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Democratic Representative Richard Neal (left), chairman of the House Ways and Means Committee, and Republican Representative Kevin Brady listen during a committee hearing. During testimony by US Trade Representative Robert Lighthizer, both Neal and Brady called for structural changes to the Chinese economy. Photo: Bloomberg
Opinion
Robert Boxwell
Robert Boxwell

China and Donald Trump have a problem. On trade, US Democrats may be even more hawkish

  • The US president opened the door to the trade war but may not be able to shut it – now both parties in Washington and allies abroad are pushing for massive changes to China’s economy
Robert Boxwell
Robert Boxwell
Why you can trust SCMP
On February 27, Donald Trump’s former lawyer, Michael Cohen, testified in front of the House Oversight and Reform Committee in a hearing that could have been called “Trump Bashing Day 767” (of which, truth be told, I’m an occasional participant in the US press).
Meanwhile, US Trade Representative Robert Lighthizer was two blocks away, testifying before the House Ways and Means Committee in a hearing called simply “US-China Trade”. Ways and Means has jurisdiction over tariffs, which is why it was interviewing Lighthizer. Committee members were civil and polite and, almost to a person, thanked him for the work he’s doing.

Practically all of them also urged him not to go easy on Beijing.

Chairman Richard Neal opened by saying, “This hearing is our opportunity to make clear what Congress stands for on US-China trade, and what the American people need to see” in any agreement with China. “This administration … must hold out for a good deal – a structural deal. The future of America’s economic prosperity is at stake.”

Neal, a Democrat, had kind words and praise for Lighthizer. He must have missed the memo that all things Trump are bad.

Kevin Brady, the leading Republican on the committee, spoke next and thanked Lighthizer for his “leadership”, adding, “We can all agree that China has cheated on trade for decades, severely harming American businesses”. He, too, emphasised that it was “even more important” for the US to negotiate structural changes in the relationship than it is to simply sell more soybeans to China.

It went on like that for three hours.

An exchange between Lighthizer and Democratic Congressman Lloyd Doggett of Texas highlighted why Trump might not be able to stop what he started without a hard-nosed agreement.

Doggett asked, “What would you anticipate would be the timetable to submitting it to Congress for approval?” Lighthizer replied, “We have no intentions of submitting it to Congress”, and pointed out that the actions the Trump administration has taken were Trump’s and Trump’s alone to make under the executive branch.

Doggett wasn’t criticising Lighthizer for imposing tariffs on China, which practically the whole political establishment was doing a year ago. He was doing just the opposite. He wants to ensure that Trump doesn’t lift those tariffs prematurely.

“Unless you get meaningful structural changes to address the stealing of our intellectual property and the other issues … if all we get is the sale of a few more soybeans and other products, then this is an agreement not worth having,” Doggett said.

The US should resist this deal-breaker in trade talks with China
Then he addressed Huawei and its “national security threat”, saying, “if there’s any bargaining away of our national security to get this agreement, it would be with great harm to our country”. Many in Congress were upset with the reprieve Trump gave Chinese telecoms company ZTE last year after his Commerce Department banned US suppliers from selling to them.

It looked like he was using ZTE as a bargaining chip in the trade negotiations. It’s not likely they’ll let him do it again with the much larger Huawei.

Trump has started fixing a thing that public opinion in the US is not going to let him walk away from half done. He told Americans, “Hey, look here at China!” They did. And they didn’t like what they saw.

So he can tweet all he wants about “substantial progress” on the negotiations and his “strong and personal relationship” with Xi Jinping, but if he doesn’t satisfy what has grown into a broad, bipartisan swathe of Congress, they are likely to finish the job for him.
The EU, Japan and others are moving towards the US’ view, meaning a sea change is under way in how the West looks at Beijing’s trade practices. The European Commission issued a paper this week that used terms like “rival” and “strategic competitor” when referring to China, a hardening of rhetoric not unlike that of the US.
Few US lawmakers seem interested in a deal that relies on Beijing to honour reform promises. Lighthizer’s team is proposing enforcement mechanisms that include an automatic “snapback” to tariffs in the event the US determines that China is not honouring its commitments.

It’s unlikely Beijing will accept that, but for now it is proposing that, if it does, it’ll have the right to retaliate with tariffs of its own; the US is unlikely to accept that.

US Trade Representative Robert Lighthizer listens as Chinese Vice-Premier Liu He talks while they line up for a group photo at the Diaoyutai State Guesthouse in Beijing on February 15. Lighthizer told US senators on March 12 that if issues are not resolved “in favour of the United States”, a deal will not be reached. Photo: Reuters

Beijing has led China on a good economic run since accession to the World Trade Organisation in 2001. Many in the West consider that run a long-lived stretch of mercantilism. It seems over.

Beijing either plays by trading rules that have kept the peace and made the world more prosperous than any time in history, or the West is likely to make it hard for China to trade in their club.

Beijing’s aversion to Western institutions like the trading system – seemingly driven by a desire to avenge past humiliations – is counterproductive to further raising China’s wealth and living standards.
Is the US willing to wage nuclear war to contain China’s rise?

There are still a billion Chinese who are some distance away from prosperous. Many of China’s educated elite understand this. Lighthizer told the Ways and Means Committee that he’s negotiating with “reformers in China who want to change” China’s trade behaviour.

It will be interesting to see how much power these reformers really have. Because Beijing’s trade practices have managed to do something few thought possible – make America’s divided politicians agree on something. And they’re demanding real, structural change in bilateral trade, not just more soybean sales.

Robert Boxwell is director of the consultancy Opera Advisors

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