chinas retaliatory tariffs on Chinese incomes
196、or manufac-turing employment.Costs to the United StatesSeveral studies have attempted to quantify the economic costs of the tariffs to the U.S.econ-omy.According to the IMF estimates discussed previously,the estimated cost of the direct effects of the tariffs on the U.S.economy in 2019 was estimated
197、 at 0.18 percent of GDP;the cost in 2023 was projected to be 0.1 percent of GDP on an ongoing basis.Dollar costs would have been$39 billion and$27 billion for 2019 and 2023,respectively.21 Bekkers and Schroeter estimated the direct cost to the U.S.economy at 0.16 percent of GDP in 2019 and projected
198、 18 Percentages estimated from International Monetary Fund,World Economic Outlook,October 2019:Global Manufacturing Downturn,Rising Trade Barriers,October 2019,Scenario Figure 1.2.1,p.38.19 Bekkers and Schroeter,2020.20 Davin Chor and Bingjing Li,Illuminating the Effects of the US-China Tariff War o
199、n Chinas Economy,National Bureau of Economic Research,Working Paper 29349,October 2021.21 Percentages estimated from International Monetary Fund,2019,Scenario Figure 1.2.1,p.38.The Effectiveness of U.S.Economic Policies Regarding China Pursued from 2017 to 202418that this loss would continue.Using t
200、his estimate,the costs to the United States would have been$34 billion in 2019 and$44 billion in 2023.22 Mary Amiti and her coauthors found that the increases in tariffs reduced U.S.aggregate welfare by$1.4 billion per month by December 2018$8.2 billion in total in 2018 as tar-iffs were repeatedly r
201、aised.They estimated the ongoing loss in U.S.welfare at$16.8 billion per year,23 which translates to 0.08 percent of 2019 GDP,because of the deadweight losses from the tariffs on the U.S.economy.24 The Congressional Budget Office concluded that the increases in tariffs would reduce U.S.GDP by 0.5 pe
202、rcent in 2020($107 billion)and reduce average real household income by$1,277(in 2019 dollars)in 2020.25Consistent with international trade theory and numerous studies on the economic effects of tariffs,Aaron Flaaen and Justin Pierce found that the increases in U.S.tariffs resulted in a reduction in
203、U.S.manufacturing output,exports,and employment.26 They estimated that U.S.manufacturers that were highly exposed to the tariffs experienced a 1.4 percent reduc-tion in employment because of the higher costs of imported inputs and the effects of retalia-tory tariffs on their exports.These losses wer
204、e only partially offset by a 0.3 percent increase in manufacturing employment in the industries that the tariffs were designed to protect.27 To illustrate the consequences of the tariffs:U.S.firms that use an input imported from China must pay the additional costs of the tariffs.This puts them at a
205、cost disadvantage against Canadian firms that use the same input to manufacture the same product.Both sell into the North American free trade area,but the U.S.firm has to absorb the cost of the tariff on the input imported from China,while the Canadian firm does not.The declines in exports,output,an
206、d employment found by Flaaen and Pierce reflect these outcomes.Amiti and her coauthors found that the tariffs resulted in a 1 percentage point increase in U.S.producer prices.The average rate of producer price inflation between 1990 and 2018 was just over two percentage points,so the tariffs increas
207、ed the rate of producer price inflation by almost 50 percent.28 Companies that experienced a sharp increase in tariffs on imports of inputs increased factory-gate prices by 4.1 percent.2922 Bekkers and Schroeter,2020.23$16.8 billion equals$1.4 billion per month times 12 months.24 Mary Amiti,Stephen
208、J.Redding,and David E.Weinstein,“The Impact of the 2018 Tariffs on Prices and Welfare,”Journal of Economic Perspectives,Vol.33,No.4,Fall 2019.25 Congressional Budget Office,The Budget and Economic Outlook:2020 to 2030,January 2020.26 Aaron Flaaen and Justin Pierce,Disentangling the Effects of the 20
209、18-2019 Tariffs on a Globally Connected U.S.Manufacturing Sector,Finance and Economics Discussion Series 2019-086,Divisions of Research and Statistics and Monetary Affairs,Federal Reserve Board,December 23,2019.27 Flaaen and Pierce,2019.28 Amiti,Redding,and Weinstein,2019.29 Flaaen and Pierce,2019.E
210、ffectiveness of U.S.Policies to Achieve Fairer Trade with China19The economic literature on the 20182019 tariff increases finds that the entire cost of the tariffs has been passed through to U.S.consumers and businesses.30 A complete pass-through of tariffs to an importing nation that is a major con
211、sumer of the products,such as the United States,is unusual.In this case,the complete pass-through is even more unusual,as Chinese exporters benefited from the depreciation of the renminbi in 2019,2020,and 2023 compared with its rate in 2017.Studies generally find that when important import markets f
212、ace abrupt increases in prices because of higher tariffs or shifts in exchange rates,exporters to the coun-try must reduce prices to keep market share.In these instances,the cost of the tariff is shared between the importing country and the exporting country.However,there was no notice-able decrease
