A recent report has shone a light on the dilemma faced by U.S. industrial planners, as they call attention to anti-competitive market practices in China but also strive to continue to play a guaranteed role in the development of China’s massive aviation complex.
The report, published in November by the China Center at the U.S. Chamber of Commerce and titled "Understanding U.S.-China Decoupling: Macro Trends and Industry Impacts," attempts to tackle the implications of a hard or full rupture in relations with China for aviation suppliers and those in three other spheres—semiconductors, chemicals, and medical devices—that play a central role in U.S. commerce.
“A complete loss of access to China’s market for U.S. aircraft and commercial aviation services would create U.S. output losses ranging from $38 billion to $51 billion annually," said the report. "Cumulatively, lost market share impacts would add up to $875 billion by 2038.” Of that figure, fleet growth sales would represent about $340 billion, MRO services some $120 billion, and other commercial services $415 billion.
Any number of threats could increase the likelihood of further breaches to constructive U.S.-China trade relations: U.S. arms sales to, and possible support for, Taiwan in any future cross-Strait conflict; the unilateral creation of Chinese military bases in disputed waters in the South-China Sea; or even data espionage carried out by Chinese actors in the U.S. The report outlines potentially grave consequences.
In aviation, U.S.-China decoupling would, at a minimum, mean reduced aircraft sales to China, resulting in lower U.S. manufacturing output, slimmer revenues for the firms involved, and consequently U.S. job losses and reduced R&D spending—leading to a longer-term reduction in U.S. competitiveness.
“Each of these elements impacts U.S. competitiveness in a sector where competition is already intense,” it said. “U.S.-China decoupling in aviation would generate unilateral U.S. losses to the benefit of competitors, including China’s own domestic industry. Decoupling risks to U.S. leadership in advanced aviation technologies are not hypothetical. Unpredictable policy makes U.S. aircraft, engines, equipment, manufacturers, and suppliers unreliable business partners in an industry that is built on long-term global partnerships.”
It seems clear that in wrestling with the dilemma of how to deal with China, not only has the policy debate raged, but the implementation of government fiat has also zigzagged, with the Biden administration overlooking possible military end-use issues in China’s aircraft development programs despite earlier sanctions.
After clearing the U.S.-French GE-Safran engine manufacturing joint venture CFM International to export products to the Commercial Aircraft Corporation of China (Comac) in April 2020, one of Donald Trump’s last acts as president was to add Comac’s name to a blacklist of Chinese companies that also included China National Aviation Holding Company. In June 2021, the Biden administration issued a new list of 59 Chinese entities, adding several new names but removing Comac’s.
The hardening of views in the U.S. towards China was not merely a Trump phenomenon but reflected “an increasing skepticism about the benefits of the globalization of science and technology and supply chains, the blurring between civilian and military dual-use technologies, and the increasing view, especially in the U.S., that the distinction between the public sector and the private sector in China means much less than it had in earlier reform periods,” said Adam Segal of the U.S. Council on Foreign Relations, speaking at an Oxford University Said Business School forum in March 2021.
Designated last March as point woman in the effort to drive trade relations with China forward as U.S. Trade Representative and the first Asian-American to hold the position, Katherine Tai gave a speech last October at the Center for Strategic and International Studies (CSIS) in which she outlined the administration’s new approach to bilateral trade and stressed the difficulties the U.S. faces in resetting relations with the once erstwhile partner.
“We are very clear-eyed in terms of the patterns that we have seen,” Tai told French television that month. “Many governments and stakeholders have hoped and worked to bring China into the community of countries and economies that have adopted open-market norms. We have not seen that that is the trajectory that China is on.
“It’s really about choices that China is going to make. If China is not going to make those choices, then the challenge that we have is how do we respond. How do we take steps to effectively defend the interests of our economies, our workers, our businesses, our farmers—and our opportunity thrives in a world economy where we will be continuing to compete and coexist?”