Is the U.S. Justified in Pushing Back Against Chinese Economic and Trade Policies?

As a presidential candidate, Donald Trump decried China’s economic and trade practices and pledged to balance the scales for America. Since taking office, the Trump administration has followed through by confronting China with tariffs and making stern demands that, among other things, China stop stealing U.S. intellectual property, coercing U.S. companies into joint ventures and tech transfers, and subsidizing state-owned enterprises. The escalating trade war has touched off an intense debate in Washington—particularly among Democrats—about the extent to which China is a threat to U.S. workers, as opposed to just U.S. companies, and what, if anything, the United States should be doing in response to China’s mercantilist policies.

Some argue that Chinese practices such as forcing technology transfers mostly hurt U.S. corporations, not U.S. workers, so the U.S. government shouldn’t have a dog in the fight, and they contend that China is behaving in much the same way as other nations, including the United States, when it subsidizes its industries, so America has little moral standing to complain. Others, including ITIF, argue that China’s mercantilist practices—especially its strategic plans to dominate key emerging technologies—do severe harm to U.S. companies, U.S. workers, and the U.S. economy, which warrants a robust and resolute response. As the 2020 presidential election gathers momentum, this debate will only intensify further.

On July 10, 2019, the Information Technology and Innovation Foundation hosted a panel discussion and spirited debate about the fraught economic and political realities of the U.S.-China trading relationship and the best-available options for policymakers. LA Times Economics Reporter Don Lee moderated the conversation.

Jared Bernstein, Senior Fellow at the Center on Budget and Policy Priorities, spoke first, noting how the current U.S. approach will undermine the prospects of the working class both in the U.S. and abroad. As Jared argued, the opposition to China's state subsidies is antipathy to a different economic model than our own in the United States.

ITIF President Rob Atkinson countered this argument, discussing ­­­­­­­­­the alignment between U.S. business interests and U.S. workers. He noted how China's subsidies used in effort to gain global market share across industries has led to a loss in U.S. jobs. Therefore, when U.S. businesses can compete and succeed, U.S. workers also benefit.

Dean Baker, Senior Economist at the Center for Economic and Policy Research, argued that the United States has become overly concerned with the knowledge China steals. He stressed that locking down our technology is backward thinking. Although there are real issues with China, the United States needs to focus on issues like currency and human rights, rather than prioritize issues like intellectual property.

Thea Lee, President of the Economic Policy Institute, then discussed how industrial policy is not the problem. Instead, engaging in a trading system that violates global rules poses a much large threat. Thea noted that China abuses the rules of the trading system in ways that hurt workers and jobs in the United States, as well as the integrity and future of the U.S. manufacturing sector. She suggested that the United States can address this issue with the development of better global and domestic rules that employ our unilateral tools more strategically.

Rob offered the debate’s first rebuttal by responding directly to Dean’s opening statement. Rob argued that the United States must put country first, rather than workers from other nations. To prioritize class over country would betray American workers. Rob then explained why China is not as innovative as the United States, and that it is in China's interest to steal American knowledge and innovation.

Thea then discussed the increasingly relevant role of technology and intellectual property law in the U.S. trade relationship with China. Dean responded that promoting an inefficient IP system internationally makes it more difficult to reform the system domestically. Thea noted that the United States purports to believe in a rules-based system, yet it is a trap if China flouts those rules with impunity.

Jared concluded by noting how U.S. workers do not benefit from a trade war. He argued that endorsing the current terms of the trade war implements a set of policies that would help companies at the disadvantage of workers.

Overall, the panelists stressed the need for the United States to address these trade policies in effort to thwart the trade war with China. Policymakers will need to evaluate both the political and economic aspects of these new rules to maintain the U.S.-China trade relationship.

Follow @ITIFdc and join the discussion on Twitter with the hashtag #ITIFchina.