213、 in the price of exports from China following the tariff increases in 2018 and 2019.Lower-income groups disproportionately bore these price increases because they spend a larger share of their income on goods imported from China,such as clothing and shoes,compared with middle-and upper-income groups
214、.31 In short,the increases in U.S.tariffs in 2018 resulted in reductions in U.S.manufacturing exports,output,and employment;accelerated producer and consumer price inflation;and diminished household welfare,especially for lower-income households.Proposed Changes to International Trade Rules and Norm
215、sAnother set of policies pursued by the U.S.government to promote fair trade consists of pro-posed changes to international trade rules and norms.Continuing the pursuit of establishing and revising international trade rules and norms could advance several key U.S.goals regard-ing fair trade.Establis
216、hing new trade agreements could codify standards of fair treatment for companies in other countries,and revising trade rules could standardize expectations for fair competition by addressing such issues as government subsidies.The WTO has historically served as a venue for addressing such issues,but
217、 gridlock over disputes has raised questions about its role in resolving international trade disputes.32 Outside the WTO,the U.S.govern-ment has also often called on China to ensure fair treatment for U.S.companies.Since the 2010s,the U.S.government has focused on regional trade agreements as a mean
218、s of countering Chinese influence and advancing fair trade goals.Although Trump success-fully negotiated the United StatesMexicoCanada Agreement to replace NAFTA,he aban-doned the Obama-era TPP agreement and did not propose a substitute regional trade agree-30 Fajgelbaum,Pablo D.,and Amit K.Khandelw
219、al,“The Economic Impacts of the USChina Trade War,”Annual Review of Economics,Vol.14,August 2022.31 Liang Bai and Sebastian Stumpner,“Estimating US Consumer Gains from Chinese Imports,”American Economic Review:Insights,Vol.1,No.2,September 2019.32 Council of Councils,“The WTO at a Crossroads:What th
220、e Failed Ministerial Conference Means,”Coun-cil on Foreign Relations,March 6,2024.The Effectiveness of U.S.Economic Policies Regarding China Pursued from 2017 to 202420ment for the Indo-Pacific.33 Biden has advanced the IPEF,which omitted the TPPs provision to open U.S.markets to all signatories but
221、 included provisions to strengthen supply chain resilience and update digital trade terms.As previously mentioned,the U.S.government has signed agreements on three of the four pillars of the IPEF but has not agreed to the trade pillar because of political opposition in the U.S.Congress.34 Despite it
222、s failure to formally accede to the TPP,the United States has had some success in influencing international trade norms and rules.As of 2024,12 countries had acceded to the treaty,which has subsequently been renamed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership(CPTPP).The
223、 CPTPP includes provisions that address several issues of concern to the United States,including state intervention in markets and protections for intellectual property rights.35 Thus,U.S.efforts to revise international rules and standards in a manner that promotes fair trade have achieved at least
224、some success.To advance its fair-trade goals and counter Chinas Belt and Road Initiative(BRI),the United States has introduced a series of initiatives aimed at upholding its key role in shaping global trade rules and norms.During the G7 meeting in 2021,the United States announced and spearheaded an
225、initiative titled Build Back Better World,later rebranded as the Partner-ship for Global Infrastructure and Investment(PGII).36 This initiative represents the largest Western effort thus far to counter influence garnered by China through BRI.Biden stated that,over five years,the United States would
226、mobilize$200 billion in grants and investment from the federal and private sectors to support projects in low-to middle-income countries.37 The PGII focuses on investments in four areas:climate change,global health,digital infra-structure,and gender equality.38 Unlike BRI,which is unilaterally manag
227、ed and supervised by the Chinese government,the PGII is a multilateral effort that relies on commitments from the United States and its G7 partners.The effectiveness of the initiative in countering BRI remains undetermined,primarily because of the uncertain nature of project finance;the inability to
228、 swiftly launch projects,compared with China,because of much longer reviews concerning the environmental and financial viability of the proposed projects;and skep-ticism from private sector companies regarding returns on investment.39 These challenges 33 Katie Lobosco,“NAFTA Is Officially Gone.Heres
229、 What Has and Hasnt Changed,”CNN,July 1,2020.34 Ji Siqi,“Nations in Bidens Indo-Pacific Framework Are Losing Interest,Trade Group Official Warns,”South China Morning Post,January 18,2024.35 Dharshini David,“CPTPP:UK Agrees to Join Asias Trade Club but What Is It?”BBC,July 15,2023.36 White House,“Par
230、tnership for Global Infrastructure and Investment at the G7 Summit,”fact sheet,June 13,2024b.37 White House,“PresidentBiden and G7 Leaders Launch Build Back Better World(B3W)Partnership,”fact sheet,June 12,2021a.38 White House,2024b.39 Simone McCarthy,“Chinas Belt and Road Is Facing Challenges.But C
