Taking on China the Right Way

A new grand strategy for bringing economic patriotism and internationalism into harmony.

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U.S.-China relations have become increasingly volatile over the past decade. President Biden’s industrial strategy—a mix of tax credits, tariffs, and other protectionist measures that significantly expands upon the legacy of Trump’s U.S. Trade Representative Robert Lighthizer—has been driven by the fear that China will soon eclipse the United States in critical industries, including those necessary to fight climate change. Success largely hinges on America’s share of the global auto industry, which China threatens to flood with low-cost electric vehicles, self-driving cars and trucks, and corresponding advanced inputs.

That challenge underscores how much the two countries have radically departed from the path envisioned when the U.S. established Permanent Normal Trade Relations with China in 2000. While the U.S. has weathered numerous competitive pressures from its trade partners since the 1970s, the combined technological edge and economies of scale represented by EV-producer BYD and other Chinese firms is altogether of a different magnitude. An inadequate or blundering response by government and industry would all but assure that domestic automaking—and thus the bedrock of industrial know-how among American workers—goes the way of textiles and televisions.

How did we reach such a visceral, existential stage of competition? There are many factors, ranging from the profits-over-people mentality of U.S. multinationals and Chinese dictator Xi Jinping’s “Made in China 2025” agenda to Washington’s recent, halting attempts to restructure global trade. But to fully grasp the origins of “Chimerica” and its potential unraveling, argues historian Elizabeth O’Brien Ingleson, one must look back not just to the “China shock” of the aughts but to the foundations of China’s export-led development under Presidents Nixon, Ford, and Carter.

In her new book, Made in China: When US-China Interests Converged to Transform Global Trade, Ingleson traces China’s rise as a manufacturing leviathan to overlooked alliances and dynamics. Her account partially reframes an era marked by dramatic diplomatic breakthroughs as one of gradual yet persistent dialogue and deal-making between American businesspeople, Chinese state-designated traders and state-owned enterprises, and Chinese policymakers. These efforts were spurred by and dovetailed with the predominant concerns of America’s foreign policy elite. Nixonian realists and idealistic free-traders alike saw that the pursuit of trade integration served overarching geopolitical goals while defusing, at least in the near-term, anxiety and conflict over America’s future prosperity.

Following an era of stagflation, social unrest, and fears about the durability of the American dream, selling “Made in China” to the American public became the central, expedient way to extend America’s domestic model of consumer-led growth. Before the Great Recession exposed serious regional fault lines in America’s national economy, this strategy, aided by an exploding credit card market, helped prop up household demand without raising wages for the majority of American workers. Most observers, meanwhile, downplayed how China’s steady capture of global supply chains came at the expense of not just America’s rust belt regions but emerging economies in Africa, Latin America, and other parts of Asia.

Ingleson’s account of how U.S. policymakers and business lobbies embraced—and reimagined—the “Open Door” to China contains important lessons for those who are contemplating the merits of industrial policy and “friend-shoring.” Whether one favors strategic decoupling or reconciliation between the world’s two largest economies, her book reminds us that the stakes facing the current generation of American and Chinese policymakers exist in large part because past leaders on both sides of the bargain privileged profits and symbolic victories over sustainable, balanced, and fair trade. Any progress toward long-term reciprocity and mutual understanding between the United States and China depends on rectifying the sacrifices working communities were forced to bear in the name of now-obsolete grand strategies.

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At the heart of Ingleson’s account are two corresponding discursive shifts that profoundly impacted how American and Chinese policymakers approached China’s development. In Washington, this entailed a new understanding of the American policy of maintaining an “Open Door” to China, which had effectively fallen dormant in 1949 following China’s Communist Revolution. Encouraged by Cold War pivots and courtships initiated by Nixon, influential business lobbies would increasingly play up China as an untapped reserve of hundreds of millions of low-wage laborers. This was a reversal, Ingleson stresses, of the expectation cultivated by a much earlier generation of American leaders who believed China would one day provide a vast market for American exports. Yet it would proceed in fits and starts, subject to China’s ability to shape the expectations of American business and policy elites and induce them to accept its terms of engagement.

