Capitalists of the world unite! You have everything to lose, especially your supply chains. 

Just about a month ago, on June 18, Raytheon CEO Greg Hayes was quoted in the Financial Times as saying “We can de-risk, but we cannot decouple” [from China]. He added, “If we had to pull out of China, it would take us many years to reestablish that capability either domestically or in other friendly countries.” 

The article also notes that Raytheon is under Chinese sanctions for selling weapons to Taiwan, as is Hayes himself. And the company itself is undeniably a national champion (i.e., a company that benefits from government support designed to strengthen the firm against its global competitors). It is instantly recognizable around the world as an American corporation (it makes the Patriot missile), and it is an obvious global leader in military technology—an exemplar of America’s unparalleled excellence in making products that fly, blow things up, or do both. A substantial portion of the company’s business depends on contracts with the US government and on legal permission (and sometimes financial assistance for the purchaser) to sell its defense products in other countries. 

The company also makes civilian jet engines (and China is undoubtedly a market), but it is nevertheless a marquee name of the military-industrial complex. Yet it is raising questions about the goals of leading US economics and defense hawks, as articulated by former US Trade Representative Robert Lighthizer. In his testimony to the House Select Committee on Strategic Competition between the United States and the Chinese Communist Party on May 17, he said “The US cannot continue to underwrite the geopolitical rise of the People’s Republic of China … I believe that Congress should act now to ensure American wealth no longer builds up Chinese power. Congress should enact policies that strategically decouple the United States economy from the Chinese economy.” 

Hayes’ comments above suggest a national champion balking at the prospect of becoming a “nationalized” one (i.e., one whose own economic and financial goals are subordinated to those of its government). And if a firm in an industry so closely tied to US strategic power has reservations, others presumably have even more. These corporate doubts are likely magnified outside the United States, even those headquartered in close allies. 

These differences of opinion have their origins in the huge shifts in the world economy since the early 1990s—a period variously labeled Globalization 2.0, the Neoliberal Era, etc. Whatever the label, the underlying dynamic captured is quite simple—the emergence of China, India, and the former Soviet bloc from near-autarky and their integration with global markets for goods, services, labor, and investment. The impact of these changes was especially profound in China —and consequently on that country’s place in the international economic and strategic landscape. 

Since 2016 or so, these changes have also led to reactions in the United States, most obviously—but not exclusively—with regard to China. However, the reactions are not identical across public and private interest groups, and the differences among them can be located in good part on how they fared under globalization. These interest groups, or trade policy factions, can be classified as belonging to four broad categories: Openers, Decouplers, Repatriators, and Derailers. (I think I can take credit for naming the first three, and thank my former colleague Michael Hirson for recognizing and naming the fourth). 

The first group consists of Openers. This comprises sectors and corporations (and government departments ideologically closer to them) whose primary goal is to level the playing field between themselves and foreign competitors. They wish to expand the set of beneficial opportunities provided by globalization and typically care most about increasing access to markets, reducing tariff and non-tariff barriers overseas, and cracking down on intellectual property theft. 

The second group consists of Decouplers. This is primarily a public-sector constituency motivated by the implications for US national security of closer economic integration with China. They see this as having increased US supply-chain vulnerability and as having hastened the technological advances of a strategic rival. The decouplers care mostly about China and have no objection to (and even advocate for) deeper economic engagement with other countries such as Vietnam, Mexico, and India.

The third group consists of Repatriators. These are the intellectual heirs of Richard Gephardt and Ross Perot, for whom the problem is not so much China as just globalization in itself. It includes a relatively smaller set of companies, a larger set of organized labor institutions, and politicians (most prominently from the upper midwest) bent on reversing the trend of offshoring, or even of imports more broadly, and displays inclinations towards a more autarkic economic posture. 

The fourth group (and as noted above, I owe this description to Michael Hirson) consists of Derailers. This group, located primarily in portions of the extended national security community in the executive and legislature, is not content with mere US decoupling from China, but wishes rather to significantly limit or even reverse that country’s technological advances. 

The schema laid out above might help explain how the largest and most influential sections of corporate America see themselves and why they are reluctant to sign up to be full-on national champions. By and large, they have been beneficiaries of the opening of huge chunks of the global economy to market mechanisms over the last thirty years. This has given them access to both increased supply and demand, and they have invested in plant and other capabilities on the assumption this would continue. 

These investments have been focused on Asia in particular, the region of the world that has seen the most profound transformation since the early 1990s. These changes have pushed the fulcrum of the global economy to the Pacific Basin away from the Atlantic Basin, with China obviously making the biggest contribution to this shift.  

What the Openers, the largest faction of corporate America, want from the government are measures that open the world (and especially Asia) more to US capital, not initiatives that push them to repatriate capital, to decouple from China, and still less to derail that country—something that would hit global growth hard. To be sure, companies are sensitive to geopolitical and regulatory risk, and are diversifying into a so-called China Plus One strategy. But the important part to note here is a “plus one” corporate push for resilience rather than acquiescence in the hawks’ calls for a reversal. 

