The Washington Consensus on China

PODCAST: explore an interview with Tom Friedman, who discusses the Washington consensus on China and its potential implications. Friedman contends that the current bipartisan approach, characterized by excessive antagonism and a lack of nuanced understanding, risks detrimental outcomes for the United States. He highlights China’s rapid advancements in emerging technologies like EVs and AI, suggesting that the U.S. is failing to compete effectively due to an outdated perception of China and a lack of serious domestic investment. Friedman advocates for a strategy of collaboration and strategic competition, emphasizing the need for the two superpowers to work together on global challenges such as climate change and artificial intelligence rather than pursuing a path of isolation and escalating hostility. He also criticizes the unseriousness of current U.S. policy, particularly regarding trade and internal political stability, which he believes undermines America’s global standing and competitive edge.

The relationship between the United States and China presents a complex landscape of challenges and opportunities for collaboration, particularly given the current geopolitical climate and economic shifts.

Challenges for US-China Collaboration

• Hardened Washington Consensus: There is a strong, bipartisan consensus in Washington that views China as an adversary. This makes it politically difficult for anyone with national ambitions to question a strategy of hostility or advocate for openness and rebuilding the relationship. Since the Trump administration, it has become “against the law in Washington DC to say anything positive about China”.
• Poor Understanding of Modern China: A significant challenge stems from a lack of American presence and understanding in China. Virtually all American business executives left China during and after COVID, leading to six years of very limited direct interaction. This has created a situation where the two countries are like “two elephants looking at each other through a needle,” with a tiny aperture of understanding. This is exacerbated by a stark asymmetry in student exchanges, with hundreds of thousands of Chinese students in the US but only a few thousand Americans studying in China.
• China’s Domestic Shift: Under President Xi Jinping, China has made a “u-turn” from its previous trajectory of openness and integration, becoming more authoritarian. Concurrently, China launched a program to dominate key 21st-century industries, changing the dynamics of the US-China relationship.
• Erosion of Business Community Influence: The American business community, which historically served as a “ballast” in the relationship by lobbying for stability due to their profits in China, now finds fewer benefits and increasing demands for technology transfer. This has diminished their incentive to advocate for warmer relations, contributing to the breakdown of the relationship.
• Espionage Concerns: A pervasive belief in America is that China has been engaged in “massive level of industrial and even educational and political espionage.” This fuels fears that China’s technological rise is largely due to theft rather than genuine innovation.
• Economic Imbalances and Practices: China’s economy is highly geared towards production and exports, with suppressed wages and an imbalance between production and consumption. This creates instability in the global system. The Chinese government also subsidizes industries heavily, absorbing “a huge amount of waste failure and graft,” which is a practice the US would not typically accept.
• Technological Decoupling: Both the US and China are increasingly severing their technological ties. The US policy aims to “wall off advanced technologies” from China, with a primary goal for AI development being to “make it ours,” leading to a bifurcated world of technology and the internet.
• Unstable US Policy and Loss of Trust: The unpredictability of US trade policy, particularly under the Trump administration, has led China to perceive the US as an “unstable actor.” This has eroded trust and diminished US leverage, as allies are alienated and the US’s own financial system can be strained by erratic measures.
• Risk of Self-Fulfilling Prophecy: The consensus in Washington to treat China as an antagonist risks making China more antagonistic in response. There is concern that the tit-for-tat escalation could “almost ensure a future of hostility,” with neither side interested in defining an “off-ramp”. Actions like detaining Chinese visitors at US airports further contribute to a “self-fulfilling prophecy” of separation.
• Domestic Political Instability in the US: Some Chinese observers have likened the US’s internal political turmoil and campaigns against perceived disloyal officials and CEOs to a “Maoist cultural revolution,” which historically set China back significantly. This perception of US instability further complicates the relationship.

