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Trump Is Wrong to Be 'Tough' on Trade with China

May 30, 2019 in Economics

By Simon Lester

Simon Lester

President Trump seems to think he is in the midst of a
hard-nosed negotiating battle with China, and talking tough is a
big part of that. His morning Twitter rants often include barbs
aimed at China. And he has a bipartisan batch of legislators
cheering him on.

Senate Minority Leader Chuck Schumer, D-N.Y., has urged Trump to
“hang tough on China,” as “strength is the only way to win.”

And Sen. Lindsey Graham, R-S.C., has told the president,
“We’re behind you!”

Reform in China will not
happen with a trade policy that slaps tariffs on all U.S. trading
partners and turns our allies into foes.

Toughness has its merits, but it also has its limits. Butch
Cassidy and the Sundance Kid were certainly tough when they emerged
from their hideout and began shooting at the Bolivian soldiers who
had surrounded them. But sometimes it is better to look for smart
strategies rather than tough ones.

Unfortunately, Trump’s approach to the China trade issue is
tough but unlikely to be effective. It relies exclusively on
unilateral tariffs, and as a result, any deal that is reached will
not be the best one possible. Instead of pushing him to come out
with guns blazing, members of Congress should argue for a strategy
that would work much better: Cooperating with allies to put more
pressure on China.

There is widespread agreement around the world that China
engages in protectionist and other problematic trade practices:
failure to protect intellectual property adequately; high tariffs;
restrictions on foreign investment; forcing foreign investors to
transfer technology to their joint venture partners; industrial
subsidies; state-owned enterprises that compete unfairly; and
opaque regulatory practices that can be used to discriminate
against foreign companies.

The only debate is about what to do about this. The Trump
administration has chosen to go it alone, by imposing tariffs on
China in a way that violates the rules of the World Trade
Organization (WTO). In the view of the Trump administration, these
tariffs have “forced China to the negotiating table,” but that is a
misconception, as the Obama administration was already in the midst
of its own negotiations on investment with China (which the Trump
administration seems to have abandoned).

Regardless, so far the only outcome from Trump’s tariffs has
been economic pain on both sides, as China has retaliated with
tariffs of its own: consumers in both countries pay higher prices,
and many producers in both countries suffer as their exports are
suddenly at a disadvantage.

The administration has convinced many people in Washington that
tariffs were the last resort, because nothing else has worked with
China. But this talking …read more

Source: OP-EDS

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