Peter Beinart: China isn’t cheating on trade
Consider the case of Nemont, as relayed by Charlie Campbell of Time. A pint-size wireless carrier operating in rural Montana, its tight margins forced it to rely on Huawei technology for its 4G hardware. Turning to a higher-cost supplier was simply not an option. Smaller players in the heartland such as Nemont would look to the federal government for relief should the Trump administration stick with the Huawei blacklist. The White House had already pledged $20 billion to expand rural broadband before the ban, a bill that may have to climb higher still.
While there’s nothing to say that either Ericsson or Nokia won’t find some cost-cutting innovations over the next few years to change this basic calculus, we should not bank on it. Instead, it would be wise to be seek out opportunities for cost-cutting and efficiency gains elsewhere in the process. At a minimum, the United States must overcome regulatory obstacles that have all but thwarted every other major effort to build out 5G infrastructure in recent years. Many of America’s larger cities and metros find themselves squeezed by soaring expenditures and cash-strapped voters who rightly resist new taxes. This has left ambitious politicians scrambling for revenue sources to paper over fiscal imbalances, even when this strategy risks deterring productive investment.
Take Portland, Oregon, where installing a 5G antenna required a $7,500 builders fee and then a recurring annual fee of somewhere between $2,500 and $3,500; or Dallas, where the right to build 5G antennae would cost you a one-time fee of $280,000. A recently announced Federal Communications Commission policy would constrain revenue-hungry local governments. Under the new guidelines, cities would be required to set their fees at however much it cost them to review the 5G-antenna application, which itself would have to be approved or declined within 90 days. It’s a policy that can’t hurt, but it won’t make the challenge of replacing Huawei’s technology all that much easier to overcome.
And so Trump has to make a decision. If he doesn’t want to cede the emerging 5G economy to a Chinese tech giant, whether out of security concerns or a larger anxiety about the loss of U.S. technological superiority, he must decide on an alternative course. One option would be to work with other market economies to reduce their collective dependence on Huawei’s low-cost networking technology. But that would require deft diplomacy—not the president’s strong suit—as America’s partners in this endeavor would need to be reassured that they have something to gain from willingly paying higher prices to fend off an amorphous Chinese challenge.
Alternatively, Trump could commit to a more ambitious strategy of rebuilding the U.S. industrial commons, and perhaps even building up U.S. national champions that can outcompete Huawei in manufacturing networking technology. In short, he could craft a “Made in the U.S.A. 2025” agenda fit to compete with “Made in China 2025.” Suffice it to say, the United States is not known for its ability to engage in this sort of long-term industrial planning, and even attempting to do so would raise hackles among free traders on the left and the right. Blacklisting Huawei is one thing. Figuring out exactly what to do next will prove to be quite another.
Regardless of the outcome of the Huawei controversy, it is yet another sign that the enmeshment of the Chinese and U.S. economies that has defined the past 20 years—the age of “Chimerica”—is coming to an end, and this will mean a painful adjustment for Chinese and Americans alike.