Trade Correspondent L.C. reports:
China steals US intellectual property wholesale, but the rest of the world does so also by government-controlled prices paid for US pharmaceuticals.
The US-China trade talks in Washington this week led to a joint statement momentarily lifting the threat of further trade war escalation. It also managed to displease politicians, analysts, and private sector organizations from across the political spectrum and economy. But despite disagreement over many aspects of trade policy, most Americans and foreign allies agree on one point – that China (1) engages in unfair, abusive, and World Trade Organization (WTO)-illegal trade practices centered about the theft or forced grabbing of intellectual property and proprietary high technology and (2) that it subsidizes excess production that distorts global metals markets through its state-owned enterprises and lending institutions.
Since the joint statement addressed neither of these top concerns – it didn’t mention “Made in China 2025,” ZTE, or excess capacity – it alarmed many and seemed to confirm earlier fears that the Trump White House might settle for a watered-down deal. Such a deal would cut the US trade deficit with China without dealing with intellectual property theft or subsidized overproduction.
Yesterday in the Washington Times, two influential Republican spokesmen, Stephen Moore and Steve Forbes, wrote an op ed blasting foreign nations’ (especially China’s) theft of US intellectual property. It’s worth reading.
By not dealing with widely recognized problems but emphasizing US exports, the US-China joint statement may make it more difficult for the US to work with Japan and the EU on their common concerns about China, since any move to increase imports from the US would be likely to decrease them for China’s other trading partners.
NAFTA: No deal, “skinny” or otherwise, as deadline passes
The most high-profile NAFTA development this week was the missing of another deadline. House Speaker Paul Ryan (R-WI) had declared that if a deal wasn’t announced by November 17th, it couldn’t be acted on by the current Congress. But once the deadline had indeed been missed, Ryan conceded that there might be some timing flexibility, if required reviews are accelerated.
Those pushing for a “quick-skinny” option include Canadian Prime Minister Justin Trudeau, who is concerned about the economic impact of the uncertainty surrounding NAFTA and the possibility that delaying a deal could collapse support following elections in Mexico (July), the US (November), and the Canadian provinces (June, September, October).
The President is thought to be sympathetic to a quick deal as long as the outcome can be portrayed as a victory for the US and a follow-through on his campaign promises. The skinny option would see a deal struck on auto rules-of-origin and uncontroversial modernization efforts. US Trade Representative Lighthizer reportedly leads the skinny deal opponents.
Tariffs loom
Hovering over NAFTA’s messy state-of-play is the prospect of the US slapping Section 232 tariffs on steel and aluminum from Canada (the major US supplier) and Mexico. The temporary exemptions expire on June 1st. They could easily be extended again, but if the EU exemption is not also extended and the tariffs remain in place for Japan, relations with those crucial partners will become even more fraught. US relations with the EU are already embittered over the latter’s refusal to stop trading with Iran in the wake of the US president’s exit from the Iran nuclear deal (the JCPOA). Meanwhile, Japan has grown tired of playing nice with the US after being slapped with Section 232 tariffs on steel and aluminum. On May 18th it formally notified the WTO that under Article 8 of the Agreement on Safeguards it will raise tariffs on US exports worth about $450 million (50 billion yen). This matches the value of the Section 232 tariffs the US imposed on Japanese steel and aluminum. Tokyo would prefer that the US grant Japan an exemption from the tariffs and has been talking to Washington about the matter for weeks, yet it is the only US ally not even granted a temporary exemption.
Farm bill failure also impacts trade
The farm bill failed in the House (198 to 213) in a May 18th vote. The current bill expires on September 30th, but if a new authorization isn’t approved by then, the old bill will remain in effect. Nevertheless, farmers aren’t happy about the uncertainty, low commodity prices from bumper crops, and the potential severe blows to exports from US trade policy.
Click here to go to the previous Founders Broadsheet post (“Why does atheist China have Muslim and Buddhist allies?”)
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