Opportunities and Necessity for Collaboration

• Addressing Existential Global Challenges: Collaboration between the US and China is seen as essential for managing three existential questions facing humanity:
  1. Artificial General Intelligence (AGI): Both superpowers must collaborate to ensure the best outcomes and mitigate the worst impacts of AGI, which is considered a “new species.” Without a “trusted architecture” for managing AI, widespread data privacy and security concerns (like those with TikTok) could apply to almost all integrated technologies.
  2. Climate Change: As the two largest emitters and economies, the US and China must collaborate to effectively address the profound effects of climate change, which is a direct consequence of global development.
  3. Zones of Disorder: The combination of global stresses is expected to lead to the breakdown of many weak states. The US and China are the only two superpowers with the capacity to manage these emerging zones of disorder, but only if they work together.
• Playing in the Future Industrial Ecosystem: To thrive, both countries need to be key players in the emerging industrial ecosystem centered on robots, electric batteries, artificial intelligence, electric vehicles (EVs), and autonomous driving cars. This ecosystem will be the “flywheel that’s going to drive everything”.
• Mutual Learning from Innovation and Competition:
  • China has demonstrated significant innovation in EV technology (e.g., smartphone companies like Xiaomi and Huawei becoming car companies) and has highly digitized its economy, allowing for rapid integration of AI into various sectors. American and European businesses are now going to China to access this cutting-edge innovation.
  • The US could learn from China’s “fitness gym” model, where intense domestic competition among numerous subsidized firms leads to a few highly competitive “national champions” that can then dominate global markets.
  • A suggested approach for the US is to require Chinese companies (like EV manufacturers) to engage in 50/50 joint ventures and build their supply chains and factories within the US as a condition for market access. This mirrors how China learned from US manufacturers and could incentivize Chinese companies to be “better actors”.
• Avoiding Self-Inflicted Harm: The current “wall-building” strategy without a coherent plan to invest in domestic industry and research risks harming US companies and undermining its own competitiveness in future technologies. This approach is seen as potentially leading to economic “disaster” for the US.
• Leveraging Allies for Collective Pressure: The US’s primary competitive advantage over China is its network of allies, whereas China largely has “vassals.” A more effective approach to trade imbalances would involve the US forming a united front with its allies (e.g., the EU, Korea, Japan) to collectively pressure China to consume more domestically and share its manufacturing capacity more equitably with the world.
• Redefining the Goal: Coexistence and Shared Prosperity: Instead of viewing the relationship through the lens of a “Thucydides trap” (where only one superpower can prevail), the goal should be to foster a relationship between “two prosperous superpowers.” This means prioritizing “our own strength and partnership” rather than seeking to keep China down or isolate it, recognizing that the prosperity of others is not inherently detrimental to the US.
• Reinjecting Trust: Given the deep mistrust, there’s a strong argument for learning to “reinject some trust” into the relationship, which is seen as fundamental for managing the global challenges ahead.The relationship between the United States and China presents a complex landscape of challenges and opportunities for collaboration, particularly given the current geopolitical climate and economic shifts.

Challenges for US-China Collaboration

• Hardened Washington Consensus: There is a strong, bipartisan consensus in Washington that views China as an adversary. This makes it politically difficult for anyone with national ambitions to question a strategy of hostility or advocate for openness and rebuilding the relationship. Since the Trump administration, it has become “against the law in Washington DC to say anything positive about China”.
• Poor Understanding of Modern China: A significant challenge stems from a lack of American presence and understanding in China. Virtually all American business executives left China during and after COVID, leading to six years of very limited direct interaction. This has created a situation where the two countries are like “two elephants looking at each other through a needle,” with a tiny aperture of understanding. This is exacerbated by a stark asymmetry in student exchanges, with hundreds of thousands of Chinese students in the US but only a few thousand Americans studying in China.
• China’s Domestic Shift: Under President Xi Jinping, China has made a “u-turn” from its previous trajectory of openness and integration, becoming more authoritarian. Concurrently, China launched a program to dominate key 21st-century industries, changing the dynamics of the US-China relationship.
• Erosion of Business Community Influence: The American business community, which historically served as a “ballast” in the relationship by lobbying for stability due to their profits in China, now finds fewer benefits and increasing demands for technology transfer. This has diminished their incentive to advocate for warmer relations, contributing to the breakdown of the relationship.
• Espionage Concerns: A pervasive belief in America is that China has been engaged in “massive level of industrial and even educational and political espionage.” This fuels fears that China’s technological rise is largely due to theft rather than genuine innovation.
• Economic Imbalances and Practices: China’s economy is highly geared towards production and exports, with suppressed wages and an imbalance between production and consumption. This creates instability in the global system. The Chinese government also subsidizes industries heavily, absorbing “a huge amount of waste failure and graft,” which is a practice the US would not typically accept.
• Technological Decoupling: Both the US and China are increasingly severing their technological ties. The US policy aims to “wall off advanced technologies” from China, with a primary goal for AI development being to “make it ours,” leading to a bifurcated world of technology and the internet.
• Unstable US Policy and Loss of Trust: The unpredictability of US trade policy, particularly under the Trump administration, has led China to perceive the US as an “unstable actor.” This has eroded trust and diminished US leverage, as allies are alienated and the US’s own financial system can be strained by erratic measures.
• Risk of Self-Fulfilling Prophecy: The consensus in Washington to treat China as an antagonist risks making China more antagonistic in response. There is concern that the tit-for-tat escalation could “almost ensure a future of hostility,” with neither side interested in defining an “off-ramp”. Actions like detaining Chinese visitors at US airports further contribute to a “self-fulfilling prophecy” of separation.
• Domestic Political Instability in the US: Some Chinese observers have likened the US’s internal political turmoil and campaigns against perceived disloyal officials and CEOs to a “Maoist cultural revolution,” which historically set China back significantly. This perception of US instability further complicates the relationship.

