Trade Policy

May 21, 2020 4:36PM

Beware the Costs of a Technology Trade War

In a post last month, we raised concerns about the unforeseen and underappreciated costs of expanding export controls on U.S. technology. Either those concerns fell on deaf ears or the administration did its due diligence and determined that the expected benefits outweigh the expected costs because—earlier this week—the Commerce Department published new rules further restricting Huawei’s access to U.S. technology.

U.S. exports to Huawei have been tightly controlled since Huawei and its affiliates were placed on the Entity List in 2019 for national security reasons. However, because of the design of U.S. export regulations and the nature of technology supply chains, Huawei and its affiliates were still able to import semiconductors from foreign producers that use U.S. chipmaking equipment and software. The new rules are intended to close this loophole and completely cut off Huawei from U.S. technology.

Explaining the purpose of those new rules, Commerce Secretary Wilbur Ross—betraying naïve expectations that Huawei would have just thrown in the towel and shut down its operations after last year’s U.S. sanctions—offered:

Despite the Entity List actions the Department took last year, Huawei and its foreign affiliates have stepped‐​up efforts to undermine these national security‐​based restrictions through an indigenization effort. However, that effort is still dependent on U.S. technologies. This is not how a responsible global corporate citizen behaves. We must amend our rules exploited by Huawei and HiSilicon and prevent U.S. technologies from enabling malign activities contrary to U.S. national security and foreign policy interests.

Although we have been skeptical from the start that this is the right way to proceed with China, the die most definitely has been cast and the technology trade war is moving ahead at full speed. Of course, the U.S. government (many in the Trump administration and many in the Congress) has its reasons (some factual; some presumptive; some political) for this course of action. So, instead of rehashing concerns already raised, we offer (in convenient bullet point fashion) the most relevant facts and assumptions culminating in the current policy, as well as the expected benefits and likely costs of that policy. Unfortunately, the list of likely costs is long.

Facts

  • The U.S. government sees the Chinese government as a bad actor.
  • The U.S. government sees Huawei as an adjunct of the Chinese government.
  • The U.S. government sees Huawei as the leader in 5G technology.
  • The U.S. government sees Huawei’s leadership in 5G technology as a threat to U.S. national security.
  • The U.S. government sees a vulnerability to Huawei’s 5G leadership in Huawei’s dependence on U.S. semiconductors and semiconductor technology.
  • The U.S. government seeks to exploit that vulnerability by depriving Huawei of the technology it needs to continue to dominate 5G.

Assumptions

  • Targeting Huawei with export controls and entity list restrictions to deprive it of needed inputs will slow or stop Huawei’s progress.
  • U.S. sanctions on Huawei from the supply side will compliment U.S. efforts to compel other governments to forego purchasing Huawei gear on the demand side.
  • Slowing or stopping Huawei’s progress will enhance U.S. national security.
  • U.S. national security will be enhanced because U.S. or U.S.-backed 5G companies will emerge and fill the void as standard‐​setters and dominant suppliers of 5G network gear and consumer products.
  • Leadership in 5G begets leadership in the next generation of communications technology and other technologies; followership consigns to more followership.
  • The expected benefits of the U.S. government’s approach outweigh its expected costs.

Benefits (if the assumptions are accurate)

  • The Chinese government’s ability to control or have disproportionate influence over global information and communications networks (and whatever other currently unforeseen powers that control or influence would bestow upon Beijing) will be reduced.
  • Reducing Beijing’s power is—in this context and with certain caveats—akin to enhancing U.S. national security.
  • Impeding Huawei’s success (albeit, through compulsion of other governments and laws restricting private companies from engaging in commerce or research and development with Huawei) could buy time for U.S. companies or U.S.-backed companies to emerge and take leadership in 5G and 6G technology space, providing U.S. economic and security benefits that might not otherwise manifest.