Nixon’s political instincts about how to rejuvenate American capitalism, which was beginning to suffer its first real postwar doldrums in 1970, were critical to reviving the Open Door vision. In summer 1971, the Nixon administration suddenly lifted the trade embargo on China that the U.S. had enforced since the Korean War. That decision was central to Nixon’s gambit to change the course of the Cold War through high-stakes diplomacy, at last exploiting the split between China and the Soviet Union. Overtures to China, Nixon hoped, would strengthen America’s international leverage and eventually facilitate new opportunities for economic growth.

Nixon’s diplomatic maneuvers were complemented by other policy decisions that gradually eased the flow of capital into China. In 1971, Nixon also abandoned the gold standard, effectively ending the Bretton Woods international monetary system; at the time it was hoped this would enhance the competitiveness of American exports, but in the long run it helped globalize supply chains—with China the outstanding beneficiary. Greater liquidity in the world economy went hand in hand with the post-war establishment’s belief that national prosperity was inextricable from trade expansion.

Overtures to Beijing served to shore up political support for post-war trade policy at a time of rising protectionist sentiment in ailing industrial cities and towns. The path to rapprochement was shadowed by a dispute between interests favoring freer trade and those who feared its consequences for regional economies and local communities; the latter had rallied behind proposed legislation known as Burke-Hartke, whose unprecedented import quotas threatened to overturn the framework for international trade. That rupture was avoided under Nixon’s successor Gerald Ford when Congress passed the 1974 Trade Act—a major defeat for unions and companies reeling from import competition, particularly those in the textile sector. Although the Act’s Generalized System of Preferences only lowered tariffs for non-communist countries, China still benefitted, Ingleson writes, because it exploited transshipment and reexport loopholes through Hong Kong. Early on, China learned to circumvent formal trade restrictions by deepening its ties with U.S. trade partners.

Reconceptualizing the “Open Door” would not have been possible, of course, without the philosophical and policy changes in China spearheaded by Chairman Mao Zedong, who eventually favored a new industrial strategy in the wake his country’s own turbulent 1960s. Following the staggering human toll of the Great Leap Forward, the geostrategic uncertainties of the Sino-Soviet split, and the intergenerational and factional chaos of the Cultural Revolution, China began to abandon its isolationist, anti-Western orientation. It proffered trade opportunities to American companies on the condition that Washington substantially ease geopolitical tensions in East Asia, which had been exacerbated by the Vietnam War. China’s new posture reflected a sober recognition that trade with the advanced capitalist countries would be the most practical way to accelerate its modernization, feed its people, and reduce its vulnerabilities in a bipolar international system.

Beijing’s calculated redefinition of zili gengsheng, or “self-reliance,” Ingleson writes, encapsulated this gradual transformation of its development agenda. Whereas China at the height of its revolutionary phase in the 1950s and 1960s had embraced, in principle, a radically autarkic vision of development, the revised paradigm countenanced increased trade with the West so as long it yielded technology transfers that could diversify China’s export sectors.

Mao’s unmistakable change in rhetoric was indicative of the new strategy. Instead of perpetual revolution as the basis of Third World solidarity, he now emphasized economic development. At bottom, however, the developmental realists emboldened by Mao’s pivot understood how to make American capitalism suit China’s ambitions and allow it to escape poverty and dependency on primary commodities. By methodically adjusting the meaning of “self-reliance,” Ingleson explains, these pragmatists were able to advance the new trade relationship and achieve, under the leadership of Mao’s pragmatic successor Deng Xiaoping, full diplomatic normalization with the U.S. in 1979.

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Solidifying the new understandings of the “Open Door” and “self-reliance” was nevertheless a protracted affair. What the “moderate” modernizers in the Chinese Communist Party wanted above all was more foreign exchange to build factories that would then allow China to compete on the world market for everyday consumer items and intermediate manufacturing inputs. Yet they had to proceed cautiously amid Mao’s failing health—the hardliners represented by the Gang of Four continued to categorically oppose engagement with the West.

