Extricating America from Its Chinese Handcuffs

Spurring Domestic and Non-Chinese Production

America should:

8. Expand Production of Commercial Uranium Enrichment. For America to free itself from the Chinese handcuffs of renewable energy sources, it should pursue an expansion of the domestic civilian nuclear capacity. To do so, the federal government will have to ease restrictions on private companies from building and operating commercial nuclear facilities.

First, the regulatory process for expanding, building, and operating new domestic low-enriched uranium (LEU) capacity should be streamlined. Private companies have been safely building and operating commercial enrichment facilities worldwide for decades, and they should be allowed to expand U.S. capacity with as little interference from Washington as possible, including for the high-assay low-enriched uranium (HALEU) that is required for some advanced reactors.REF

Second, the U.S. should expand domestic nuclear fuel capacity. There are challenges ahead. President Joe Biden recently signed into law the bipartisan Prohibiting Russian Uranium Imports Act.REF The legislation has three key parts: (1) It bans the import of LEU from Russia or any Russian entity; (2) it prevents black market imports by banning LEU that “is determined to have been exchanged with, swapped for, or otherwise obtained” to circumvent the ban; and (3) it is in effect until 2040.REF

A long-term ban is critical because investors will not expand capacity to make up for Russian supply if the ban can be terminated or waived, making low-cost Russian LEU available again to U.S. buyers. While growing demand for non-Russian uranium fuel had already prompted America’s sole domestic commercial enricher to expand capacity, a long-term ban on Russian imports is necessary to provide the market certainty required to justify investment in a broader expansion in the sector.

An additional concern is the abuse of the waiver process that the Prohibiting Russian Uranium Imports Act establishes to allow some Russian imports through 2027 under certain conditions.REF While a waiver process may be necessary in specific cases, waivers must not be granted unless there is no alternate source for the LEU. One such waiver has already been granted.REF Little information is available on how the waiver request meets the law’s requirements.REF To ensure the law’s integrity, Congress should demand a full justification from the Department of Energy about any decisions to grant waivers.

9. Wean U.S. Industry Off Chinese Products and Spur Reshoring or Nearshoring. Future Administrations must use the power of the executive to deal harshly with overt machinations by China to dominate key industries with national security implications. Increasing tariffs in response to unfair practices will signal to other nations and to international companies the country’s continued willingness to resolutely hold China accountable for its behavior.

While there are appropriate uses for tariffs—and the U.S. does need to pursue strategic decoupling from China to reduce its dependence on Chinese imports in sensitive sectors—the Biden Administration’s new policies fail to hit the target.

As a general economic principle, for those goods and imports the U.S. seeks to phase out from China, outright bans or graduated quotas are generally preferable to tariffs. On the import of Chinese EVs, for example, The Heritage Foundation has argued for full-blown import ban.REF

In cases where there are not currently viable alternatives to Chinese imports, imposing quotas for Chinese imports and then gradually decreasing these quotas would incentivize a shift toward alternative suppliers or domestic manufacturers.

In cases where tariffs are preferable to bans and quotas, they must be imposed on end-user products and not intermediate goods or critical supply components. Equally important, they cannot be guided more by political calculations than economic conditions, and they cannot be undermined by counterproductive domestic policies in other areas.

For example, several of the tariffs unveiled by the Biden Administration will not take effect for several years and were designed to avoid affecting the 2024 election while kicking the can of responsibility down the road to a future Administration.

Pursued in smart and targeted ways, tariffs can be a part of the overall policy toolkit for rebalancing America’s distorted economic relationship with China. But rarely are they preferable to bans and quotas, and they must always be complemented through sound domestic policies and free from political calculations if they are to serve the American people and advance American interests.

10. Expand Memoranda of Understanding and Trade Agreements with Countries in Africa and Latin America to Secure Fair Market Access to Their Resources. Beyond developing U.S. domestic resources, America can more rapidly decouple from China by diversifying its supply chains for these critical minerals to countries with supplies of critical minerals, such as Angola, the Democratic Republic of the Congo, Malawi, Mozambique, Namibia, and South Africa. America should not allow China to dominate countries in Africa and Latin America with false promises, no economic gain for these countries, and unfair, disadvantageous, and exploitative conditions because these countries sell their resources to China rather than to the United States.

