China’s government has economically taken advantage of the United States for far too long. American efforts to engage the nation on a level playing field have failed for decades. The political establishment responded to China’s abuses of power with ineffectual responses at best. America’s inability to effectively respond enabled our adversary to get away with manipulative economic practices that chipped away at America’s status as a world leader and devastated America’s industrial heartland. President Trump wisely understands the threat to the United States and its allies posed by Xi Jinping’s ambitions for economic and world dominance and is right to confront China.
Contrary to assurances from so-called experts in the political class that China would straighten its act out after joining the World Trade Organization (WTO) in 2001, the country continued to get away with its unfair trade practices that broke the backs of many American manufacturers and exporters to China. A study by the nonprofit Information Technology and Innovation Foundation in 2015 found that China flouted numerous promised open market reforms it made in exchange for WTO membership. President Trump is right to assert that “China declined to adopt promise[d] reforms … [and] embraced an economic model dependent on massive market barriers, heavy state subsidies, currency manipulation, product dumping, forced technology transfers and the theft of [intellectual property] … on a grand scale” in a speech to the UN reported by Fox Business.
In a free market system, companies succeed on their merits and talents. As the Nikkei Asian Review noted in April 2019, the state propped industry leaders up with billions in subsidies to strengthen market dominance over rival corporations from foreign countries.
In the past year, Chinese government entities handed over $1.2 billion to the three car manufacturers: BYD, SAIC Motor, and Chongqing Changchang Automobile. According to the Nikkei Asian Review, they also lent about $285 million to ZTE, the telecom corporation that Reuters noted illegally conducted business with Iran and North Korea along with billions more to other corporations critical to China’s ambitious goals to game global trade.
Furthermore, China arguably makes liberal use of forced technology transfers, forcing American companies to participate in joint ventures with Chinese firms and surrender their control of the partnership. America’s companies and workers spend billions each year on research and development only for China to steal sensitive, proprietary technology without spending a dime, as noted by Investopedia.
One of the most concerning of China’s plan to continue to implement the Belt and Road Initiative (BRI). The Council on Foreign Relations (CFR) wrote that the plan, spearheaded by President Xi Jinping, is a series of infrastructure and “investment initiatives… stretch[ing] from East Asia to Europe.” As it grows, the BRI will serve to be a powerful tool for Xi Jinping to exert influence on Eurasia and shift the balance of power in dozens of countries against the U.S.
By trapping developing nations with high-interest loans to finance infrastructure projects, Communist Party leadership makes its (unequal) partners dependent on Chinese resources. The CFR found debt to China surpasses “20 percent of GDP in some countries.” Should states default on payments, China will have a semi-legitimate claim to seize the financed assets, giving them a looming presence over the flow of commerce and the leaders who rely on their revenue.
Challenging China’s policies through the WTO is time-consuming and fails to stop trade impropriety in the meantime. The 2018 Report to Congress on China’s WTO Compliance by the U.S. Trade Representative reported that even when China lost WTO cases, it often resisted compliance with the rulings. For instance, the report found that China continues to block “Visa and MasterCard from its market despite… a WTO dispute settlement panel” confirming China agreed to “open its market to foreign suppliers.” Xi Jinping has grand ambitions and showed no signs of stopping his behavior after slaps on the wrist from WTO disputes his nation lost. President Trump rightly recognizes a tougher tack is needed. Chinese exports to the U.S. far outpace American exports to China, making tariffs the perfect tool to bring about a long-term solution.
The strategy is working. Reuters reported Chinese GDP growth is slowing due to the tariffs’ downward pressure, manufacturers are moving out of China, and the New York Times noted American businesses such as GoPro, Hasbro and Universal Electronics are switching suppliers. Thanks to President Trump’s resolve, Mr. Xi was forced to the negotiating table. If inked, the president’s “phase one” deal with China will go a long way toward ending China’s fundamental commerce transgressions.
The proposed agreement will lead to more sales for farmers, end currency manipulation, stop government-sanctioned theft of American intellectual property and ensure U.S. businesses are free to compete on a level playing field with Chinese firms, as noted by The New York Times. Curbing China’s dominance isn’t merely a matter of economics, but a question of who will lead the 21st century. President Trump’s perseverance will make Americans wealthier, protect our alliances, strengthen our national security and, most importantly, keep America great.
