Ro Khanna on How to Change the U.S.-China Economic Relationship
The Democratic congressman talks about the U.S.'s need for a 'new economic patriotism' and why Silicon Valley firms should rethink their ties with China.
BY KATRINA NORTHROP — FEBRUARY 26, 2023
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Ro Khanna is a Democratic Congressman from California’s 17th District, which includes Silicon Valley. He recently joined the House’s new Select Committee on China, and also sits on the House Armed Services Committee, and co-chairs the Congressional Caucus on India and Indian Americans. Khanna co-sponsored the Endless Frontier Act, one of the China competition bills which was a precursor to the CHIPS and Science Act. Prior to being elected to Congress in 2016, he taught economics at Stanford University and served as deputy assistant secretary of commerce in the Obama administration. He is the author of two books, Entrepreneurial Nation: Why Manufacturing is Still Key to America’s Future and Dignity in a Digital Age.
Ro Khanna.
Illustration by Lauren Crow
Q: In a recent Foreign Affairs article, you made the argument that the U.S. needs a ‘new economic patriotism.’ Can you explain what you mean by that term and how it relates to China policy?
A: We need to rebalance our economic relationship with China, with an explicit goal of reducing our trade deficit every year. We need to prioritize economic strength in our approach to China. The challenge is how many of our jobs were shipped offshore, how many jobs we lost because of China’s accession to the World Trade Organization (WTO). We need to demand more open markets in China and an end to the joint venture agreements that force American tech companies and other companies to give up intellectual property. I believe our approach to China needs to have economic strength at its core.
At the same time, we must affirm the One China policy to prevent the escalation into a cold war. We need to have overwhelming deterrence for any military invasion of Taiwan by increasing their military capability and training. But that has to be coupled with a clear commitment to a One China policy. And that’s the approach that I will be advocating on the [China Select] Committee — affirmation on One China, increasing Taiwan’s military capability to prevent a potential strike and the training of Taiwan’s military. And then a focus on economic rebalancing, which is certainly what affects American lives on a day-to-day basis.
BIO AT A GLANCE | |
AGE | 46 |
BIRTHPLACE | Bucks County, PA, United States |
When I was out in Pennsylvania campaigning for [recently elected Senator] John Fetterman, someone said, ‘You sold my father’s steel mill job to China’. So we’ve got to rebalance steel, aluminum, paper, textiles, and the electronic components that we lost. It’s actually in China’s long term interest because they are way too dependent on an export driven economy.
The only other thing I’ll say is that I’m leading, in the next couple weeks, a [congressional] delegation to Taiwan [This interview was conducted before Rep. Khanna’s visit to Taiwan last week]. And I have said that I also plan, in coordination with the State Department, to visit China sometime this year. Clearly signaling our commitment to ensure that Taiwan doesn’t face a military invasion, while signaling that I still believe that we have to have engagement with China.
Starting with the economic side, in your Foreign Affairs piece, you talk about Andy Grove, the former Intel executive, and his idea that innovation is linked to manufacturing — so without any of the manufacturing happening in the U.S., there is also less innovation domestically. This was a fringe idea for a very long time, until recently, when competition with China has pushed it more into the mainstream. Why do you think it was a fringe view for so long?
MISCELLANEA | |
BOOK REC | A Brief History of Equality |
FAVOURITE MUSIC | Bob Dylan, Bruce Springsteen – the American songwriting greats. |
FAVOURITE FILM | Rocky |
MOST ADMIRED | Bernie Sanders and Barack Obama are my two political heroes. Very different people, but both transformative leaders with inspiring visions for this country. |
I wrote a whole book in 2011 about why manufacturers still matter, making Grove’s arguments in detail. My sense is that there was a view that we could just win the Nobel Prizes here. We could just do the design work, the service work, and that the production work was not as high end, and that it would be cheaper elsewhere. And that was a fallacy. It turned out to hollow out our working and middle class. It led to the closing and shutting down of factory towns. It led to some of the politics that we see today of resentment and grievance and polarization. It’s the political backlash, candidly, that has woken people up to the fact that we shouldn’t have watched silently as factory town, after factory town shut down. And there’s also now a recognition that production leads to innovation. There was almost, I would say, a racial bias in thinking that somehow the Chinese wouldn’t innovate, that all they would do is produce, and that was naive. That turned out to be wrong.
