Trump should walk if China refuses to change its ways

President Trump is right to challenge Chinese economic policies, unlike his predecessors, who were believers in the global trading system.         

And as the president levies more tariffs on China and as the trade negotiations come to an end, he appears to be very cognizant that an agreement with China must change the terms of the trading relationship. If it does not, the entire exercise will be viewed as a failure, particularly in the Rust Belt, which voted him into office.  

{mosads}Additionally, it will embolden the Chinese leadership to continue China’s one-sided economic policies that have decimated the United States’ middle class.

Those who attack Trump as a protectionist are in denial of the U.S.-Chinese economic relationship. President Trump’s trade policies can be best described by something President Reagan once said: 

“I believe that if trade is not fair for all, then trade is free in name only … I will not stand by and watch American businesses fail because of unfair trading practices abroad. I will not stand by and watch American workers lose their jobs because other nations do not play by the rules.”

President Trump, like Reagan, is not a libertarian or an ivory-tower academic beholden to the theory of free trade which, in practice, doesn’t apply to China with its hyper-aggressive use of state-owned enterprises, intellectual property theft and substandard regulatory regime.   

We are told by globalists that free trade, as overseen by the professional international bureaucrats at the World Trade Organization, European Union, World Bank and the International Monetary Fund, is the only path forward. 

They insist that the U.S. must embrace the accelerated shift to a service economy because it will lose manufacturing jobs anyway. Governors of the United States would certainly not agree with this stance, and they deal with the repercussions of U.S. trade policy on a daily basis.  

According to the Bureau of Labor Statistics, the manufacturing sector has lost 7.5 million jobs since 1980.   

The increase in service jobs is a factor in depressing wage growth. According to the Economic Policy Institute, manufacturing hourly wages (and benefits) are 13-percent greater than the average private-sector job.

China is now the second-largest economy in the world and projected to overtake the U.S. by 2030. China’s GDP increased from $202 billion in 1980 to over $12 trillion in 2018. In contrast, U.S. GDP in 1980 was nearly $3 trillion and in 2018 was nearly $20 trillion.  

Make no mistake, the gains generated by China were at the expense of the American worker in Cleveland, Detroit, Erie and Kenosha.   

President Clinton and most U.S. politicians told us that by bringing the Chinese into the World Trade Organization, they would be forced to play by the rules. They have not and show no willingness to substantively embrace the classical liberal understanding of a free market, rule of law and the role of limited government.  

The reality is that the opening of China created tremendous opportunities for China and not for the U.S. Globalists, in protecting the status quo trade relationship, declare that there is no going back and actions that attempt to do so are narrow-minded, illogical and dangerous. 

But economics is dynamic, not static. Just as our policymakers did not foresee the downside of engaging China economically, it is wrong to categorically dismiss that new opportunities can be gained by recalibrating the relationship as Trump is attempting to do, whether by negotiations or other trade administrative measures.  

What is clear is that open markets and a level playing field are essential for U.S. business to compete — coupled with low taxes and limited regulation. Our trade focus going forward should be directed toward bilateral and regional relationships with like-minded nations.  

The president should walk away from the negotiating table with China if he cannot secure a fundamental change in Chinese policies that will rebalance the trade relationship.        

Mark Brady is former U.S. deputy assistant of commerce in the International Trade Administration and former director of international trade and investment at the National Governors Association. He is currently managing principal of M.A. Brady & Company, LLC., a strategic consulting firm focused on international trade & investment, infrastructure and government affairs.