Trade Groups Agree Chinese Trade Policies Unfair, But Need for Tariffs Disputed

Trade groups representing the apparel, steel, grain and chemical industries largely agree that China is flouting World Trade Organization rules for trade, but there remains some debate over whether the use of tariffs is necessary. "I think somehow imagining that China after 17 years of noncompliance with WTO rules will somehow reverse and do it is the definition of insanity," said Scott Paul, president of the Alliance for American Manufacturing, which represents U.S. steelworkers. "We're sitting on an economy where corporations are getting $1.5 trillion in tax cuts, we have pretty robust economy growth, so in a lot of ways there's never been a better way to fight a trade war and this is a very targeted war," Paul said, speaking as a panelist at a May 17 Washington International Trade Association event.

The tariffs under the Section 301 investigation should be considered "a means to an end," Paul said. "The end result is not to have tariffs, retaliatory tariffs, that are escalating and spiraling, but they should result in some sort of change," he said. "Tariffs can't be the only solution. It's not easy to win a trade war, it's not easy at all, but we shouldn't back away from it, because if we do, we're really playing into Beijing's hands." Paul noted that the Section 232 tariffs on steel and aluminum are having some of the intended impact so far.

The apparel industry should be seen as a "poster child" for how tariffs are ineffective, U.S. Fashion Industry Association President Julia Hughes said. Clothing already faces some of the highest tariffs of U.S. imports and yet domestic production declined rapidly, she said. While the apparel industry largely avoided inclusion on the proposed list of products subject to Section 301 tariffs, "we've heard we're on that second list if that list ever comes," she said. That's why her industry is so engaged on the issue (see 1805110020), she said.

Others said WTO action should be considered instead. The WTO process is not as fast as many would like but its mechanisms can work, as they did in its decision that the European Union improperly subsidized Airbus (see 1805150066), Cal Dooley, CEO of the American Chemistry Council, said. While that Airbus case took over a decade to reach conclusion, that process helped reduce the prospect of new tariffs when it was initiated, he said. If certain issues can't be addressed by the WTO, that should elicit talk of changing the WTO, Hughes said.

It's clear that the U.S. has the "leverage" over China "and we have never really utilized it in a meaningful way before," Paul said. Dean Garfield, CEO of the Information Technology Industry Council, agreed that the U.S. holds leverage, but disagreed with Commerce Secretary Wilbur Ross' view that China is limited in its ability to respond (see 1805140052). For example, beyond tariffs, China could close off its market to U.S. companies, he said. The administration's "public statements have been a bit too cavalier," Garfield said.

Garfield also disagreed with the U.S. focus on Made in China 2025, one of the elements of Chinese industrial policy that the U.S. says is in violation of WTO rules. A better focus would be on how to "mitigate" the effects of China's economy on the rest of the world, he said. "If the goal of the administration is to get China to make structural changes to abandon state-led capitalism, it's bound to fail," he said. The panelists also noted their concern for a potential end to NAFTA if there's no agreement in the renegotiations by the end of the month.