“I will not stand by when our competitors don’t play by the rules,” said President Obama in his State of the Union message on Tuesday. And to make sure other nations comply with their obligations, he announced the creation of the “Trade Enforcement Unit.” According to the Wall Street Journal, the new grouping will be a task force combining officials from the Treasury, Commerce, and Energy Departments as well as the US Trade Representative’s office. Despite the generic name, the target of the Trade Enforcement Unit is China.
China may have racked up as much as a $300 billion trade surplus against America last year; if it failed to achieve that record-smashing mark, it was only billion or two short. In any event, it will surely surpass its 2010 surplus against the US of $273.1 billion. The 2010 deficit with China is the largest single-country one in the history of the United States.
If there were any time for the White House to get serious about Beijing’s predatory trade policies, this is it. Clearly, China’s surpluses are not sustainable, especially in a period of deteriorating economic conditions. Last Wednesday, the World Bank downgraded its global growth estimate by a full percentage point to 2.5 percent.
The president is right to highlight the China issue, and perhaps his organizational approach will result in more effective policies. Ted Alden of the Council on Foreign Relations, in comments carried in the January 12th Nelson Report, correctly called the task force proposal “the most comprehensive effort by any administration to rethink approaches to trade enforcement since the creation of the WTO.”
Yet that is not saying much. The Clinton administration made a strategic mistake by agreeing to China’s admission into the global trade organization before it was ready to abide by international standards, and the Bush team inexplicably allowed Beijing to continually game the system after the country’s accession in 2001. The common element of the policies of the two presidents is the belief that Washington must work cooperatively with the Chinese.
President Obama, despite the trade actions he has launched against China, still shares this view. For instance, Treasury Secretary Timothy Geithner apparently discussed the task force proposal with Chinese officials during his visit there this month.
Yet the effort to maintain this dialogue appears misguided, as this patient “engagement” approach is what contributed to our problems in the first place, by giving the Chinese more time to engage in delaying tactics while racking up trade surpluses. As Alan Tonelson of the US Business & Industry Council wrote this month, “Ever since he endorsed the 2008 version of the Senate currency bill early in his first White House run, President Obama has had all the evidence of Chinese economic transgressions he could possibly want to justify strong retaliatory actions.” And, as Tonelson also points out, the president already has the legal tools to enforce China’s trade obligations.
One does not need to believe that Obama’s task force is a ploy—“Will anyone be fooled?” Tonelson asked—to understand that the US will not make progress until Washington realizes it must move beyond “dialogue.” After decades of broken Chinese trade promises, we should realize that the only thing that will work going forward is the full use of our economic leverage.
And what would that leverage be? With the collapse of European orders for Chinese goods last year, America has become an even more important market for China. President Obama has the bargaining power. The question now is, does he have the will to use it?
China may have racked up as much as a $300 billion trade surplus against America last year; if it failed to achieve that record-smashing mark, it was only billion or two short. In any event, it will surely surpass its 2010 surplus against the US of $273.1 billion. The 2010 deficit with China is the largest single-country one in the history of the United States.
If there were any time for the White House to get serious about Beijing’s predatory trade policies, this is it. Clearly, China’s surpluses are not sustainable, especially in a period of deteriorating economic conditions. Last Wednesday, the World Bank downgraded its global growth estimate by a full percentage point to 2.5 percent.
The president is right to highlight the China issue, and perhaps his organizational approach will result in more effective policies. Ted Alden of the Council on Foreign Relations, in comments carried in the January 12th Nelson Report, correctly called the task force proposal “the most comprehensive effort by any administration to rethink approaches to trade enforcement since the creation of the WTO.”
Yet that is not saying much. The Clinton administration made a strategic mistake by agreeing to China’s admission into the global trade organization before it was ready to abide by international standards, and the Bush team inexplicably allowed Beijing to continually game the system after the country’s accession in 2001. The common element of the policies of the two presidents is the belief that Washington must work cooperatively with the Chinese.
President Obama, despite the trade actions he has launched against China, still shares this view. For instance, Treasury Secretary Timothy Geithner apparently discussed the task force proposal with Chinese officials during his visit there this month.
Yet the effort to maintain this dialogue appears misguided, as this patient “engagement” approach is what contributed to our problems in the first place, by giving the Chinese more time to engage in delaying tactics while racking up trade surpluses. As Alan Tonelson of the US Business & Industry Council wrote this month, “Ever since he endorsed the 2008 version of the Senate currency bill early in his first White House run, President Obama has had all the evidence of Chinese economic transgressions he could possibly want to justify strong retaliatory actions.” And, as Tonelson also points out, the president already has the legal tools to enforce China’s trade obligations.
One does not need to believe that Obama’s task force is a ploy—“Will anyone be fooled?” Tonelson asked—to understand that the US will not make progress until Washington realizes it must move beyond “dialogue.” After decades of broken Chinese trade promises, we should realize that the only thing that will work going forward is the full use of our economic leverage.
And what would that leverage be? With the collapse of European orders for Chinese goods last year, America has become an even more important market for China. President Obama has the bargaining power. The question now is, does he have the will to use it?
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