GUEST EDITORIAL: The start of a China deal
America’s vast trade deficit — we import far more goods from overseas than we send out — was one of the central issues of Donald Trump’s presidential campaign.
Trump managed to win over many blue-collar voters in battleground states with the argument that “free trade” had benefited some at the top but hurt the American worker. And, indeed, idled factories and hollowed-out towns across the country made a strong case that something was wrong, even if Americans could obtain cheaper foreign-made goods through our trade deals.
The country’s trade deficit with China — the world’s second largest economy by GDP, behind only our own — is a big part of the gap. In 2018 (the most recent available data), the trade gap in goods between the U.S. and China stood just shy of $420 billion, according to the Office of the United States Trade Representative. When you factor in services as well, the trade gap was around $380 billion.
That’s $380 billion pouring out of the United States into Beijing in just one year, helping to underwrite the authoritarian regime’s economic and military build-up.
China’s companies — many state-owned — have for decades systematically undercut U.S. industries, not only by virtue of China’s cheaper labor pool, but also through subsidies and dumping. For years, Beijing also manipulated its currency to keep its exports artificially cheap.
But America’s trade imbalance with China reflects another alarming fact. Beijing’s trade and economic policies are often based on theft — outright theft of intellectual property and through what are blandly known as “forced technology transfers.” The idea is that, should a U.S. company want to set up shop in China, it is required to find a local Chinese partner. And that partner is thus granted access to the American company’s proprietary technologies.
Since assuming office, Trump has been attempting to reset our economic relationship with China. He has mostly used the blunt weapon of tariffs. This has caused pain for Americans, but has compelled China to take notice. And this month, the president announced a halfway measure toward his goals, unveiling Phase One of a new U.S.-China trade agreement. The stock market signaled its relief.
The agreement contains several important provisions. Beijing has committed to going on an American shopping spree; over the next two years, it will increase purchases of U.S. goods to the tune of $200 billion. Perhaps more important, however, are the provisions governing intellectual property and technology transfers.
“China recognizes the importance of establishing and implementing a comprehensive legal system of intellectual property protection and enforcement as it transforms from a major intellectual property consumer to a major intellectual property producer,” the draft agreement reads. “Moreover, the United States and China affirm the importance of ensuring that the transfer of technology occurs on voluntary, market-based terms and recognize that forced technology transfer is a significant concern.”
Even as a start, China’s pledge to behave better seems fairly weak. The United States must maintain pressure on China to change, or our country will face a bleak future.
This guest editorial was originally published in The Providence Journal, a sister newspaper within Gannett.