And this time the stakes could be even higher. With their powerful military, the Soviets presented a formidable challenge to the United States, but they were weak economically and hamstrung by a rigid political system. By contrast, China not only has a strong military but will also soon eclipse the United States to become the largest economy in the world. It has also developed 21st century technology and a highly effective system of governance. In short, China is a strategic rival unlike any the United States has faced since it became a world power, one that threatens to grab the throne as the dominant global force.
To date, Trump’s attempts to curtail China’s march toward economic and strategic dominance — threatening draconian tariffs and withholding Western-made technology — have failed miserably. Accordingly, it’s time to resurrect the model that was so successful for Marshall in the late 1940s.
Marshall used this model, which combined ideas of free trade and mutual security, to build up America’s Western European allies and contain the Soviet Union, giving the United States a decisive advantage. Such an approach would offer the United States critically important leverage to negotiate better deals with the Chinese.
In the aftermath of World War II, Marshall curbed Soviet leader Joseph Stalin’s attempts to dominate all of Europe by providing two powerful incentives — trade and security — to the nations of Western Europe. The Marshall Plan involved $13 billion in aid, but it was essentially a trade deal. It was motivated in large part by the need to restore markets in Europe so that postwar American industry could buy and sell goods and commodities with these countries. And to protect those markets Marshall made the case for a transatlantic security coalition: NATO.
One of the most important but unsung members of Marshall’s team was Will Clayton, an international trade expert who had created the largest cotton trading firm in the world. Because of Clayton’s persistence, the Marshall Plan included provisions that mandated a timetable for tariff reduction and the removal of other trade barriers. Clayton’s dream was realized when the 23-nation General Agreement on Tariffs and Trade (GATT) was signed in Geneva in October 1947.
Strategically, Marshall’s extraordinarily talented team succeeded because it had strong and disciplined leadership, built bipartisan support and stayed on message. And just as important, it had a president, Harry Truman, who would weigh in with a speech when needed but did not meddle in or undermine its efforts.
The architects of the Marshall Plan also succeeded because they conditioned their offer of massive financial aid on the ability of the Western European nations to deliver beneficial policy reforms. Crucially, these countries had a history and tradition of effective governance, making such terms achievable. The Western European governments also agreed to support the re-industrialization of West Germany and to exclude communists from their governments — absolute musts for the United States. The combination of aid and reform reduced trade barriers, stabilized currency and restored confidence in Western European monetary systems.
Because China has strong and effective central governance, making it similarly capable of reform, the model that brought success for Marshall and his team in Western Europe is precisely the one that Trump’s team ought to adopt today. But instead of using financial aid as the carrot, the Trump team should use the incentives of eliminating U.S. tariffs and sanctions to persuade the Chinese government to enact and deliver the necessary policy reforms.
Robert E. Lighthizer, Trump’s trade representative, must come away from negotiations with his Chinese counterparts with much more than an agreement that requires China to buy dramatically more U.S. goods in exchange for elimination of American tariffs and sanctions. Just as Marshall and Clayton compelled the leaders of Western Europe in 1947 and 1948 to drop historic trade barriers and open up their economies to foreigners, Lighthizer must persuade China to commit to structural reforms, including a reduction of government subsidies and protections for state-owned enterprises, a more level playing field for non-Chinese competitors and reciprocal trade and investment. And Lighthizer can sign no deal that doesn’t curtail the theft of U.S. intellectual property and Chinese control of digital infrastructure.
While the United States has less natural leverage with China than it did with the war-torn nations of Western Europe, there is a way to gain more leverage. Trump’s team should resume negotiations with the Trans-Pacific Partnership nations (just as it revised and rebranded the North American Free Trade Agreement) and seek deeper security ties with the nations in that region as Marshall’s team did with Western Europe. A revised and rebranded TPP would also lessen the economic and political dependence of the Pacific Rim countries on China.
And though Trump will always be Trump, his team should take steps to minimize the obviously staged threats, bombast and chaotic inconsistencies. Like Marshall and his aides, as well as the Chinese negotiators today, the Trump team needs to stay calm and confident.
Unfortunately, Marshall’s years as a diplomat provide no useful lessons for addressing the most difficult problem faced by Trump’s secretary of state and his trade negotiators: how to prevent Chinese technology companies Huawei and ZTE from dominating global digital infrastructure. However, another initiative undertaken in the 1940s, the U.S. Army’s Manhattan Project, arguably offers the solution.
From a national security perspective, control of digital infrastructure today is as critical as being the first to have an atomic bomb was in 1945. Because efforts by the United States to slow the march of Huawei and ZTE toward dominance through threats and sanctions may not work, American tech firms — with the help of government incentives, academia and companies hailing from nations allied with the United States — need to develop their own capabilities to compete effectively with China’s national champions. The Trump administration should consider calling for a “High-Tech Manhattan Project,” one that aims to make the United States technologically dominant.
Adopting this late-1940s playbook would enable Trump to offer a carrot-and-stick approach to the United States’ biggest international rival. A Manhattan-like project and resurrected trade and security ties with TPP nations would provide the necessary leverage to secure a win-win trade deal with China, one that cajoles the Chinese into embracing the structural reforms that are key to leveling the playing field for the United States.