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Commentary

Rethink the Trade War: How America Should Respond to China’s Trade Practices

By Trenton Marsolek

March 26, 2019
Photo: Creative Commons

In the News

China, US prepare for final push in trade talks, as dates set for Beijing, Washington meetings
Sarah Zheng
South China Morning Post, March 21

“Trade officials from China and the United States will be going all out to reach a deal when they meet in Beijing next week, but the two sides still have obstacles to overcome, analysts said.”

EU leaders to discuss stronger shield against Chinese influence
Robin Emmott and Philip Blenkinsop
Reuters, March 20

“The European Union will weigh a more defensive strategy on China on Thursday, signaling a possible end to the unfettered access Chinese business has enjoyed in Europe but which Beijing has failed to reciprocate.”

A Forgotten Italian Port Could Become a Chinese Gateway to Europe
Jason Horowitz
The New York Times, March 18

“President Xi Jinping is in Rome to make a state visit, as Italy is expected to become the first G7 nation to participate in China’s One Belt, One Road Initiative. The Italian port city of Trieste offers a more direct trade route for Chinese goods to access central Europe due to its central location and access to railroads.”

China’s Premier Acknowledges Economic Slowdown, Promising Tax Cuts
Keith Bradsher
The New York Times, March 15

“Li Keqiang’s acknowledgement that China’s economy is slowing down was one of the clearest messages yet from a top Chinese government official.”

Lighthizer Casts Doubts on China Trade Talks as ‘Major Issues’ Go Unresolved
Alan Rappeport
The New York Times, March 12

“President Trump’s top trade negotiator raised doubts on Tuesday that a trade agreement with China was within reach, saying that “major issues” must still be resolved and that it was impossible at this point to predict success.”

Top U.S., Chinese Trade Negotiators Decide on Next Step in Call
Miao Han
The Bloomberg, March 11

“China’s Vice Premier Liu He and his American counterparts decided on arrangements for the next stage of trade talks, state-run Xinhua News Agency reported.”

U.S.-China Trade Deal Isn’t Imminent So No Summit Date Set, Envoy Says
Lingling Wei and Jeremy Page
The Wall Street Journal, March 8

“The U.S. and China have yet to set a date for a summit to resolve their trade dispute, the U.S. ambassador to China said Friday, as neither side feels an agreement is imminent.”

China Pushes Ahead With New Foreign-Investment Law
Chao Deng
The Wall Street Journal, March 8

“China’s legislature made scant changes to a proposed law on foreign investment criticized by business groups as vague, as Beijing hurries the bill’s passage to ease trade tensions with the U.S. while leaving key complaints unaddressed.”

Huawei Sues U.S. Government Over What It Calls an Unfair Ban
Paul Mozur and Austin Ramzy
The New York Times, March 6

“The Chinese electronics giant Huawei sued the United States government on Wednesday, arguing that it had been unfairly and incorrectly banned as a security threat.”

US-China trade war suspicions have had a chilling effect on Beijing’s Thousand Talents Plan
Jun Mai and Kristin Huang
The Wall Street Journal, March 6

“China has cooled on its flagship talent recruitment plan after relations between Beijing and Washington frayed and the United States began to view the scheme with suspicion, a Chinese government adviser and programme beneficiary said.”

China Expects a ‘Tough Economic Battle’ in 2019 as Debt Legacy and Trade Standoff Bite
Bloomberg, March 5

“China lowered its goal for economic growth and announced a major tax cut, as policymakers seek to pull off a gradual deceleration while grappling with a debt legacy and the trade standoff with the U.S.”

Philippine Official, Fearing War With China, Seeks Review of U.S. Treaty
Jason Gutierrez
The New York Times, March 5

“The Philippines’ top defense official said on Tuesday that the government should review a decades-old treaty with the United States, its longtime ally, to avoid provoking a potential armed conflict with China in the disputed South China Sea.”

China Expects 2019 Economic Growth of 6% to 6.5%
Lingling Wei
The Wall Street Journal, March 4

“China lowered its economic growth target this year to between 6% and 6.5%, bowing to a deepening slowdown that can’t be quickly arrested without aggravating debt levels that are already high.”

