Breaking the China Supply Chain: How the ‘Five Eyes’ can Decouple from Strategic Dependency

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MEMBERS of the Five Eyes are dependent on China for 831 separate categories of imports – of which 260 service elements of critical national infrastructure (CNI) – according to a think tank report released today.

The report, published by the Henry Jackson Society, says these categories of goods include consumer electronics like laptops and phones, as well as pharmaceutical ingredients necessary for antibiotics, painkillers, and anti-viral medicines.

The report uses “Comtrade” data, compiled by the UN, of 5910 subsets of goods to measure “strategic dependency”. A country is “strategically dependent” on China for a good when more than 50% of imports of that good are from China, it is a net importer of those goods, and China controls more than 30% of the global market for that good.

All members of the Five Eyes are affected:

  • Australia is strategically dependent on China for 595 categories of goods.  167 of these have applications in critical national infrastructure.
  • New Zealand is strategically dependent on China for 513 categories of goods.  144 of these have applications in critical national infrastructure.
  • The US is strategically dependent on China for 424 categories of goods.  114 of these have applications in critical national infrastructure.
  • Canada is strategically dependent on China for 367 categories of goods.  83 of these have applications in critical national infrastructure.
  • The UK is strategically dependent on China for 229 categories of goods.  57 of these have applications in critical national infrastructure.

The report findings come as a group of Conservative MPs in the UK have written to the Trade Secretary to say that they plan to amend the Trade Bill currently before Parliament to legally require the Government to reduce strategic dependency on China.  The letter — which cites the HJS report — is signed by 21 MPs including David Davis, Iain Duncan Smith, and Owen Paterson.

In essays within the report, senior legislators from around the Five Eyes criticised the current situation and call for changes:

  • From the USA, Senator Marco Rubio recommends “coalition-centered strategies to boost resilience” across the Five Eyes.  He warns pointedly “how we respond to the challenges posed by China will define the 21st century”.
  • From Canada, Hon. Peter MacKay recommends limiting “trade with unpredictable states like China”, reconsidering Canada’s position on recognising China, and an allied approach to tackling strategic dependency.  He warns that the threat of Chinese disinformation “to Canada’s national security has not been properly addressed or fully acknowledged”.
  • From the UK, Bob Seely MP calls for reform to the WTO including changing China’s classification as a “developing nation”, the development of a “robust framework” to assess strategic development, and a targeted sanctions regime against Chinese firms that steal intellectual property”.

The report recommends that the other Five Eyes members mirror the US’ system of entity listing for countries found to have engaged in unfair trading practices or IP theft.  The report also suggests the members of the Five Eyes establish a working group to explore the viability of a Five Eyes free-trading zone.

The paper also includes freshly released polling that shows 63% of the British public support adopting an American-style tougher trade approach with China, a plurality of Britons now believe the process of globalisation was carried too far as practised, and 62% of UK adults would support “bringing back manufacturing of critical medical supplies to the UK from China”.

By James Rogers, Dr Andrew Foxall, Matthew Henderson, and Sam Armstrong
HJS

Download the full report here:

Breaking-the-China-Chain

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