There was also the matter of determining how to execute the new vision of “self-reliance.” China’s pragmatists had to make sure the purchase of U.S.-made industrial goods such as fertilizer plants, machine tools, textile machinery, RCA satellite equipment, and Boeing commercial aircraft tracked with diplomatic benchmarks—but contracts with American firms were also contingent on China’s ability to increase its range and volume of exports. Bereft of the Soviet assistance that had fueled its first heavy industries, China faced a classic import substitution dilemma: it needed to maximize sales of what it could readily produce—especially oil, chemicals, metals, fine fabrics, and sundry handicrafts—in order to obtain the infrastructure necessary to mass produce textiles, basic electronics, and other, more complex goods.

In 1973, China embarked on its “4-3 Program,” an ambitious $4.3 billion initiative (in 1973 dollars) to ramp up the acquisition of technology for just that purpose. But compared to imports from Western Europe and Japan, Ingleson writes, U.S. goods only made up a fraction of the program’s expenditures and primarily consisted of agricultural commodities and basic agro-industrial inputs. On top of the opaque negotiating style of Chinese traders at state-controlled expositions, the guarded approach to American delegations conveyed that China was preoccupied with export sales and willing to prioritize other trade relationships.

Still, China’s initial big-ticket purchases carried symbolic weight while clarifying what China expected from bilateral trade. Despite the factional rivalries and palace intrigue that characterized the late Mao era, the 4-3 Program and several high-profile U.S. technology transfers provided some concrete evidence of changing political winds. Much like Washington’s drive to lower trade barriers and encourage cultural and scientific exchange, China’s posture signaled that openness would shape relations between the industrialized West and the most significant emerging market in the Global South. In hindsight, of course, this posture was not a true measure of China’s strategic intent; beneath each country’s appeals to mutual interest lurked deeply asymmetrical views of where trade integration should ultimately lead. As China skeptics from both political parties and manufacturing communities eventually learned, China’s unyielding pursuit of neomercantilist development ensured that engagement depended on America’s tolerance for widening trade deficits.

Ultimately, American businesses’ accommodation of China’s priorities would prove critical to the success of Beijing’s pragmatists. To be sure, Ingleson writes, enterprising Americans were driven by self-interest, as well as the allure of doing business in China and becoming a so-called China hand. The National Council for U.S.-China Trade, the key organization buttressing Washington’s diplomatic agenda, reflected five constituencies who stood to strongly benefit from increased trade: big-city importers who influenced fashion and lifestyle trends and could exoticize “Made in China” products in the years before the deluge of cheap Chinese imports; large retailers like J.C. Penney and Neiman Marcus who recognized the profits to be gained by importing the bulk of their merchandise from China; manufacturers whose operations were already combining domestic and outsourced production; wheat, cotton, and other agricultural exporters; and those makers of industrial goods who, in addition to building factories and selling advanced technology, could profit from providing technical services to China’s engineers and state-owned firms.

For several leading executives, China’s stipulations and narrow, strategic interest in American goods did not diminish their sense of opportunity and discovery; rather, their experiences previewed where global trade was inexorably headed. Major American companies may have relished the symbolism of meeting China’s developmental needs, but they were motivated by the possibility that more and more of their supply chains could be restructured and offshored at significant profit. China’s trade interlocutors, for their part, studiously encouraged this outlook. They depicted China not as a burgeoning consumer market but as a source of skilled, diligent, and cheap labor capable of producing many goods beyond things like porcelain, silk fabrics, decorative objects, and home tools. The unsubtle message was that China could fulfill American corporate wants and needs at unbeatable prices.

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It was a message that American labor would prove unable to counter. One reason is that the trajectory of post-war trade had already rocked American textiles and other light manufacturing sectors; stretching back to the 1934 Reciprocal Trade Agreements Act, American workers who made clothes, shoes, workwear, furnishings, and related goods had been the sacrificial lambs of Washington’s pursuit of peace through trade. While a powerful tool to keep developing countries out of the Soviet sphere of influence, Washington had routinely deferred serious action to address the socioeconomic challenges that followed offshoring. The prospect of lower tariffs on Chinese goods all but promised to wipe out the livelihoods of hundreds of thousands of American textile workers.