Costs

  • Cutting off Huawei from U.S. semiconductors, semiconductor equipment, and software will expedite China’s development of indigenous semiconductor production capabilities and, ultimately, put the world’s largest market for semiconductors out of reach of U.S. producers within a few years.
  • Cutting off Huawei from semiconductors made with U.S equipment in third countries will compel chipmakers in those third countries to purchase non-U.S. equipment, ultimately drying up current U.S. export markets.
  • Cutting off Huawei will inject even more uncertainty into global information and communication technology (ICT) markets, which likelywill slow the process of standards setting, which likely will retard product development schedules, which likely will deter investment in new technologies, and which likely will be resolved only by bifurcation or even greater splintering of global technology standards.
  • Bifurcation or splintering of technology standards would significantly limit scope for economies of scale in production, as firms all along the ICT supply chain would be producing for fewer customers or producing in separate production runs for customers that follow different sets of standards.
  • U.S. supply chain warfare could prove contagious, encouraging Chinese restrictions on exports of rare earth minerals or other inputs and Chinese retaliation against U.S. technology companies, while opening the door to all countries to treat trade as a strategic weapon rather than as a tool of cooperation and economic betterment.
  • Technology decoupling will inspire a cold‐​war style competition between the United States and China to win the hearts and minds of third countries through the offering of carrots and the threats of sticks.
May 11, 2020 3:33PM

The WTO Needs to Drag Itself into the 21st Century

The World Trade Organization (WTO) has recently been under fire. The Trump administration has called for its reform, but to date, its confrontational approach has aggravated allies and gotten in the way of any progress.

Now, amid the COVID-19 pandemic, work at the WTO has ground to a halt, which puts the institution at risk of irrelevance. The only multilateral talks the WTO is conducting, that is, negotiations that include the entire 164 country membership, are on eliminating harmful fisheries subsidies. These talks are now in jeopardy. A key obstacle is an inability to find a way to conduct negotiations remotely. As many of us are now working from home, it is fair to ask why the WTO can’t do so as well?

Last month, the chair of the fisheries talks, Ambassador Santiago Wills of Colombia, was hopeful that negotiations would continue in order to meet the deadline for a deal by this summer’s now cancelled Ministerial Conference. But recent reports suggest that technical difficulties are the heart of the problem. Hannah Monicken from Inside U.S. Trade reported the following:

The chair of the World Trade Organization negotiations to rein in harmful fisheries subsidies has concluded that members are not prepared to commit to virtual negotiations, telling members on Thursday that further work must be put on hold as they wait for pandemic‐​related restrictions to lift.

Colombian WTO Ambassador Santiago Wills, in a communication to members, said he had been receiving questions about next steps, according to a Geneva‐​based trade official. Based on his consultations with members and views presented at the heads‐​of‐​delegations meeting last month, Wills concluded that members were not prepared to engage in virtual and written discussions, he wrote.

Wills decided that the best course of action was to wait and see what comes next, the official said. 

The challenge is finding a way to replicate the face‐​to‐​face experience digitally as closely as possible so that these discussions may continue. This is no easy feat, since negotiations consist of countless meetings that happen not just with the entire membership, but also with a subset of countries. Lots of bilateral meetings also take place and are often critical in the last moments of securing a final deal. How to make this work in an age of telework is crucial, because even as restrictions put in place from the pandemic are lifted, it is not likely to be a smooth transition. In addition, if we are hit with a second wave of infections, stopping negotiations again is impractical if fisheries talks are to conclude this year, and worse still for our rapidly depleting fish stocks.

Last month, heads of WTO member delegations met virtually to discuss this problem and noted that while members are generally willing to talk informally through digital platforms, they are reluctant about making binding decisions, as the WTO has no current procedure for this. There are several valid concerns here.

Smaller delegations may rightly fear that they will be cut out of important discussions, there are also technological capacity gaps and security concerns. But finding a solution to these and other problems is not impossible. The United Nations quickly developed an interim decision‐​making procedure last month to allow countries to continue to vote on resolutions. And negotiations between the United Kingdom and the European Union on Brexit have moved online as well.

The WTO should be able to find a way to do this. It should prioritize getting negotiations back on track as soon as possible. As my colleague James Bacchus and I have explained, the fisheries talks are a crucial test case of the WTO’s ability to adapt to the changing realities of the global trading system. Getting these negotiations right is critical, and they won’t conclude unless delegations are willing to buckle down and put in the effort to make a deal.

Last week, Sen. Hawley (R-MO) suggested “abolishing” the WTO, which he followed up with a joint resolution in Congress for the United States to withdraw. Much of what Senator Hawley said about the WTO was factually incorrect and distracts from important conversations about how to make the WTO work better. There remain real challenges that the WTO faces, and the organization is far from perfect. The inability to conduct negotiations online is a key example of this and an area that is ripe for reform. If the WTO wants to survive the pandemic, its negotiating function needs to be brought into the 21st century.

