After nearly a year and a half in office, President Biden needs to finalize China’s trade policy. This has become an increasingly pressing issue with intense debate over how to deal with it Exclusions from Chinese customs dutiesor indeed whether tariffs should remain in effect at all.
There have been three waves of China’s trade policy over the past and current few administrations (unfortunately, as we have to have a consistent trade policy with China). The first, to which the 43 Bush administration and the Obama administrations attributed, was essentially open trade policy.. As part of Bush Policy 43, China was allowed to join the World Trade Organization (WTO) in 2001. But many promises made by China upon its accession, such as those related to financial and telecommunications services, subsidies, transparency, non-market economy practices and market opening, Didn’t come off. China reaped the benefits of the US open market while turning its back on the rules of the World Trade Organization.
The result was massive increases in the US trade deficit with China and huge losses in manufacturing jobs. President Obama imposed tariffs on imports of some tires made in China early in his administration. But after being highly criticized by the free trade community, he backed away from pursuing an active trade policy with China.
The Trump administration has adopted a different path, clearly pulling the curtain on China’s unfair trade activities, and Self-filing of major business lawsuits Under Section 301 of the U.S. Trade Laws on Intellectual Property Theft and under Section 232 on National Security Threats for Importing Steel and Aluminum.
Now President Biden and his team appear to be standing at a crossroads, unsure of which path to take. Certainly, what the war in Ukraine or inflation can do to trade policy should not be underestimated. But as we engage with China on Ukraine, the failure to have a strong trade position seems to indicate chaos or even weakness, which is not going to help our discussions.
on inflation, Many commenters, including the pro-trade Peterson Institute, note that there is no significant correlation between China’s tariffs and inflation. In any case, regardless of these developments in other areas, America cannot stand idly by in a dwindling trading environment with respect to China. It is clearly time for President Biden to fully formulate and implement China’s trade policy. We need actions and achievements. What would I like to see?
First, we should call on China for its massive packages of industrial subsidies that continue to undermine US manufacturing, and specifically identify and take action against them. China has She said she was ready to tackle industrial subsidies in its negotiations to join the CPTPP (Comprehensive and Advance Agreement for Trans-Pacific Partnership).
Well, let’s not wait and see if this happens at all; We need to address those now. We need to reform unfair trade strike forces across government agencies to implement this, and we need to work hand in hand with our allies. We must pursue business issues and innovate solutions.
Regarding Chinese tariffs, there is one main reason they should remain in effect and that any exceptions should be very limited. This is because we need to promote Resettlement, Near Consolidation, Allied Support of the supply chains that supply America.
Unless you have worked closely with hundreds of US manufacturers, as you have while in government and outside of government, no one will realize the great positive effects of these tariffs. They put into every American manufacturer’s thinking and planning the obvious need to “buy American” or at least develop a nearby source, perhaps in the USA, USA or CAFTA-DR, or in an allied country in Europe or Asia.
These tariffs have been in effect for years, and this process is well underway. Raising tariffs is now taking us back to zero, and starting over (maybe) in the future. Manufacturers (and retailers) should know that your free China pass is out. Unless a different trade policy is implemented which achieves these objectives, tariffs should remain.
We also need to start strict control And perhaps control the flow of capital and investment to China. The idea of reversing CFIUS on US government and private spending in China is a very good one, as was shown recently Pentagon Study It found that some small business management innovation programs were benefiting Chinese companies and the Chinese government.
We should limit exports from the United States and our allies to critical defense technology to China. If we properly control these exports, it is possible that illegal trade can still be prevented Building China’s semiconductor industryfunded by hundreds of billions of dollars in Chinese government funding, has bypassed American industry.
But this will not be possible forever. We should also restrict major US companies, such as Tesla and Apple, from moving factories to China. It is naive to think that when the workforce in these factories goes home at night, trade secrets do not accompany them.
We have to keep doing something President Biden is already doing well: investing government money in the industrial base. The Infrastructure bill, with its trillion-dollar spending on US infrastructure, means hundreds of billions of dollars to purchase US-manufactured inputs. We must also ensure that the USICA/COMPETES invoice, including CHIPS, is passed quickly.
Finally, we need to enforce all our trade agreements with China, including Phase one agreement.
How can China’s lack of an ultimate trade policy or higher Chinese tariffs help develop a labor-based, climate-based, or diversity-focused trade policy, all of the overall goals the Biden administration has set? It simply doesn’t, and we need to take action now.
Gilbert P. Kaplan is Chair of the Advisory Board for the Manufacturing Policy Initiative at Indiana University and a senior advisor at Center for Strategic and International Studies. Previously, he served as Under Secretary for International Trade at the US Department of Commerce.