Trump’s Misguided Obsession with China

The reality governing modern-day trade appears far more complicated than the White House lets on — and the WTO isn’t the answer, said speakers at a recent panel sponsored by the Chazen Institute.

Print this page

“Blaming China for US manufacturing woes is selling snake oil,” said Phil Levy, a senior fellow at the Chicago Council on Global Affairs and a panelist at “Protectionism Today,” held recently at Columbia University.

He added: “Pledging that jobs will return is dangling false promises.”

Those sentiments, and variations thereof, were repeated frequently by the experts featured on the panel, which was cosponsored by the Chazen Institute for Global Business.

A broader “obsession with China is at the heart of Trump’s thinking” about trade, said Jagdish Bhagwati, a Columbia University professor of economics, law and international affairs and moderator of the panel. As proof, Levy reminded the audience that Trump likely chose several close advisors because of their stated antipathy toward China, including Peter Navarro, head of the White House National Trade Council, and former chief strategist Steve Bannon.

view the event video

We’re Not Alone

The United States is hardly alone in erecting trade barriers, of course. Despite efforts of the World Trade Organization to promote free trade, protectionist policies are rampant around the globe.

But China’s size and clout as it barrels toward the title of the world’s largest economy make the country different. Panelists at the event argued that if we continue to propagate false notions about China, if we fight back with blunt weapons of tariffs and walls, world trade will suffer.

To be fair, China also taxes a sizeable number of imports — from the United States and elsewhere — that cross its borders. And Trump has threatened similar treatment for any country that cheats on rules of trade or currency manipulation, often singling out Mexico for special scrutiny as well. What’s more, a sizeable number of import categories already carry high tariffs, including aluminum foil, steel and washing machines.

Members of the panel agreed they had no clue which direction the current administration will ultimately take on China trade, especially given US political and regional aspirations for China regarding North Korea and the South China Sea.

What About the WTO?

“Trump has no China trade policy,” said Chad Bown, a senior fellow at the Peterson Institute for International Economics.”

Just as worrisome, the international body designed to create a fair and level playing field for global trade is more or less toothless when it comes to China. “The WTO needs new rules for China,” said Bown. “But first we have to decide if we want China to become more like the rest of the world or do we want WTO rules to change to address China?”

But some pundits suggest that one overarching global trade organization is no longer relevant, and more specific strategies are needed than the WTO can provide. The flurry of bilateral trade treaties that have been enacted since the 1990s have stripped away much of the WTO’s authority. “Preferential agreements create a disincentive against the WTO,” said Pravin Krishna, a Johns Hopkins professor of international economics and business.

President Obama attempted to shore up US influence vis a vis China through the Trans Pacific Partnership. With neighboring Asian countries agreeing to rules dealing with state-owned companies, data flows, intellectual property, labor and the environment, the “if you can’t beat ’em, pressure ’em” strategy was meant to take the peer-pressure approach to a new level.

Of course, that strategy backfired, since one of Trump’s first acts as president involved scuttling the TPP. Meanwhile, China’s One Belt One Road initiative has enshrined its trading position as it forges trade and infrastructure links with its neighbors. Even as the country moves from an emerging market to a more expensive developed economy, China is finding ways to preserve its trade position.  

Whatever the forum, negotiations need to become more targeted, said the panel. “Major frictions need to be addressed for trade to flourish,” added Bown, who singled out issues of intellectual property stealth and China’s related policies requiring local joint venture partners.

Added Levy: “We should identify a small number of priorities. If we make tech transfer #15 on the list, it won’t ever reach the stage of negotiations.”

And voters need to accept the reality of the 21st century. “US trade policies are designed to protect the US economy, not to make it more competitive,” said Krishna. “If Trump focuses on fighting for declining industries, not much will happen.”

articles by Topic