Nov 27, 2018

Opportunities for Trade Policy Reform at G-20 Summit

Daniel Griswold Director of Trade and Immigration, Christine McDaniel Senior Research Fellow

Daniel Griswold

The G-20 summit this week offers an opportunity for the United States and China to de-escalate the trade dispute that is damaging both our economies and roiling global markets.

The US government has legitimate complaints against Chinese policy, but the Trump administration’s escalating tariff war has inflicted more pain on the US economy than any policies pursued by the Chinese government. The Section 301 tariffs against Chinese goods are taxing American consumers, disrupting supply chains for US producers, and provoking retaliation that has cost American firms and farmers billions of dollars of lost exports. And, as the administration itself acknowledges, US tariffs have failed to gain any concessions from the Chinese.

The right approach would be to remove the tariffs and at the same time ramp up pressure on the Chinese government through coordinated action with our allies in the World Trade Organization.

 

Christine McDaniel

President Trump and President Xi should use this opportunity to re-confirm the important trade and investment relationship, while also reconfirming their commitment to the World Trade Organization.

The US should continue to use the World Trade Organization to pursue meaningful reforms in China. Cyber theft, intellectual property theft, excessive market access restrictions, and trade-distorting subsidies are all things that should be tried in the WTO. The second necessary step is to team up with our trading partners and lock in stronger rules on state-owned enterprises, subsidies, and non-market economy practices. These practices can distort trade and lead to inefficiencies—inefficiencies mainly for the Chinese economy. 

The bilateral trade imbalance (commonly referred to as the “trade deficit”) is due to macroeconomic issues much larger than China’s trade practices, and should not be the focus of these talks. Otherwise, they will surely fail.

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