On Friday, CD Media reported on President Trump’s threats to decouple from China and the market responded violently to the news. And while a trade shift is practically inevitable at this point, some are clinging to hopes that President Trump and Communist China will work out their irreconcilable differences.
The United States-China Act of 2000, a last performance of the U.S. congress during the final months of the Bill Clinton presidency, was the initiative which paved the way to the current economic imbalance of power that is felt by almost every nation on earth. This act awarded China permanent normal trade relations with the U.S., opening up a huge market for Chinese companies in which they could market their products and allowed American companies to move to China and utilize their low wage unskilled labor to great effect.
China was also able to use this new status for leverage to become a full member of the World Trade Organization the following year.
The new relationship was supposed to be overseen by a Congressional Executive Commission that would monitor China’s compliance with international human rights laws, labor standards as well as religious freedom. What we see today is anything but compliance.
According to Human Rights Watch, China frequently makes dissenters “disappear”, runs the largest mass-surveillance program that collects even the DNA and voice samples of citizens without any privacy laws, and notes that authorities have stepped up their persecution of religious communities, including prohibitions on Islam, in recent years.
The Relations Act also originally included “anti-dumping” clauses specifically designed to prevent cheap Chinese goods from flooding American markets and U.S. manufacturers that produce competitive products.
But as with everything made in China, the Act started to break down very quickly. Chinese companies, taking advantage of the low tariffs imposed by the U.S., began to flood the country with cheap products pushing aside quality American manufacturers. Some of these products were even incredibly toxic including dog food, children toys, and even nefariously, baby formula.
Not only was the U.S. market saturated with low quality, hazardous products, but the Chinese government began to encourage intellectual theft among its own companies causing unfair competition with the American companies operating in China. Intellectual property theft by China is estimated to cost the U.S. a staggering $600 billion a year.
The Chinese government has repeatedly continued to manipulate the value of its currency allowing for their companies to export more towards the rest of the world, charges which have been made since 1994. According to 2019 Hill reporting:
“With the People’s Bank of China taking action over several years to reverse the market forces that strengthened the RMB as China’s economy grew, China gained a systemic advantage in international trade by using currency manipulation to flood markets with artificially low-priced exports.
Simultaneously, in an effort to protect the development of nascent domestic industries, manipulation of the RMB created significant non-tariff barriers to foreign nations seeking to get involved in this large emerging market, by keeping imports artificially costlier than Chinese products.
Such actions went unchecked for years, leading China to become the global trade and manufacturing powerhouse it is today. However, under President Trump, the U.S. finally is beginning to take steps toward holding China accountable for its misbehavior.”
The most problematic issues about dealing with China, by far, is their reclusive, centralized, and allreaching government, which recently even allowed a deadly virus to spread around the world because of their need for secrecy.
Why do we choose to have such a huge amount of trade with China, a known tyrannical government? President Trump has recently made clear that we don’t have to and has told the press that he could cut all ties with the world’s second largest economy completely.
What would a trade shift look like?
The U.S. is already currently in a trade war with China whether either side admits to it or not. This is underreported but obvious due to the huge trade deficit between the two countries.
By allowing, and even encouraging intellectual property theft, China has become a hostile place to do business in. The current administration has taken some important steps to reign in that trade deficit by imposing larger tariffs on China.
While this is an important step in the attempt to close the deficit gap, it doesn’t fully get rid of the problem. The U.S. government should begin looking into a fully reciprocal trade agreement with China, and with the current economic hardships brought on by the Chinese mishandling of Covid 19, the U.S. could even ask for reparations.
Asking for reparations from another country isn’t a new idea; Germany had to do it twice after the World Wars. These reparations don’t necessarily have to be cash in hand paybacks either but could instead take the form of debt forgiveness or asset transfers. Though we seem that we are on a path to doing this, it still might be some time off before it can come to pass.
Typically, a fully reciprocal trade deal with China would quickly affect the import of cheap products and would probably increase prices for U.S. consumers at home. But it doesn’t have to be so in 2020.
Nations such as India, and even Brazil, at a lower scale, could easily start to fill in the gap left open by the trade shift from China. The population of India is similar to that of China and the cost of labor is very on par as well. Additionally, there are more English speakers in the Republic of India than in China and by 2026, perhaps even more than the U.S.
There is one major benefit that India can hold over China and must not be overlooked: democracy. Shifting trade toward a more open democratic country would benefit the U.S. greatly, as well as boost the economy of one of our largest allies. Giving India a new stance as the factory of the world, in which by opening the U.S. markets to them could bring us closer to a regional military ally from which the threats of our adversaries, even China, would be met.
While this would also throw the Chinese economy in a downward spiral, essentially destroying their newly formed middle class, a trade shift would thwart their ambitions for world domination and prevent the next contagion from escaping some janky lab in China and wreaking havoc on the rest of the globe.
And while I don’t expect the president to admit this and risk the neo-Con label, the damage to China will have to be contained elsewhere for a successful trade shift, as well.
While the Chinese military doesn’t currently have the strength to be considered more than a regional power, this has been changing due to disastrous U.S. trade deals which have brought great wealth quickly into the Chinese economy. Using this wealth the Chinese have started the Belts and Roads Initiative in Africa among other various third and second-world investments. Through these investments targeted toward developing nations, China has been successfully able to finally enter into their version of colonialism.
By investing heavily in infrastructure and propping up corrupt governments, the Chinese government has managed to gain a foothold in a resource rich continent. In order to counter this Chinese economic expansion and be able to contain it, it is imperative that the U.S. be able to aid and direct her allies in the region.
Resisting this modern age colonial empire will be a difficult task but if done correctly, the U.S. will gain the ability to secure the resources of Africa to be available for the promotion of the regional economy as well as offer security throughout the continent. In this manner the U.S. could hope to come out as the clear victor in this economic struggle whose effects we have just started to see for ourselves.
Making America Great requires having a strong economy as its backbone. In order to do this the U.S. must start considering taking action for its own national interests rather than for the sake of the global community. Only then can the U.S. be sure of its victory in this trade war and reclaim the title of world’s greatest economy that ever was.
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