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  • Stephen Fodor

The Biden Administration and Their Approach to Trade and China


February 10, 2021


(Bloomberg) The China policy debate in Washington is often framed in terms of toughness and as a binary choice. Joe Biden is either going to be tough or soft on China and Donald Trump’s “Tariff Man” approach to the relationship is the benchmark.


The more clarifying question is whether Biden and his team will be intelligent in approaching a China that is the most significant strategic competitor the U.S. faces.


In a CBS interview at the weekend, Biden repeated that he plans a new approach to China built around U.S. allies and global rules. “I’m not going to do it the way Trump did,” Biden said.


It’s still unclear what that means in concrete terms in a world where commercial and geopolitical imperatives often clash. Allies in the European Union have their own strategic concerns yet still want an investment treaty with China to solidify economic links. Likewise, General Motors and Tesla still want to sell a lot of cars in the Asian nation.


Biden’s arrival has also come alongside evidence that while the former president may have installed China fears atop the American foreign policy agenda, Trump’s own trade strategy did not deliver the economic gains he promised.

The pandemic’s effects on the global economy put a big asterisk on any analysis. But the numbers are stark.


The U.S. had 150,000 fewer manufacturing workers in January 2021 than it did in January 2017, the month Trump took office, employment data released Friday showed.


U.S. data for 2020 put the U.S.’s annual deficit in goods trade with China at $310.8 billion, $36 billion less than at the end of 2016. That looks good for Trump, until you see that trade just went elsewhere. The gap in goods with Vietnam was up by more than $37 billion over the same period. The shortfall with Mexico increased by $49.5 billion. The total annual U.S. goods and services deficit with the world grew by $197.5 billion, or 41%, during Trump’s term.


Biden’s team is reviewing the “phase-one” deal that Trump signed with China a year ago. And Beijing also hasn’t delivered so far on the $200 billion in additional U.S. goods it promised to buy over a 2017 benchmark. Though, again, that has a pandemic asterisk on it.


In a new accounting released Sunday, Chad Bown of the Peterson Institute for International Economics found Chinese purchases in 2020 fell 40% short of the deal’s targets.


In 2020, U.S. manufacturing exports to China were still down 14% from when Trump’s trade war started in 2017, Bown calculated. Which isn’t good, even if Boeing’s 737 Max travails account for some of that.

Those metrics also come against a continuing debate over the cost in U.S. jobs of competing with China.


‘China Shock’


In a celebrated 2016 paper, David Autor, David Dorn and Gordon Hanson estimated that between 1999 and 2011, increased imports from China — the “China Shock” — killed 2.4 million jobs in the U.S.


But it turns out one of the U.S.’s most commonly used trade-defense mechanisms, anti-dumping tariffs, may have caused their own labor-market carnage.


In a recent working paper, Bown, Paola Conconi, Aksel Erbahar and Lorenzo Trimarchi calculate the higher cost of imported inputs caused by those tariffs leveled at China caused the U.S. economy to create 1.8 million fewer jobs in downstream industries between 1988 and 2016 than it might have otherwise. A further 500,000 jobs were lost in the first two years of Trump’s presidency. The industries the tariffs ostensibly protected showed no meaningful job gains.


The policy lessons are messy because there’s a relationship. To get anti-dumping tariffs, petitioners have to prove “injury” via lost jobs or revenues. An industry needs a tangible China Shock to secure tariffs that may lead to job losses among its clients. Lost jobs equal tariffs equal more lost jobs.


Anti-dumping tariffs aren’t the only ones in place. Trump imposed duties on more than $300 billion in Chinese imports. Those are also under review by Biden. Even before the pandemic, they were blamed for costly supply-chain disruptions and even a U.S. manufacturing recession. They were also contributing to a rotation of production out of China to Mexico and Vietnam, a geopolitical win if not an economic one.


How Biden digests all that is yet to be seen. Most of his nominees still need Senate confirmation and are navigating Washington politics by doing their best to look tough for now. It’s going to be a while before we learn just how intelligent their new China policy will be.


To Read More: https://www.bloomberg.com/news/newsletters/2021-02-08/supply-chains-latest-biden-tough-on-china-is-the-wrong-metric

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