(What’s Left of) Our Economy: Biden Makes Clear: Trump’s China Trade Strategy Sure Won Reelection

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Biden, Biden administration, Buy American, decoupling, Donald Trump, Katherine Tai, manufacturing, monitoring and enforcement, Phase One, sanctions, supply chains, tariffs, U.S. Trade Representative, USTR, {What's Left of) Our Economy

Meet the new U.S. China trade strategy. And now it’s all but official: Same as the old (Trump administation) China strategy. Further, as should be obvious to anyone with a realistic view of core U.S. interests when it comes to the People’s Republic, that’s decidedly great news for America.

Overlooked amid dramatic developments like the Ukraine war and surging inflation and Ketanji Jackson Brown winning a Supreme Court seat, U.S. Trade Representative (USTR) Katherine Tai revealed late last month that after years of dumping on the former President’s approach to the subject as unproductive and even counterproductive, Joe Biden has finally agreed that Donald Trump’s priorities on this front were right all along.

Specifically, rather than trying to change the predatory Chinese practices that for decades have victimized U.S. businesses and workers, Mr. Biden’s trade envoy indicated to Congress that this goal had become quixotic.  So the administration would pivot to the eminently feasible aim of using tariffs both to punish Beijing’s offenses and eliminate the advantages created by its subsidies and intellecual property theft and investment blackmail and host of import barriers.

Not that Trump ever explicitly stated that reforming China was pointless. In fact, the Phase One trade agreement he signed with Beijing in January, 2020 committed the Chinese to dismantle numerous protectionist policies. But for two reasons it should have been clear that his administration’s emphasis lay elsewhere. The first was Trump’s relatively early resort to towering and sweeping tariffs. The second was the lopsidedly pro-U.S. nature of Phase One’s dispute-resolution system.

By securing China’s agreement to enforcement procedures that on a de facto basis enabled the United States to tariff China for Phase One violations much more aggressively than vice versa, and that greatly reduced the odds of retaliatory levies, Trump and his trade chief, Robert Lighthizer, signaled deep skepticism that China would verifiably comply with the deal.

Candidate Biden, however, faulted Phase One for failing to address Chinese trade predation, and once elected, told a leading pundit that he’d differ from Trump on the issue by pursuing policies “that actually produce progress on China’s abusive practices.”

Last October, Tai was still complaining that Trump’s deal “did not meaningfully address the fundamental concerns that we have with China’s trade practices and their harmful impacts on the U.S. economy,” and her office repeated the charge just two months ago in the administration’s annual Report to Congress On China’s WTO Compliance. In that survey, moreover, the trade office added, “China is an important trading partner, and every avenue for obtaining real change in its economic and trade regime must be utilized.”

But in testimony to Congress at the end of last month (see here and here), Tai reported that this goal had been dramatically modified – and probably in effect abandoned. She stated that after decades of negotiations (including during the Biden term), “real change remains elusive” aside from instances in which China’s compliance with its trade obligations “fit its own interests.”

Therefore, the Biden team had decided to “turn the page on the old playbook with China, which focused on changing its behavior. Instead, our strategy must expand beyond only pressing China for change and include vigorously defending our values and economic interests from the negative impacts of the PRC’s unfair economic policies and practices.”

In terms of day-to-day policy, Tai’s revelation doesn’t change much. As I – and many others have noted – the Biden administration had decided from the get-go to keep in place nearly every single dollar of the Trump tariffs (see the New York Times interview linked above), and continued – and in numerous cases expanded (see, e.g., here) – its predecessors’ sanctions and export controls targeting Chinese tech entities.

Instead, the new strategy’s impact will mainly be felt going forward. With the last two American presidents now having determined that handling the China economic challenge through diplomacy has been futile, their successors will face enormous difficulties returning to engagement-heavy strategies without unmistakable – and enduring – evidence of greatly improved Chinese behavior. That is, Trump’s focus on punishment and protection are here to stay for the foreseeable future. And indeed, forgetting about changing China through a “Phase Two” agreement, and concentrating trade-wise on shielding the U.S. economy from Beijing’s predation using Phase One’s de facto tariff-ing authority, are exactly the courses I recommended in the mid-2020 article linked above.