May 6, 2020 4:27PM

Senator Hawley’s Case for Nationalism Is Strong on the Propaganda but Weak on the Facts

Over at Forbes, I follow up on Simon Lester’s insightful analysis of what Senator Hawley gets wrong about the World Trade Organization. Here are the first couple of paragraph:

On the opinion page of the New York Times yesterday, Senator Josh Hawley (R-MO) proposed the abolition of the World Trade Organization (WTO). Fair enough. For those concerned about the United States, its future, and the nature of its relationship with the wider world, Hawley’s idea is worth considering. After all, nowhere is it set in stone that the post‐​war economic institutions established under U.S. tutelage would or should endure forever, impervious to evolving politics, geopolitics, and economic conditions.

But if we are going to have an honest debate about this important issue, those offering their views should rely on facts and truth, not on propaganda and dog whistles. Senator Hawley violates those conventions in his op‐​ed, which amounts mostly to a string of slogans intended more to inflame than inform.

If you’re so inclined, you can read it in full right here.

May 5, 2020 9:35AM

Senator Hawley’s Many Misunderstandings of the WTO

Senator Josh Hawley has a NY Times op‐​ed today entitled “The W.T.O. Should Be Abolished.” Debates about the scope and nature of the World Trade Organization (WTO) and the trading system in general are important, but this op‐​ed gets so many facts wrong that it cannot serve as the basis for a useful discussion. In this blog post, I’ll go through a few of them. If the early response on Twitter is any indication, plenty of other pro‐​trade folks will be doing a similar exercise, so keep an eye out for other commentary on this.

Hawley starts off with this:

The W.T.O. was created in 1995 as the crown jewel of a new global market, a system designed by ambitious Western policymakers after the fall of the Soviet Union. Their aim was to create one giant, liberal international economy to support a new liberal international order.

The reformers wanted all the world to follow the same economic rules, so that capital, products, and people could move easily across national boundaries. Nation‐​states themselves would become less important in setting economic policy and new, multilateral institutions, like the W.T.O., would take on the role of managing the global economy.

One crucial point missing here is that the WTO carried over the previous system that existed under the General Agreement on Tariffs and Trade (GATT), which was created after World War II. The GATT covered trade in goods, and the WTO expanded that system to cover trade in services and intellectual property protection. The WTO also strengthened the dispute settlement system a bit and created a better monitoring system for evaluating governments’ trade policies.

But what the WTO certainly does not do is “manage the global economy.” Under both the GATT and the WTO, nation‐​states are in charge of “setting economic policy.” Thus, Hawley’s expressed concerns are moot, and he could have stopped writing at this point.

The way I like to think of the main function of the GATT and then the WTO is as mutually agreed constraints on protectionism. Governments recognize their weakness in giving in to protectionist interest groups, and they all agree, through the GATT and WTO, to limit their protectionism. Not to eliminate it (which would be nice!), because protectionism is still allowed. There are plenty of famous examples, such as the 25% U.S. tariff on imported trucks.

Thus, nation‐​states are still clearly in charge of their economic policy, as there is flexibility for governments to act within the rules and protect their domestic industries if they choose to do so. But through their actions in the WTO, nation‐​states have chosen to moderate their protectionism. It’s a small, sovereign step towards trade liberalization.

Hawley seems to want to downplay the continuity between the GATT and the WTO. He says: “[The WTO] was a bold vision, and a major departure. The economic system it replaced had been created by America and its allies at the close of the Second World War and pursued more modest aims.” The reality is that the GATT and all of its various agreements were carried over into the WTO. The WTO is not a “major departure.” Rather, it was a modest expansion, and it’s worth noting that key aspects of this expansion — adding trade in services and IP protection — were pushed by the United States.

Hawley then explains his understanding of the WTO as follows:

Its mandate was to promote free trade, but the organization instead allowed some nations to maintain trade barriers and protectionist workarounds, like China, while preventing others from defending themselves, like the United States. Foreign agriculture won concession after concession, while American farmers struggled to get fair access to markets. Meanwhile, the W.T.O. required American workers to compete against Chinese forced labor but did next to nothing to stop Chinese theft of American intellectual property and products.

For what it’s worth, the WTO Agreement does not refer to “free trade,” but rather “entering into reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international trade relations.” But he is right that “the organization instead allowed some nations to maintain trade barriers and protectionist workarounds.” What he gets wrong is that WTO rules allow all nations to do this. Remember the 25% U.S. truck tariffs I mentioned earlier? Again, those are permitted.

Now, there is a real issue with China and other nations who are less wealthy taking on fewer commitments, and an op‐​ed by Hawley arguing that China should do more as it has gotten wealthier (like this one from me and one of my colleagues) would be useful. But pulling out of the WTO would be counterproductive for the goal of opening up the Chinese market. Chinese tariffs were higher before it joined the WTO, and if the U.S. pulls out of the WTO, U.S. producers would face higher tariffs on their exports to China than their competitors do.