11. Establish a Short Phase-On Plan that Identifies Which Foreign-Produced Energy Infrastructure Equipment Must Be Completely Excluded from the U.S., and What Must Be Manufactured Domestically, on National Security Grounds. The Administration must establish import prohibitions for the former, including Chinese-manufactured power transmission and storage equipment.

The specific types of equipment in this category would have to be a National Security Council initiative, where equipment was identified by the Departments of Commerce, the Treasury, Energy, and Defense, in consultation with industry representatives. When Congress passed a law requiring certain levels of domestic content in EVs to allow the vehicles to qualify for tax credits, the Treasury Department received many complaints that the standards were too onerous. The Treasury Department was pressured into allowing individuals to lease EVs without any domestic content requirement, on the grounds that these were commercial vehicles.

Phasing out technologies should be gradual, so that American firms do not go out of business due to this action.

12. Rebuild the American Maritime Industrial Sector to Ensure Access to Strategic Materials Beyond China’s Control or Leverage, While Ensuring Ability to Supply Allies with American Energy. This policy is premised on the U.S. regaining a comparative advantage through a revolution in shipping. China plans to lead in the global maritime sector, and for strategic and military reasons to focus on shipbuilding. That objective was ensconced in a 1998 policy white paper, which informed CCP focus on a range of commercial maritime industries to take a leading position in global shipbuilding eight years later in 2006.REF A copy of this CCP-led effort is not envisioned or needed, but a concerted effort to regain American competitiveness in shipbuilding can be achieved in a decade, regaining the capacity to build and sustain the nation’s economy and a Navy that deters China. Rather than working within existing business models, a “blue ocean strategy” is needed—a revolutionary rethinking of logistics integrating a range of innovations and technologies in a novel intermodal approach—that could usher in a new era of shipping.REF The nation is well positioned for leadership in such an approach.

Targeting China’s Malicious Practices

The Administration should:

13. Leverage America’s Position at the World Trade Organization (WTO) to Change Rules About Self-Determined Developing Nation Status. The WTO must be reformed to accurately reflect the economic development of its members, starting with China. Indeed, it was a failure of previous U.S. Administrations to agree to admit non-market economies and autocracies, such as China, into the WTO.

The WTO should return to its focus on negotiations between parties as a basis for dispute resolution, not unaccountable and biased appointees expanding their power through an internationalist version of judicial activism. Former U.S. Trade Representative Ambassador Robert Lighthizer is correct when he recommends that the Appellate Body (AB) of the WTO be “scrapped” and replaced with a fair dispute settlement system based on commercial arbitration.REF

The Office of the United States Trade Representative (USTR) clearly articulated the WTO AB’s failure to comply with WTO agreements when it published its “Report on the Appellate Body of the World Trade Organization” in 2020.REF In essence, the AB has failed to apply WTO rules in a way that “adheres strictly to the texts of those agreements.”REF 

The USTR highlighted numerous examples of how the AB altered member states’ rights and obligations through “numerous erroneous interpretations of WTO agreements.”REF In other words, the AB judges engaged in judicial activism by expanding the AB powers beyond the scope of the treaties to which that the U.S. had agreed. The AB was intended to interpret existing treaties, not to create new laws and obligations binding on member states. 

These failures have not been rectified, even after years of U.S. objections. In fact, the AB’s failures have magnified the shortcomings of the WTO as a whole, because the AB effectively supplanted the WTO’s negotiating function when America’s trade competitors realized that they were better off focusing on litigation rather than on negotiations.

