In 2017, the U.S. Commission on the Theft of American Intellectual Property released a report detailing the cost of China’s theft of American intellectual property. The findings were staggering: theft by all parties accumulates an annual cost of $255 to $600 billion a year. The report specifically named China as the principal offender.
It’s no secret China engages in unethical practices to grow their economy. The international community has been trying to leverage global bodies like the World Trade Organization to prevent China from cheating the game of global trade for years. Yet, China continues stealing intellectual property, unfairly subsidizing domestic firms and ignoring other countries’ demands that they stop distorting market practices.
It isn’t just China’s economic practices we have to worry about. Chinese President Xi Jinping continues to bully and intimate their neighbors over disputes in the South China Sea, a contested set of islands in the Pacific Ocean. Instead of abiding by the Law of the Seas, a United Nations treaty governing international waters, China has militarized the Spratly Islands and ignored rulings ordering them to back off.
Justifiably so, the United States has expressed outrage over China’s behavior. President Trump is not the first president to shake his fist at their carelessness towards fair trade and the rule of law. Unfortunately, he’s taken a brazen and dangerous stance to address his grievances.
Specifically, Trump has responded by starting a trade war with China. This occurs when two countries place restrictions on what they can trade with each other, which increases the costs of exports. By raising tariffs, the argument goes, China will feel pressure to back down from their illegal behavior and come to the table for negotiations.
The problem with this strategy is that China has the power to weather the financial damages of U.S. tariffs, and thus has no reason to capitulate. Though the U.S. buys plenty more from China, Jinping can wield the state’s control over the economy by subsidizing companies being hit by tariffs and shield them from job losses. As a result, China can withstand years of massive tariffs without breaking much of a sweat.
The U.S., on the other hand, is more likely to suffer the immediate harms of a trade war. Tariffs disrupt supply chains and force companies to pass on costs to consumers, resulting in higher prices that low-income Americans can’t afford. It also squeezes key U.S. industries like agriculture, which don’t enjoy the same massive subsidies that Chinese firms do.
More importantly, on a broader economic scale, a trade war is likely to slow economic growth and, just as it did when we last engaged in one, push the economy into recession.
Trump may be right about China’s bad practices, but he’s wrong about what to do about it. If the U.S. wants to leverage its power against bad actors, it should use its enormous presence in the international community and embrace the rule of law to fight back.
For starters, Trump should utilize the World Trade Organization to check back against China. Though it has had trouble getting them to behave, it has been historically successful in compelling China to liberalize their economy and open up trade to the rest of the world. With persistence and multilateral pressure, the U.S. can bend China to its will.
Trump should also embrace global trade as a way to prevent China from breaking the rules. Ironically, the Trans Pacific Partnership, which Trump withdrew from immediately upon entering office, would have prevented China from seizing open markets in Asia that give them an advantage over the U.S. Now, China is becoming economically dominant in the fastest growing economies in the world.
More importantly, it would have given Western countries more bargaining power in the region, making it harder for China to game the system.
The last thing Trump can do to take on China is embrace international organizations. Trump has an affinity for ditching our obligations abroad. In the last two years, we’ve withdrawn from the Paris Accords, the UN Human Rights Commission and the Iran Deal. He’s threatened to leave NATO, abandoned security commitments with Japan and nearly sabotaged NAFTA re-negotiations.
The U.S. will not become stronger by isolating itself. Trump cannot simultaneously demand that everyone play by our rules while also undermining the institutions that give us the authority to police them.
If Trump wants to stop China, he needs two things: influence and credibility. Both of those require a steadfast commitment to the international order and a willingness to cooperate with others within the confines of the law. An absence of that cooperation will rob America of their influence and allow China to parade their nonchalant indifference towards law and order for as long as they want.