Source: Blog – Alliance for American Manufacturing

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There’s bipartisan recognition that China’s weaponization of trade poses a threat to America’s economic and national security. Now it’s time to do something about it.

New trade tools and improved trade enforcement action is essential for the United States to compete against China’s exploitative mercantilism, Members of Congress and expert witnesses said on Tuesday during a House Ways and Means Subcommittee on Trade hearing.

Both Republicans and Democrats on the panel shared concern about what Subcommittee Chairman Adrian Smith (R-Neb.) described as China’s “aggressive trade and investment agenda” and utilization of “predatory trade practices,” including state-owned enterprises, intellectual property theft, espionage, and massive industrial subsidies. Members also raised worries about China’s dominance of global supply chains, especially when it comes to things like critical minerals.

But what to do about it?

That was the focus of Tuesday’s hearing, and Members of Congress and witnesses put forth a host of ideas, from ending China’s permanent normal trade relations (PNTR) status to export controls to strengthening domestic production and supply chains to reduce U.S. dependence on China. And while policymakers differed whether future trade deals are part of the solution — Republicans seemed eager for them, Democrats less so — there did seem to be a general consensus that when it comes to China, the status quo of the past two decades failed.

Now the United States must put new trade enforcement mechanisms in place in response. “We cannot compete using classic free trade tools developed in the 1970s with a naïve hope that unfettered trade would push back authoritarian governments,” said witness Roy Houseman, the legislative director of the United Steelworkers (USW).

Indeed, legislative action is in the works to address some of China’s predatory practices. Rep. Terri Sewell (D-Ala.) announced during the hearing that she is joining with Republican Rep. Mike Bost (Ill.) to introduce the Fighting Trade Cheats Act, which would increase penalties for violating U.S. trade laws, impose a five-year ban on imports from known violators, and allow U.S. manufacturers to sue foreign producers for customs fraud.

Sewell also said that she plans to reintroduce the Leveling the Playing Field 2.0 Act, which would strengthen U.S. trade remedy laws by providing an enhanced set of enforcement tools to address trade cheating, including by making it easier to go after repeat offenders and those seeking to circumvent U.S. trade action. Subcommittee ranking member Earl Blumenauer (D-Ore.) also expressed his support for the bill, noting “now is the time to move from rhetoric to action.”

Houseman said the proposed tools in Leveling the Playing Field Act 2.0 would help American workers compete, especially given China’s track record of dodging U.S. enforcement. He pointed to the USW’s own history, as the union won a trade remedy case against Chinese tire makers who dumped passenger vehicle light truck duty tires into the U.S. market, undermining American tire manufacturers and leading to 5,000 lost jobs.

But the USW was forced to file another case just a few years later when there was another flood of cheap tire imports, coming from foreign manufacturers who — surprise! — had parent companies in China. “So, they just basically shifted production to third-party countries and just started shipping, putting those tires back into the market,” Houseman said.

Rep. Greg Murphy (R-N.C.) said that China’s circumvention of U.S. trade enforcement efforts has created a a “wack-a-mole” situation, in which U.S. producers respond as issues arise, but we never seem to solve the problem entirely. Some of this is due to bad U.S. policy, Murphy argued; he was especially critical of the Biden administration’s June 2022 decision to pre-emptively pause tariffs on imported solar panels ahead of an investigation into whether some solar importers were circumventing trade enforcement (indeed, in December 2022 the Commerce Department determined several were doing just that).

But Murphy also among the Members who called for a wholesale shift in our trade relationship with China, arguing that America’s massive trade deficit with China is serving to fund China’s economic and military growth.

Witness Jamieson Greer agreed.

“I think we will always have some sort of trade with China, but we have to manage it,” said Greer, who is currently a partner at King & Spalding and previously worked as chief of staff to former U.S. Trade Representative Robert Lighthizer. “It has to be in appropriate sectors, it has to be balanced. We have gross persistent trade deficits. We are funding our strategic adversary.”

Blumenauer pointed to another trade policy in need of reform — the de minimis exemption. This U.S. trade law allows shipments valued under $800 to enter the United States duty free, something that Chinese companies like SHEIN and Temu have exploited to seize market share and undermine U.S. manufacturers.

Interestingly enough, China’s de minimis level is just $10, Houseman noted.

There are potential ways in which the United States can work with allies to counter some of China’s most egregious trade practices. Houseman pointed to the Global Arrangement on Steel and Aluminum as one potential path, with the United States and European Union potentially limiting non-market economy and carbon intensive steelmaking products from entering their markets.

“We could actually set up a club to allow us to push back,” Houseman said, adding that the arrangement could serve to benefit American workers and companies who “have modernized, are playing by the rules, and recognizing that we need to reduce carbon emissions” while also countering “state-powered and fueled steel production.”

Overall, the United States must not fear taking action against China, Greer argued. The U.S. often missteps by deploying strong rhetoric but then failing to follow up with any consequences.

Instead, Greer advised that the U.S. should be “polite” and “respectful” with China’s government and follow up with “real strong action” — a lesson learned from his experience working alongside Lighthizer on implementing Section 301 tariffs and the “Phase 1” U.S.-China trade deal.

“They did not think we were going to impose tariffs on them, and then we did. And then they didn’t think we were going to do it again, and then we did,” Greer said. “And then they came to the table.”

Watch the full subcommittee hearing here or below.

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