Trump must fight for the jobs of tomorrow in meetings with China
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This week’s meeting between Presidents Trump and Xi provides the American president an opportunity to reset a U.S.-China trade and economic relationship that has become severely unbalanced. Over the past 15 years, the United States has accrued a $3.8 trillion goods trade deficit with China, a trade deficit that analysts estimate may have cost America as many as 3.4 million jobs.

This reality represents a far cry from that envisioned in 2001, when China joined a community of nations in the World Trade Organization committed to trade on market-based terms in accordance with the principles of reciprocity, national treatment and non-discrimination. 

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To be sure, America’s staggering trade deficit with China has arisen for a multitude of reasons, but the principal one has been an unrelenting Chinese economic mercantilism that, on the one hand, has denied American enterprises fair access to Chinese markets, while simultaneously ramping up exports of Chinese products to U.S. markets.

 

With regard to the former, China has essentially closed its digital services (e.g., Web search, auction, and social media) and cloud computing markets to American enterprises, while continuing with long-imposed severe restrictions on a range of service industries, from banking and cinema to telecommunications.

Meanwhile, American goods producers are regularly compelled to produce in China as a condition of market access (instead of producing goods here for export to China) or forced to enter joint ventures and share proprietary technology.

Most recently, China’s “Made in China 2025” strategy calls for using at least 70 percent locally-produced code, content and components in an array of advanced-manufacturing products. Underlying all this is a Chinese mentality that seeks to restrict foreign access to Chinese markets while still expecting unfettered Chinese access to the rest of the world economy. 

Still, it’s important that President Trump recognize that the last contest was about low- and mid-tech manufacturing, in which China competed on the basis of low cost, devalued currency, encouragement of large numbers of low-wage workers to migrate to cities and the provision of massive subsidies ($118 billion for just four industries —auto parts, steel, paper, and glass and glass products — alone).

But the current and future contest revolves around which country will lead in advanced industries. Today, China seeks to move up the value chain to capture greater global share in knowledge-, technology-, and innovation-based industries. It’s for this reason that a singular focus on ameliorating the trade deficit would miss what’s really at stake now.

Indeed, one could very well envision a world where U.S.-China trade is in balance, but where the structure of both the trade and national economies has radically shifted, with China’s exports and economy shifting to higher-value-added advanced industries, while America’s exports and economy become more commodity- and natural-resource based, with increases in food, fiber, and mineral exports (along with waste paper, our fastest-growing export to China, by volume).

At this rate, America could go back to being an economy made up of “hewers of wood and drawers of water,” while China becomes the global technology leader. U.S.-China trade does need to be much more in balance, but with America exporting much more of the high-tech, high-wage-supporting, high-value-added products and services from sectors where it enjoys comparative advantage.

Addressing this challenge — as the Information Technology and Innovation Foundation writes in its recent report, "Stopping China’s Mercantilism: A Doctrine of Constructive, Alliance-Backed Confrontation" — will require President Trump to elevate U.S.-China trade issues to a central focus of both U.S. economy policymaking and diplomatic relations.

To be sure, the United States should aggressively pursue every tool at its disposal under WTO trade rules and U.S. trade law (e.g., anti-dumping and countervailing duty cases) to counter individual cases of Chinese mercantilism. But a whack-a-mole strategy alone won’t be enough; China’s mercantilism is simply too pervasive. 

Accordingly, the Trump administration should adopt a doctrine of constructive, alliance-backed confrontation that enrolls America’s leading allies in collectively pushing back — through all available global forums and diplomatic channels — against Chinese trade and economic policies that are tearing the very heart out of the market-based, liberalized global trade system.

This should include these nations working collaboratively to document the damage Chinese policies have done to their economies and to develop new global trade rules and norms that constrain such policies. Here, America must lead in forging new high-standard trade agreements, setting the terms of global trade going forward on American terms, for a failure to do so risks ceding leadership of the global economy to China.

But the key for Trump in Mar-a-Lago will be to communicate that U.S.-China trade going forward needs to be conducted on more equitable terms and that unfair Chinese policies that damage America’s advanced industries will no longer be tolerated.

 

Stephen Ezell is vice president for global innovation policy at the Information Technology and Innovation Foundation, a science- and tech-policy think tank.


The views expressed by contributors are their own and not the views of The Hill.