The only major remaining uncertainty in U.S. economic policy toward China entails how far the decoupling of the two economies will go. Tai said a week ago that the administration’s goals didn’t include “stopping trade or trade divorce.” But that’s a straw man. The real question entails how far economic disengagement will proceed. And given the administration’s aforementioned tariff and sanctions moves, and related objectives both of creating more secure supply chains in economically and strategically important industries, and boosting domestic manufacturing output through increasing government procurement of U.S.-made products and investments to improve the competitiveness of U.S.-based industry, the answer — encouragingly — seems “pretty darned far.” 

(What’s Left of) Our Economy: Thomas Friedman’s Trump Trade Column Must be a Hack Job

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China, Donald Trump, environmental standards, labor standards, monitoring and enforcement, state-owned enterprises, The New York Times, Thomas Friedman, TPP, Trade, trade agreements, Trans-Pacific Partnership, {What's Left of) Our Economy

Thomas Friedman’s email account must have been hacked! Assuming the New York Times columnist doesn’t walk his offerings over to the paper’s editorial page office, what else could explain the appearance last night of an essay on trade under his byline so chock full of embarrassing mistakes and stale canards?

True, the column had a characteristically clever, Friedman-like premise: Republican presidential front-runner Donald Trump shouldn’t be criticizing President Obama’s Trans-Pacific Partnership (TPP) trade agreement because it contains exactly the kinds of tough-minded provisions that the champion deal-maker would insist on himself. Unfortunately, whoever really wrote the article revealed such ignorance that identity theft must have been committed.

To start, the impostor assumed that passages in a treaty’s text are remotely likely to change facts on the ground. But anyone as knowledgeable about trade policy as Friedman – who covered the beat for The Times in the 1990s – must realize that monitoring and enforcing rules on the books has never been a remotely strong suit of the U.S. government.

A big part of the reason is logistical.  As I’ve noted repeatedly, manufacturing complexes even in smallish developing countries like TPP signatory Vietnam are so vast that making provisions like new labor rights and environmental protections actually stick is impossible even for a superpower. Indeed, Washington struggles even to enforce such rules in the United States.

Another big reason has to do with the secretive nature of Asian governments like those in Vietnam and other TPP signatories such as Japan and Malaysia. Although the Pacific Rim trade pact does seek to curb the ways that these bureaucracies distort trade flows, anyone as familiar with the region as Friedman surely realizes that these regimes put few of their biggest decisions in writing, and make even fewer of them public. So as has long been the case, American officials will be hard-pressed even to identify violations of the new TPP provisions, let alone combat them effectively.

It’s also hard to imagine that the real Friedman would simply parrot the Obama administration talking point that TPP will greatly benefit Americans by eliminating tariffs in 18,000 product categories. How could he not have seen the documentation provided by Public Citizen (and refuted by exactly no one) that the United States doesn’t even sell overseas more than half of these products, and that its exports in most of the rest are miniscule?

And it’s positively inconceivable that the genuine Thomas Friedman would have claimed that “if we walk away from the TPP all our friends in the Pacific will just sign up for China’s R.C.E.P., or Regional Comprehensive Economic Partnership, which will set trade rules in Asia….” He obviously would have known that six of the ten other TPP countries are clearly hedging their bets by signing on to the Chinese initiative, too. These including the biggest by far (Japan and Australia), along with Malaysia, New Zealand, Singapore, Vietnam.

In other words, the real Thomas Friedman would never have written that a negotiator as good as Donald Trump would have okayed an agreement with this many gaping loopholes and other weaknesses. Let’s hope that the hacker(s) are caught before Friedman’s reputation takes on more water!