231、an the US Counter It?”CNN,August 22,2022.Effectiveness of U.S.Policies to Achieve Fairer Trade with China21have made it difficult for the United States to provide a viable alternative to BRI for lower-to middle-income countries.Another initiative,spearheaded by the United States through the G20 and
232、titled the IndiaMiddle EastEurope Corridor(IMEC),has made little progress.Announced during the G20 summit in September 2023,IMEC aims to better facilitate trade among India,the Arabian Gulf states,and Europe.40 Another strategic goal of IMEC is to counter Chinas increasing engagement with Saudi Arab
233、ia and the United Arab Emirates.IMEC focuses not only on trade connections but also on the development of electricity and digital infra-structure,along with pipelines for exporting clean hydrogen.IMEC remains largely in the planning stages,however.41In Africa,the Lobito Corridor,known as the Trans-A
234、frican Corridor,aims to link Angola,the Democratic Republic of the Congo,and Zambia,ultimately extending to the Indian Ocean.The successful implementation of the Lobito Corridor would facilitate increased pro-duction and exports of critical minerals(such as copper and cobalt),reducing dependence on
235、China for these critical minerals.42 Both IMEC and the Lobito Corridor represent substantial endeavors that will require many years to implement.Alongside these global initiatives,the United States has intensified its efforts to reduce the dependence of Asian countries on China.These endeavors inclu
236、de the Indo-Pacific Eco-nomic Framework,the Japan-U.S.Clean Energy Partnership,the Japan-U.S.-Mekong Power Partnership,the U.S.-Taiwan Economic Prosperity and Partnership Dialogue,and the Min-erals Security Partnership.These regional initiatives serve to strengthen collaboration among allies and par
237、tners.By concentrating on specific areas and sectors within the supply chain,the United States is encouraging countries to reduce their dependence on China.Many of these initiatives have just gotten underway,so it is too soon to assess their effectiveness.The U.S.government has also demanded that Ch
238、ina ensure fair treatment of U.S.com-panies.In 2024,for example,Blinken called on his Chinese counterparts to provide a“level playing field”for U.S.companies operating in China.43 However,Chinese officials have made little effort to accommodate these demands.40 White House,“World Leaders Launch a La
239、ndmark India-Middle East-Europe EconomicCorridor,”fact sheet,September 9,2023a.41 White House,2023a.42 David Sacks,“Will the U.S.Plan to Counter Chinas Belt and Road Initiative Work?”blog post,Council on Foreign Relations,September 14,2023.43 Simon Lewis,“In China,Blinken Urges Fair Treatment of Ame
240、rican Companies,”Reuters,April 25,2024.The Effectiveness of U.S.Economic Policies Regarding China Pursued from 2017 to 202422Industrial PoliciesUnder the Biden administration,the U.S.government has passed several pieces of legisla-tion supporting industrial policies.The Bipartisan Infrastructure Law
241、(BIL),signed into law in November 2021 and also known as the Infrastructure Investment and Jobs Act,funds improvements to transportation infrastructure and some investments in critical materials.44 The CHIPS and Science Act authorizes federal funding for research,development,and man-ufacturing of se
242、miconductors in the United States.45 And the IRA,passed in 2022,aims to strengthen the United States production of green energy through investments in relevant technologies and start-up manufacturers.46 The administration has also used the Defense Production Act(DPA)to provide grants for R&D and inv
243、estments in the supply chain for critical minerals.These pieces of legislation were passed and are being used,in part,to advance fair trade by countering Chinese industrial policies,thereby creating a more level playing field for U.S.companies to compete against Chinese firms in industries deemed cr
244、iti-cal to U.S.economic and national security.Many of the investment projects have just gotten underway(as of 2024),but preliminary assessments indicate that investment in manufactur-ing has generated significant growth.Whether these investments will increase the number of workers in manufacturing i
245、s unclear,however,as much of the work has been automated.47 However,U.S.government investment in infrastructure should improve the competitiveness of U.S.exporters.ConclusionThe U.S.government under Trump and Biden has upheld fair trade as a key goal for its economic policy regarding China.The sub-o
246、bjectives that make up this goal have achieved varying degrees of success(Table 2.2).Relevant actions to achieve this goal include rais-ing tariffs,proposing changes to regional trade rules and norms,and supporting industrial policies.The most significant measure undertaken to achieve this goal has
247、been the tariff increases adopted by the U.S.government in 2018 and 2019.These increases have achieved the goal of reducing the value of Chinese imports and narrowing the bilateral trade deficit.Other U.S.initiatives to promote fair trade with China,such as regional trade agreements,have made less p
