Here is more from the FT, by Oren Cass. Keep in mind that capital flows are the mirror image of the trade deficit! Be careful not to slip into the language of causality here, because it is all mutually determined. But a world of higher net American capital flows into China is also a world with a lower American trade deficit with China. Which is it going to be? There are legitimate national security reasons for restricting some U.S. investments into China. But an analysis such as this should start by recognizing the relevant trade-offs. How about calling it "the new Republican coalition for a higher trade deficit with China?"
...[Tom] Cotton argued that America “ought to ban US investment in strategic Chinese industries and encourage reshoring of US factories and jobs — and punish offshoring to China. Further, we need to scrutinise and regulate Chinese investment in America much more closely.” In a 2021 report he highlighted a wide range of “financial weapons”.
Republican senator Marco Rubio is another outspoken critic of globalisation. In December, he sent an open letter to his colleagues, declaring it a “strategic disaster” that “American financial investment is pouring into [China] at its highest rate ever” and seeking support for his “American Financial Markets Integrity and Security Act,” which would block investment in Chinese companies flagged by the Departments of Defense and Commerce.
Here is more from the FT, by Oren Cass. Keep in mind that capital flows are the mirror image of the trade deficit! Be careful not to slip into the language of causality here, because it is all mutually determined. But a world of higher net American capital flows into China is also a world with a lower American trade deficit with China. Which is it going to be? There are legitimate national security reasons for restricting some U.S. investments into China. But an analysis such as this should start by recognizing the relevant trade-offs. How about calling it "the new Republican coalition for a higher trade deficit with China?"
