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Making China Pay Would Cost Americans Dearly

There are smart ways to face Beijing’s challenges, but a reckless and politicized response isn’t among them.

By , a senior fellow at the Cato Institute.
A picture taken on March 30 shows a billboard bearing Chinese President Xi Jinping's face looking down over a boulevard in Belgrade next to the words "Thank you brother Xi," a message paid for by a pro-government tabloid.
A picture taken on March 30 shows a billboard bearing Chinese President Xi Jinping's face looking down over a boulevard in Belgrade next to the words "Thank you brother Xi," a message paid for by a pro-government tabloid. Andrei Isakovic/AFP via Getty Images

China has few friends in United States these days, and it’s mostly Beijing’s own fault. Over the last decade, the Chinese Communist Party (CCP) has taken an increasingly authoritarian direction, attempting to impose its policies not only on its own long-suffering people but on the residents of other nations.

China has few friends in United States these days, and it’s mostly Beijing’s own fault. Over the last decade, the Chinese Communist Party (CCP) has taken an increasingly authoritarian direction, attempting to impose its policies not only on its own long-suffering people but on the residents of other nations.

But the COVID-19 crisis has greatly inflamed anti-China sentiments in a dangerous and counterproductive way. The Xi Jinping regime responded badly, missing an opportunity to isolate Wuhan early and perhaps prevent the emergence of a pandemic. Beijing’s ham-handed propaganda afterward, including attempts to blame the United States for the virus, created additional antagonism.

However, conspiracy theories that China intentionally created the virus and, accident or not, loosed it on the world are seriously short of evidence, despite the best attempts of the Trump administration to claim otherwise. To be sure, China blundered badly, and some of its mistakes—censoring doctors and journalists—reflect the CCP’s oppressive rule. Nevertheless, it is not the first government to be slow to acknowledge problems, timid in responding to a serious challenge, reluctant to impose painful remedies, and unwilling to be open internationally about its problems. Moreover, Beijing’s failings do not excuse the West, and the United States especially, for wasting months when officials should have been preparing for the arrival of COVID-19.

Alas, the coronavirus hit during the political silly season in the run-up to the U.S. presidential election, and with 70,000 American deaths and counting, the silly has become dangerous. The Trump administration’s unofficial rallying cry is to “make China pay.” Republican legislators have taken up the cause, and the Republican National Committee urges vulnerable candidates to demonize Beijing rather than defend the administration.

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China is used to being treated as a campaign prop. And Beijing deserves criticism, though that would be best delivered with multilateral backing in a nonpolitical setting. Washington has an opportunity to build on global anger toward China and especially the CCP but risks losing the moment by shamelessly seeking partisan gain.

Alas, the Trump administration seems serious—or as serious as a team that moves on a mercurial president’s whims gets—about making China pay. President Donald Trump has publicly mused about seeking damages from Beijing. According to the Washington Post, the president “fumed to aides and others in recent days about China.” As a result, senior officials have begun “mapping out a strategy for seeking retaliatory measures against China.” An anonymous senior advisor declared: “Punishing China is definitely where the president’s head is at right now.”

How? By sending it a bill? The ideas are many. One is limiting or eliminating sovereign immunity, which is routinely granted to other governments. This would allow private and public—by states, for instance—lawsuits. That has never been done on this scale, though in 2016 Congress voted to allow terrorism lawsuits against Saudi Arabia, a more limited action that proved to be quite controversial. Another idea would be to cancel federal debt, principal or interest, purchased by China. That would indirectly put money into Washington’s coffers. The Trump administration also could impose high tariffs on Chinese products, raising funds directly.

Republican legislators have similarly proposed lifting immunity and refusing interest repayments. Rep. Jim Banks suggested going to the International Court of Justice. Less discriminately, the Henry Jackson Society proposed that the world take advantage of a long list of potential legal forums to sue China. Other policymakers urged legislation to push U.S. businesses to return from China.

Conservative activists are busy pushing a variety of their own schemes. The Washington Post columnist Marc Thiessen favored lifting immunity. He argued: “Somebody has to pay for this unprecedented damage. That somebody should be the government of China.” With domestic judgments in hand, Americans could circle the globe seeking Chinese assets.