248、rogress.The U.S.governments effort to shape international trade rules and 44 Federal Transit Administration,“Bipartisan Infrastructure Law,”webpage,U.S.Department of Trans-portation,last updated November 15,2023.45 White House,“CHIPS and Science Act Will Lower Costs,Create Jobs,Strengthen Supply Cha
249、ins,and Counter China,”fact sheet,August 9,2022b.46 Christina DeConcini,Jennifer Rennicks,and Shannon Wood,“One Year in,How the Inflation Reduc-tion Act Is Creating a Manufacturing Resurgence in the US,”World Resources Institute,August 9,2023.47 Timothy Aeppel,“US Employment Boom Leaves Factory Work
250、ers Behind,”Reuters,April 4,2024.Effectiveness of U.S.Policies to Achieve Fairer Trade with China23norms has yielded some fruit,as many countries accepted proposals associated with the TPP.However,the United States decided not to accede to the treaty.U.S.efforts to compel China to change how it trea
251、ts U.S.companies operating in China and curtail its use of subsi-dies to give its companies a competitive advantage have borne little fruit.Domestically,the U.S.government is providing very large subsidies for industries deemed critical,and invest-ment in new plants in these industries has increased
252、 sharply.The U.S.government is also attempting to diversify sources of supply away from China for a variety of products.As of 2024,it has made some progress toward diversification,but many products deemed critical are still primarily sourced from China.U.S.policies to advance fair trade have also im
253、posed costs on U.S.businesses,workers,and consumers.Notably,the tariff increases resulted in a reduction in overall welfare for the United States.They contributed to reductions in U.S.manufacturing exports,output,and employment;accelerated producer and consumer price inflation;and diminished househo
254、ld welfare.TABLE 2.2Assessment of U.S.Policies to Promote Fair TradeSub-ObjectiveAssessmentReduce imports from China SuccessReduce bilateral trade deficitSuccessIncrease U.S.exports to ChinaMixedDiversify supply chains MixedShape international trade rules and normsMixedConvince China to treat U.S co
255、mpanies equally with Chinese companies FailureConvince China to stop its unfair trade practicesFailureSOURCES:Contains information from Blinken,2022,and Yellen,2023.25CHAPTER 3Effectiveness of U.S.Economic Policies to Defend U.S.InterestsIn this chapter,we evaluate the effectiveness of U.S.policies
256、designed to protect the economic interests of the United States and its allies and partners.In particular,we focus on restrictions on the export of technologies that could grant China advantages in market sectors featuring advanced technologies,we review the effects of restrictions on Chinese invest
257、ment in U.S.key industries,and we consider the effects of restrictions on U.S.investment in Chinese tech-nology sectors that could be viewed as threats to U.S.interests.To facilitate a more thorough analysis,we conducted case studies on five product and material sectors in which the U.S.government h
258、as adopted restrictions on trade and investment:polysilicon,lithium,graphite,rare earth minerals,and advanced semiconductors.Restrictions on Chinas Direct Foreign Investment in the United StatesCFIUS is an interagency committee authorized to review certain transactions involving for-eign investment
259、in the United States and certain real estate transactions by foreign persons.These reviews are meant to determine the effects of such transactions on the national secu-rity of the United States.1 Around the mid-2010s,U.S.national security policymakers and professionals became increasingly concerned
260、that the legislation establishing CFIUS was inadequate for the U.S.government to intervene when Chinese entities were making minor-ity investments in U.S.technology companies.Although these investments did not provide investors with controlling stakes,they could permit the transfer of important U.S.
261、technolo-gies to China.The U.S.governments worries stemmed from dramatic increases in Chinese investments in U.S.technology companies beginning in 2014(Figure 3.1).Although Chinese FDI in 2014 hovered around$3.9 billion,by 2016,those investments ballooned to$27.4 bil-lion.In 2017,Chinese FDI fell to
262、$15 billion,much lower than 2016 but still nearly four times the 2014 investment total.During this time,Alibaba and Tencent(two Chinese technology 1 U.S.Department of the Treasury,“The Committee on Foreign Investment in the United States(CFIUS),”webpage,undated.The Effectiveness of U.S.Economic Poli
263、cies Regarding China Pursued from 2017 to 202426companies)and Hone Capital(a Chinese venture capital fund)began to aggressively invest in U.S.technology start-ups.2 For example,by 2017,Tencent had invested in over 40 technology firms,including Snap and Tesla.3 The rapid increase in Chinese FDI,and e
264、specially the types of companies that Chinese investors were targeting,generated concerns in the U.S.intelli-gence community and in Congress about loss of critical U.S.technologies to China.4The Foreign Investment Risk Review Modernization ActThese investment-related concerns about national security
