Will Trump Flub the China Trade Talks?
We’ve heard a lot of hype about a looming trade war for the past two years, but the evidence is scant that President Trump’s aggressive trade policy shift has devastated the American economy. It’s certainly been no Smoot-Hawley. We are in fact now better positioned to settle long-standing disputes with China, and one of the more remarkable shifts in our national political discourse is the way the rest of us now talk about China.
Maybe having an unfiltered celebrity president who loves to hyperbolize “China” was the change agent America needed, but the effect on our rhetoric has been significant, and it spans the political divide. From Chuck Schumer, Mark Warner and Elizabeth Warren to Lindsey Graham and Marco Rubio, some may question the tactics of how best to respond to our trade problems – and there have been plenty of strategic missteps so far in this burgeoning dispute – but all would agree with the new framing that Trump has ushered in: China is an economic rival and competitor, and American trade policy should more boldly reflect that.
That wasn’t the case only a few years ago. And that means there’s now bipartisan support – the closest the administration may have to a mandate on anything in February 2019 – in favor of reworking that trade policy.
But will the president make use of this support? Or will it be squandered? A high-level Chinese delegation is in Washington to discuss specifics in the trade relationship between the two countries, and China has made oversized promises of purchasing U.S. commodities while avoiding the more difficult issues like market access and intellectual property rights.
It’s easy to see how Trump could succumb:
He listens to his conciliatory advisers, like Treasury Secretary Steven Mnuchin, and relieves China of the pressure caused by broad U.S. tariffs and specific trade enforcement actions – the very pressure that brought Beijing to this bargaining table.
He reaches for immediate gratification after a few brutal weeks of self-inflicted government shutdown headlines, and closes negotiations without touching on the fundamental problems at the root of these trade disputes: China’s massive support for key industries and state-owned enterprises; its disregard for intellectual property rights; its forced technology transfer policies. He picks apart none of them, and this amalgamation of Chinese policies, which creates that nation’s unnatural trade advantage, is allowed to continue.
He overrules clear-eyed negotiators like U.S. Trade Representative Robert Lighthizer and accepts an immediate “deal,” in which the Chinese side offers to purchase more liquified natural gas, more soybeans, or a few more planes from Boeing to reduce our annual goods trade deficit.
If Trump folds quickly and accepts very little, then yes: It will be an opportunity squandered.
But if he and this new Washington near-consensus appreciate what these talks represent – the first chapter in a very long book – then they might succeed. At the very least, in this scenario, they won’t be a failure.
The Trump administration should be seeking measurable improvements to China’s industrial policies so that those policies don’t tacitly encourage economic espionage or serve as release valves for Beijing’s intentional industrial overcapacities. It should maintain those tariffs and a strict enforcement regimen to hold China’s attention.
And then it should turn to China’s weaponized exchange rate; its captive labor force, which has little to no rights to its name; and its lax regulatory environment, which poisons its own citizens and puts other workers – like our own – out of a job.
Many Chinese leaders know they must put their nation’s economy on a more sustainable path, which would mean adopting many of the changes that the U.S. has been proposing. The fact that the United States, China’s most important export market, is now taking notice may be the spark that ignites that transformation.
But insisting that China play by widely agreed upon rules of global competition won’t mean a boon for American jobs unless we also make our own serious policy shifts.
That means investment: We should be boosting federal R&D partnerships like the network of Manufacturing USA institutes; rebuilding America for the 21st century with massive infrastructure investment that comes with strict domestic procurement policies; training the next generation of workers who will make the products that we sell abroad.
We should be planning to win the next decade, not the next news cycle. Because it’s in those kinds of increments that this dispute must be tracked if America hopes to win it.
In years past, many would have looked at these U.S.-China trade talks as the opportunity to close an unfortunate chapter in an unwise trade war. That’s no longer the case today. The president must leverage this shift in Washington’s opinion and prepare for a long game. When it comes to reshaping trade with China, we should just be getting started.