(What’s Left of) Our Economy: A New China Bill – & Trade Policy Realist? – Worth Watching

Tags

China, currency manipulation, economic nationalism, Fair Trade with China Enforcement Act, foreign direct investment, Gang of Eight, Immigration, Made in China 2025, Marco Rubio, national security, Populism, Republicans, subsidies, tech transfer, Trade, trade law, Trump, {What's Left of) Our Economy

One of the biggest questions surrounding the future of the Republican Party, and in turn of American politics, is how many leading GOP politicians learn the main lessons of the Trump victory in 2016. In my view, these include the political appeal and real-world imperative of a nationalist approach to American economic policy, especially in the realms of international trade and immigration.

President Trump’s capture of even most of his party’s establishment on the latter could not be clearer. But signs of populism’s growing appeal are also emerging in the former, and one of the biggest has just come courtesy of Marco Rubio. In fact, legislation recently introduced by the Florida Republican and Trump rival for the 2016 GOP presidential nomination strongly indicates that, when it comes to the crucial issue of China, Rubio is out-Trumping Mr. Trump.

Rubio’s journey has been a far as it has been high-speed. His voting record on trade policy overall has been awful – at least from an economic nationalist/populist standpoint. In fact, according to the libertarian Cato Institute, the only blemishes on his record so far have come from his support for federal subsidies for sugar – a crop grown in his home state. As a result, in the fall of 2015, I dismissed him as a typical Republican pseudo-hawk on China.

That is, he talked tough about the need to confront China’s expansionism in the East Asia/Pacific region. But he seemed oblivious to how decades of American trade policy had showered the People’s Republic with literally trillions of dollars worth of hard currency, along with cutting-edge technology voluntarily transferred by, and extorted with impunity from, American companies. In other words, he did and said nothing about U.S. decisions that unmistakably had helped China become a formidable military as well as economic power.

Fast forward to this year, and what a change – at least on China. In addition to criticizing President Trump for backing away from his own Commerce Department’s initial decision to all-but shut down the Chinese telecoms firm ZTE for (repeat) sanctions busting, he’s just introduced legislation that represents the most comprehensive effort I’ve yet seen to deal holistically with the intertwined Chinese threats to America’s economy and national security.

Rubio’s “Fair Trade with China Enforcement Act” contains numerous important measures to staunch the flow of money and defense-related tech to China. (Here’s a summary from his office.) Provisions that represent major and needed advancements in America’s strategy are:

> a prohibition on the the voluntary corporate transfer of technology to a wide range of explicitly named technologies subsidized by the Chinese government, including in the Made in China 2025 program aiming to achieve Chinese predominance in numerous economically and militarily critical technologies. That is, Rubio recognizes that tech extortion (conditioning access to the Chinese market on a company’s willingness to share knowhow with Chinese partners) isn’t the only way that Beijing has been closing the tech gap with the United States. American companies seeking to curry favor with China on their own, or simply recognizing the importance of locating R&D and related activities in close proximity to their manufacturing, have also fueled China’s power.

> a requirement that U.S. trade law recognize that any Chinese product headed for the American market that’s from an industry mentioned in any Chinese document even related to the Made in China 2025 plan is ipso facto receiving subsidies the kinds of subsidies that these statutes consider illegal; and that this same body of trade law just as automatically assume that such goods are actually injuring or threatening to injure U.S.-based competitors when they enter the American market. Translation into plain English: Rubio’s bill would dramatically lower the bar for imposing tariffs on imports from China deemed to be unfairly traded. Which would be one heckuva lot of imports from China.

> a ban on investors from China owning more than fifty percent of any American company producing goods targeted by Made in China 2025 – which would restrict another major channel of tech transfer to China;

> and a new tax on Chinese investments in the United States – including levies on Chinese purchases of American Treasury debt. The latter measure, in particular, would discourage China from buying excessive levels of U.S. government debt, which keeps China’s yuan weak versus the American dollar and therefore helps to put U.S.-made goods at price disadvantages versus their Chinese made counterparts wherever they compete.

Incidentally, a proposal along these lines was first made, to my knowledge, by Raymond, Howard, and Jesse Richman in their 2008 book Trading Away our Future. So they deserve a big shout-out.

Rubio’s bill isn’t perfect. For example, it should be clear by now that any Chinese entity permitted to bid for American assets is tightly controlled by the Chinese government. Therefore, I would favor banning all such takeovers. Even if existing acquisitions were permitted, Washington would at least be freezing the Chinese state’s economic footprint in the United States, and thereby preventing ever more American businesses from having to compete with rivals whose operations have nothing to do with the free market values the nation rightly values.

In addition, Rubio’s bill says nothing about American tech companies’ growing predilection for investing in Chinese tech “start-ups” and similar entities. Some of these investments are surely extorted, but others seem to be voluntary. But since all of them can help strengthen China’s tech capabilities, they should be banned as well if the recipients have any connection with Made in China 2025.

Finally, Rubio still seems pretty comfortable with the rest of America’s longstanding trade liberalization policies except for the impact of the North American Free Trade Agreement (NAFTA) on Florida produce growers. 