14. Prohibit Taxpayer Dollars from Being Used for Chinese-Manufactured Renewable Energy Products Tainted by Forced Labor. Forced labor remains a central component of the CCP’s ongoing genocide against the Uyghurs in Xinjiang.REF Labor from Uyghurs is endemic in global supply chains of renewable energy products. Chinese companies operating in Xinjiang account for 35 percent of global polysilicon production, a key input for solar panel production.REF In addition, inputs for China’s battery production come from Xinjiang.

China must also be held accountable for its other persistent human right violations, including the exploitation of forced labor and its calculated investments in South Asia and Mexico aimed at circumventing the Uyghur Forced Labor Prevention Act (UFLPA).REF These secondary manufacturing or assembly and repackaging schemes, highlight the CCP’s ongoing efforts to avoid meaningful compliance with international trade standards. Rather than adhering to its commitments under the WTO or fulfilling obligations in bilateral or multilateral trade agreements, China continues to obscure its practices, seeking ways to bypass scrutiny and dodge the consequences of its unfair trade behavior and present and future tariffs.

The United States should adopt a zero-tolerance policy for forced labor in the supply chains of renewable energy products—for the government’s own agencies, as well as for U.S.-supported international institutions, such as the World Bank and the Asian Development Bank. No taxpayer dollars should be handed over to entities helping to fund the genocide of Uyghurs, and U.S. citizens should not be asked to pay for Chinese slave labor products that are illegal in the United States.

15. Ban the Import of Chinese EVs. China produces 66 percent of EVs, compared to 22 percent and 10 percent produced in Europe and the United States, respectively.REF The CCP has subsidized its domestic EV market by $28 billion between 2009 and 2020 and plans to spend another $72 billion between 2023 and 2026.REF These subsidies include sales tax exemptions, R&D grants, and infrastructure subsidies. Many Chinese companies were incentivized to enter the battery industry because of these subsidies.

Chinese EVs have the potential to send data back to China and spy on Americans.REF EVs could go anywhere, including military bases, power plants, and cellphone towers. EVs would be far more effective than spy balloons at collecting important data, and at far lower cost—because Americans would be purchasing these vehicles. For similar security reasons, the U.S. Federal Communications Commission banned Huawei and ZTE technology in 2022.REF

Chinese EVs would hand the CCP an unprecedented trove of Americans’ personal data.REF When people buy cars, they provide addresses as well as driver’s license, credit card, and insurance information. If people get loans, the company can access credit history, including mortgages, other loans, and additional credit cards. America should not hand this personal sensitive data to the CCP.

The CCP controls all major Chinese companies, and America should not join the global rush to give the CCP power over a vital economic sector. Indeed, America should ban the sale of Chinese EVs—both those made in China and those made in other countries, such as Mexico. China should not be able to abuse the United States–Mexico–Canada Agreement (USMCA) to circumvent U.S. tariffs through production in Mexico. The U.S. government can weaponize USMCA Article 32.2—which deals with essential security.

Rolling Back Mandates

Congress and state lawmakers should:

16. Roll Back Mandates for Renewable Energy at the Federal and State Levels. The Biden-Harris Administration has put in place policies to reduce mineral extraction, domestic oil and gas production, and encourage wind and solar power production through Environmental Protection Agency (EPA) and Department of Energy regulations, monument designations, and climate czars in multiple agencies.REF These should all be reversed.

On President Biden’s first day in office, through executive order, he limited offshore drilling, enlarged boundaries of national monuments, and prohibited construction of the Keystone XL pipeline.REF These decisions can be rolled back through executive order, which can then form the basis for legislation to provide private industry with more confidence in large projects going forward. The Biden-Harris Administration has appointed climate officials in each agency who focus on reducing the use of fossil fuels and slowing natural gas infrastructure.REF A new Administration should eliminate these positions.

At the Securities and Exchange Commission (SEC), new climate regulations required companies to disclose climate effects of their operations; these rules were put on hold by the New Orleans-based 5th U.S. Circuit Court of Appeals in March.REF The Department of Justice should not fight the legal challenge to these rules.

