Why America Can't Afford to Get Into a Trade War with China

March 3, 2017 Topic: Economics Region: Asia Tags: ChinaTradeU.S.-China RelationsDonald TrumpCommerce

Why America Can't Afford to Get Into a Trade War with China

Americans should pay less attention to the partisan headlines and pay more attention to the historical trend lines.

Is Trump leading from behind?

Governor Branstad’s nomination as American envoy indicates that Trump must surely recognize the importance of trade with China as it is one of the top export markets for Iowa in both goods and services. While Peter Navarro, who Trump has tapped to lead the newly created White House National Trade Council, has been known to be an economic nationalist, he has also been more conciliatory, indicating that “the last thing a Trump administration plans is a trade war.” He also noted that “the issue simply is getting a decent trade deal with each of the major trading partners.”

But, all the polemics misses the point that if policymakers really want to bring jobs back to America, they need to prepare its citizens for the jobs of the future by providing retraining and better education from childhood onward. Pronouncements about “trade wars” and bringing manufacturing jobs back to America by the millions is simply pandering. Manufacturing jobs, for the most part, are not coming back to the American heartland. In fact, those jobs have left China and are not coming back to China either. Waging a trade war would simply be a race to the bottom. The United States may have options for punishing China, but Beijing has plenty of options to punish Washington as well. As Xi Jinping recently said at the World Economic forum in Davos, “No one will emerge as a winner in a trade war.”

The recent U.S. exit from the TPP has already handed China a significant advantage. Those nations left out in the cold by TPP, which did not include China, are now looking to join the Regional Comprehensive Economic Partnership (RCEP), which does not include the United States. The RCEP, which includes the ten member states of the Association of Southeast Asian Nations (ASEAN)—plus Australia, China, India, South Korea and New Zealand—makes up almost half of the world’s population and nearly 30 percent of global GDP. It has also set America’s high ideals adrift as RCEP “lacks the protections for labor, human rights and the environment” that had been specified in the TPP.

If President Trump wants to “Make America Great Again,” he should focus on more current and relevant global trends and Sino-American issues, such as intellectual property rights, market access, cybersecurity, SOEs and the ongoing Bilateral Investment Treaty negotiation. Railing against the loss of manufacturing jobs and TPP protections is to dwell on something that has already been overcome by events.

In the meantime, Americans should pay less attention to the partisan headlines and pay more attention to the historical trend lines in Sino-American trade and commercial intercourse that have raised millions from abject poverty on both sides of the Pacific Ocean—and the world.

Patrick Mendis, a former Harvard Kennedy School Rajawali senior fellow, is an associate-in-research of the Fairbank Center for Chinese Studies at Harvard University. Joey Wang, an alumnus of the Harvard Kennedy School’s Executive Leadership Program, is a defense analyst.

Image: Flickr/Creative Commons/AK Rockefeller