265、 and U.S.leadership in emerging technologies led to the drafting and passage of FIRRMA,which became law on August 13,2 Zimmerman,Evan J.,“The Foreign Risk Review Modernization Act:How CFIUS Became a Tech Office,”Berkeley Technology Law Journal,Vol.34,No.4,2019.3 Steven Russolillo and Wayne Ma,“Tence
266、nt Continues to Snap Up Stakes in U.S.Startups,”Wall Street Journal,November 8,2017.4 Andres B.Schwarzenberg,U.S.-China Investment Ties:Overview and Issues for Congress,IF11283,Con-gressional Research Service,August 7,2019.FIGURE 3.1Flows of Foreign Direct Investment Between China and the United Sta
267、tes52025150302024 U.S.$billionsYear102014SOURCES:Data on Chinese FDI in the United States are from Bureau of Economic Analysis,“Direct Investment and Multinational Enterprises(MNEs),”database,U.S.Department of Commerce,last updated July 23,2024.Data on U.S.FDI in China are from multiple editions of
268、the National Bureau of Statistics of China,China Statistical Yearbook,various years(19992023).20162017201820192020202120152022YearChinese FDI in the United StatesU.S.FDI in ChinaEffectiveness of U.S.Economic Policies to Defend U.S.Interests272018.5 FIRRMA strengthens and modernizes CFIUS to better a
269、ddress concerns about U.S.national security and U.S.technological leadership.The law also broadens the authority of CFIUS to review investments beyond mergers,acquisitions,and takeovers and potentially block minority investments,such as specified noncontrolling investments and real estate transactio
270、ns involving foreign persons.Under FIRRMA,CFIUS has the authority to review investments that might pose potential risks to national security and U.S.leadership in a spe-cific technology.FIRRMA also permits CFIUS to look at past patterns of behavior by the investor or the investors home country when
271、determining whether the investment is not in the U.S.national interest.Not surprisingly,legislators were highly concerned about China and inserted a reporting requirement about Chinese investment in the United States as part of the legislation.6Changes in Foreign Direct Investment Flows Between Chin
272、a and the United StatesAlthough China has invested massively in U.S.portfolio investments,especially purchases of U.S.government bonds,Chinese FDI in the United States was small until 2014.Beginning in 2014,however,Chinese FDI surged.This surge took place during a period when venture capi-tal invest
273、ment in information technology and other high-technology sectors was increasing rapidly in the United States.FIRRMA abruptly changed this trend.Following its passage in 2018,Chinese FDI in the United States fell sharply.By 2022,it had fallen to just$427 million,less than 2 percent of the inflow in 2
274、016(Figure 3.1).In contrast,flows of U.S.FDI to China have been much less variable,fluctuating between$11 billion and$14 billion per year between 2014 and 2022,the latest year for which we have data(Figure 3.1).This relatively constant flow of funds reflects reinvestments in China by U.S.com-panies
275、that have operations there,as well as new investments from the United States.Although a 2022 survey by the American Chamber of Commerce in Shanghai found that 19 percent of U.S.companies in China were cutting their investments,a large majority of respondents said they would maintain or increase thei
276、r investments.7 However,U.S.companies are much more negative about doing business in China than in the past,which is reflected in the survey.Case Studies of Five Key Products and MaterialsThe enactment of FIRRMA in 2018 resulted in a dramatic decline in Chinese access to U.S.technology through FDI.I
277、n addition to the passage of FIRRMA,the U.S.government has 5 U.S.Department of the Treasury,undated.6 Zimmerman,2019.7 Evelyn Cheng,“American Companies Increasingly Look Outside of China After Covid,”CNBC,Octo-ber 27,2022.The Effectiveness of U.S.Economic Policies Regarding China Pursued from 2017 t
278、o 202428passed legislation and carried out other policies to diversify U.S.supply chains and restrict Chinese access to advanced technologies.We illustrate the variety of policies and their relative effectiveness through five case studies of specific products and materials:polysilicon,lith-ium,graph
279、ite,rare earths,and advanced semiconductors and semiconductor manufacturing equipment.For each case study,we assess the relative success of efforts to diversify U.S.supply chains or constrain Chinas access to advanced technologies.Case Study 1:PolysiliconPolysilicon is a high-purity,crystallized ver
280、sion of silicon and a key material in the production of photovoltaic cells,from which solar panels are constructed.Manufactured by processing metallurgical-grade silicon(derived from quartzite)to higher levels of purity,polysilicon is then melted into ingots,which are sliced into wafers before they
281、are processed into solar cells.8 Polysilicon is also used in the production of semiconductors other than solar cells.Trends in Global Market ShareOver the past decade,China has become the worlds largest producer of polysilicon.During this period,global demand for polysilicon has soared because of th
