U.S. President Joe Biden has offered frustratingly few details as to how he plans to handle the vexing issue of trade with China. He has not even answered the very straightforward question of whether he will keep his predecessor’s controversial tariffs of up to 25 percent on most Chinese imports. But the new administration’s broad approach to China is clear: The treatment of China as a strategic threat rather than an economic opportunity—a shift that took place under the Trump administration—will continue.
Nevertheless, Biden should throw out most of the Trump playbook, which was built around a futile and failed effort to bully China into submission. In a struggle between economic powers, the United States and China are on roughly equal footing—and the U.S. position is weakening as China continues to grow. Instead, what the United States can win is a contest of power backed by principle.
The Biden team’s broad approach has been flagged for months in articles by its leading foreign-policy officials, including National Security Adviser Jake Sullivan and White House Indo-Pacific Coordinator Kurt Campbell. It would accept the rise of China as a major rival power and seek to manage that competition to restrain China and advance U.S. interests. Washington would give up on the goal of nudging Beijing towards greater pluralism and focus instead on curbing its growing influence. The new White House press secretary, Jen Psaki, said on Monday that “strategic competition with China is a defining feature of the 21st century.” She warned: “China is growing more authoritarian at home and more assertive abroad. And Beijing is now challenging our security, prosperity, and values in significant ways that require a new U.S. approach.”
That new approach seems likely to roll out slowly, in part because the administration is focused on urgent domestic priorities, including its proposed $1.9-trillion economic recovery package. Psaki said the new team has launched a “complex review” of the overall relationship that will involve inter-agency consultations among the State Department, Department of the Treasury, and others. “We’re starting from an approach of patience as it relates to our relationship with China,” she said. The administration is also trying to figure out where China fits into what incoming U.S. Trade Representative Katherine Tai has called a “worker-centered trade policy” that focuses more on jobs and wages as home, a theme that was also sounded by her predecessor under former President Donald Trump, Robert Lighthizer. The one sharp point of distinction between Biden and Trump so far is the promise to work more closely with allies in developing some common policies towards China.
The administration needs to quickly emphasize another distinction: that it will pursue a trade policy based on principles as well as power. Trump did enormous damage to U.S. influence by walking away from trade agreements such as the Trans-Pacific Partnership (TPP) and running roughshod over the rules of the World Trade Organization (WTO). China is now a larger export market than the United States for two-thirds of the world’s nations, and that share will only grow as China overtakes the United States as the world’s largest economy near the end of this decade.
If it comes down to pure calculations of economic gain, the United States will lose the support of many countries. But these smaller nations are also great defenders of the WTO and its system of economic rules, and many are members of regional or bilateral trade agreements. Trade rules protect these countries from the sort of aggressive economic bullying that China has displayed in shutting down imports from Canada, Australia, and others over diplomatic disputes. The United States was once the great architect and defender of these rules. It needs to be so again.
Trump’s approach was to compete with China by behaving more like China. Trade rules were for suckers—if Beijing was violating its trade commitments, then Washington should simply do the same. That led the administration to toss out the rule book by imposing broad-ranging tariffs on Chinese imports and blocking steel and aluminum sales from many allied countries, on the specious claim that those imports threatened U.S. security. The Trump administration gambled that China would genuflect to Washington, changing its trade practices to ensure continued access to the huge U.S. market.
But the Trump gambit failed on two counts. First, the tariffs hurt U.S companies, workers, and consumers at least as much as Chinese exporters. Therefore, they provided little leverage. Instead of changing its trade-distorting practices such as industrial subsidies and intellectual property violations, Beijing gave Trump a series of weak commitments to increase purchases of U.S. goods that China has not even come close to realizing. But the Trump approach had a bigger flaw: It was based on a serious misunderstanding of the value of international trade rules. They are not like domestic laws; breaches are quite common and expected, and the penalty for violations is usually modest and slow in coming. But most countries—China is no exception—do not want to be perceived as international outlaws, and there is a strong bias towards compliance. While Beijing has dragged its feet in implementing adverse WTO rulings, it has never rejected them outright. When it has lost clear-cut decisions—such as the WTO’s 2014 ruling against China’s ban on exports of rare earth materials that are critical for high-technology industries, a case spearheaded by Tai—Beijing eventually complied.