Along the same lines, Hawley complains that “the W.T.O. … did next to nothing to stop Chinese theft of American intellectual property and products.” He has it backwards here. In fact, the GATT did next to nothing here, whereas the WTO, with its agreement on Trade‐​Related Aspects of Intellectual Property Rights, does a lot. If the U.S. pulls out of the WTO, it loses one of the key mechanisms to press China to improve its protection of these rights.

So what does Hawley want instead of the WTO? Here is his vague prescription:

The United States must seek new arrangements and new rules, in concert with other free nations, to restore America’s economic sovereignty and allow this country to practice again the capitalism that made it strong. History can be our guide. For nearly 50 years before the W.T.O.’s founding, the United States and its allies maintained a network of reciprocal trade that protected our national interests and the nation’s workers. We can do it again, for the 21st century. That means returning production to this country, securing our critical supply chains and encouraging domestic innovation and manufacturing. It means striking trade deals that are truly mutual and truly beneficial for America and walking away when they are not. It means building a new network of trusted friends and partners to resist Chinese economic imperialism.

As I mentioned above, “for nearly 50 years before the WTO’s founding,” we had the GATT. Does Hawley want to go back to that? If so, that means he loses the IP protection that he was concerned about. But he doesn’t mention the GATT by name, so it’s not really clear what his vision is here. And to the extent that he offers a vision, it is pretty cloudy. He talks about “returning production to this country,” but also mentions “building a new network of trusted friends and partners.” But you kind of have to pick one of these. You can’t really have both. If you adopt a trade policy that forces production back to the United States, you will aggravate your friends and partners (and also raise prices for U.S. consumers). In doing so, you will lose their trust.

Now, he doesn’t say this, but I can imagine a policy that fulfills his goals. Basically, the United States would negotiate trade liberalizing agreements with our European and Asian friends, building up trust with allies in both places and putting China on the defensive a bit. Does that strategy sound familiar? It’s pretty close to what President Obama did with the Transatlantic Trade and Investment Partnership and the Trans‐​Pacific Partnership. It’s actually not a bad strategy, although it obviously needs some tweaking to make it work this time. But of course, Hawley doesn’t want to seem like he is endorsing an Obama initiative, so he has to obfuscate a bit here.

Ultimately, you are not going to learn much about the WTO, its actual problems, or its future by reading the Hawley op‐​ed. But it will probably generate a number of useful tweets, blog posts, and op‐​eds explaining the real issues. I hope this blog post was a start, but keep an eye out for all the others.

May 4, 2020 2:42PM

Regulatory Barriers in a Crisis, Canada Edition

Anyone who grew up in Canada (outside of Quebec) will likely remember spending mornings reading the back of cereal boxes, first in English, and then in French. In fact, almost everything you buy has bilingual packaging. As a kid, I never thought much about this. It was just a fun way for me to practice French every morning. But as an adult who spends almost all her time researching regulatory barriers to trade, product requirements like these take on a whole new meaning. When I read a story about how Canada was relaxing this requirement for some products, I was naturally intrigued.

In a recent online event, I spoke about how government regulations can act as barriers to trade, even if they are not protectionist in intent. Canada’s bilingual packaging requirement is a great example of this. But there are also countless other examples, such as testing requirements for makeup or medicines, and even whether you can call a veggie burgerburger, or almond milk, milk. While as consumers we may not notice these barriers in day to day life, producers certainly do. Particularly now, amidst the COVID-19 pandemic, where there are product shortages all over the world, this trade problem is more relevant than ever.

This is exactly why Canada recently relaxed bilingual labeling requirements for some cleaning products coming from the United States. Just like in the United States, grocery store shelves in Canada have noticeable empty spaces in the cleaning aisle. Prime Minister Justin Trudeau thus defended the action, citing the need for access to disinfectants and hand sanitizers where suppliers face shortages or logistical challenges in their supply chains. This makes a lot of practical sense. Though Canada will revert back to strict enforcement of bilingual packaging after the current crisis is over, its willingness to relax this requirement will undoubtedly help Canadian consumers get the products they need to feel safe now.

