Who Cares About China Trade Policy? (Just debaters and special interests)

Who cares whether the United States federal government substantially increases its economic and/or diplomatic engagement with the People’s Republic of China? Well, NSDA policy debaters do, or will, as they research and debate proposed policy reforms. But most people are less interested. People have limited time and lots to do, and realize time spent researching trade policy likely won’t be rewarded. Most people have little influence on public policy, and without reforms they will be stuck under whatever trade regulations are in the status quo

The people and organizations who do care enough to be active are those who benefit from current trade regulations, or expect to benefit from new regulations. So U.S. Furniture manufacturers lobby for and file “dumping” charges with the Commerce Department against Chinese furniture companies. U.S. shrimpers lobby to restrictions on frozen shrimp imported from China (and Chinese shrimp industry fights back). U.S. Steel companies care, and lobby to restrict steel imports from China (though higher steel prices raise costs for most U.S. manufacturers, whose products become competitive on world markets).

Jeff Henderson, president of the Aluminum Extruders Council cared enough to charter a plane to investigate transshipped aluminum stockpiles in Mexico (see September 9, 2016 front page WSJ  story).

Union leadership lobbies for trade barriers they believe will protect union jobs here. Environmental groups concerned about CO2 emissions from China’s heavy use of coal in manufacturing look for ways to add a carbon-tax to imports from China.

Each trade barrier increases the prices U.S. consumers pay for imported goods. These price increases are rarely enough for most consumers to notice, much less spur them to protest. But the gains from protectionism to U.S. producers can be substantial, and through trade associations they invest millions of dollars to advocate new and protect existing trade restrictions.

The benefits of trade restrictions are concentrated to a handful of producers, but the costs are diffused across thousands of companies and consumers. (Over half of goods imported from China are in supply chains and integrated into U.S. manufactured goods, often for export. Raw and extruded steel and aluminum parts, for example.)

NSDA (and NCFCA) debaters will stand almost alone as motivated enough to research, sort through, and speak out on the various claims, regulations, trade agreements, and protectionist arguments.

Brink Lindsey’s Low-Hanging Fruit Guarded by Dragons: Reforming Regressive Regulation to Boost U.S. Economic Growth makes the case for first repealing “regressive regulations” in the U.S.

However, Lindsey’ Low-Hanging Fruit study focuses on domestic regulations rather than U.S./China engagement.

This October 2013 article in The Diplomat, American Protectionism Threatens US-China Trade looks at current “bilateral” U.S./China protectionist policies.

The United States and China have one of the largest trading relationships in the world, at over $550 billion per year. U.S. policymakers are right to cry foul when the Chinese government distorts that trade to protect domestic interests. Unfortunately, U.S. policymakers do the same thing and, in the process, harm the U.S.-China relationship.

One example is Washington’s continued use of so-called “non-market economy methodology” when deciding whether Chinese goods are being “dumped” into the U.S. market at unfairly low prices.  The designation is a holdover from the Cold War that exists today only because its mystical formula enables U.S. officials to impose higher punitive tariffs to protect inefficient domestic industries.

The practice is actually illegal under World Trade Organization rules. But when China joined the organization in 2001, the United States insisted that an exception be created, allowing it to continue discriminating against Chinese imports for 15 years. Time has passed, and unless the United States government changes its practice by the end of 2016, it will be in flagrant violation of U.S. trade obligations.

A key inherency point for debaters looking at “non-market economy methodology”:

Unfortunately, the United States is almost certainly not going to comply. There is a shameful history of law-breaking by U.S. trade officials abusing the non-market economy methodology. Both U.S. law and international trade rules have been consistently stretched or outright ignored for decades, and there is little indication that this trend will change. 

Commerce, enterprise and voluntary exchange help make the world a more peaceful and prosperous place. Trade and trade policy are at the center of economic theory and political economy. As consumers we benefit from exchange, from trade. As producers we benefit when people in other places purchase the goods and services we produce. But local producers don’t benefit at first from foreign producers offering competitive goods and services here.

Foreign competition can stimulate local producers to innovate and improve their offerings, drawing from better knowledge of local markets and opportunities. Background article by Alan Blinder on “Free Trade.”

On international trade policy, Douglas Irwin writes (from EconLib article A Brief History of International Trade Policy):

The theory of international trade and commercial policy is one of the oldest branches of economic thought. From the ancient Greeks to the present, government officials, intellectuals, and economists have pondered the determinants of trade between countries, have asked whether trade bring benefits or harms the nation, and, more importantly, have tried to determine what trade policy is best for any particular country.

On Amazon.com debaters can “Look Inside” Douglas Irwin’s 2015 book Free Trade Under Fire.

America’s founders tried to limit Congressional and Executive power to intervene in the economy. Modest tariffs on imported goods were for decades the federal government’s major source of revenue, along with land sales. America’s founders believed economic interventions would excite factions, that is, special interest groups who gain from economic legislation. Trade policy through American history has been just that. Domestic producers, from farmers to manufacturers, lobby each generation for new or continued restrictions on imported agricultural and manufactured goods.

Here is a Princeton University discussion of interest groups and “The Problem of Factions.” (pdf)

An earlier Debate Central post, China Trade: Hollowing Out or Filling In the U.S. Economy? discussed this ongoing free trade /managed trade/protectionism debate over U.S. China policy, linking to various recent studies and articles.


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