Alpha
Trusted Member
JANUARY 30, 2024
Council on Foreign Relations
Washington, D.C.
MR. SULLIVAN: At least I had the bravery to give that speech at Brookings rather than at CFR. So — (laughter) —
Mike, I want to say thank you for having me back at CFR. And to Susan and Kurt and Charlene and Steve, thank you for having me back at the UCSD China Forum, which I’ve had the privilege of actually attending since its inauguration. I would say San Diego in January is a little nicer than D.C. in January, but we’ll make do here.
My aim today is not to try to unveil a new China strategy, but something more straightforward: to share with you behind the curtain how we’ve tried to implement our strategy over the last three years and then what we might expect here in 2024. And in the course of that, without directly answering the questions Mike has posed, perhaps provide a little grist for the mill that can help over the next couple of days as you grapple with these very difficult questions.
I want to start by taking a step back.
Before serving in the Biden administration, many of us who are now in government — including myself and Kurt and others — were revisiting the assumptions behind our longstanding China policy in writing and in conferences like this one. And once in government, we immersed ourselves in the latest intelligence, expertise, and analysis.
We determined that the PRC was the only state with both the intent to reshape the international order and the economic, diplomatic, military, and technological power to do it. We saw that the PRC sought to “catch up and surpass” the United States in high technology; that it was pursuing the largest peacetime military buildup in history; and that it was more repressive at home and more assertive abroad, including in the South and East China Seas as well as the Taiwan Strait. We saw the PRC working to make the world more dependent on China while reducing its own dependence on the world. And we saw it taking steps to adapt the international system to accommodate its own system and preferences.
We also saw something that really stood out, which is that the PRC believed the United States was in terminal decline — that our industrial base had been hollowed out, that our commitment to our allies and partners had been undercut, that the United States was struggling to manage a once-in-a-century pandemic, and that many in Beijing were openly proclaiming that “the East was rising and the West was falling.”
When we came into office, we inherited an approach from the previous administration that had updated the diagnosis of the scope and nature of the China challenge but had not adequately developed the strategy and tools to address it. That approach was at times more confrontational than competitive, and too often undervalued the allies and partners critical to sustaining an effective China strategy.
But we did not want to return to an earlier approach with the PRC, one based on more optimistic assumptions about its trajectory and that sometimes prioritized avoiding friction over pursuing the American national interest. So we developed our own approach, which Secretary Blinken laid out in a speech a couple of years ago — invest, align, compete — that sought to strengthen our competitive position and secure our interests and values while carefully managing this vital relationship.
And over the past three years, we’ve implemented that approach. We’ve made far-reaching investments in the foundation of American strength at home with historic legislation on infrastructure, chips and science, and clean energy, all while addressing the PRC’s non-market practices and taking steps to ensure that the United States would lead in the sources of technological and economic growth.
We believe our approach has generated results. Large-scale investments in semiconductor and clean-energy production in the United States are up 20-fold since 2019. Construction spending on new manufacturing projects has already doubled. And looking out over the next decade, we’re estimating $3.5 trillion in new public and private investment, unlocked by the investments made in the historic legislation I just referenced.
Abroad, we’ve tried to strengthen our ties with Indo-Pacific allies and partners in ways that would have been unlikely, even inconceivable, a few years ago. We launched AUKUS. We elevated the Quad. We upgraded our relationship with Vietnam, the Philippines, India, Indonesia, and others.
We launched a historic trilateral with Japan and the Republic of Korea that culminated in a historic summit that President Biden hosted at Camp David.
We held summits — multiple summits — with the leaders of the Pacific Islands as well as with ASEAN.
Our regional allies and partners, for their part, are betting on American economic vitality. They’ve announced almost $200 billion of investments into the United States since the start of the administration.
We’ve also worked to connect our European and Indo-Pacific alliances. And together with our G7 partners, we’ve aligned on collective steps to de-risk our economies and diversify away from strategic dependencies rather than decoupling. And alongside our allies and partners, we’ve stressed the importance of maintaining peace and stability across the Taiwan Strait.