Consider China’s actions since Trump launched his failed trade war. While Beijing responded tit for tat to U.S. tariffs, it has taken further steps to enmesh itself in trade rules. It finalized negotiations last year to cut tariffs under the 15-nation Regional Comprehensive Economic Partnership in Asia, which includes Japan and South Korea. It made several concessions to conclude a broad investment agreement with the European Union, including stronger language on transparency on subsidies, and promises not to lower environmental standards to attract investment. While those may turn out to be hollow promises, such commitments make it easier to call out China for trade-distorting practices. Beijing has even made growing noises of wanting to join the TPP, now known at the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, despite the much deeper commitments to transparency and openness that would be required.
China’s continued desire for such trade rules suggests a clear path for the Biden administration: Get back in the trade game and use those rules as leverage against China. First, Washington must come back onside with the WTO. A WTO panel ruled last September—to the surprise of no one in the trade community—that Trump’s tariffs on Chinese imports violated WTO rules. The Biden administration should acknowledge the ruling and immediately lift Trump’s tariffs. Some are advocating that Biden use the tariffs as negotiating leverage against China, but that would fail for the same reason it failed under Trump: China has little incentive to offer concessions to remove tariffs that are mostly harming U.S. companies. By lifting the tariffs in response to the WTO ruling, Biden will take a big step to restoring U.S. credibility while also strengthening the U.S. economy, which is so central to his agenda.
Next, the administration should work with Europe and others to revive and improve the WTO dispute-settlement system, including reconstituting and streamlining decision-making by the WTO Appellate Body, which was neutered by the Trump administration. Once the dispute system is restored, Biden should work with allies to launch a flurry of new cases against China. Promising areas include challenges to Chinese state subsidies, intellectual-property violations, and forced technology transfer. No one is better prepared for this job than the soon-to-be U.S. Trade Representative Tai, a lawyer fluent in Mandarin who knows the ins and outs of China’s economic system. The United States should also stand behind Australia and other countries that have been on the receiving end of Chinese sanctions that are clearly illegal under WTO rules. Australia in December filed a WTO complaint against Chinese tariffs on its barley exports and could bring other cases as well. Finally, the Biden administration should reengage in updating WTO rules in areas such as digital trade and clean energy. If China continues to block such negotiations, the United States should move forward with like-minded nations.
Such actions would clearly target China as a scofflaw, a country that claims adherence to trade rules while often violating them. Trump’s actions did exactly the opposite—they gave Beijing cover to throw its weight around with disregard for the rules because Washington was doing the same. Biden should take another step and rejoin the TPP as soon as possible, which would anchor the United States economically with China’s Asian neighbors, dampening China’s ability to become the economic sun around which all of Asia revolves. Leaving the TPP was a massive strategic blunder by Trump. While Democrats also had legitimate criticisms of the TPP on issues such as investor dispute settlement and protections for pharmaceutical companies, many of those provisions were watered down after Trump left the agreement. Biden should start negotiating his way back in.
A United States that is again seen as abiding by its principles will keep the rest of the world from having to choose between a Chinese bully and an American bully. And it will further expose Beijing’s hypocrisy. Chinese President Xi Jinping’s speech on Monday at the World Economic Forum’s virtual Davos—in which he promised a path of “mutual benefit and win-win cooperation”—was rightly denounced as double-speak. But as long as the U.S. remains a scofflaw too, it has no moral standing to join in the criticism.
None of these trade actions is sufficient on its own to meet the economic challenge from China, much less the broader security challenge. The Biden team seems rightly to be moving to a whole-of-government approach involving multiple departments, agencies, and policies. That would include maintaining and—where needed—strengthening those Trump-era sanctions that help the United States retain an edge in critical new technologies such as 5G and artificial intelligence. It requires using U.S. trade laws, including the imposition of WTO-compliant tariffs, to protect U.S. companies and workers from Beijing’s predatory trade practices. It requires reinvestment at home—in research and development and 21stcentury infrastructure to bolster U.S. competitiveness. It requires an immigration overhaul that once again opens the United States to the world’s best and brightest.
But on trade, Washington should stop standing on its own and reestablish itself as the champion of the trade system it first began building nearly 75 years ago. The system has served the United States and the world well for decades, and it will help Biden meet the growing China challenge.