Opportunities and Necessity for Collaboration

• Addressing Existential Global Challenges: Collaboration between the US and China is seen as essential for managing three existential questions facing humanity:
  1. Artificial General Intelligence (AGI): Both superpowers must collaborate to ensure the best outcomes and mitigate the worst impacts of AGI, which is considered a “new species.” Without a “trusted architecture” for managing AI, widespread data privacy and security concerns (like those with TikTok) could apply to almost all integrated technologies.
  2. Climate Change: As the two largest emitters and economies, the US and China must collaborate to effectively address the profound effects of climate change, which is a direct consequence of global development.
  3. Zones of Disorder: The combination of global stresses is expected to lead to the breakdown of many weak states. The US and China are the only two superpowers with the capacity to manage these emerging zones of disorder, but only if they work together.
• Playing in the Future Industrial Ecosystem: To thrive, both countries need to be key players in the emerging industrial ecosystem centered on robots, electric batteries, artificial intelligence, electric vehicles (EVs), and autonomous driving cars. This ecosystem will be the “flywheel that’s going to drive everything”.
• Mutual Learning from Innovation and Competition:
  • China has demonstrated significant innovation in EV technology (e.g., smartphone companies like Xiaomi and Huawei becoming car companies) and has highly digitized its economy, allowing for rapid integration of AI into various sectors. American and European businesses are now going to China to access this cutting-edge innovation.
  • The US could learn from China’s “fitness gym” model, where intense domestic competition among numerous subsidized firms leads to a few highly competitive “national champions” that can then dominate global markets.
  • A suggested approach for the US is to require Chinese companies (like EV manufacturers) to engage in 50/50 joint ventures and build their supply chains and factories within the US as a condition for market access. This mirrors how China learned from US manufacturers and could incentivize Chinese companies to be “better actors”.
• Avoiding Self-Inflicted Harm: The current “wall-building” strategy without a coherent plan to invest in domestic industry and research risks harming US companies and undermining its own competitiveness in future technologies. This approach is seen as potentially leading to economic “disaster” for the US.
• Leveraging Allies for Collective Pressure: The US’s primary competitive advantage over China is its network of allies, whereas China largely has “vassals.” A more effective approach to trade imbalances would involve the US forming a united front with its allies (e.g., the EU, Korea, Japan) to collectively pressure China to consume more domestically and share its manufacturing capacity more equitably with the world.
• Redefining the Goal: Coexistence and Shared Prosperity: Instead of viewing the relationship through the lens of a “Thucydides trap” (where only one superpower can prevail), the goal should be to foster a relationship between “two prosperous superpowers.” This means prioritizing “our own strength and partnership” rather than seeking to keep China down or isolate it, recognizing that the prosperity of others is not inherently detrimental to the US.
• Reinjecting Trust: Given the deep mistrust, there’s a strong argument for learning to “reinject some trust” into the relationship, which is seen as fundamental for managing the global challenges ahead.