This is an important lesson for how to address regulatory barriers in a crisis situation, when every day that passes is critical. Delay is incredibly costly. For instance, as countries around the world race to create a vaccine, medical treatments, or test kits for COVID-19, making sure that we can have access to these innovations as quickly as possibly should be a top priority for policymakers. My colleague, Dr. Jeffrey Singer, has been closely following the regulatory failures that have impeded testing capacity in the United States, including preventing the use of tests developed abroad. Why should we not accept tests developed in South Korea, a trusted ally, for instance?

While COVID-19 may bring attention to these issues now, even once the crisis is over, we should work towards limiting the burden of regulatory barriers on trade wherever possible. Repatriating global supply chains is not the answer to shortages. Instead, we should look at the barriers we have at home that impede our ability to respond quickly and to help our citizens stay safe. If Canada can relax something so sacrosanct as its bilingual labelling requirements, un élément fondamental de notre identité nationale, then perhaps other barriers can be addressed too.

May 4, 2020 9:55AM

Energy Industry Desperation Leads to Jones Act Tanker Use

Something strange is afoot in the energy industry. According to Reuters, demand for tankers has reached such stratospheric levels that traders are resorting to that most desperate of measures—using Jones Act ships:

Oil traders are hiring expensive U.S. vessels, normally only used for domestic shipments, to store gasoline or ship fuel overseas, five shipping sources said, in a sign of the energy industry’s desperation for places to park petroleum amid a 30% drop in worldwide demand.

Billions of people worldwide are living under confinement rules due to the coronavirus pandemic, destroying demand for gasoline and other fuels and creating a supply glut. Storage tanks onshore and floating storage in tankers on the water are rapidly filling, leaving fewer options for traders looking to sock away oil.

Several shippers said they have started to book Jones Act (JA) vessels for foreign voyages or to store refined products. The century‐​old Jones Act requires that vessels traveling between domestic ports be owned and operated by U.S. crews, and they are generally more expensive than other vessels.

“It’s very unusual to use JA tankers for international trips,” one shipping source said.

Pause for a moment to reflect on this. International traders with a wide range of vessels to choose from consider Jones Act ships a last gasp option. But these costly vessels are the only option when transporting goods by water within the United States. Which helps explain why Americans largely avoid water transport. Despite 40 percent of the U.S. population living along coasts, ships are used to transport just 2 percent of the country’s freight (barges account for another 4 percent). In contrast, 40 percent of the European Union’s internal freight is moved by sea.

This is in large part the Jones Act’s handiwork. Instead of being able to select from a vast array of ships offering competitive rates, those seeking domestic waterborne transport are restricted to a limited, old, and expensive fleet undesired by the rest of the world. And what should be a leading means of transporting goods within a country as vast as the United States is a last resort. Americans deserve better.

April 28, 2020 1:55PM

Is The Jones Act a Help or Hindrance in Confronting China?

I recently explained why concerns about China are no reason to allow the Jones Act status quo to fester. But the analysis can be taken a step further. If China is assumed to be a grave geopolitical threat, is the 100‐​year‐​old Jones Act an asset? If the United States and China are on a collision course—be it a Cold War‐​style confrontation or worse—does the law leave the United States better prepared or at a disadvantage? Here are some reasons to suspect it’s the latter.

Shipping: In the (hopefully unlikely) event of a U.S.-China military conflict, access to commercial ships will be a prized commodity. Any large‐​scale sealift operation will require such vessels to transport U.S. military supplies and equipment. But the Jones Act’s U.S.-build requirement means fewer U.S.-flag ships available than would otherwise be the case.

Any vessels engaged in the domestic waterborne transport of goods must be built in the United States. In other words, U.S. domestic ship operators have been effectively subjected to an international embargo for the purchase of vessels—all without China having to lift a finger. Instead of Americans having access to efficient foreign shipyards that offer competitive prices, they are restricted to domestic producers that charge up to five times as much as their international counterparts while taking longer to deliver the contracted vessels.

Such vessels must charge higher rates to compensate for their costly acquisition, and, thus, there is less demand for their services. The result is fewer of them. Anyone in China rooting for a decline in the U.S. commercial fleet can hardly believe their luck.

Shipbuilding: Jones Act supporters often claim the law’s U.S.-build requirement helps foster U.S. shipbuilding, which is often deemed key to U.S. national security. But here too the Jones Act plays the role of saboteur. Low demand for pricey U.S.-built ships means that the combined output of U.S. shipyards is typically in the low single digits. This is entirely predictable. By handing U.S. shipyards a captive domestic market, the Jones Act nearly guarantees their inferiority to shipbuilders abroad. These shipyards don’t need to be world‐​class to win Jones Act business—they simply need to better than the handful of other U.S. builders.