Articles and Analysis

Boeing’s Crisis Strengthens Beijing’s Hand
Richard Aboulafia
Foreign Policy, March 20

“In its trade standoff with the United States, China’s Ace could be the 737 Max.”

Testing times for China and Xi Jinping
The Japan Times, March 20

“Virtually every measure of economic activity shows weakness. Cellphone shipments marked double-digit declines in January, as did car sales (the seventh straight monthly fall) and the number of unsold houses is at its highest level in two years. The Purchasing Manager’s Index, a respected measure of factory activity, has plummeted to its lowest level in three years. To adjust, companies have begun to lay off workers.”

“A slowdown is especially worrisome for the Chinese leadership because most Chinese have only known economic opportunity. They have not faced a downturn or real hardship. In the past, the Chinese government had real firepower to goose a slowing economy. When the great recession struck in 2008, Beijing spent an estimated $586 billion to compensate for slowing demand, Now, however, debt is mounting and has reached $34 trillion, nearly 2½ times the size of the entire economy.”

In Search of ‘Real’ Data on China’s Economy
Dmitriy Plekhanov
The Diplomat, March 19

“Technology to the rescue: new sources of data help researchers and analysts shed more light on the Chinese economy.”

The U.S. quietly made a big splash about the South China Sea
Zack Cooper
The Washington Post, March 19

“Mike Pompeo just reaffirmed Washington has Manila’s back.”

China’s Slowdown Broadens, Despite Government Bid to Bolster Growth
Liyan Qi, Lin Zhu and Grace Zhu
The Wall Street Journal, March 14

“Industrial activity and home sales cool down in the first two months of the year.”

China Aims to Placate U.S. With Law Banning Theft of Foreign Trade Secrets
Lingling Wei and Chao Deng
The Wall Street Journal, March 14

“Some quiet, last-minute amendments have been made to a law, as part of a concession to a key U.S. complaint in trade negotiations.”

Trump’s Hanoi Walkout Upends South Korean Politics
Frida Ghitis
World Politics Review, March 14

“When President Donald Trump stunned the world last year by agreeing to hold a summit with North Korea’s Kim Jong Un—the first-ever meeting between an American president and a North Korean head of state—it felt like a punch in the gut to South Korean conservatives. Hard-liners on North Korea, they were already roiling from corruption scandals that had brought down President Park Geun-hye with massive protests in 2016 and led to the election of President Moon Jae-in.”

“After Trump’s abrupt decision late last month to walk out of talks with North Korea during his second summit with Kim, he has pulled the rug out from under South Korean liberals, most of all Moon. South Korea’s president, who has pushed for diplomacy with the North, was all set to celebrate what he thought would be a successful summit in Hanoi. Instead, Trump’s moves on North Korea have roiled South Korea’s politics even more. ”

What’s Causing China’s Economic Slowdown
Christopher Balding
Foreign Affairs, March 11

“Last year, China experienced its slowest economic growth in nearly three decades. The trouble seemed to start in the fall. Wage growth has cooled. Surveys show that companies in the manufacturing sector have begun shedding jobs. And imports are down, hurting other major exporting economies.”

Past Events

Hong Kong’s Role in the U.S.-China Relationship
Event hosted by Georgetown University, March 25, 2019

China and U.S. National Security: Gathering Storm?
Event hosted by Hillsdale College Kirby Center, March 26, 2019

Trade Tensions: Cross-Border Investing Between the U.S., China, and Asia
Event hosted by SAIS International Finance Club, March 26, 2019

New Era of Great Power Competition: China-US Trade Conflicts and Intellectual Property Disputes
Event hosted by China Development Student Think Tank, March 26, 2019

Competing Perspectives: How Does the U.S. Maintain a Competitive Edge in 5G?
Event hosted by Confucius Institute U.S. Center, March 26, 2019

The State Strikes Back: The End of Economic Reform in China?
Event hosted by SAIS China Forum, April 2, 2019

SAIS Asia Conference: Grand Strategy in the Indo-Pacific
Event hosted by SAIS Asia Programs, April 5, 2019

Integrating air quality, water, and climate concerns into China’s energy strategy
Event hosted by SAIS Energy, Resources, and Environment Program, April 5, 2019

China’s Climate and Energy Policies
Event hosted by SAIS Energy, Resources, and Environment Program, April 15, 2019