Are there any types of jobs or industries that we shouldn’t be trying to bring back from China?
A worker operating a robot in order to attach the glass roof to the Tesla Model S. Credit: Steve Jurvetson via Flickr
We need to bring back what is sustainable. And that’s going to mean we have to have a productivity advantage. That means a new manufacturing process or investment in technology that allows it, whether that’s 3D printing, robotics, the Internet of Things, or sensors that allow production to be easier. So we need some comparative advantage. And then I would look at the big industries that we can have here: the new types of steel, aluminum — the way China makes aluminum is so horrible for the environment — the textile industry, the paper industry. But it’s not going to be the factories of the 1950s or 60s, it’s going to be newer technology with higher productivity. It will lead to more employment, but it’s not a panacea for employment because of the productivity advantages. So we have to do it in a way that is sustainable.
You have also made the argument that this ‘new economic patriotism’ is an explicit rejection of China’s state-led capitalism. In what specific ways do you see this as different from the way China approaches industrial policy and promoting domestic manufacturing?
Well, we don’t have our government have seats on the board. We require private sector companies to raise private capital and to have business plans that meet the rigors of the market. And that diminishes the risk of cronyism. Before Intel put those factories in Ohio, they had to justify it to their independent board, and then justify it to the capital markets. And then the government does come in with an investment tax credit or grants to put it over the top. But there is a rigor to the private market that is missing in China, where the government often just comes in with significant resources or is on the board of these companies.
Ohio Governor Mike DeWine, Intel CEO Pat Gelsinger, and other officials break ground on the site of of Intel’s manufacturing site in Johnstown, Ohio, September 9, 2022. Khanna also attended this event. Credit: Sara C. Tobias/The Advocate via USA TODAY NETWORK
You also think that reducing economic reliance on China will reduce political tensions as well, right?
By rebalancing, I mean we should increase our exports as well. I am not for a decoupling, but reducing the trade deficit could lead to less political tension as long as it’s coupled with an affirmation of the One China policy and the military supply to defend Taiwan to have deterrence. As long as there’s no invasion of Taiwan, the rebalancing of the economic relationship can help reduce tensions.
You represent Silicon Valley, which is home to big tech companies that are extremely enmeshed in China and profit greatly from being in China. What do you hear from them in terms of what they think the relationship between the U.S. and China should look like?
They understand some of the need to rebalance production. Some of them are for bringing it back to the United States. Some of them want to move it to other parts of Asia, like India. It’s harder to move to India right now — a lot of it’s in Vietnam because it’s still near the China supply chain. They’re looking to diversify, both in Asia and in the United States. But they also recognize that China is a huge export market. Intel couldn’t put the factories in Ohio if it stopped selling into China — it’s one of the biggest export markets and they may want to also be pushing for more exports, while recognizing the need for export controls in the most sensitive technology.
Do you think those companies should be rethinking their relationships with China?
Yes, they need to be looking at where they put their production, and to the extent that they can bring some production home to America, that is the best case scenario. And to the extent that they need an Asian manufacturing hub, they should be looking to India. The three roles that I have are sort of coalescing around my vision. And that is, being on the China Select Committee, being the ranking member in the Democratic side on armed services, and the [subcommittee] on innovative technologies and cyber, and then the co-chair of India caucus. India provides an opportunity for some of these companies as well.
Could you expand on what you see as India’s role in the U.S.-China relationship today?
My first preference is for as much of the production to be back to the United States. But to the extent you need an Asian manufacturing hub to supply Asian markets, or to the extent that you can’t bring everything back in production to the United States, India could emerge as one of those manufacturing hubs. It’s got a lot of work to do, because China has been doing this for the past 20, 30 years. India has focused much more on just technology, software development, not as much of the manufacturing base. Part of the United States and Indian relationship should be focused on helping India be an alternative to China in Asia for a manufacturing hub. And it should focus on strengthening the technology cooperation with the United States to make sure we’re staying ahead in the critical technology areas. It’s going to require India investing in more domestic manufacturing capacity, in its workforce and in building the ecosystems for the supply chain.
Ro Khanna meeting with Tsai Ing-wen in Taipei, Taiwan, February 21, 2023. Credit: 總統府 via Flickr
What do you hope to get out of both of your visits to Taiwan and China ?