U.S. shipyards find themselves caught in a vicious cycle. Their lack of competitiveness results in minimal export business (exports accounted for just 4.6 percent of industry revenue in 2014) and little demand in the captive domestic market. This lack of demand means lower economies of scale, leading to reduced efficiencies and higher costs, further dampening the appetite for U.S.-built ships. And so it goes.

The Jones Act also harms U.S. shipbuilders in more direct ways. The law, for example, imposes severe limits on the amount of foreign‐​modified steel that can be used in vessel construction. In contrast, high‐​wage Norwegian shipyards are able to stay competitive in shipbuilding by outsourcing hull construction to cheaper yards in Eastern Europe. This allows the country’s shipyards to specialize in higher value‐​added aspects of the vessel construction process. Jones Act restrictions, however, make such an approach impossible for U.S. shipyards.

The Jones Act not only disincentivizes shipyards to achieve excellence but actively hamstrings their ability to reduce costs. Chalk this up too as a win for China.

Maritime Infrastructure: While China expands its investments in ports around the world, the Jones Act increases the difficulty and expense of maintaining such critical maritime infrastructure in the United States. Acting in concert with the 1906 Foreign Dredge Act, the Jones Act restricts dredging operations to vessels that are U.S.-flagged, U.S.-crewed, U.S.-built, and U.S.-owned. But the U.S. dredging fleet is comparatively small, aging, and costly. This translates into more time and money to remove the sand and silt that impedes the efficient operation of U.S. waterways.

Economic Impact: U.S. economic might is the sine qua non of both the country’s soft and hard power. Without its massive economy, the United States would be diminished in influence and less able to fund its large military. But the Jones Act undermines U.S. prosperity. Indeed, a 2019 study performed by the Organization for Economic Cooperation and Development found that the law’s repeal would boost U.S. value‐​added (essentially GDP) by up to $64 billion.

It’s easy to understand why. Although typically viewed as a foreign trade barrier, the Jones Act is perhaps best understood as an impediment to domestic trade. By raising the cost of transportation the law hampers Americans’ ability to trade with each other across the country’s vast expanse. It is figurative sand in the gears of the U.S. economy (more literally in the case of U.S. ports).

A lack of competitive shipping rates, or even sometimes actual ships, means that Americans purchase products from abroad despite a domestic abundance. New England ports receive liquefied natural gas (LNG) originating in Russia rather than the United States, Puerto Rico imports agricultural products instead of buying them domestically, and Hawaii meets its liquefied petroleum gas (LPG) needs from West Africa instead of the U.S. mainland.

China imports U.S. LNG and LPG while Americans in places such as Hawaii and New England cannot. That’s not defensible on the grounds of either economic efficiency or national security.

The Verdict is Clear: the Jones Act is Hurting U.S. Interests

This is far from an exhaustive list of harms caused by the Jones Act. Nonetheless, it’s hard to escape the conclusion that—assuming the worst about the path of U.S.-China relations and intentions of China’s leadership—the Jones Act actually serves Beijing’s interests. The law is a classic example of economist Henry George’s maxim that “What protection teaches us, is to do to ourselves in time of peace what enemies seek to do to us in time of war.” Concerns over China are not only a false justification for the status quo, but they actually make reform or repeal of this law even more imperative.

For the record, I do not believe that framing U.S.-China tensions as a neo‐​Cold War or China as the Soviet Union reincarnate is a useful or accurate depiction of the relationship. But there is a clear element of competition. The United States has traditionally been seen as a champion of free markets and free people while China’s leadership has chosen the path of authoritarianism and a greater role for economic central planning. Other countries are watching and deciding which is best.

To be an effective advocate and model, the United States must hew to its principles in both word and deed. The embrace of laws such as the Jones Act serves as a disturbing indicator that the United States lacks confidence in the ideals it espouses. The Jones Act isn’t just about what’s best for the U.S. maritime sector or even U.S. economic efficiency and prosperity, but what the country stands for. Free people ought to use foreign ships in domestic transport, or at the very least foreign‐​built ships. The United States does not prevail in an ideological clash by embracing policies that are at clear odds with its stated values. It only undercuts and undermines itself.

Regardless of how one views the U.S.-China relationship, be it a battle of ideals or something more foreboding, the case for the Jones Act’s repeal or reform is overwhelming. The law is not only failing to achieve its stated objective of promoting a strong maritime sector but is actively working against U.S. interests. After 100 years change is long overdue.