China recruits allies in showdown
Published 11:00 am Monday, June 4, 2018
We didn’t agree with former President Barack Obama on a lot of things back in the day. But one initiative we did agree with him on was the Trans-Pacific Partnership.
TPP was a trade agreement negotiated between the U.S. and 11 Pacific Rim nations. Collectively, the 11 nations comprise 40 percent of the global economy. The agreement would have eliminated 18,000 tariffs, opening substantial export opportunities for U.S. companies in a region where they currently are bit players.
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In August 2016, we said in an editorial that there was a second, potentially more significant reason the U.S. needed TPP to succeed. It was global security. The TPP purposely omitted China and in fact was meant to isolate it by marrying the rest of the Pacific region to U.S. trade and economic policies.
But TPP was sacrificed on the alter of demagogic politics. Today, China is playing this to full advantage.
The Wall Street Journal reported Wednesday that China is looking to line up Pacific Rim nations as well as some in Europe against the U.S. in what looks to be an emerging trade war. It is now the U.S. that risks isolation.
Obama was unable to get enough support in Congress for approval of TPP despite Republican majorities that historically back free trade. Republicans’ hatred for all things Obama overrode the national interest.
The death knell for TPP came when then-candidate Donald Trump’s populist message that trade deals merely export American jobs caught fire with blue-collar voters. Hillary Clinton, who once (probably correctly) called TPP the “gold standard” of trade deals, disavowed it on the campaign trail amid the shifting political winds.
Now, President Trump is attempting to get China to change what we agree are egregiously one-sided trade policies against the U.S. But he is doing so without the leverage of the TPP. And at present Trump’s effort doesn’t seem to be going well.
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The WSJ said China had been working toward lowering its tariffs on U.S. washing machines, cosmetics and other consumer goods beginning in July, as well as opening entire sectors of its economy to U.S. investment. This was being crafted in advance of a planned visit by U.S. Commerce Secretary Wilbur Ross to try to hammer out a more substantive agreement.
But the Trump administration blew that one up out of the blue. The WSJ said China was stunned last week when the administration announced it would move forward with tariffs on $50 billion of Chinese goods. This came less than two weeks after the two sides declared a truce on tariff threats to allow time for negotiation.
The U.S. now says it will slap 25 percent tariffs on the Chinese goods June 15 and will by June 30 announce new restrictions to prevent China from obtaining U.S. technology.
The single largest trade concern with China in our view is its misappropriation of American technology. We agree the Trump administration does well to require an end to this.
But the discussion of tit-for-tat tariffs on consumer goods – part of Trump’s misguided belief that any foreign trade deficit harms the U.S. – doesn’t hit that mark. The tariff game is going to end badly for the U.S., particularly if China succeeds in lining up Pacific Rim and European nations in its camp.
One criticism we read of Trump in the wake of his rapid reversal on his ban of U.S. imports from Chinese technology firm ZTE Corp. is that Trump talks loudly but carries a small stick. His tariff misadventure simply provides China with a grand opportunity to make that point more spectacularly.