For Taiwan, an understanding of the economic relationship, an understanding of what they’re going to need to make sure that there’s sufficient deterrence and China never considers the military invasion. With China, a candid conversation about the economic rebalancing, which I had with the Chinese ambassador [Qin Gang] — he’s now the foreign minister. So continuing that conversation with him and making the case that the economic rebalancing is ultimately in both country’s interests. And then affirming the One China policy while trying to make clear that China can’t be aggressive in crossing the median line during these tests over Taiwan’s airspace. And certainly in the balloon incident, making it clear that the United States is shooting them down now before they cross our national sovereignty. I would like to go to China, but I would do that in coordination with the State Department at a time where they thought it was appropriate.
What have your interactions with Qin Gang been like?
He is very knowledgeable about history, and history is very current for him. The embarrassment that the Chinese felt with the Opium Wars is still poignant in his worldview, the sense of humiliation, was still on the top of his mind. But he is open to frank conversation.
I think the American people want a common sense policy… They want economic revitalization, they don’t want China to take advantage of the trade relationship. But they also don’t want a war.
If China does invade in the future, should the U.S. send its military physically to Taiwan?
We have a policy of strategic ambiguity, which I support. And that is to say, under the 1979 Taiwan Relations Act, we would assist Taiwan in ensuring that they’re capable of defending themselves, what that looks like would be for the president at that time to flesh out.
Besides Taiwan, and economic rebalancing, are there other major issues on the top of your agenda for the China Select Committee?
An excerpt from a summary of Marco Rubio and Ro Khanna’s National Development Strategy and Coordination Act.
I would say the major issue is the economic rebalancing, what I call new economic patriotism, and getting the committee to understand we need massive investment to do this. Many people voted against the CHIPS Act. But hopefully, they’ll support [Senator Marco] Rubio and my proposal for a National Economic Development Council, and realize that this is going to require significant investment to rebalance. Building support for that idea in Congress, and then convincing people that we should be engaged with China, that we can’t just have a Cold War. We need to be tough on the economy and deter any invasion of Taiwan, but then also be engaged.
And then just making sure that people are sensitive to the rhetoric and the implications that has for the Asian American community. I’m very mindful of Vincent Chin’s story, when there was hysteria and anti-Japanese sentiment in the 1980s, and he was murdered in Michigan. His murderers only paid a $3,000 fine. So making sure that the committee is responsible in its rhetoric.
It seems to me that talking about any level of engagement with China is politically controversial in Washington these days. How do you navigate that political landscape?
The American people want a common sense policy. They care that their jobs went there. They want those jobs back. They want economic revitalization. They don’t want China to take advantage of the trade relationship. But they also don’t want a war. They know a war would be devastating to the American economy and American families. And they want statesmanship and diplomacy to prevent that. That’s my read on where people are at. And that’s why I made a point of saying that I’d go to China after I go to Taiwan.
Ro Khanna at a Brookings Institution event titled “Building the workforce of the future: Resilient people and places”, May 21, 2019. Credit: Brookings Institution
What are your goals for the National Economic Development Council you and Senator Rubio are proposing?
That would help the massive reindustrialization of the United States, that would help in coordinating a plan in the left out areas to have new industry and to help rebuild steel, aluminum. It should be a goal for America to reindustrialize in places left out. The President talked about bringing manufacturing back and it was a nod to the direction I want to go, but the question is how? The CHIPS Act, which I helped write, is great. But we need a CHIPS Act for steel, aluminum, a CHIPS Act for paper, for textiles. We need it in every part of this country, suited to what the industry is. So it can’t be just brought back magically, it’s going to require, in my view, over 10 years, a $2 trillion investment in workforce grants and loans in conjunction with our universities and in conjunction with our community colleges and private industry. The ‘how’ is critical — people have been hearing for the past 50 years that we’re going to bring back manufacturing and most people yawn because the policies weren’t there to bring it back.
How does immigration policy fit into that?