Losing the Trade War: Rethinking America’s China Consensus – NotebookLM

The “Washington consensus” on China refers to a hardened, bipartisan agreement in Washington D.C. about the nature of China and how the United States should interact with it. This consensus has evolved significantly, particularly from the Trump administration onward, making it “politically lethal in most cases to question if you have any national ambitions that openness towards China would be the right strategy”.

Key characteristics and beliefs of the Washington consensus on China include:

• China as an unfair actor: The consensus believes that China has “taken terrible advantage of America” over the last decade or two, does not “play fair,” and is “willing to lie cheat and steal to win”.
• Imperialist and ideological ambitions: It views China as “imperialist,” seeking to “remake the world in its own image,” and, for some, as an “ideological project meant to spread Chinese power and and and communist ideology”.
• Espionage and theft as drivers of China’s rise: A significant component is the “growing belief recognition that China had been conducting a massive level of industrial and even educational and political espionage against America,” with fears that this was “behind China’s rise” and that China “can’t really innovate they can just steal from us”.
• Aversion to positive engagement: Since the Trump administration, it “kind of became against the law in Washington DC to say anything positive about China”. This has led to an aversion to American business executives, congressional delegations, and students going to China, resulting in a significant asymmetry in cross-cultural exchanges.
• Decoupling and treating China as an antagonist: The consensus has moved from a “softer form of competition” to a view that the U.S. should “decouple” from China and “understand them as an antagonistic power that we treat as a hostile enemy”. This includes efforts to “bring our supply chains back home” from China.
• Focus on containing China’s power: The overarching goal of this policy is often seen as ensuring China “never surpasses us” in “wealth and might and strength,” effectively aiming to “keep them down as opposed to the goal being our own strength and partnership”. This reflects a belief in a “Thucydides trap,” where only one superpower can ultimately prevail, leading to an “all-out fight for power”.

The development of this consensus is linked to several factors:

• Xi Jinping’s rise and China’s “u-turn”: Starting with President Xi Jinping’s ascent in 2012-2013, China is seen as having “went in reverse” and “made a u-turn” from its trajectory for more openness and integration, becoming more authoritarian.
• Diminished American business influence: The traditional “ballast” of the U.S.-China relationship—the American business community lobbying for engagement—weakened as fewer businesses felt they were benefiting from China and were being forced to transfer technology.
• Concerns about Chinese industrial policy: China’s program to dominate 21st-century industries, its subsidized competition, and its ability to absorb “waste, failure and graft” while producing “potent national champions” have fueled alarm.
• Post-Ukraine invasion anxieties: Russia’s invasion of Ukraine highlighted the dangers of dependency on a potentially hostile power, leading to a stronger belief that “China is more dangerous than we’ve given it credit for”.

Critics of this consensus argue that it is based on an outdated understanding of China, fighting “the China of the ’90s or the 2000s”. They suggest that it is “unserious” and may lead to a self-fulfilling prophecy of hostility, where both sides escalate tensions, creating a “tit for tit and the tat for tat” dynamic with no defined “offramp”. There is also a concern that the democratic approach to China is becoming “Trump-like,” lacking any argument for continued openness or cooperation, even when China has significant technological advancements from which the U.S. could learn.

The “Washington consensus” on China currently frames the relationship as one of antagonism and a need for decoupling, moving from a “softer form of competition” to viewing China as a “hostile enemy”. This consensus, hardened since the Trump administration, makes it “politically lethal in most cases to question if you have any national ambitions that openness towards China would be the right strategy”. The prevailing belief is that China has “taken terrible advantage of America,” does not “play fair,” and is “willing to lie cheat and steal to win”. Concerns about Chinese espionage and the belief that China “can’t really innovate they can just steal from us” have also fueled this view.

However, the sources suggest that for the U.S. to effectively compete with China while fostering necessary global collaboration, a more nuanced and “serious” approach is required, departing from the current “Trump-like” policies.

