Why Are We Buying What China Is Selling?

China's huge. Its history is remarkable. And its recent economic growth has been breathtaking. But China's government is autocratic and brutal, its internal policies are oppressive, and its external policies do damage to the rest of the world.

So is China a friend, an enemy, or, as I saw one reporter describe it recently, a frenemy?

Now, as President Obama meets with and fetes Chinese President Xi Jinping, we're at a tipping point. China's economy may be collapsing. Its citizens are losing jobs and wallowing in unimaginable pollution. And, if things go terribly wrong, Beijing's aggressive, bullying military actions against its neighbors and its cyber war on us may some day lead to a wider shooting war.

But through all of these issues runs a thread that's worthy of exploration: How complicit is the United States in China's troubles? The answer, regrettably, is "very." Our last two presidents have been terrible stewards of this relationship and have welcomed China to walk all over us in nearly every way.

It isn't that the U.S. forces Beijing to arrest lawyers, lock down Tibetan monasteries, or curtail the sale of Taylor Swift merchandise. But China's become much richer thanks to American consumption of its goods, American companies' locating in China, and American trade policies that largely let it off the hook.

Back in 2008, President Obama called President Bush a "patsy" for the way he approached the trade relationship with China. But since that time, things have become even worse. Our bilateral trade deficit with China is by far our largest such imbalance, and it has been growing to record and staggering heights in recent years. It was $343 billion in 2014.

Some will point to relatively cheap consumer products or low unemployment rates and say, what's the problem? Here's the problem: Our middle class is being hollowed out, we've shortchanged our future economy by letting needed investments in infrastructure and research slip, and an extraordinary amount of our industrial know-how and workforce has disappeared over the past 14 years.

There are roughly 5 million fewer manufacturing workers in the United States than there were in 2000. While these challenges had been taking root for a few decades, you can trace the most important decision back to that year, when a bipartisan group of American politicians eased China's entry into the World Trade Organization by normalizing trade relations and removing the annual threat of higher tariffs. They didn't even ask for much in return beyond promises of social and economic liberalization. And so China hasn't offered up much of either.

Instead, we've seen a steady reliance on a weak currency to boost an export-heavy economy that has concurrently hamstrung our own; gluts of commodities like steel, iron, and aluminum that are produced by zombie companies and dumped into the U.S. market; spurious domestic market restrictions and technology transfer requirements that make investment difficult for American companies; and a steady stream of government-sponsored cyberhacking against stateside private-sector targets.

It seems our trade and public debt have been bankrolling a large, belligerent police state. It would be convenient to fault big-box retailers, whose unending search for the lowest prices possible over the past few decades helped push thousands of American manufacturers to uproot for East Asia. But that wouldn't be enough.

The real culprits were always in Washington. And now is it's time for them to fix their mistakes.

Once through with the formalities, President Obama should press his counterpart on a range of economic issues. To wit:

China suddenly devalued its yuan in August by a full 4 percent, reminding us that China's currency is still controlled by the government, not the market. This history of currency manipulation has been tied to massive American manufacturing job loss. The president, like he did as a candidate in 2008, should threaten — and follow through, if necessary — to shut off some access to the U.S. bond and consumer markets if China doesn't change course by the end of the year.

Hackers tied to the Chinese military have stolen trade secrets from a number of American corporations in the past few years, and a recent survey shows industrial espionage originating in China amounts to the lion's share of all new cases reported to the FBI. Yet some in the administration thought it would be embarrassing to sanction China prior to Xi's visit. That choice is the truly embarrassing thing here.

Lastly, China is well past the point when it should have shifted its model for growth toward one based more on private consumption. Its industrial overcapacity has global effects, and represents an existential threat to large swaths of American industry.

America should stop buying what China is selling. Until we do, don't expect the Chinese government to refrain from aggressive military behavior or underhanded economic tactics. They've worked so far. Until there are consequences for their actions, why would they stop? 

Scott Paul is the president of the Alliance for American Manufacturing.