CPA Op-ed: Don't believe that China might actually comply with trade pledges

November 30, 2018

Editor’s note: The USA Today Editorial Board wrote today, that President Trump should not raise tariffs and should, instead, make a deal with China when he meets with President Xi tomorrow. Michael Stumo, CEO of CPA, authored the “Opposing View” (below) in contrast to the editorial board’s position.

At this weekend’s summit of the Group of 20 nations, some will be urging President Donald Trump to ease tariffs on China. In exchange, Beijing would finally halt such longstanding predatory trade practices as intellectual property theft and forced technology transfer. It sounds encouraging, but it would be the height of folly to believe that China might actually comply.

America has been a victim of China’s trade war since 1994, when Beijing pegged its currency at an artificially low rate to the dollar. This made Chinese exports particularly cheap in the U.S. market — and drove a massive increase in U.S. goods deficit with China.

Since then, China has built its economy by relying on America’s wide open consumer market. Last year, the U.S. goods deficit with China reached a record $376 billion.

In 2001, Beijing joined the World Trade Organization by promising to open its markets and move toward a more democratic government. However, China simply continued to undervalue its currency and massively subsidize key industrial sectors, all in clear violation of WTO rules.

China has also engaged in the most persistent, massive, state-directed commercial espionage campaign in history. Chinese companies hack U.S. networks with impunity and readily steal high-tech intellectual property.

In response, President Trump imposed Section 301 tariffs to address this ongoing hacking and espionage. When the first $50 billion in tariffs were implemented, China denied wrongdoing and instead retaliated. When additional tariffs of $200 billion were implemented, China again denied wrongdoing, and again retaliated.

Beijing has been conducting a China-first policy for many years, making a bid for regional and global superpower status. What’s at stake is not just trade and technology, but also military, economic and political leadership in the coming decades. At the G-20, China could pledge to end some hacking and IP theft. But it would be yet another hollow promise.

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