Developments leading up to the 1979 U.S.-China Trade Agreement would only magnify labor’s difficulties. Another reason workers couldn’t mount a successful challenge to the rising tide of Chinese imports is that workers in different sectors and different regions had diverging views on trade. Dockworkers on the West Coast linked increased trade to job growth and better contracts, for instance, in contrast to textile workers who feared erratic schedules and declining pay. The trend toward finishing products in the U.S. using imported materials also complicated efforts to lobby for coherent and enforceable trade restrictions. The textile industries, meanwhile, were now concentrated in the non-union South and increasingly employed black women and Latinas, demographics who plainly lacked the power and connections to get Washington to impose tough import quotas. Already undercut by the 1974 Trade Act, entry-level manufacturing workers had few avenues to get a proper hearing in Washington.

In the face of these obstacles stood a tenuous alliance between textile unions and those manufacturers who were less equipped, or inclined, to alter their supply chains. Yet a practical strategy eluded this brittle coalition. The reality was that the changes already set in motion by Nixon and then followed through by the Carter administration doomed any efforts to influence public opinion and trade policy. “Buy American” campaigns and consumer boycotts drew media coverage but were impossible to sustain amid high inflation. And, as Ingleson writes, ongoing structural changes made it hard to discern who really stood for “Made in the USA”; a number of corporations that eagerly pressed for protection for certain goods had import divisions that increasingly relied on China.

Finally, the power of the so-called “Washington Consensus” on economic policy further inhibited an alignment of interests based on sensible tariffs, regional reinvestment, and industrial policy. Midwestern Republicans sympathetic to protectionism had to weigh farm interests geared toward exports, Southern Democrats were fluctuating over how to best maintain the Sunbelt’s growth, and liberal Democrats were divided between their loyalties to organized labor and their long-held commitments to a Wilsonian internationalism that included free trade as a core principle. By the early 1980s, there was little to prevent Deng Xiaoping’s Special Economic Zones from becoming magnets for U.S. multinationals. Well before China’s entry to the World Trade Organization, then, American policymakers, business lobbies, and CCP modernizers had engineered a quiet revolution in American consumerism—and facilitated the decline of American industrial labor.

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It is hard not to conclude from Ingleson’s study that “Made in China” was an unstoppable process—and, in some respects, a necessary one when seen through the lens of China’s legitimate economic needs. Still, if legislation like Burke-Hartke appeared infeasible—and possibly regressive—the course taken also had many negative outcomes. Though Ingleson tends to highlight the contingencies that surrounded U.S.-China relations through the 1970s, in the end her account underscores that a very narrow understanding of mutual advantage triumphed over other considerations.

It is therefore worth recalling what motivated China policy skeptics in the late twentieth century—and why voices on the labor left, “new center,” and populist right agree there needs to be a new equilibrium. Transformative economic development invariably involves difficult choices, but as an earlier generation of labor and environmental activists once insisted, trade with China seemed to flagrantly disregard human rights and basic environmental standards. The goal, the most clear-eyed critics made clear, wasn’t to retreat from globalization or to “punish” China, but to restore some accountability in public policy (of which trade is an enormous, if seemingly inscrutable, component). Otherwise, the foundations of democratic capitalism would continue to erode, and with it, the ideals that had animated the best of American internationalism.

Is there a way forward that keeps America strong without escalating conflict with China? Pro-globalization skeptics of Biden’s industrial strategy tend to exaggerate its “neomercantilist” spirit, ignoring that trade with China continues to grow and that the U.S. trade deficit, while at its lowest level since 2010, has yet to substantially abate. But as Made in China illustrates, paradigm shifts often precede—and are indeed necessary to accelerate—far-reaching changes.

If we are to rehabilitate our industrial base but also leave the door open to cooperation and shared development, trade policy must reflect, as National Security Advisor Jake Sullivan promised last year, “a new global labor strategy that advances workers’ rights through diplomacy.” Putting that principle into practice will be the great test of leaders who believe economic patriotism and internationalism can and must be brought into harmony.

Justin Vassallo is a freelance writer who specializes in American political development and comparative/international political economy, with an additional focus on social democratic and progressive policymaking.