Trump’s Trade Deal with China Might Not Tackle Industrial Subsidies

Elizabeth Brotherton-Bunch

Elizabeth Brotherton-Bunch Digital Media Director, Alliance for American Manufacturing

We’ve been closely monitoring trade talks between the United States and China, and we’ve gone on record to note that there are a couple of ways things could go. The two countries will either reach a historic deal that requires China to play by the rules of global competition — or the agreement will be a dud, making a few superficial changes but mostly maintaining the status quo.

Well, score one for the status quo.

Reuters reports that “U.S. negotiators have tempered demands that China curb industrial subsidies as a condition for a trade deal after strong resistance from Beijing.”

Instead, negotiators are focusing on issues they see as more achievable, including ending forced technology transfers, strengthening protection of intellectual property and opening up China’s markets.

Look, addressing technology transfers and intellectual property is vital, and U.S. negotiators are right to focus on them. Ditto for further opening up China’s market.

But by abandoning the issue of industrial subsidies in these talks, the United States is giving a green light to China to continue to cheat the global trading system and put countries and companies that play by the rules at a disadvantage.

Case in point: Steel.

President Trump put a 25% tariff on steel imports in April 2018 in response to surging foreign imports. Now, you’ve probably heard about those "Section 232" tariffs — they’ve garnered a lot of criticism from the Acela Corridor set — but what is often missing from the conversation is that despite Trump’s bluster, there was a very legitimate reason why he issued those tariffs.

China’s government heavily subsidizes its steel industry, and China makes far more steel than it can use for its own purposes. But Chinese companies need to do something with all that extra steel, and so they dump it onto the global marketplace at rock-bottom prices, far below what companies operating in a free market can afford.

This gives China a huge advantage — its heavily subsidized companies don’t have to worry about making money, because their operations are subsidized by the government. As a result, Chinese steel flooded the global market, and a whole lot of that subsidized steel made its way to U.S. shores.

At one point, the flood of cheap Chinese steel imports exceeded the amount U.S. factories produced in an entire year. Tens of thousands of U.S. workers were laid off, and dozens of U.S. steel facilities shut down.

The Obama administration recognized this problem and issued tariffs on specific steel productswhile also urging China to stop subsidizing its industry. China even pledged to cut its steel production! (Spoiler: China did not.)

Enter Trump, who decided to send a message by issuing the 25% tariff. Since then, things have stabilized for the American steel industry, leading to an uptick in domestic production, 12,000 new jobs, and $18.2 billion in announced investments.

But the underlying problem remains: China is still subsidizing its steel and other key industries.

The tariffs might have stopped the flood of steel imports, but it is only a temporary fix, something United Steelworkers President Leo Gerard pointed out in March during the annual Congressional Steel Caucus hearing:

“The underlying problem of Chinese overcapacity continues to plague world markets and is a sword of Democles hanging over the future of our industry and those in other market economies. The 232 tariffs must not be discontinued, and they should be coupled with renewed efforts to reach multilateral disciplines on overcapacity, largely fueled by China which, in October, had the highest production levels on record.”

Which brings us back to the U.S.-China trade talks.

As AAM’s own Scott Paul recently wrote, Trump is facing a brief window in history when he has an opportunity to do something really big. The domestic economy is doing well, and the bumps caused by his trade fight with China — which not only include action on steel but also $250 billion worth of imports of Chinese goods — have been relatively minor, all things considered.

Trump fancies himself as the greatest dealmaker in the world, and his willingness to play hardball brought China to the table. Now he needs to follow through.

There’s a lot at stake in this deal, and Team Trump is right to demand more market access and enforced intellectual property rights, along with things like stronger labor standards for Chinese workers and stricter environmental controls.

But the deal will be incomplete if China is allowed to continue to subsidize its key industries, as now appears to be the case. If this is how we end up, it will turn out that Trump isn't much of a dealmaker after all.


Reposted from AAM

Posted In: Allied Approaches, From Alliance for American Manufacturing

Union Matters

Get to Know AFL-CIO's Affiliates: National Association of Letter Carriers

From the AFL-CIO

Next up in our series that takes a deeper look at each of our affiliates is the National Association of Letter Carriers.

Name of Union: National Association of Letter Carriers (NALC)

Mission: To unite fraternally all city letter carriers employed by the U.S. Postal Service for their mutual benefit; to obtain and secure rights as employees of the USPS and to strive at all times to promote the safety and the welfare of every member; to strive for the constant improvement of the Postal Service; and for other purposes. NALC is a single-craft union and is the sole collective-bargaining agent for city letter carriers.

Current Leadership of Union: Fredric V. Rolando serves as president of NALC, after being sworn in as the union's 18th president in 2009. Rolando began his career as a letter carrier in 1978 in South Miami before moving to Sarasota in 1984. He was elected president of Branch 2148 in 1988 and served in that role until 1999. In the ensuing years, he worked in various roles for NALC before winning his election as a national officer in 2002, when he was elected director of city delivery. In 2006, he won election as executive vice president. Rolando was re-elected as NALC president in 2010, 2014 and 2018.

Brian Renfroe serves as executive vice president, Lew Drass as vice president, Nicole Rhine as secretary-treasurer, Paul Barner as assistant secretary-treasurer, Christopher Jackson as director of city delivery, Manuel L. Peralta Jr. as director of safety and health, Dan Toth as director of retired members, Stephanie Stewart as director of the Health Benefit Plan and James W. “Jim” Yates as director of life insurance.

Number of Members: 291,000 active and retired letter carriers.

Members Work As: City letter carriers.

Industries Represented: The United States Postal Service.

History: In 1794, the first letter carriers were appointed by Congress as the implementation of the new U.S. Constitution was being put into effect. By the time of the Civil War, free delivery of city mail was established and letter carriers successfully concluded a campaign for the eight-hour workday in 1888. The next year, letter carriers came together in Milwaukee and the National Association of Letter Carriers was formed.

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There is Dignity in All Work

There is Dignity in All Work