Knowledge, Skills, and Technology Transfer in China-Africa Engagements
Event hosted by China-Africa Research Initiative at SAIS, April 15, 2019

Upcoming Events

China and Global 5G: Getting the Questions Right
Event hosted by Wilson Center, March 4, 2019

The Present and the Future: Trade in the Asia-Pacific Region
Event hosted by the Washington International Trade Association, March 5, 2019

Soft Power, Influence, and Strategic Competition in Southeast Asia
Event hosted by the Asia Society, March 6, 2019

A conversation with the Chief of Naval Operations
Event hosted by SAIS, March 6, 2019

How should US and Japan respond to a possible China-Taiwan conflict?
Event hosted by U.S.-Japan Research Institute, March 8, 2019

China’s 21st Century Rise in Historical Perspective
Event hosted by CSIS, March 12, 2019

Commentary

Rethink the Trade War: How America Should Respond to China’s Trade Practices

By Trenton Marsolek

“China is neither an ally or a friend–they want to beat us and own our country.” President Trump tweeted this message in 2011 and his rhetoric remains unchanged eight years later in 2019. Embroiled in a tense trade war with China, the US is determined to emerge from trade negotiations with what it views as fairer trade terms with Beijing. However, any gains achieved from negotiations with China are likely to be only temporary.

China continues to unveil ambitious economic plans such as Made in China 2025, ‘Buy China’ and the One Belt, One Road Initiative with the goal of dominating the global supply chain and expanding its economic influence. These plans fixate on investing in and dominating key sectors such as artificial intelligence, new materials, and aerospace while also developing emerging markets in Africa, the Middle East, and Latin America. America perceives these plans as a significant threat to its industry as demonstrated by the US Chamber of Commerce’s release of an eighty-four page report about Made in China 2025. The Chamber notes in their report that they are “concerned about the growing risk that policies such as MIC 2025 pose for China’s relationships with its key economic and commercial partners, including the United States.”

Instead of publishing inflammatory reports which center on criticizing China’s economic ambitions, the United States should focus its attention on increasing cooperation with China on economic, political, and social fronts. As the second-largest economy, it is only natural that China seeks to change the current world order by overtaking American hegemony, and the US should be prepared to compete by out-innovating China. This competition doesn’t have to be a Soviet-esque space race where each side is motivated by fear and national pride, however. The United States and China can have a friendly competition where each nation cultivates their best talent to tackle important global issues such as climate change and medical research.

Breakthroughs which develop as a result of this friendly competition would benefit both countries as they develop new technologies and industries which lead to new jobs and economic growth. The US would solidify itself as a key trading partner for China if it is at the center of technological breakthroughs and innovation, and the US would not want to isolate itself from a market with nearly 1.4 billion consumers.

A recent example of competitive cooperation between the United States and China is the Chinese-led Chang’e 4 lunar exploration mission. This mission resulted in China being the first country to ever soft land a spacecraft on the far side of the moon and sprout plant life (which died shortly after due to the freezing temperatures). The China National Space Administration (CNSA) cooperated with NASA extensively prior to the mission and was asked to photograph the lander using its Lunar Reconnaissance Orbiter. In a press conference following the mission, the CNSA noted that they intend to cooperate more with the US and other countries on future space endeavors, mentioning the possibility of establishing a space lab with the US and other countries on the moon.

Following the arrest of Huawei executive Meng Wanzhou, there has been a lot of discussion surrounding competition between the US and China to develop 5G networks. The United States has been pressuring its allies to not employ Huawei 5G technology citing security concerns and alleged connections to the Chinese government. However, Huawei is an industry leader in the development of 5G, and instead of trying to isolate the company we should seek to develop a partnership with them instead. If the United States changes its perspective of Huawei from a threat to an opportunity for growth and technological advancement, both the United States and China can benefit.

The trade war is a regressive solution in an ever-changing world where multilateral cooperation is paramount, especially when faced with global challenges such as the effects of climate change. President Trump’s ‘real deal’ with China should focus on increasing cooperation and developing an ally out of an adversary instead of short-term trade gains which are unsustainable assuming China continues to innovate.


Trenton Marsolek is a Research Assistant intern at the Institute for China-America Studies and an undergraduate at American University in Washington, D.C.