U.S. troubles over Trump, TPP risk emboldening China in Asia
U.S. Defense Secretary Ash Carter warned a few months back that China risked a “great wall of selfisolation” for its actions in the disputed South China Sea. That hasn’t deterred Xi Jinping.
Beijing is boosting its military presence in the area unabated, in the face of increased U.S. patrols and a recent arbitration court ruling that invalidated its claims to most of the waterway. After decades of U.S. dominance in the western Pacific, Xi’s behavior presents an increasingly urgent dilemma for America on how to slow China’s military and economic expansionism.
The risk now is that troubles afflicting a signature Obama-backed trade deal embolden China to see how much further it can push the world’s biggest economy. Regardless of who wins the U.S. presidential election in November, the mood among a vocal number of American voters is one of isolationism after more than a decade fighting wars thousands of miles away and amid concern about preserving U.S. jobs.
That domestic climate is threatening the U.S. ratification process for the Trans-Pacific Partnership, a pact that would cover 40 percent of world commerce and does not include China. Republican Party nominee Donald Trump says the TPP will cost U.S. jobs, and Democrat Hillary Clinton has reversed her earlier support for it.
“Right at the heart of China’s conduct in the East China Sea and the South China Sea over the last few years has been a conviction that the U.S. doesn’t have the resolve to push back hard against China’s prodding,” said Hugh White, a professor of strategic studies at the Australian National University in Canberra and author of “The China Choice.”
If TPP fails, “it will encourage them to think that America is not willing to pay the costs and risks required to push back against it, and that will encourage China to test it.”
Why it matters
In this angry election year, many American voters are deeply skeptical about free trade — or downright hostile to it. The backlash against trade threatens a pillar of U.S. policy since World War II: Through trade pacts and institutions such as the World Trade Organization, the United States has sought to rip down barriers to global commerce, including quotas and taxes on imports. Economists argue that the benefits of free trade outweigh the costs. Imports cut prices for consumers, and exposure to foreign competition makes American firms and the overall U.S. economy more efficient. There’s a geopolitical angle, too: Countries that do business with each other are less likely to go to war. Free trade, it seemed, paid off. But doubts lingered, especially as China emerged as an economic power. China overwhelmed the world with hundreds of millions of low-paid factory workers who could crank out products for less than just about anybody else. And critics charge that China doesn’t play by the rules — unfairly subsidizing exporters, manipulating its currency to give them a competitive edge and condoning the theft of U.S. trade secrets. Whatever the reasons, the United States last year ran a $334 billion trade deficit with China — a big chunk of America’s $500 billion total trade deficit. Even economists are having second thoughts. David Autor of the Massachusetts Institute of Technology, Gordon Hanson of the University of California-San Diego and David Dorn of the University of Zurich looked at the American workers most exposed to competition from China. They got an unpleasant surprise. Instead of finding jobs in newer, growing industries, as economic theory dictated, Americans thrown out of work by the “China shock” bounced from job to job and suffered a drop in lifetime pay. China’s rise has “challenged much of the received empirical wisdom about how labor markets adjust to trade shocks,” they concluded. WHERE THEY STAND Presidential candidates Donald Trump and Hillary Clinton oppose the trade agreements that are a hallmark of U.S. economic policy. Clinton has broken with President Barack Obama by opposing the TPP. Trump vows to tear up existing trade deals, such as the North American Free Trade Agreement with Mexico and Canada, and to slap huge tariffs on Chinese imports. He traces America’s economic problems to bad trade deals reached by clueless U.S. negotiators outfoxed by craftier foreigners. The author of “The Art of the Deal” says he can do better. IMPACT Foreign competition is one reason America has lost 3.4 million factory jobs since China joined the World Trade Organization and became a bigger part of global trade in 2001. It’s also partly responsible for stagnant American wages. Adjusting for inflation, U.S. households earn less than they did in 1997. But trade isn’t the only culprit: Technology allows factories to cut jobs and still increase production. Despite the campaign rhetoric, trade deals have far less impact on jobs than forces such as automation and wage differences between countries. The controversial Pacific deal, for instance, probably would have a negligible impact on American employment, the International Trade Commission concluded. Trump’s plans to impose punitive tariffs would risk setting off a trade war and driving up prices for American consumers. Pulling back from trade agreements could also reduce America’s diplomatic influence. The Pacific agreement, for instance, is aimed partly at countering China’s clout in Asia.