At the same time, China policy inevitably shapes so much of trade policy that Rubio’s single-minded focus to date can’t reasonably be criticized. Further, he seems to understand that it’s not enough simply to introduce a bill. Rubio’s been taking it the next step by lobbying for it, and for related China policy changes, actively in the media – both broadcast and print. He still needs to show a willingness to buttonhole his colleagues actively – the most important form of Capitol Hill lobbying. But (paradoxically) his leadership on 2013’s decidedly non-nationalist or populist Gang of Eight immigration bill at least indicates he recognizes the importance of this test. 

I’ve often wondered whether American politics can produce a leader with both the populist leanings of an outsider and the insider-type institutional expertise and contacts needed to turn these impulses into actual change. Rubio’s China bill and the policy migration it represents looks like major grounds for optimism.       

Advertisement

Im-Politic: What the War on Trump is Really Telling Us

Tags

2016 election, Donald Trump, Gang of Eight, Im-Politic, Immigration, Jeb Bush, Jobs, John Kasich, Mainstream Media, Marco Rubio, offshoring, Republicans, Trade, Trans-Pacific Partnership, wages, white mortality

Let’s put it this way: If you gave me the power to create a politician with an ideal presidential personality, the product wouldn’t be an identical twin of Donald Trump. Don’t get me wrong: I’m fine with an in-your-face style generally speaking, and in politics in particular. In fact, given the abject failures of conventional politicians across the political spectrum combined with their continued sense of entitlement and arrogance, I think it’s great that Trump is blasting and ridiculing their pretensions of competence and claims to special degrees of respect.

At the same time, as I’ve pointed out repeatedly here at RealityChek, too many of Trump’s remarks have been thoughtless and gratuitously mean-spirited. Worse, with just a little premeditation and deftness, he could have made the same points about his critics in Democratic and Republican ranks, and in the Mainstream Media, with just as much force and far wider appeal. Ditto for more policy-oriented statements on issues ranging from Mexican immigrants to databases for Muslim Americans. (He’s walked back the latter, but clearly endorsed the idea in an off-the-cuff – and thoughtless – answer to a question.) This kind of carelessness is worrisome because it’s unnecessarily divisive at home, and can be dangerous in international affairs, where presidential language can make the difference between war and peace, and send dangerously confusing or completely misleading signals to allies and adversaries alike.

So clearly it’s time for Trump to up his game if he’s going to expand his following, and deserve the trust of enough Americans to win the Republican nomination and go on to the White House.

But it’s time for Trump’s enemies in the media, which plays an especially important role in our democracy, and in the political arena to up their game, too. The former need to stop hysterically seizing on every intemperate – and even childish – statement made by Trump as a sign of utter disqualification for political office, much less a sign of incipient fascism. Ditto for their descriptions of his followers as racists and even proto-Nazis.

In fact, if they want the increasingly heated, angry tone of American politics these days dialed down, maybe they could shine their spotlight more brightly and more consistently on the economic losses suffered by too many middle class and working class American voters for decades, and on their devastating impact (which goes far beyond lower living standards to include family break-ups and other social pathologies, deteriorating health, and even greater mortality).

They could also take with some seriousness the fears of comparably large numbers of Americans about the nation’s vulnerability to terrorist attacks; about the wisdom of admitting much greater numbers of Middle Eastern refugees despite major misgivings about security screening procedures expressed by President Obama’s advisers; and about Mr. Obama’s adamant insistence that the situation is in fact under control, and that doubters are betraying the nation’s leading ideals.

Just looking at the economics of this campaign year, here’s one admittedly imperfect but revealing sign of the media’s skewed priorities. If you Google “Trump” and “Nazi,” you get 16.1 million results. If you Google “white mortality,” you get 17,000 results. That latter phrase refers to a recent study co-authored by the latest recipient of the Nobel prize for economics showing that mounting economic strains are literally killing larger and larger numbers of middle aged white Americans. And you wonder why Trump voters – who come frequently from those ranks – feel angry and ignored?

Politicians deserve more indulgence, since they’re under no professional obligations to be accurate or objective. But they can up their game in similar ways. If Republicans, in particular, are genuinely alarmed at the prospect of a Trump victory, maybe they could spend less time vilifying the front-runner and more time proposing policies that could respond to their needs.

Interestingly, a growing number of GOP presidential candidates are now registering opposition to amnesty-friendly, Open Borders-style immigration policies – even Florida Senator Marco Rubio, a member of the so-called Gang of Eight that tried to steer such legislation through Congress. Moreover, several have also – so far – turned their back on President Obama’s Trans-Pacific Partnership, normally the kind of offshoring-focused trade agreement that they and their Big Business funders consistently demand.

Just as interestingly, however, the apparently converted don’t include either former Florida Governor Jeb Bush or current Ohio Governor John Kasich. Both keep touting the virtues of trade policies that are proven job-, wage-, and growth killers, and immigration policies with similar effects. And both have been among the loudest (and angriest) anti-Trump voices. Maybe if they stopped shilling for the intertwined offshoring and Cheap Labor lobbies, they might actually start eating into Trump’s lead. Or at least their poll numbers might break out of single digit-territory. But so far, it seems like they’re doubling down on demonizing Trump. Reportedly, there’s big money behind these escalating efforts. Maybe if they helicopter it on primary days, they could even buy a few voters.