There is growing bipartisan agreement that China cheats at trade. We’re now faced with a new question: Do we continue to ignore China’s cheating or do we finally act decisively to stop it?
The only progress the U.S. has ever made with serial trade cheats has been the result of extraordinary pressure applied by Congress and the White House, including, but not limited to, the threat of tariffs. We must therefore stick together. Now is not the time for Washington to demonstrate to the governments of China, Russia, or other mercantilist nations that our resolve is anything less than strong and unified.
The past 20 years of endless dialogue with China and other nations show that polite requests to curtail state-driven industrial overcapacity or to refrain from forced technology transfers and joint ownership partnerships in exchange for market access do not yield meaningful results.
China is not holding up its end of the bargain, at the WTO or via its bilateral relationships, and kicking the can further down the road is simply not a smart trade policy strategy.
This is true particularly in the steel sector, where the United States has for years worked at the OECD and for the last two years at the Global Forum on Steel Overcapacity to address these serious problems and achieve enforceable multilateral disciplines. But these efforts have not produced meaningful results and we cannot afford to wait any longer.
As time has passed, our bilateral trade deficit with China has surged to unthinkable levels. The theft of our intellectual property has inflicted serious injury and dampened our future economic outlook. China’s industrial overcapacity has spread like a virus through global markets, putting at risk our ability to produce essential materials like steel and aluminum for our national security and domestic preparedness requirements.
Regrettably, our trading partners have refused to act.
That’s why I support the administration’s recent imposition of tariffs on steel and aluminum under Section 232 of the Trade Expansion Act of 1962 to defend our national security capabilities. I also support the intention to impose tariffs under Section 301 of the Trade Act of 1974 to protect our intellectual property.
The threat (or imposition) of tariffs as a necessary step to achieving real progress, which includes reforming anti-competitive practices and reducing market-distorting behaviors.
Returning to a posture of “endless dialogue” with China, on the other hand, simply will not work. And withdrawing the threat of tariffs without achieving results would be tantamount to waving the white flag of trade surrender – signaling to China and other trade cheats that there will be no consequences for their non-market actions that harm the American economy.
If a negotiated multilateral solution with specific disciplines and automatic enforcement provisions can be agreed to, then, and only then, we should look at lifting the tariffs. Otherwise, we are simply abandoning the most effective leverage we have had in years.
The U.S.-China trade relationship is on an unsustainable path. Since Beijing’s 2001 entry into the World Trade Organization (WTO), the U.S. bilateral goods trade deficit with China has more than quadrupled, from $83 billion in 2001 to a record $375 billion in 2017. Too often, the impact of this surging U.S-China trade deficit on U.S. companies and American workers has been overlooked or even characterized as a positive development.
Our communities have shed more than 54,000 manufacturing facilities. A staggering 3.4 million jobs, largely in manufacturing, have been lost because of this massive trade imbalance. Each state and every congressional district in the United States has experienced lost jobs. And the losses extend into nearly every sector of the economy, ranging from computer and electronic parts to textiles and apparel, furniture, steel, aluminum, and other capital-intensive sectors.
The time for this to end is now.
This opinion was written after recent testimony given at a House Ways and Means hearing in support of the steel/aluminum tariff and IP investigations. Read the full testimony here https://waysandmeans.house.gov/event/hearing-effects-tariff-increases-u-s-economy-jobs/ or listen to the oral testimony https://youtu.be/1UmIvv0TDcU?t=53m22s.
Scott Paul is the president of the Alliance for American Manufacturing, a unique nonprofit partnership established in 2007 by some of America’s leading manufacturers and the United Steelworkers union. Follow him on Twitter at @ScottPaulAAM.