We’ve also worked hard to ensure that advanced and sensitive technologies our companies are developing do not become a source of vulnerability. We implemented carefully tailored export restrictions on key technologies; focused on advanced semiconductor manufacturing tools — a topic, by the way, that was central to one of the earlier UCSD forums when I first really got immersed in this question of semiconductor manufacturing equipment; supercomputing capabilities; and the most advanced chips critical to military modernization.
We also took steps to regulate outbound investments of concern in technology and to strengthen CFIUS’s focus on critical technologies to make sure inbound investment actually addresses evolving national security challenges — the screening regime for inbound investment.
These steps are not about protectionism, and they’re not about holding anybody back. They’re critical for our national security over the long run.
Now, the backdrop to these actions was the strongest post-pandemic recovery and among the lowest inflation of any leading economy in the world. For years, economists were predicting that the PRC would overtake the United States in GDP either in this decade or the next. Now those projections are moving further and further out. And with the PRC facing its own set of challenges, some say that moment may never come.
And this brings me to a critical point: America, in this moment, is once more showing its capacity for resilience and reinvention.
But this is not the whole story. And that’s what’s really critical about the remarks I want to give today.
As we took these steps to improve our competitive position, we aimed to do so in a way that built stability into one of the world’s most consequential relationships — perhaps the world’s most consequential relationship. And, in fact, we believe our investments at home and our work to deepen ties with allies and partners abroad actually created the conditions for more effective diplomacy with the PRC.
A sustainable China policy is about holding in one’s head multiple truths at the same time and working iteratively to reconcile them. We are clear-eyed about the competitive structural dynamics in our relationship with the PRC. But we’re also keenly aware that the United States and the PRC are economically interdependent and share interests in addressing transnational problems and reducing the risk of conflict.
We realize that efforts, implied or explicit, to shape or change the PRC over several decades did not succeed. We expect that the PRC will be a major player on the world stage for the foreseeable future. That means that even as we compete, we have to find ways to live alongside one another.
...............................
Council on Foreign Relations
Washington, D.C.
MR. SULLIVAN: At least I had the bravery to give that speech at Brookings rather than at CFR. So — (laughter) —
Mike, I want to say thank you for having me back at CFR. And to Susan and Kurt and Charlene and Steve, thank you for having me back at the UCSD China Forum, which I’ve had the privilege of actually attending since its inauguration. I would say San Diego in January is a little nicer than D.C. in January, but we’ll make do here.
My aim today is not to try to unveil a new China strategy, but something more straightforward: to share with you behind the curtain how we’ve tried to implement our strategy over the last three years and then what we might expect here in 2024. And in the course of that, without directly answering the questions Mike has posed, perhaps provide a little grist for the mill that can help over the next couple of days as you grapple with these very difficult questions.
I want to start by taking a step back.
Before serving in the Biden administration, many of us who are now in government — including myself and Kurt and others — were revisiting the assumptions behind our longstanding China policy in writing and in conferences like this one. And once in government, we immersed ourselves in the latest intelligence, expertise, and analysis.
We determined that the PRC was the only state with both the intent to reshape the international order and the economic, diplomatic, military, and technological power to do it. We saw that the PRC sought to “catch up and surpass” the United States in high technology; that it was pursuing the largest peacetime military buildup in history; and that it was more repressive at home and more assertive abroad, including in the South and East China Seas as well as the Taiwan Strait. We saw the PRC working to make the world more dependent on China while reducing its own dependence on the world. And we saw it taking steps to adapt the international system to accommodate its own system and preferences.
We also saw something that really stood out, which is that the PRC believed the United States was in terminal decline — that our industrial base had been hollowed out, that our commitment to our allies and partners had been undercut, that the United States was struggling to manage a once-in-a-century pandemic, and that many in Beijing were openly proclaiming that “the East was rising and the West was falling.”