282、e rise in production of solar panels.In 2012,China produced 30 percent of the global production of solar-grade polysilicon;by 2021,Chinas market share had reached 80 percent.In 2022,seven of the top ten polysilicon companies by production volume were Chinese(Table 3.1).9 Chinese PoliciesIn the 1990s
283、 and early 2000s,China imported most of its polysilicon from Europe and the United States.10 However,following its 11th Five-Year Plan(2006 to 2011),the Chinese gov-ernment subsidized Chinese companies engaged in the production of polysilicon and other steps in the solar panel supply chain.11 Chines
284、e companies also signed technology transfer agreements with European companies to learn how to process highly purified silicon.12 As a consequence,Chinese companies ramped up production and have come to dominate the global polysilicon market.In 2014,following an investigation by the Chinese governme
285、nt that found that Chinese manufacturers“suffered substantial harm”because of U.S.subsidies,China levied anti-8 Edward Lees and Ulrik Fugmann,“What You Need to Know About Polysilicon and Its Role in Solar Modules,”Viewpoint,BNP Paribas Asset Management,October 13,2021.9 Kelly Pickerel,“Chinas Share
286、of the Worlds Polysilicon Production Grows from 30%to 80%in Just One Decade,”Solar Power World,April 27,2022.10 Yasmina Abdelilah,Heymi Bahar,Franois Briens,Piotr Bojek,Trevor Criswell,Kazuhiro Kurumi,Jeremy Moorhouse,Grecia Rodrguez,and Kartik Veerakumar,Special Report on Solar PV Global Supply Cha
287、ins,International Energy Agency,August 2022,p.108.11 Shannon Osaka,“How USA-First Failed the Solar Industry,”Grist,May 19,2022.12 Emily Feng,“How Did China Become the Worlds Dominant Polysilicon Producer?”NPR,July 6,2021.Effectiveness of U.S.Economic Policies to Defend U.S.Interests29dumping duties
288、on imports of U.S.and South Korean polysilicona move that was part of a broader trade conflict over the solar panel supply chain.13 Chinas introduction of duties on polysilicon imports and the declining cost of polysilicon production in China(due,in large part,to the subsidies provided by the Chines
289、e government)contributed to the loss of global market share by Hemlock Semiconductor,a U.S.-based company jointly owned by Corning Inc.and Shin-Etsu Handotai.Hemlock was the global leader in the polysilicon market from 1994 until 2011,but its global market share fell sharply after 2013.14 In additio
290、n to expanding the production of polysilicon,the Chinese government has sup-ported the construction and expansion of quartzite mines.Many of the worlds active quartz-ite mines are in China,although there are significant quartzite reserves in the United States,Brazil,and Norway.1513“China Sets Final
291、Duties on U.S.Solar Materials,”Reuters,January 20,2014.14 Heather Jordan,“Hemlock Semiconductor to Cut 100 Jobs,”MLive,October 18,2017.15 Lees and Fugmann,2021.TABLE 3.1Top Ten Global Polysilicon Manufacturing Companies,by Output in 2022CompanyCountryEstimated Production Capacity(metric tons)Global
292、RankTongwei Co.,Ltd.China345,0001GCL Technology Holdings Ltd.China300,0002Daqo New Energy Corp.China240,0003Xinte Energy Co.,Ltd.China200,0004Xinjiang East Hope New Energy Co.,Ltd.China130,0007Asia Silicon(Qinghai)Co.,Ltd.China92,0006Wacker Chemie AGGermany/United States85,0005OCI Company Ltd./OCI H
293、oldings Co.,Ltd.South Korea/Malaysia41,5008Hemlock Semiconductor Operations LLCUnited States20,0009Shaanxi Non-Ferrous Tianhong REC Silicon Mat.Co.,Ltd.China19,30010SOURCE:Estimated production capacities and global rankings are from Johannes Bernreuter,“Polysilicon Manufacturers,”Bernreuter Research
294、,June 29,2020.The Effectiveness of U.S.Economic Policies Regarding China Pursued from 2017 to 202430U.S.Policy ResponseThe concentration of solar manufacturing capacity in China over the past decade raised con-cerns among U.S.manufacturers and U.S.officials about risks to the supply chain.16 U.S.sol
295、ar companies pushed for increased production of polysilicon outside China,arguing that“a less-concentrated supply chain will be more resilient,emit less carbon,and circumvent companies accused of using forced labor.”17In response to Chinese actions and the loss of global market share by U.S.companie
296、s,in 2012,the Obama administration imposed tariffs on solar panels and other solar power equipment from China.The Trump administration imposed additional tariffs on Chinese solar equipment in 2018,and the Biden administration extended those tariffs,with some exemptions.18U.S.authorities also passed
297、legislation to address another source of Chinese uncompet-itive behavior.Chinese polysilicon manufacturers have long benefited from reduced labor costs by using forced labor in the Xinjiang Uyghur Autonomous Region.The Hoshine Silicon Industry factory,for example,includes two facilities that CNN has
298、 identified as detention centers for Uyghurs.19 According to the U.S.Department of Labor,“nearly half”of global polysilicon production comes from the Xinjiang region of China.20 The Department of Labor estimates that 100,000 Uyghurs and other ethnic minorities“may be working in conditions of forced
299、labor following detention in re-education camps.”21Passed by Congress in December 2021,the Uyghur Forced Labor Prevention Act came into effect in June 2022.The law bars all goods that are fully or partially produced in the Xinjiang Uyghur Autonomous Region from entry into the United States on the gr
