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Trump Administration Lays Groundwork to Keep Big Tariffs on Chinese Goods

March 30, 2017

WASHINGTON—The Trump administration appears poised to cement China’s unfavorable status in trade cases, making Chinese goods eligible for higher U.S. tariffs well into the future.

[William Mauldin] March 29, 2017 [The Wall Street Journal]

U.S. officials are preparing a review of China’s “market-economy status” under the World Trade Organization, according to official documents on the Commerce Department website.

The review is expected to be announced as early as this week, just days before a high-stakes meeting between President Xi Jinping and President Donald Trump.

“China and others need to realize that the games are over—continuing their unfair trade practices and operation as a nonmarket economy will have serious consequences,” the Commerce Department said in a statement.

U.S. labor unions on Wednesday applauded the review and urged the Trump administration to avoid granting market-economy status. “The preferential status China is seeking would allow them to dump more unfairly priced products into the market, while claiming to abide to market economics,” said Leo Gerard, president of the United Steelworkers union, in a statement.

Beijing has said members of the WTO were required to start treating it as a market economy in December 2016, on the 15th anniversary of its membership in the Geneva-based body that oversees global trade.

However, the Obama administration declined to take steps to grant China that status, continuing to treat one of its largest trade partners as a nonmarket economy. Mr. Trump said in December that China is “not a market economy.”

Adopting full market-economy status would involve changing the way the U.S. conducts trade cases and likely make it harder for American firms to win big punitive tariffs against Chinese companies blamed for dumping products on the U.S. market or selling goods that benefit from improper subsidies.

The U.S. has dozens of punitive tariffs on steel products and other allegedly dumped products.

The Trump administration is working out how to deal with trade cases against Chinese industries and whether to continue to calculate the tariffs treating China as a nonmarket economy.

The Commerce Department linked the notice of its review to a new case in which it is investigating possible aluminum-foil dumping by China.

Wang Hejun, head of the trade remedy and investigation bureau of China’s commerce ministry, urged the U.S. on Wednesday to abide by WTO rules in its aluminum-foil investigation. Chinese companies shouldn’t be blamed for reduced U.S. output since American producers have been walking away from low-value aluminum-foil production for 20 years, he said, according to the official Xinhua News Agency. Improper trade remedies would hurt both sides, he said.

China has benefited enormously in recent decades from open global trading systems, but economists and political scientists say Beijing needs to further open its markets, reduce government’s heavy hand in the economy and allow unprofitable companies to fail if it wants to live up to its verbal embrace of free trade and globalization.

Mr. Trump has repeatedly accused Beijing of cheating at trade and threatened during the 2016 campaign to impose across-the-board tariffs on Chinese imports. Trade experts say the Trump administration is almost certain to step up the types and number of trade cases against China, even at the risk of a backlash at the WTO or from U.S. importers.

Beijing is likely to fight the new administration’s trade cases at the WTO and has also said it would challenge the way the U.S. calculates its tariffs in line with its status at the WTO.

Trade lawyers expect a protracted battle and a final ruling in Geneva several years in the future.

For nonmarket economies, trading partners can use other countries’ price data in calculating China’s costs, a method that has been employed when assessing punitive tariffs against China.

 


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  • No politically viable tariffs will be sufficient to bring back U.S. manufacturing jobs. China’s cost advantage is so great that not even 100% across-the-board tariffs would allow U.S. entrepreneurs to compete with China. Also, our barriers to entry for manufacturing are overwhelming since most of our infrastructure has disappeared. The machine shops, steel service centers, plastic molding shops, and other component suppliers that supported U.S. manufacturers would also have to start from scratch. The decades of manufacturing knowledge — both management and hourly, are gone.

    The only way to bring back significant numbers of U.S. manufacturing jobs would be to impose hard limits on imports from China. This would have to be phased in over a number of years. Warren Buffett proposed such a program back in 2003, in an article in Fortune. Here is a link to that article. http://archive.fortune.com/magazines/fortune/fortune_archive/2003/11/10/352872/index.htm

    Manufacturing is the only way for millions of high-school graduates to earn a middle-class income. Service jobs pay one-half to one-third of what manufacturing jobs pay.

    Communist China is a criminal enterprise. We should not be doing business with China at all, much less be allowing them to steal our technology, our intellectual property, and our jobs. China is draining our wealth, not to benefit its citizens, but to build up its military and to enrich the honchos of the Chinese Communist Party. Check out Peter Navarro’s book, or the documentary, “Death by China,” for the details on how China is cheating us. Here is a link to the trailer. The video is free on YouTube. https://www.youtube.com/results?search_query=death+by+china+trailer