US needs a little help from its friends to curb Chinese mercantilism

US needs a little help from its friends to curb Chinese mercantilism
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During campaign stops all across the country, Donald TrumpDonald John TrumpCould Donald Trump and Boris Johnson be this generation's Reagan-Thatcher? Merkel backs Democratic congresswomen over Trump How China's currency manipulation cheats America on trade MORE spoke about the need to re-balance our trade relationship with China, saying they have cheated us, robbed us and cost us hundreds of thousands of jobs. 

The reality, however, is much more complicated. While our bilateral trade deficit is very large, we exported nearly $200 billion in goods and services to China last year, and that total has been growing steadily for several years.

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U.S. manufacturers, service providers, farmers and ranchers all depend on U.S.-China trade as a growing market for their products. Moreover, many U.S. companies made huge profits in their China businesses, which has helped to spur R&D, technology leadership and investment earnings here at home.

 

Measuring success or failure by the trade deficit alone is a mistake, as there are complex causes and effects and there are many benefits for American consumers and producers flowing from China’s rise to prosperity.

It is no secret, of course, that despite these successes, our trade and investment relationship has serious problems. U.S.-based companies face numerous hurdles when entering China, and our exports do not always face a level playing field in the country.

China’s practices deny national treatment and create discriminatory burdens for companies who wish to enter their market. There is no doubt that the Chinese government uses a number of pernicious policies to force transfer of U.S. technologies and to further its goals of achieving technological leadership in many fields.

But the Chinese problem is not simply an American problem. Companies from all over the world, including Europe, Latin America and Asia, face the same problems competing in China as American companies do. Herein lies the key to improving the U.S.-China relationship.

The only way to change China’s problematic trade and investment practices is to work together with our allies and trading partners in order to put pressure on the Chinese to finally, and definitively, change their ways.

The solution to these problems must come as part of a multilateral and measured strategy to achieve fundamental changes in China’s treatment of foreign companies and imports. Without a growing, global consensus that China is not playing by the rules, it will be hard to affect fundamental change.

Unilateral tariffs alone will not do the job. They will only escalate conflict and could potentially bring about even more damaging practices and retaliatory measures as China seeks to deflect global attention away from its practices and toward our unilateralism.

Among those who stand to lose the most from this conflict are American ranchers and farmers across the country whose products are at the top of the list for retaliatory measures from China.

One example of this is the soybean industry. The United States exported over $12 billion in soybeans to China in 2017, making China the largest purchaser of U.S. soybeans in the world.

Thursday, in response to the tariff announcement, the American Soybean Association issued a statement stating that, “This decision places soybean farmers across the country in financial danger.” 

But U.S. technology companies and workers also face risks. A trade war with China will disrupt this fastest-growing sector of our own economy, which depends on a complex supply chain that involves both exports to and imports from China in order to prosper.

What is most concerning about the administration’s sudden invocation of retaliation under Section 301 is that, instead of focusing on forming closer relationships with our trading partners and devising a strategy to bring China to the table for meaningful negotiations, the United States has alienated its trading partners and isolated itself by pulling out of TPP, threatening to pull out of NAFTA and KORUS and implementing global tariffs on steel and aluminum.

These measures, which disproportionately affect the same allies who would have formed the basis of a strategy to counter China in the international arena, have made it more difficult to build international consensus for a strategy to force the change we need to see in China.

The administration’s “America First” policy looks more and more like an “America Alone” policy. Change in China will only come about if we work with our partners, our allies and our friends to uphold a rules-based trading system that encourages free trade and fair treatment for international goods and services in the Chinese market and across the world. 

Ambassador Rufus Yerxa is president of the National Foreign Trade Council. He previously served as deputy director general of the World Trade Organization (WTO) and deputy United States Trade Representative (USTR) under both a Republican and Democratic president.