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CPA Outlines Tools to Improve China Trade Strategy

March 06, 2020
Delivers China testimony to House Ways and Means Committee 

Washington.
In response to a House Ways and Means Committee hearing on the impacts of trade with China, the Coalition for a Prosperous America (CPA) has submitted its analysis of comprehensive offensive and defensive strategies that the U.S. should implement. The document reflects both CPA’s research on Beijing’s predatory trade practices and the experience of CPA member companies engaged in head-to-head competition with Chinese firms.

“Too often, we hear Members of Congress giving theoretical talks about the benefits of trade with China,” said CPA Chair Dan DiMicco. “But in the real world, China’s predatory behavior has resulted in serious, adverse consequences for America’s productive economy. Our testimony explains why elected officials are naive to focus on concepts like ‘market efficiencies’ and ‘global cooperation.’ Beijing is engaged in an aggressive competition for the jobs and industries of tomorrow. We want to help the Committee intelligently chart a new course.”

CPA’s testimony focuses on five key areas related to U.S.-China trade: the effectiveness of tariffs; Beijing’s aggressive “China 2025” industrial strategy; the hidden and persistent bailout program offered by China’s state banks to its major industries; the impact of trade deficits on job quality in America; and, the trade imbalances and economic harm posed by currency misalignment. 

CPA has consistently supported the Trump administration’s tariffs on China, and has documented subsequent investmentand capacity expansion in key U.S. industries. A 2019 study by CPA’s economic team detailed the economic benefits of an across-the-board 25 percent tariff on Chinese imports. And CPA research has also examined the problem of an overvalued dollar.

A key point of CPA’s testimony is the challenge posed by China’s state-managed capitalism. Beijing maintains a continuous bailout program that props up state-owned companies, allowing them to operate at a loss while exporting artificially underpriced goods to the U.S. market.

“We want to increase the committee’s understanding of the tools available for a sovereign country like the United States to improve its trade performance,” said Michael Stumo, CEO of the CPA. “There is a fundamental misunderstanding about the positive role that tariffs, exchange rate management, and industrial strategy can provide. Too much of the current China debate has been mired in a simplistic understanding of tariffs and free trade. 

“We can go on the offense, to build a better economy. And we must play defense, to prevent other countries’ strategies from harming our economy. The economy directed by China’s communist party is not a rough facsimile of our own capitalistic system. Until Members recognize these differences, they won’t be able to adequately implement a suitable response to such challenges.”

Click here to read CPA’s full testimony to the House Ways and Means Committee.

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