Trump Caves to China on Trade Because of North Korea
From a trade point of view alone, Trump’s action Monday looks exceedingly weak. He called it “a very big move.”
Protection of American businesses and workers has been put on hold because the Trump administration sees trade concessions as a way to influence Chinese leaders on North Korea issues.
On Monday, President Donald Trump signed an executive memorandum authorizing Robert Lighthizer, the U.S. trade representative, to determine whether there should be an investigation of China’s intellectual property practices.
An investigation into the need for an investigation?
As The New York Times put it, “President Trump is planning to jab, not punch, China.” The influential Washington-insider Nelson Report politely termed the move “an interesting straddle.”
From a trade point of view alone, Trump’s action, despite his calling it “a very big move,” looks exceedingly weak, especially in comparison to the course of action he had charted at the beginning of this month. Then, the president was set to announce on Friday, August 4, a formal investigation of Chinese practices pursuant to Section 301 of the Trade Act of 1974.
Section 301 generally permits the president to impose extraordinary remedies—additional tariffs and other forms of relief—for practices constituting barriers to American goods and services.
But the announcement was not made because, as Politico reported, the preceding afternoon U.N. and the State Department officials prevailed on the administration to postpone the long-awaited investigation in order to obtain Beijing’s approval for Security Council sanctions against North Korea.
Beijing on Saturday, the 5th, did not veto what became Resolution 2371, the seventh set of U.N. sanctions on North Korea.
So far, Trump’s strategy has not worked particularly well. For all of the intensive efforts of the administration since the early-April meeting in Mar-a-Lago between Trump and Chinese President Xi Jinping, Trump can only point to the watered-down Resolution 2371 as a tangible accomplishment.
That resolution, although the strictest yet, has no chance of stopping missile-happy Kim Jong Un, the North Korean leader, from continuing to develop nuclear weapons and the ballistic missiles to deliver them.
And to obtain China’s assent to Resolution 2371, Trump gave up the 301 investigation—and much more.
The Commerce Department, for instance, has not released two reports on whether the U.S. should restrict steel and aluminum imports for reasons of national security. The reports, to be issued pursuant to Section 232 of the Trade Expansion Act of 1962, had been expected by the end of June. Moreover, a third report, on the sources of America’s bilateral trade deficits, also has yet to see the light of day, even though observers had thought it would be released more than a month ago.
Trump’s proposed informal investigation now is superfluous. American companies and trade associations have bitterly complained about Beijing’s intellectual property practices, so much so that robust action against China now enjoys strong bipartisan support in Washington.
Beijing leaders, over the course of decades, have seized intellectual property from foreign companies, by both outright thievery and predatory rules, what trade expert Alan Tonelson in comments to The Daily Beast called “intensified techno-nationalist restrictions.”
A favorite Chinese tactic of dubious legality is requiring American companies to joint venture with Chinese enterprises and thereby surrender intellectual property as a price for market entry. A new stratagem is to take intellectual property by requiring foreign companies to comply with tech-sharing rules embedded in national security statutes and regulations.
If there is any such thing as a hardened trade criminal, it is the Chinese state.
The Trump administration, unfortunately, will have to think of more drastic measures.
For example, the American president can order an expedited 301 investigation and impose penalties, something that would enrage Chinese leaders but would also convince them that Trump, unlike his predecessors, is not afraid of them, that he knows he has leverage over China and is willing to use it.
Everyone says China will never abandon North Korea, and that’s true if Washington does not change the incentives on the Chinese state. Trump, with the weak measures like the one he just took, is certainly not giving Beijing a reason to act responsibly.
Instead, Trump needs to tell Xi Jinping that he knows China has leverage over North Korea and that he, Trump, knows he has leverage over Xi.
And now is the perfect time for Trump to act “bigly.” Xi Jinping is heading into the Communist Party’s 19th Congress, which will be scheduled for sometime this fall. At this once-a-half-decade event, the Chinese leader is especially vulnerable, in part because of the fragile economy. Xi will surely be blamed by his many adversaries if Trump, for any reason, sinks China with trade actions.
Trump, with the half-hearted trade action today, is just love tapping Xi. He’s not even throwing a jab or a punch when what the American president needs to do is convince his Chinese counterpart that he is willing to go all the way and land a knockout blow.