When we came into office, we inherited an approach from the previous administration that had updated the diagnosis of the scope and nature of the China challenge but had not adequately developed the strategy and tools to address it. That approach was at times more confrontational than competitive, and too often undervalued the allies and partners critical to sustaining an effective China strategy.
But we did not want to return to an earlier approach with the PRC, one based on more optimistic assumptions about its trajectory and that sometimes prioritized avoiding friction over pursuing the American national interest. So we developed our own approach, which Secretary Blinken laid out in a speech a couple of years ago — invest, align, compete — that sought to strengthen our competitive position and secure our interests and values while carefully managing this vital relationship.
And over the past three years, we’ve implemented that approach. We’ve made far-reaching investments in the foundation of American strength at home with historic legislation on infrastructure, chips and science, and clean energy, all while addressing the PRC’s non-market practices and taking steps to ensure that the United States would lead in the sources of technological and economic growth.
We believe our approach has generated results. Large-scale investments in semiconductor and clean-energy production in the United States are up 20-fold since 2019. Construction spending on new manufacturing projects has already doubled. And looking out over the next decade, we’re estimating $3.5 trillion in new public and private investment, unlocked by the investments made in the historic legislation I just referenced.
Abroad, we’ve tried to strengthen our ties with Indo-Pacific allies and partners in ways that would have been unlikely, even inconceivable, a few years ago. We launched AUKUS. We elevated the Quad. We upgraded our relationship with Vietnam, the Philippines, India, Indonesia, and others.
We launched a historic trilateral with Japan and the Republic of Korea that culminated in a historic summit that President Biden hosted at Camp David.
We held summits — multiple summits — with the leaders of the Pacific Islands as well as with ASEAN.
Our regional allies and partners, for their part, are betting on American economic vitality. They’ve announced almost $200 billion of investments into the United States since the start of the administration.
We’ve also worked to connect our European and Indo-Pacific alliances. And together with our G7 partners, we’ve aligned on collective steps to de-risk our economies and diversify away from strategic dependencies rather than decoupling. And alongside our allies and partners, we’ve stressed the importance of maintaining peace and stability across the Taiwan Strait.
We’ve also worked hard to ensure that advanced and sensitive technologies our companies are developing do not become a source of vulnerability. We implemented carefully tailored export restrictions on key technologies; focused on advanced semiconductor manufacturing tools — a topic, by the way, that was central to one of the earlier UCSD forums when I first really got immersed in this question of semiconductor manufacturing equipment; supercomputing capabilities; and the most advanced chips critical to military modernization.
We also took steps to regulate outbound investments of concern in technology and to strengthen CFIUS’s focus on critical technologies to make sure inbound investment actually addresses evolving national security challenges — the screening regime for inbound investment.
These steps are not about protectionism, and they’re not about holding anybody back. They’re critical for our national security over the long run.
Now, the backdrop to these actions was the strongest post-pandemic recovery and among the lowest inflation of any leading economy in the world. For years, economists were predicting that the PRC would overtake the United States in GDP either in this decade or the next. Now those projections are moving further and further out. And with the PRC facing its own set of challenges, some say that moment may never come.
And this brings me to a critical point: America, in this moment, is once more showing its capacity for resilience and reinvention.
But this is not the whole story. And that’s what’s really critical about the remarks I want to give today.
As we took these steps to improve our competitive position, we aimed to do so in a way that built stability into one of the world’s most consequential relationships — perhaps the world’s most consequential relationship. And, in fact, we believe our investments at home and our work to deepen ties with allies and partners abroad actually created the conditions for more effective diplomacy with the PRC.
A sustainable China policy is about holding in one’s head multiple truths at the same time and working iteratively to reconcile them. We are clear-eyed about the competitive structural dynamics in our relationship with the PRC. But we’re also keenly aware that the United States and the PRC are economically interdependent and share interests in addressing transnational problems and reducing the risk of conflict.
We realize that efforts, implied or explicit, to shape or change the PRC over several decades did not succeed. We expect that the PRC will be a major player on the world stage for the foreseeable future. That means that even as we compete, we have to find ways to live alongside one another.
...............................