Corporate America also seems to be much more optimistic about its future under a relatively open trading regime than the broader public or large parts of official Washington. With some exceptions (notably steel), industries have tended to be skeptical of US government initiatives in the direction of trade heterodoxy. For example, the Business Roundtable was publicly critical of the efforts of the Trump administration to expand Section 232 National Security Tariffs on autos to the EU and Japan, noting acerbically that “the US automobile industry is prospering and is not seeking protection.” And continuing Trump-era tariffs on Chinese auto imports, Inflation Reduction Act subsidies for domestic production, and the peculiarities of the US market (e.g., size and weight preferences) could keep the brunt of dramatic recent increases in Chinese electric vehicle exports diverted toward the European Union. 

Successful bipartisan passage of the Inflation Reduction Act suggests that where foreign industries receive subsidies, the broad US corporate response has more often been to urge the US government to either fight such subsidies abroad or to grant them the same (or better) at home, rather than protection. Companies’ worries include not just increased foreign competition at home, but also deadweight losses from offshored plants hit by US tariffs, supply chain disruptions, and retaliation that could cause them to lose market share abroad. 

There are other factors that make American firms wary of being drafted into international economic conflicts by their government. The first is just the sheer weight of China—it is not just economically larger than the former Soviet Union, it is also more interconnected with the rest of the world, and it operates at a significantly higher level of civilian technological complexity than the Soviet bloc ever did. A presence there is not just about cheap labor or installed mineral refining capacity. The former head of the EU Chamber of Commerce in China has described China as a “fitness center” where Western multinationals “have to be.” John Neuffer, head of the Semiconductor Industry Association has said something similar—not about chip design and manufacture (where China is still behind), but about chip usage. He noted, “China is the world’s largest market for semiconductors, and our companies simply need to do business there to continue to grow, innovate and stay ahead of global competitors.”

US firms are unlikely to oppose a more activist government in toto. In a recent piece, Nils Gilman and Yakov Feigin set out the case that “instead of focusing on the optimal distribution of limited sources of wealth … The Designer Economy will center on the goals and methods for government-enabled economic development that will in effect ‘pre-distribute’ the fruits of accelerated technological deployment and economic growth.” But the “designer economy” (e.g., as seen in the Biden administration’s Inflation Reduction Act and CHIPS initiatives) has a big role for increased government spending—both in the form of direct infrastructure investment and via producer and consumer subsidies that give firms confidence that lumpy, capital outlays with long lags to completion will be remunerative. These are strategies meant to “crowd in” domestic private investment, and there is little here for corporations to object to, however much foreign governments with less fiscal space than the US might gripe. 

However, regulatory or fiscal carrots to entice firms to stay home are very different from sticks to keep them from engaging abroad, which raise corporate hackles. This perceived distinction between carrots and sticks was made perfectly clear by a recent statement from the Semiconductor Industry Association:

Recognizing that strong economic and national security require a strong U.S. semiconductor industry, leaders in Washington took bold and historic action last year to enact the CHIPS and Science Act to strengthen our industry’s global competitiveness and de-risk supply chains. Allowing the industry to have continued access to the China market, the world’s largest commercial market for commodity semiconductors, is important to avoid undermining the positive impact of this effort. Repeated steps, however, to impose overly broad, ambiguous, and at times unilateral restrictions risk diminishing the U.S. semiconductor industry’s competitiveness, disrupting supply chains, causing significant market uncertainty, and prompting continued escalatory retaliation by China.

And beyond these purely economic considerations, there are likely other factors in play as well. In terms of stock ownership, senior leadership, location of plant, choice of supplier, product destination, revenue source, and tax domicile, the twenty-first-century corporation is more multinational (and perhaps even post-national) when compared to its predecessor of fifty or 120 years ago. 

In his book, The Great Convergence: Information Technology and the New Globalization, Richard Baldwin suggests that “under the Old Globalization, the frontline of competition was thought of as national borders … Under the New Globalization, the frontline of competition is better thought of as being between cross-national production networks” and “[The effective geographical boundaries of competition are] no longer really Japan versus Germany; it is the Honda-led [global value chain] versus the BMW-led [global value chain].” 

This is a profound insight with significant implications for how interests and ideology might intersect to make it harder to corral corporations into national projects. This is even more likely to be the case if inter-firm rivalries are particularly bitter inside a shared domestic market. If so, this could lead to cross-border rather than national alliance patterns, including features such as sharing the costs and benefits of research into emerging technologies. The logic of the marketplace could lead to alliance patterns that look more like rival airline families that share frequent-flier mile programs across national boundaries. 

It would make eminent sense for firms with a global footprint and complementary local strengths to partner to share research or other expenses across geographies. And for all the rhetoric about “friend-shoring” across “shared values,” it could prove hard for governments to keep corporations from pursuing the most economically advantageous path, particularly if official definitions of friends, foes, and values themselves prove to be variable and instrumental. Being a national champion could mean less to corporations that have come to think that under the conditions of “actually existing capitalism”—even as of mid-2023—capitalism in one country is barely capitalism at all. 

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The views expressed in this article are those of the author alone and do not necessarily reflect the position of the Foreign Policy Research Institute, a non-partisan organization that seeks to publish well-argued, policy-oriented articles on American foreign policy and national security priorities.