The Yale Law School professor E. Donald Elliott argued that China’s behavior required “a strong response to prevent recurrences in the future.” He wanted more than compensation: “The first step should be to require China to pay for the harm that it has caused if we can. That is necessary, but not sufficient, to deter future risk-taking with the lives and livelihoods of other people around the globe.”

Elliott acknowledged that doing so would require both stripping immunity and effectively garnishing Chinese revenues. He suggested seeking a court order for Uncle Sam to send Chinese debt repayments to victims of the virus. Elliott liked the idea of raising tariffs even more. And he suggested another option, establishing “a ‘foreign claims tribunal’ to pay the claims of the injured, either by voluntary agreement or by seizing the property of the guilty party. For example, following the Iran hostage crisis, the United States seized Iranian assets in the U.S. and the two countries then agreed to set up an international tribunal that has paid $2.5 billion out of the seized Iranian assets to settle 4,700 claims by victims.”

The Berkeley Law professor John Yoo and Ivana Stradner, a fellow at the American Enterprise Institute, proposed a detailed economic assault on China. But they would not rely on international law: “[T]he COVID-19 crisis has exposed the crisis of ineffectiveness and corruption of international institutions. Instead of focusing on international law, the U.S. should thus protect its national interests by opting for the self-help mechanism.”

Some of their steps would be purely punitive. For instance, they proposed sanctioning Chinese leaders and supporters, denying Chinese students and scholars access to university and research facilities, and enhancing “efforts to exclude China from buying and selling advanced technologies, such as microchips, artificial intelligence, or biotechnology.”

However, Yoo and Stradner also argued that the administration “needs to impose pain on CCP supporters so that they will want to change policy to alleviate their own economic losses.” To do so, they suggested: “[T]he administration could also seize the assets of Chinese state-owned companies. Under its Belt and Road Initiative, Beijing reportedly has loaned billions to developing nations in Africa, Eastern Europe, and Latin America, and then taken over their strategic ports and facilities once the debts fall due. The U.S. could turn this strategy on its head by supporting the expropriation of these assets by legal process and the cancellation of these debts as compensation for coronavirus losses.” This, Yoo and Stradner contended, would force China to sue under international law for redress.

The desire for compensation—and, frankly, vengeance—is understandable. But it is a poor basis for public policy, a wonderful hope but an impossible dream. None of the ideas being tossed about are good. Some would be ineffective. All would create costly blowback for the United States.

Yoo and Stradner are correct about relying on international panels. China has a veto at the United Nations, international tribunals have no enforcement mechanisms, and the World Health Organization has been captured by China and has no means to penalize member states. Going this route might meet emotional needs and serve educational goals but would yield no damages. Private commercial treaties have more teeth but don’t cover a case like COVID-19.

The more punitive steps would be of limited effect without allied support. Targeted sanctions would inconvenience those affected, not change Chinese government policy. Denying Chinese commercial, educational, and research access would cost the United States as well and should be considered within a larger policy of dealing with concerns of espionage and theft of intellectual property.

Making China legally liable is appealing but foolish. It would set an extraordinarily dangerous precedent. Imagine the rest of the world “making America pay” for Washington’s mistakes, failures, and crimes.

Sovereign immunity is a bit like diplomatic immunity. Both are pragmatic responses to an imperfect world. Occasional outrages result—such as when Washington spirited Anne Sacoolas, the wife of an American diplomat, out of the United Kingdom after she drove on the wrong side of the road and hit and killed a British citizen. Diplomatic immunity, explained the State Department. The U.K. was angry but did not abandon the principle in response.

Much of domestic criminal law operates similarly. Access to an attorney, prohibition of unreasonable searches and seizures, and requirement of trial by jury all are vital in protecting the public from unfair and arbitrary conviction, though unjust results occasionally occur in particular cases.

What would happen if Congress voted to allow Americans to sue the Chinese government? The next day China would authorize its citizens to sue the United States. A couple days later, North Korea, Iran, Venezuela, and Cuba would legalize suits. A week or two later, Iraq, Syria, Somalia, Libya, Serbia, Haiti, and Yemen might adopt corresponding legislation. Perhaps countries like Egypt, Vietnam, Laos, and Mexico would follow suit. Much of Latin America might join in.