300、ounds that they may be produced using forced labor.Polysilicon is one of just a few products designated as a“high-priority”sector for enforcement.22 The Biden administration also 16 Prachi Patel,“The Inflation Reduction Act vs.Chinas PV Dominance,”IEEE,October 15,2022.17 Matt Blois,“The US Solar Ind
301、ustry Has a Supply Problem,”Chemical and Engineering News,Septem-ber 18,2022.18 Osaka,2022.19 Michael Shellenberger,“China Helped Make Solar Power Cheap Through Subsidies,Coal and Allegedly,Forced Labor,”Forbes,May 19,2021.20 U.S.Department of Labor,“Traced to Forced Labor:Solar Supply Chains Depend
302、ent on Polysilicon from Xinjiang,”infographic,undated.21 Bureau of International Labor Affairs,“Against Their Will:The Situation in Xinjiang,”webpage,U.S.Department of Labor,undated.22 Public Law 117-78,An Act to Ensure That Goods Made with Forced Labor in the Xinjiang Uyghur Autonomous Region of th
303、e Peoples Republic of China Do Not Enter the United States Market,and for Other Purposes,December 23,2021.Effectiveness of U.S.Economic Policies to Defend U.S.Interests31banned imports of other solar materials from Hoshine in 2021,citing allegations of using forced labor.23The U.S.response to Chinas
304、 grip on the solar panel supply chain extends beyond tar-iffs and legislation about forced labor.The 2022 IRA provides a tax credit for photovoltaic modules and their subcomponents,including solar-grade polysilicon,produced in the United States.24 Congress estimated that the tax credits for elements
305、 of clean energy productionincluding wind turbines,solar panels and their components,batteries for electric vehicles(EVs)and the power grid,and related mineral mining and processingwould amount to more than$30 billion in the decade following implementation.The IRA also includes tax incentives for ge
306、nerating electricity using clean energy sources,a measure that is spurring the installation of more solar projects.Under the IRA,the U.S.government is providing loan guarantees for investments in new factories that manufacture clean energyrelated compo-nents as well.25Effectiveness of U.S.Policy Mea
307、suresNeither tariffs nor the legislation on forced labor in Xinjiang appears to have substantially affected Chinas dominance in the polysilicon industry.However,although it is still too early to tell,the IRA could diminish Chinas share of polysilicon supplies by expanding the ranks of U.S.-based sup
308、pliers and U.S.production.Analysts believe that U.S.tariffs have not yet had their intended effect of bolstering the domestic solar cell and solar panel industries by protecting U.S.manufacturers from Chi-nese competitors.Rather,the tariffs appear to have increased the costs of installing utility-sc
309、ale solar panels in the United States.26 Some argue that tariffs implemented before 2012 could have had a more substantial effect by deterring Chinese state subsidies but that,after that year,it was too late.“Both established U.S.manufacturers of conventional silicon solar panels and venture-funded
310、Silicon Valley start-ups developing new solar technologies failed in the face of a flood of cheap Chinese silicon panels,”one analyst wrote in 2018.27 There is some evidence that the tariffs have increased solar panel assembly in the United States using imported cells,but the growth in U.S.assembly
311、capacity has been mostly small-scale and has not met U.S.demand.Most U.S.solar industry groups oppose the tariffs,arguing 23 Michael Martina,Karen Freifeld,and David Shepardson,“U.S.Bans Imports of Solar Panel Material from Chinese Company,”Reuters,June 24,2021.24 Solar Energy Technologies Office,“F
312、ederal Tax Credits for Solar Manufacturers,”webpage,U.S.Depart-ment of Energy,undated.25 Timothy C.Brightbill,Laura El-Sabaawi,and Paul A.Devamithran,“The Inflation Reduction Act Pro-vides Potential Game-Changing Benefits for U.S.Solar Industry,”Wiley,August 15,2022.26 Osaka,2022.27 Varun Sivaram,“T
313、rumps Solar Tariffs Create Far More Losers than Winners,”Council on Foreign Rela-tions,January 23,2018.The Effectiveness of U.S.Economic Policies Regarding China Pursued from 2017 to 202432that“theres now more than a decade of evidence proving that tariffs do not encourage U.S.solar manufacturing.”2
314、8The Uyghur Forced Labor Prevention Act has not had a significant effect on Chinese global sales of polysilicon.In response to the Uyghur Forced Labor Prevention Act,Chinese solar companies are reportedly dividing their supply chains,“creating a Xinjiang-free line for the U.S.while continuing to sup
315、ply other global clients from factories in the region.”29 The U.S.-bound supply chain accounts for between 7 and 14 percent of the total production of Chinese solar companies.Because silicon metal from Xinjiang is used as feedstock in the production of polysilicon by Chinese companies,even Chinese c
316、ompanies located outside Xinjiang may use components built with forced labor.30 The U.S.-bound supply chain sources polysilicon produced by companies based in the United States and Germany,creating a higher-priced market for non-Chinese polysilicon.The import ban does appear to have had some effect
