A Democratic Trade Policy Part III

As promised, I am continuing my efforts to suggest a Democratic trade policy. Part I laid out some general principles. Part II discussed how to clean up the inevitable leftovers from the Trump administration. Today’s part III will focus on China, which is the 800,000-pound gorilla in the campaign and will be a major challenge on multiple fronts afterward. This is the first time the United States has faced an economic and security adversary at the same time. The Soviet Union was never an economic threat, and Japan in the 1980s was never a security threat. China is both.

As far as the campaign is concerned, the die seems already cast—both candidates will accuse each other of being soft on China—and both are not without evidence. Biden has a quote or two suggesting the China challenge is less than it is, and Trump seems not to have pushed the Chinese nearly as hard as he claims, apparently in the interest of maintaining his personal relationship with Xi Jinping. So, there is plenty of ammunition to go around, and you should expect a slugfest. That is partly because U.S. public opinion has also moved in a negative direction with respect to China, validating both candidates’ efforts to make it an issue.

Beyond beating each other over the head, however, there will be differences. The president will defend his policies, defend his tariffs, and brag about his “Phase One” agreement (assuming the Chinese are making progress on implementing it). Biden will argue right diagnosis, wrong prescription, collateral damage, and very little to show for it. In addition, he will, at some point, have to go a step further and say what he would do instead.

Politicians generally aim for positive messages, so Biden will most likely argue that China is a problem that can be solved, albeit with policies different than Trump’s. However, one of the biggest differences between the two is particularly relevant here. Trump is by nature a unilateralist. He believes in the power of the United States to leverage others into doing what we want. Biden is inherently a multilateralist. He believes in working with others and building coalitions to unite on a common objective. This is a contrast he will make many times in the campaign on trade, climate change, defense, and other issues. It is a legitimate distinction, and voters will have to decide which they prefer. Biden will also say what all Democrats (and most Republicans) say—that aggressive enforcement of trade laws must be an essential part of our policy.

Biden will also argue that by working together with others that face the same problem, we can do a better job of pressing China to undertake the reforms we want and that our success will justify removing the tariffs. However, the reforms will not be materially different from those identified in the current administration’s section 301 report. The difference will be a more collegial, cooperative approach, both because that is his way and because it is likely to produce better results. That approach will continue if he wins, as in he will begin with what he promised—an effort to build a coalition and negotiate with China. Some progress there in the form of Chinese concessions will enable Biden to remove the Trump tariffs, but he won’t do that for free.

There are also other ways to use the multilateral process. Biden will support the World Trade Organization and work more collegially to reform it, including the creation of expanded tools to address the distortions caused by nonmarket economies. He may use tariffs if our unfair trade laws justify them, but he will approach the China challenge on other fronts as well, with one of them being security. We have already seen enhanced U.S. government focus on the security aspects of the relationship and watched it spill over into what used to be conventional commercial sectors like telecommunications (Huawei). That is not going to change. Expect the continuation of strict export controls and close scrutiny of Chinese inbound investments. The difference here will be a more clearly articulated and consistently implemented policy. 

The more frequent mentioning of human rights aspects is also to be expected as this is always a Democratic priority, and there are plenty of issues there with China. He will inevitably discover, as President Clinton did, that the Chinese are unfortunately immovable on these issues, and if he wants to get their cooperation in other areas, he will have to accept limited progress on human rights.

Finally, he will need to prepare for the likelihood that his policies won’t work any better than the current administration’s policies. China sees our demands as an effort to weaken the Chinese Communist Party’s control and is not going to agree to them, at least while Xi Jinping is in office. Biden will realize that, probably quicker than Trump would, and will conclude that pushing China to reform is an important pillar of our policy but not the only one. Pursuing policies to enable our companies to run faster and compete more effectively in the rest of the world, which is the real battleground, is more important. That is not a new message for Democrats, and they have no shortage of proposals on how to do it. These have been derided as “industrial policy” in the past, but the ground has shifted because of China, and there is now a broader realization that successfully meeting the challenge will require more government involvement in the economy.

William Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C.

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