Immigration is critical. We need the talent, we need to invest in our community colleges and our universities. Look at semiconductors. I mean, we need to get some of the talent from Taiwan. And this is how my new economic patriotism differs from [former President] Trump’s. We’re going to need immigrants; we’re going to need women; we’re going to need communities of color. Modern manufacturing looks very different than the manufacturing of the 50s, and 60s, and it’s a much more inclusive vision for how we build the 21st century economy. One of the points I made to the Ohio governor is, the restrictive abortion laws are making it hard for you to get talent. The kids in my district don’t want to go to college. So it has to be a comprehensive vision for how we get the talent.
…on economic patriotism, I guess I’d have a more populist economic philosophy that’s prioritizing American jobs and our communities that were de-industrialized.
Is there anything specific where you disagree with Representative Mike Gallagher, who is chairing the China Select Committee, in terms of his priorities or his approach to China policy?
I have a lot of respect for Mike Gallagher and the way he’s approaching this committee: to be serious and not be partisan, to not demonize the Chinese people. I guess I would just want to make sure that we still have an engagement with China and tough diplomacy, and are not moving towards the Cold War. I imagine that will be a part of the debate and conversation of the committee.
Click here to read another Q&A from Katrina Northrop with Mike Gallagher.
Do you see divides within the Democratic Party on China policy? And where do you see yourself on that spectrum?
Well, I certainly think I’m in a place of economic rebalancing. So there is a rejection of neoliberalism, where some of the Democratic Party may still believe that we should have let China into the World Trade Organization, or don’t believe that trade deficits matter. I’ve said that trade deficits do matter and we should never have let China into the World Trade Organization. We do need to bring back production. And that’s a rejection of some of the thinking of the ’80s and ’90s when there was a view that America didn’t need a productive capacity. And I’ve been open to having strategic tariffs to prevent dumping. So on economic patriotism, I guess I’d have a more populist economic philosophy that’s prioritizing American jobs and our communities that were de-industrialized.
Secretary of Defense Lloyd J. Austin III arrives at Camp Navarro, Zamboanga, Philippines, February 1, 2023. Credit: Chad J. McNeeley/U.S. Department of Defense
On military strategy and diplomatic strategy, I would be in the camp of tough diplomacy. Let’s prepare Taiwan with the military capability and let’s make sure that we are doing things like President Biden is with our bases in the Philippines. Let’s clearly affirm a One China policy, and let’s clearly make sure that we’re engaging. That’s why I’ve said that, while I’m going to Taiwan, in leading a delegation there in the next week, that I’m also making it very clear that I want to go to China. And that is a different stance than certainly some Republicans have taken.
I don’t know how would you characterize that? I haven’t talked to enough Democratic members about China policy to know exactly how that fits with other views.
Well something that is interesting to me is that Republicans have been so much more outspoken on China issues than Democrats. Why do you think that is?
One of things I am trying to do is articulate a coherent theory of China policy, which I believe hopefully will be adopted by the Democratic Party. That is, again, tough economics, rebalancing trade, affirming the One China policy so that we don’t unnecessarily provoke China into a Cold War, and providing sufficient military training and equipment to Taiwan and our allies to deter any military move that China could make. With the goal being America being the preeminent producer in the world, at peace with the second biggest power of China, in a peaceful coexistence. So that’s the goal. I’m not saying everyone in the Democratic Party would agree with it. But I do think it’s important for us to articulate a coherent worldview, a vision, of what our policy is. Gallagher has articulated his a number of times, and I’m trying to do that for the Democratic Party.
What did you learn from the visit to Taiwan last week? Anything surprise you or change your views on U.S. policy towards Taiwan?
The delegation to Taiwan. Credit: 總統府
It was an excellent trip. This was not a provocative trip. It was a chance to engage with Taiwan and keep the peace. It solidified for me how critical it is for America to listen to Taiwan about what the people of Taiwan want and for U.S. lawmakers to not get out ahead of that. While there, I also met with Morris Chang, the founder of [the Taiwanese chip giant TSMC] the semiconductor industry of Taiwan, and spoke to him about the challenges of manufacturing in the United States and how we can make sure TSMC can succeed in Arizona. We need to be more engaged about keeping and attracting world talent like Morris Chang, who is an American [and] who began his career here. I left with a much deeper understanding of the U.S.-Taiwan relationship and was grateful for the opportunity to visit.
Katrina Northrop is a journalist based in Washington D.C. Her work has been published in The New York Times, The Atlantic, The Providence Journal, and SupChina. @NorthropKatrina