Subject: NYT: Experts Warn of Backlash in Donald Trump’s China Trade Policies
From: "Sarge, Matthew" <[email-masked]>
To: Comm_D <[email-masked]>
Date: Tue, 3 May 2016 04:06:34 -0700

http://mobile.nytimes.com/2016/05/03/us/politics/donald-trump-trade-policy-china.html?_r=0&referer=https://www.google.com/

Experts Warn of Backlash in Donald Trump’s China Trade Policies
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On the campaign trail, Donald J. Trump<http://www.nytimes.com/topic/person/donald-trump?8qa> has promised to do quite a few things that are beyond the powers of an American president, like billing Mexico for a border wall. But when it comes to foreign trade, his powers as president would come closer to his expansive ambitions.

As president, Mr. Trump could seek to penalize other nations for undercutting American manufacturers or stealing American ideas. He could also pursue congressional legislation to impose a 45 percent tariff, or tax, on imported Chinese goods, as he has proposed<http://www.nytimes.com/politics/first-draft/2016/01/07/donald-trump-says-he-favors-big-tariffs-on-chinese-exports/>.

The bottom line, some experts say, is that Mr. Trump might well be able to squeeze China.

That does not mean, however, that his punitive approach would ease America’s economic pains. In fact, a range of experts agree that Mr. Trump’s proposals are more likely to deepen those problems, particularly if China or other targeted nations retaliate, rather than accept his demands.

Starting a trade war might be cathartic for workers who have lost jobs, but it is unlikely to create a lot of factory work.

“There’s no way a tariff of this kind could deliver the kind of benefits that he’s talking about, and it’s quite wrong to think that the big problem for American workers has been foreign trade,” said J .W. Mason, a professor of economics at John Jay College and a fellow at the Roosevelt Institute, a liberal think tank. “But I think it could be very destructive for the rest of the world.”

Mr. Trump’s views on trade are among his oldest and steadiest public policy positions. He has long maintained that other countries are taking advantage of the United States because Americans spend more money on foreign goods than the rest of the world spends on American goods. And he has long argued for slapping higher tariffs on those foreign goods in order to fortify the American economy.

Trade was the first policy issue Mr. Trump mentioned last Tuesday in a speech after his latest round of victories in five northeastern primaries.

“Our jobs are being sucked away from our country, and we’re not going to let it happen anymore, folks,” he said at a victory party in New York that night.

It emerged again Wednesday in Washington during what was billed as a major foreign policy speech.

This Tuesday, Mr. Trump hopes to sweep the delegates in Indiana and all but sew up the Republican nomination. Nowhere has trade figured more centrally than in the Hoosier State, where the air-conditioner maker Carrier opted to move operations to Mexico, becoming a recurrent feature in Mr. Trump’s anti-free-trade litanies.

China has prospered over the last few decades by focusing its economy on low-cost manufacturing for foreign markets. Exports to the United States soared, particularly after China joined the World Trade Organization<http://topics.nytimes.com/top/reference/timestopics/organizations/w/world_trade_organization/index.html?inline=nyt-org> in 2001. American businesses and consumers bought $481.9 billion in Chinese goods in 2015, about one-fifth of all imports and the most from any country. But manufacturing employment in the United States has fallen sharply. A 2013 study estimated that China’s rise had eliminated at least one million domestic factory jobs<http://economics.mit.edu/files/6613>.

In the current campaign, Mr. Trump has proposed a 45 percent tax on Chinese imports and a 35 percent tax on Mexican imports. He has also proposed tariffs on goods that specific American companies produce in foreign countries, including Carrier air-conditioners and Ford cars.

Mr. Trump has said the threat of such tariffs would persuade China, for example, to modify the economic policies that he describes as providing unfair advantages to Chinese companies. Rather than incur his wrath, he says, American companies would be persuaded to keep more of their factories close to home.

“The 45 percent is a threat that if they don’t behave,” Mr. Trump said at a Republican debate in Miami last month<http://edition.cnn.com/2016/03/10/politics/republican-debate-transcript-full-text/>, the United States “will tax you.”

He added: “It doesn’t have to be 45; it could be less. But it has to be something because our country and our trade and our deals and most importantly our jobs are going to hell.”

As president, Mr. Trump would have some latitude to reverse a course that the nation has pursued for decades. But the results could be troublesome on multiple fronts. The removal of trade barriers has played a significant role in reducing global poverty and encouraging peace between nations, achievements that could be eroded by tit-for-tat backsliding.

