The Case for “Avalanche Decoupling” From China

4 comments

1. Writing at *Foreign Affairs*, coauthors of [On Day One: An Economic Contingency Plan for a Taiwan Crisis](https://www.hoover.org/research/day-one) [Eyck Freymann](https://www.hoover.org/profiles/eyck-freymann) and Hugo Bromley make the case that the United States must be prepared for rapid economic separation from the People’s Republic of China in the event of a Taiwan invasion or other crisis scenario. Freymann (Hoover Institution) and Bromley (Cambridge University) outline how contingency plans for escalating tariffs and revocation of China’s Permanent Normal Trade Relations status would, along with related actions, signal to American and allied countries that they need to immediately plan to exit China’s markets, should China force a “geopolitical rupture.” As they write, “The power of the avalanche decoupling mechanism is that it harnesses market forces to create a process that gains momentum over time.” Along the way, the authors offer a number of other recommendations to accelerate “friend-shoring” and increase economic deterrence vis-à-vis China.

2. An interesting line of argument. I agree that the United States needs to “future-proof” its industries and prepare for major supply chain disruptions in the near future. I’m not confident we’ll see much other than talk.

3. This article assumes/hopes that most other countries follow the US into decoupling from China

   Meanwhile, everything the current president is doing is making it *less* likely that countries will follow the US against China.

   He is bullying and harassing every country on the planet, dissolving all remaining goodwill and trust in the US as a good, respectable partner. He is doing everything to drive countries to become *more* dependent on China.

   But the Hoover Insitution is pitching proposals for America’s allies to decouple and create a new, revitalized trade system amongst each other. Lol.

4. Strange that they brand this “avalanche decoupling”, when it appears to be a Frankenmonster scheme to **prevent** decoupling, except under extreme circumstances, and then manage in a way that is minimally disruptive to business interests, rather than in a way that optimizes the US’ strategic leverage.

   The first problem is that decoupling wouldn’t even start until AFTER a major crisis has occurred, which is going to be much, much too late. The second is that rather than apply maximum economic pressure to China, it would allow much trade with China to continue and merely seeks to incentivize companies to consider moving operations to other countries. The third problem is that it speaks optimistically of a tightly coordinated trade policy between the US and its allies, which is likely necessary for the scheme to have any prospect of success, but such tight coordination is unlikely to emerge, especially since the author’s leave open the possibility and even likelihood that it wouldn’t even be discussed until a crisis occurs. Furthermore, the authors admit the EU is unlikely to fully commit, which is kind of a huge problem. Also, it is naive to believe that under the circumstances China would simply allow foreign companies to transfer their assets out of the country – Russia didn’t. The fourth problem is that it incorporates a vague idea to use public money to offset the disruption caused by decoupling, which probably amounts in practice to offering companies subsidies to relocate to third countries (not the countries paying the subsidies, mind).

   This is the fifth problem:

   > Washington would commit to enforcing its anti-China trade policy against [third countries] in a rules based-manner, subject to appeal and external adjudication

   I mean… 🤯

   What they are proposing is that the US allow an external organization like the WTO to review and overturn decisions made for reasons of *national security*. The US doesn’t even allow external organizations that kind of control now, when it’s not on the brink of war.

   This pretty much gives the game away in terms of demonstrating that their real priority is protecting the commercial interests of private companies rather than optimizing a decoupling strategy that best serves America’s security needs and foreign policy objectives.

   In order for decoupling to occur it has to be occurring now, because it is a complex process that needs to be carefully managed over a period of many years. Trying to start it in the midst of a major crisis is like delaying re-armament until the Wehrmacht has already raised the *Reichskriegsflagge* over the Kremlin.

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