317、on polysilicon market share.In 2020,polysilicon produced in Xinjiang accounted for about 45 percent of global polysilicon production,but that share dropped to 35 percent in 2022.31Because non-Chinese sources of polysilicon are adequate to meet the needs of the U.S.market,the law does not appear to h
318、ave had a significant effect on Chinese state policies and labor practices in Xinjiang.32 Other major importers will likely need to pass similar laws to have a significant effect on Xinjiangs share of global polysilicon markets.The EU,for example,passed legislation in April 2024 banning the import o
319、f products made with forced labor.33 Since its passage,the IRA has reportedly“spurred hundreds of billions of dollars in invest-ment in clean technology.”34 Hemlock Semiconductor and Wacker Chemie AG are increas-ing output of polysilicon,and REC Silicon has reopened a plant in Moses Lake,Washing-ton
320、.35 In contrast to Hemlock Semiconductor and Wacker,which manufacture polysilicon for semiconductors,REC Silicon is making polysilicon to be used in solar panels.Despite the launch of construction of 52 new domestic solar manufacturing facilities from August 28 Osaka,2022.29 Lili Pike,“Has the U.S.C
321、ampaign Against Uyghur Forced Labor Been Successful?”Foreign Policy,August 21,2023.30 Kelly Pickerel,“The Global Polysilicon Market Is Entering Another Severe Oversupply Situation,”Solar Power World,November 28,2023.31 Pike,2023.32 Pike,2023.33 European Parliament,“Towards an EU Ban on Products Made
322、 with Forced Labour,”press release,Octo-ber 16,2023.34 Justin Worland,“How the Inflation Reduction Act Has Reshaped the U.S.and the World,”Time,August 11,2023.35 Ivan Penn,“Key Solar Panel Ingredient Is Made in the U.S.A.Again,”New York Times,April 25,2024.Effectiveness of U.S.Economic Policies to D
323、efend U.S.Interests332022 through July 2023(because of funding from the IRA),36 U.S.assemblers of solar panels still struggle,as Chinese manufacturers have moved assembly to Cambodia,Malaysia,Viet-nam,and Thailand.These assembly operations have cut prices by 50 percent compared with the previous yea
324、r(2022 to 2023),making U.S.assembly of solar panels uncompetitive.37 Consequently,although the IRA has helped existing manufacturers of polysilicon for semi-conductors,it will be difficult for the United States to compete with Chinese manufacturers of solar cells and solar modules,so demand for U.S.
325、polysilicon for solar panels is likely to be limited.Case Study 2:Lithium and Lithium-Ion BatteriesLithium is a soft,silver-white,flammable,alkaline metal and the lightest metal in the peri-odic table.It is used for air purification and in metallurgy,ceramics,glass,pharmaceuticals,polymers,and batte
326、ries.38 Lithium is considered a critical mineral because it is a key compo-nent in rechargeable lithium-ion batteries.Lithium-ion batteries are more energy-efficient and have longer life cycles than other commercial rechargeable batteries.They are used in portable consumer electronics,grid-scale ene
327、rgy storage,aerospace applications,and EVs,among other products.Consumption of lithium has skyrocketed in recent years as sales of EVs have taken off.Lithium-ion batteries accounted for 87 percent of global lithium con-sumption in 2023.39Trends in Global Market ShareAustralia and Chile,not China,are
328、 the largest sources of raw lithium in the world.Australia extracts lithium from granitic pegmatite and other ores from open pit mines.Lithium output from Australia accounted for 45 percent of global production in 2023(Table 3.2).Chile,which extracts lithium from brines,is the second largest source
329、of the material,accounting for 23 percent of global production.China ranks number three,accounting for 17 percent.Because of explosive growth in demand for lithium and the resulting rise in prices,several other countries have been increasing output.The United States,for example,has expanded producti
330、on at operations in Nevada and from other sources;over a dozen companies are exploring for or investing in U.S.lithium extraction operations.36 American Clean Power,Clean Energy Investing in America,August 2023,p.2.37 Evan Halper,“U.S.Solar Companies,Imperiled by Price Collapse,Demand Protection,”Wa
331、shington Post,April 25,2024.38 Dwight C.Bradley,Lisa L.Stillings,Brian W.Jaskula,LeeAnn Munk,and Andrew D.McCauley,“Lith-ium,”Professional Paper 1802K,in Klaus J.Schulz,John H.DeYoung,Jr.,Robert R.Seal II,and Dwight C.Bradley,eds.,Critical Mineral Resources of the United StatesEconomic and Environme
332、ntal Geology and Prospects for Future Supply,U.S.Geological Survey,2017.39 Brian W.Jaskula,“Lithium,”in U.S.Geological Survey,Mineral Commodity Summaries 2024,U.S.Department of the Interior,2024.The Effectiveness of U.S.Economic Policies Regarding China Pursued from 2017 to 202434Although many produ
333、cers refine their own lithium ore or brine,the refined productslithium carbonate or lithium hydroxidedo not attain the purity levels needed for batter-ies.Refined lithium carbonate,for example,is frequently sold at 99.5 percent purity,but battery manufacturers prefer 99.9 percent purity or higher.China has a dominant position in processing lithium to battery-grade levels and producing global lithi