“The basic principle is that a sovereign state enters trade agreements of its free will, and it can get back out,” said Robert Howse, the Lloyd C. Nelson professor of international law at N.Y.U. School of Law. “But that’s the easy part.”

Imposing sweeping tariffs would reverse a mainstay of United States foreign policy. Beginning after World War II, the United States gradually reduced its import taxes and pushed other nations to do the same, seeking not only to promote increased trade but to prevent conflict. The United States now imposes average weighted import tariffs of just 1.4 percent, according to the World Bank<http://data.worldbank.org/indicator/TM.TAX.MRCH.WM.AR.ZS>, among the lowest rates in the world.

Under existing laws, Mr. Trump could impose tariffs only on specific categories of imports, not whole countries, and only by demonstrating specific violations of trade rules, such as export subsidies.

“There are at least 50 sets of laws and regulations that exist that China has, at least in spirit, crossed the boundaries,” Sam Clovis, an adviser to Mr. Trump, said in an interview.

But Mr. Trump would have the difficult task of proving that China is breaking the rules before the World Trade Organization, which polices global commerce. International trade laws limit the type of help governments can provide to companies, but the role of the Chinese government is particularly opaque, said Mark Wu, a professor of law at Harvard and a former United States trade negotiator in the administration of President George W. Bush.

“China’s economy is its own beast, and it has a form that was not envisioned at the time these rules were created 20 years ago,” Mr. Wu said. “W.T.O. rules are not necessarily equipped to address all of the problematic aspects of that China Inc. system as far as American exporters are concerned.”

<http://www.nytimes.com/interactive/2016/05/02/us/elections/100000003627564.mobile.html>

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In fact, one of Mr. Trump’s favorite charges, that China and other nations are suppressing the value of their currencies, is actually not a violation of existing trade agreements.

A central problem is defining currency manipulation in a way that excludes the United States — in particular, the Federal Reserve’s post-recession stimulus campaign, which had the effect of weakening the dollar much in the same way that other countries do to their currency.

Alternatively, Mr. Trump could pursue the radical option of seeking legislation to impose a broad China tariff, in effect demolishing the rules of global trade.

“It would be a flagrant violation,” said Alan O. Sykes, a professor of law at Stanford and an expert on international economic relations. “There is no prior violation of W.T.O. law that would be even close.”

The impact of such legislation would touch almost every aisle at Walmart.

In 2015, Americans bought $14.2 billion worth of Chinese shoes, $2.5 billion of Chinese jewelry and $593 million of Chinese rugs. And, most of all, cellphones — $64 billion worth, according to the Commerce Department.

All told, the United States imported $481.9 billion in Chinese goods in 2015, a record<https://www.census.gov/foreign-trade/statistics/product/enduse/imports/c5700.html>.

But research suggests that the price of Chinese goods would rise by significantly less than 45 percent<https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr537.pdf> because companies would hold the line to preserve their market share. Consumers can also buy comparable goods. When the United States imposed a 35 percent tariff on Chinese tires<http://www.nytimes.com/2009/09/12/business/global/12tires.html> in 2009, imports of tires from China declined while imports from Indonesia, Mexico and Thailand rose sharply.

For the same reasons, however, economists see little chance that a tariff would achieve Mr. Trump’s goal of encouraging domestic production. They say it is even less likely to create large numbers of new factory jobs. American manufacturing output is at the highest level in history and employment has fallen because of large gains in efficiency, a trend that is unlikely to reverse.

China could retaliate by imposing its own tariffs. China responded to the tire tariff, for example, by imposing a tariff on American chicken parts.

The United States sold $116.2 billion in goods to China in 2015, including aircraft parts, automobiles and semiconductors — high-value industries in which workers earn high wages. Losing China’s market could mean sacrificing better jobs for less desirable ones.

Doug Oberhelman, chairman and chief executive of Caterpillar, described higher tariffs as “very dangerous” in February. “We’re 5 percent of the world population,” said Mr. Oberhelman, who spoke in his capacity as president of the Business Roundtable, a pro-trade lobby. “Ninety-five percent of our potential customers are elsewhere. We’ve got to learn and figure out how to deal with that.”

The damage to international trade agreements could also have deep and enduring consequences.

One of the central benefits of the current system is that it separates trade disputes from other kinds of conflict. The global effort to reduce tariffs after World War II “was dreamed up as a way to prevent world wars,” said Mr. Howse, the N.Y.U. professor.

“That should not be forgotten.”