Cracking China’s Playbook of Unfair Trade

Graham Turner Intern, AAM

A Senate Committee on Foreign Relations subcommittee met with a panel of experts on Wednesday to discuss a response to “international predatory economic practices.” While the broad terminology was surely meant to include a broad range of topics, one country was on everyone’s mind: China.

Sen. Todd Young (R-Ind.) opened the event by stating his belief that U.S. national security lies largely in the security of our economy. While many countries engage in predatory economic practices, China’s practices are unique in “scope, nature, severity, and consequences.”

China is seeking to advance its Made in China 2025 plan by exploiting joint ventures and acquiring foreign enterprises through government subsidiaries, according to witness testimony from Dr. Robert Atkinson, president of the Information Technology and Innovation Foundation, and Michael Wessel, a member of the U.S.-China Economic and Security Review Commission .

“China is in its own league,” wrote Atkinson in his prepared statement, “fielding predatory economic and trade policies and practices.”

Young rattled off ways China exploits foreign businesses when granting access to its market, including forced technology transfer, forced local production, theft of intellectual property, and manipulation of technology standards. “And that’s not a comprehensive list!” Young punctuated.

Sen. Jeff Merkley (D-Ore.) added that American businesses have been “mesmerized” by the Chinese consumer market, but failed to respond to aggressive and often illegal Chinese methods that negate any benefits.

The brunt of Chinese malpractice has been felt most by American workers. The unfair economic aggression from China has driven down labor value, pushed jobs overseas, and deprived the American people of their economic security, speakers said.

“We cannot allow other nations to ignore labor and environmental standards in an attempt to undermine our markets and gain competitive advantage,” said Kimberly Glas of the BlueGreen Alliance.

Glas gave a handful of examples of Chinese recklessness in manufacturing that led to severe ecosystem pollution, including the San Francisco-Oakland Bay Bridge. Her organization estimates that if the bridge had been built with American steel, 180,000 tons of carbon emissions could have been averted (along with a number of other problems).

Atkinson brought up the “Chinese playbook,” an elegantly simple way to describe China’s trade policy boiled down to four parts. First, China wants to be globally competitive, if not dominant in virtually all technologies. But because China lacks the capability to rise to this dominance organically any time soon, its strategy is focused on stealing, coercing, or buying this technology (that’s step 2).

Once Chinese enterprises get hold of often illegally acquired technology, those entities receive grand subsidies, protections, and benefits from the Chinese government.

The final step is export subsidies and benefits to overtake global markets and industries. The World Trade Organization was never built to handle economies that don’t play by the rules, and it still isn’t equipped to preside over a nation like China. Atkinson called for drastic reform, spearheaded by the United States to combat China on a global scale. Stopping IP theft, dramatic funding reduction to China from the World Bank, and creating a special regime tasked with handling Chinese investment were all on the agenda.

The panel agreed that Congress currently has the tools to defend the U.S. and its economy from Chinese intervention. The Section 301 tariffs were a good start, but they could have been implemented as early as eight years ago. The panel called for heavier use of trade act sections and self-initiated cases to show the public they’re acting.

All speakers at the event were united in stating that when the playing field is level, the United States wins. But there are rule breakers like China out there, and it’s our responsibility to protect our own national economy and security.

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Reposted from AAM

Posted In: From Alliance for American Manufacturing, Allied Approaches

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