To Fight China on Trade, We Need More Than Tariffs
To Fight China on Trade, We Need More Than Tariffs
By Marco Rubio
After World War II, the United States helped build an international economic order on the assumption that free and fair trade benefits all partners. During the postwar years, the American economy was unmatched by any other country. The postwar boom was fueled not just by thriving domestic demand but also by trade, which opened a flow of wealth from the world’s consumers to American workers. Trade made America and our partners more prosperous and secure.
This basic case for trade still stands. When we exchange goods with other nations on equal terms, both countries benefit. Maintaining the conditions that make this possible is the purpose of the international economic order that we took great care to nurture. We need to take violations of this economic order seriously. We must enforce the rules. China, in pursuit of its goals of economic and regional dominance, has been among the most egregious rule breakers.
When China acceded to the World Trade Organization in 2001, the United States supported that decision for two reasons: We hoped to promote better access to China’s consumer markets for American companies immediately and, eventually, political liberalization within China.
Neither has materialized. While the Chinese people have pushed for a somewhat more open society, the Chinese government is becoming even more autocratic. And since peaking in 2003, imports of manufactured goods into China as a share of gross domestic product have steadily declined.
Instead of opening its doors to United States exports, China has thwarted competition at every turn. It has advanced Chinese state-planned businesses by stealing American intellectual property and has pressured foreign companies that want to enter the Chinese market to agree to “joint ventures” that facilitate theft and espionage. China has also bought up American assets to inflate the value of the dollar and make American exports more expensive. China has also tried to tilt the playing field in the United States by manipulating its currency, among other tactics.
“Free” trade with China has yielded some short-term benefits for consumers, in the form of lower prices, and for United States companies, in the form of higher profit margins.
But free trade has been devastating for American workers and manufacturing. The so-called China shock, the impact of China’s entry to the international trading system, wiped out more than 2.4 million American jobs from 1999 to 2011. Ignoring China’s trade violations reinforces the view among American workers that international trade is bad for them and their way of life.
President Trump is correct when he says that America has been taken advantage of. The federal government had the tools to better manage the start of trade with China, but our leaders chose not to use them. For example, in exchange for greater standing at the trade organization, China agreed to allow other countries to impose tariffs in response to sudden surges of Chinese imports, yet the United States did not impose them.
The United States government still has a host of tools to defend the national interest on matters of trade. The president’s proposed steel and aluminum tariffs, under Section 232 of the Trade Expansion Act of 1962, are just one example.
By themselves, these tariffs will not do enough to rein in China’s trade violations. Because the tariffs are broad and apply to many countries, they may not have much of an impact on the worst violators, including China. Tariffs like these penalize the production decisions companies made decades ago, so they will do more to increase the cost of business downstream, in the United States, than they will rewire the global economy to benefit American workers.
We should enforce the rules by taking additional actions against China. Last year, the Office of the United States Trade Representative announced its investigation of Chinese intellectual property theft under Section 301 of the Trade Act of 1974. This authority allows for a wide range of actions. The Trump administration should push its boundaries.
For example, the government should impose duties on Chinese industries that benefit from stolen American intellectual property, and those penalties should be equivalent to the size of the economic loss faced by American producers. We should limit “joint ventures” with Chinese copycat companies and encourage our allies to do the same. We should prohibit Chinese investment in industrial categories where the Chinese have blocked American investment. And when the Chinese threaten retaliation and bring suit at the World Trade Organization, we should welcome the opportunity to have China publicly repudiate its anti-free trade practices.
These measures targeted at China are no less bold than Mr. Trump’s broad metals tariffs. Indeed, what I propose could do more to redirect trade flows to the United States.
The right trade policy for the United States is not a choice of unrestrained free trade or protectionism. “More Trade” or “Less Trade” isn’t the goal. The goal is better jobs and higher wages for American workers. Trade is a means to those ends.
I believe in the promise of free and fair trade, but to defend that principle against an adversary that has broken the rules with impunity, we have to be willing to fight with everything we’ve got — not just tariffs.
Correction: March 15, 2018
An earlier version of this article misidentified the law under which President Trump has authorized steel and aluminum tariffs. It is Section 232 of the Trade Expansion Act of 1962, not the Trade Act of 1974.