Here’s how the U.S. could approach this, according to the provided information:

• Acknowledge the necessity of collaboration for existential challenges:
  • The world faces three existential questions: managing artificial general intelligence (AGI), dealing with climate change, and addressing the blow-up of weak states leading to zones of disorder.
  • The United States and China are the only two superpowers capable of managing these issues, but only if they collaborate. The idea is that “interdependence is no longer our choice it’s our condition,” and humanity “will rise together or… will fall together”.
• Adopt a “serious” and long-term competitive strategy:
  • Focus on the 21st-century industrial ecosystem: Instead of fighting the “China of the ’90s or the 2000s,” the U.S. must understand and compete seriously in the industries that will drive the future, such as robots, electric batteries, artificial intelligence, electric vehicles (EVs), and autonomous driving cars. China is already at the forefront of many of these technologies, with sophisticated industrial bases and the ability to spin up complex supply chains rapidly.
  • Leverage allies to create a united front: Rather than making it “America against the world,” the U.S. should sit down with allies like the European Union, Korea, Singapore, Japan, and the Philippines to form a collective front against China on issues like global trade imbalances. This means pressing China to consume more domestically and share more of its manufacturing capacity with the world, rather than exporting too much and suppressing wages.
  • Invest robustly behind the “wall” of competition: If tariffs or other barriers are used, they must be part of a larger strategy to “build the industrial base that you want to take advantage of the time you’re buying with your tariffs”. This means doubling down on the research capacity of American universities, investing in NIH, and providing incentives for companies to develop 21st-century industries.
• Strategically engage and learn from China, even as a competitor:
  • Promote “reverse” technology transfer and joint ventures: Instead of just trying to “kill” Chinese companies or deny them access, the U.S. should condition access to its market on practices that allow learning. This could involve demanding 50/50 joint ventures and requiring Chinese companies (like Xiaomi or Huawei) to build their factories and supply chains in the U.S., mirroring what China required of American companies. This allows the U.S. to “learn from them” and be “in the gym with them”.
  • Create incentives for better behavior: Instead of simply blocking or isolating, the U.S. could offer a “ladder up or out” to Chinese companies. For example, allowing a company like Huawei to operate in a limited, monitored capacity could incentivize better behavior regarding data handling and intellectual property.
  • Rebuild cross-cultural exchanges: The current “aversion to going to China” for American business executives, congressional delegations, and students has created a “giant asymmetry” in understanding. Re-establishing these exchanges is crucial for the U.S. to truly understand modern China, which it is currently “fighting… the China of the ’90s or the 2000s”. A significant worry is that when U.S. academics travel to China, they are immediately flagged, creating a “self-fulfilling prophecy” that discourages future exchange.
• Redefine the ultimate goal of U.S. policy:
  • The current “Washington consensus” often frames the goal as ensuring China “never surpasses us” in “wealth and might and strength,” or “to keep them down”. This reflects a belief that “coexistence is impossible” and that the relationship is “an all-out fight for power”.
  • Instead, the goal should be a relationship between two prosperous superpowers, where competition does not preclude partnership. This involves understanding that the strength of other nations, even competitors, is not inherently “bad for us”.
  • This different goal would also mean prioritizing things like decarbonization over protectionist tariffs that hinder the transition to electric vehicles, even if China offers better or cheaper options.
• Foster trust and stability, especially in emerging tech:
  • The current “tit for tit and the tat for tat” dynamic risks ensuring a future of hostility with no clear “offramp”.
  • For AI, specifically, if the U.S. and China do not “have a trusted architecture for managing AI,” everything could become like the TikTok debate, with concerns about data and surveillance permeating daily life. The goal should not simply be to “make it ours,” which risks racing too quickly without ensuring safety.
  • There is a need to “reinject some trust” into the relationship, as countries can rise and fall together, and “interdependence is no longer our choice, it’s our condition”. The current U.S. approach, particularly under Trump, has created instability and eroded trust internationally, making it harder for China and other nations to trust the U.S. as a stable actor for agreements.

Ultimately, the source suggests that the U.S. must be “serious” about understanding China’s capabilities, fostering domestic strength in key future industries, and finding ways to collaborate and learn even amidst intense competition, rather than retreating into an isolationist, antagonistic stance.