A deluge of lawsuits would be filed. Think of the potential damages: Washington has bombed, invaded, and occupied more nations than any other in the last two decades. The United States has routinely applied ruinous economic sanctions. Throughout the Cold War, the United States subsidized a gaggle of dictators, tyrants, thieves, thugs, and incompetents. The State Department, CIA, and other agencies intervened in scores of foreign elections. American trial attorneys would enthusiastically join foreign advocates and organize massive class action suits to bring Washington to justice.

If there are inadequate U.S. government assets available in individual countries, no problem. Foreign regimes might seize private companies, instructing the owners to seek compensation from Washington. Moreover, foreign litigants could seek to satisfy their judgments wherever else U.S. monies, buildings, and companies are quartered. Even if the retaliation were limited to China itself, there are hundreds of billions of private U.S. assets in China. Then, to borrow from Yoo and Stradner, the United States could try to go to court and claim that China has violated international rules. Even the Europeans might not be inclined to shield American assets, given Washington’s proclivity for sanctioning them. They might see foreign creditors pursuing U.S. officials as a bit of rough justice.

The tariff idea is simply idiotic. Trade sanctions would chiefly punish Americans, not the Chinese government. Americans pay tariffs. Some U.S. consumers pay the government directly. Other U.S. consumers pay more for comparable products since tariffs inflate product prices overall. Some Chinese firms would lose sales, but others would enjoy higher, tariff-induced prices paid by Americans. In essence, Washington would tax Americans to compensate Americans.

Repudiating debt held by China, even if only interest, would ensure retaliation. Beijing might ignore the difference between public and private assets, and there is more American investment in China than Chinese investment in America. Moreover, voiding Chinese holdings would lower barriers to international debt repudiation. If the United States politicizes its debt, it would make foreign borrowers more willing to follow suit. Worse, buyers, private investors, sovereign wealth, and governments would be more reluctant to purchase U.S. securities.

The Trump administration might argue that the case of China is sui generis, but Washington has already politicized its control of the financial system. The United States has applied both secondary and financial sanctions against its closest allies in Asia and Europe. Last year, Congress even targeted a natural gas pipeline project, Nord Stream 2, between Germany and Russia. No one, no matter how close to the United States, could have any confidence in Washington’s promises.

Finally, any and all of these steps would have huge foreign-policy ramifications. Relations between the United States and China were steadily worsening before the coronavirus. Xi is returning to Maoism, Chinese foreign policy is becoming more aggressive, and even U.S. businesses have grown frustrated with Chinese economic and legal discrimination. The challenge is great, but the response should be thoughtful, nuanced, and targeted.

Launching a full-scale economic war would roil relations across the board. Attacking the Chinese economy and hunting Chinese assets worldwide would inflame nationalist sentiments there, even without the Chinese government’s assistance. The regime could not help but battle back and do so in any forum available. While economic conflict does not guarantee military confrontation, the disintegration of commercial cooperation and contact that once provided the glue in the relationship between very different systems would yield an incendiary environment.

Moreover, Washington would put almost every country on Earth in the middle of a collision between the two most important—and by some measures, at least, most powerful—nations. This would transmit great-power conflict around the globe. Every government would have to decide who to support and who to defy. The United States might be surprised at some decisions: Though many countries are angry with Beijing, they are not likely to appreciate America making them take sides.

Such a step should be taken only after serious consideration and rigorous calculation. Washington must expect and prepare for the consequences—and believe that pushing Chinese relations toward an abyss in a world already on edge after the worst pandemic in a century would advance U.S. interests. That seems unlikely.

There is much to criticize about Chinese behavior. Beijing’s response to COVID-19 is just one among many reasons. Measured and intelligent steps can be taken to shore up U.S. interests and build coalitions to respond smartly to Beijing’s propaganda and aggressive claims. However, a crusade to make China pay, no matter how appealing politically, would backfire badly. Consciously blowing up a relationship already under great strain would be worse than irresponsible. It could become the trigger for a new cold war or worse.

Doug Bandow is a senior fellow at the Cato Institute. A former special assistant to President Ronald Reagan, he is the author of several books, including Tripwire: Korea and U.S. Foreign Policy in a Changed World.

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