The climate czar at the Office of the Comptroller of the Currency wants to force banks to disclose loans to companies that have climate effects. This disclosure requirement is likely illegal, like the SEC rule, and should be eliminated. The Biden-Harris Administration stopped new exports of liquid natural gas (LNG) from a terminal in Louisiana before the stop was halted in July 2024 by U.S. District Judge James Cain, Jr. The Biden-Harris Administration’s focus on sustainability not only directly harms exporters who want to use this terminal but also increases carbon-dioxide emissions, because LNG is a substitute for coal. The ability to find these foreign markets would motivate greater natural gas production, thereby simultaneously adding production for domestic use as well, which would help to promote U.S. energy independence at the same time.

The White House is appealing Judge Cain’s decision.REF The Department of Justice should drop the appeal.

17. End Mandates for Electric Cars and Trucks. The Biden-Harris Administration has put into place new regulations on automobile emissions from the EPA and the U.S. Department of Transportation that would require 70 percent of new car sales to be battery-powered electric or plug-in hybrid by 2032, compared to 7 percent sold in 2023—for no environmental benefit.REF

Electric vehicles suit some people, but they are not for everyone. They cost more, take one or two hours to charge, and lose battery range in hot and cold climates.REF Most important, they increase America’s dependence on China, which makes 80 percent of the world’s batteries and controls 60 percent of the critical minerals used to make the batteries.REF

With the Biden-Harris EV rule, Americans will not only have to buy more Chinese batteries and components but will also have to pay higher electricity bills and transportation costs. This will, in turn, exacerbate inflation, drive manufacturing offshore, and increase unemployment—lowering gross domestic product growth and disproportionately hurting the poor, farmers, and small business. The EV mandate distorts choice of vehicles, increases the prices of all cars, and destroys jobs in the auto industry, parts industry, and at repair shops.

18. End Zero-Emissions-Vehicle (ZEV) Mandates Through Legislation. Auto companies that do not sell EVs in sufficient quantities in California and other states that have voluntarily joined the California Air Resources Board regulations must purchase ZEV credits from companies that sell sufficient numbers of cars.REF This mandate increases the price of gasoline-powered vehicles, making them less affordable, and subsidizes EVs. This rule encourages more vehicles with Chinese components to be sold and fewer vehicles with American components. It raises prices of cars, disproportionately hurting poor people, farmers, and small businesses.

In the 1970s Congress did not allow states to place separate requirements for cars covered by the federal rules.REF This was meant to stop one state from imposing its will on other states.REF Congress gave California an exception to this rule due to problems with smog in Los Angeles.REF But the Biden-Harris Administration’s EPA has given California a special waiver from pre-emption under the Clean Air Act not for smog, but for climate-change reasons.REF This goes beyond congressional intent. Congress should repeal the California waiver, and automakers should not have to purchase credits for artificially high targets for EV sales.

Conclusion

There is growing recognition that the economic engagement strategy with China that the U.S. has pursued for decades has failed. Embracing China with free trade and investment flows was designed to produce growth, which would in theory spawn greater political liberalization and foreign policy moderation. It did the opposite.

As China has grown richer, it has only grown more aggressive abroad, more repressive at home, and more determined to replace the U.S. as the world’s pre-eminent power. Rather than liberalizing China, engagement has empowered America’s principal adversary and exposed its economy and its citizens to predatory Chinese policies that have harmed their security and prosperity.

There is now widespread recognition that the U.S.–China relationship must be rebalanced, and that Beijing’s predatory practices must be addressed. To ensure that America does not abdicate its natural advantage in the energy sector and voluntarily get caught in China’s green energy handcuffs, it must advance and implement policy solutions that protect the U.S. homeland, safeguard the U.S. economy, and mitigate U.S. reliance on China’s economy.

Diana Furchtgott-Roth is Director of the Center for Energy, Climate, and Environment, and the Herbert and Joyce Morgan Fellow in Energy and Environmental Policy, at The Heritage Foundation. Andrew Hale is Jay Van Andel Senior Policy Analyst in Trade Policy in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.

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Publish date : 2024-09-26 03:03:00

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