Think Tank Official Says Tariffs Not Getting Results With China
The trade policy counsel at a free markets-oriented think tank said that the hike in tariffs on 70% of what we import from China has increased costs on consumers, led to an estimated 300,000 fewer jobs, and didn't achieve its aims. “That might have been worth it if China were making wholesale changes to its commercial policies, but the early indications are not positive,” Clark Packard said during an R Street Institute webinar April 9. Packard said that staffers on Capitol Hill accept his argument that tariffs are damaging to the U.S. economy, but they say that not doing anything to respond to China's quest for economic domination is not an answer.
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In a recent white paper, Packard suggests that reinvigorating the World Trade Organization, including by reinstating the appellate body and concluding plurilateral negotiations, is one plank of a smarter approach. He said the U.S. should bring a comprehensive case against China where the rules already exist at the WTO. He also argued that the U.S. should be more circumspect about its use of antitrust laws, as it doesn't want to damage Google's innovation, which can match or exceed China's national champions and Made in 2025 ambitions.
Packard agreed that avoiding reliance on Huawei 5G equipment is wise for democracies, and said that export controls on dual-use technologies would be more effective if coordinated with allies, so that those controls really keep China from a certain technology rather than just losing market share for U.S. firms.
He said one of the more important recommendations in his paper is to increase legal immigration, which fell by about 50% during the Trump administration.
Hudson Institute Senior Fellow Peter Rough, who also spoke on the webinar, agreed with Packard's strategy, but said that coordinating with Europeans on China, or on bilateral trade, is easier said than done. “No battle plan survives first contact with the enemy,” he quipped. Specifically, he said that the German attitude about China is less wary than even some other European countries, and is definitely out of step with the Washington consensus.
He said that if Germany continues to operate as it did before, because it's worried that taking a stand on human rights violations or commercial abuses by China could threaten German market access, it will be in the medium term “a recipe for ruin.” He said already Chinese manufacturers have begun to move up the value chain to where German firms used to be dominant.
Packard said he's concerned that there's no room in U.S. politics for nuance on China, and that he's seeing “a pervasive belief among policymakers [that] the way you compete with China is to mimic China.” He said throwing money at industrial policy is not how the U.S. will win economic competition with China, but by openness, which he defined as lower tariffs for intermediate goods, more skilled immigration and optimism about technology advances.