Update: Congresswoman Murphy did introduce her bill, Reclaiming Congressional Trade Authority Act, into the US House of Representatives, on June 25, 2019. The bill has a companion piece in the Senate introduced by Senators Tim Kaine of Virginia and Tom Carper of Delaware.
Today’s Talking Trade is taken from the opening remarks made by Congresswoman Stephanie Murphy, D-FL, at the CSIS/JETRO conference in Washington DC on June 19, 2019 on “Is the United States Decoupling from Asia’s Economic Architecture?” For her full speech, please see the transcript here. The audio of her remarks and the rest of the event can be obtained from here.
With that as backdrop, let me return to the three themes that worry me most about the state of U.S. economic policy in Asia, and the connection between them.
First is what might be called the “X Factor”—the multi-dimensional challenge posed by China under Xi Jinping to the U.S.-led international order, especially in the Asia-Pacific. There is an emerging consensus that the U.S. and China have entered a period defined by confrontation and competition that will be won or lost in the grey area short of kinetic action.
At its core, this is a contest over divergent values and interests. It’s a contest between opposed political and economic systems, and between different visions for the future of Asia and the world writ large. On the political front, it’s a contest between authoritarian rule and democratic rule. On the economic front, it’s a contest between a state-led model and a market-based model. It’s a contest in which the U.S. must prevail.
To compete effectively with China, it’s imperative for the United States to strengthen economic engagement in the Asia-Pacific through increased trade and investment, and not to succumb to protectionist impulses. I would note that every U.S. multinational enterprise worth its salt understands that they cannot be a successful global company unless they have a meaningful presence in Asia or a strategy to attain one.
But American firms are working against considerable headwinds emanating out of Washington. And that brings me to the second theme I mentioned—the Trans-Pacific Partnership.
In one of his first acts from the Oval Office, President Trump withdrew the United States from TPP. The President could have sought to renegotiate aspects of the agreement he didn’t like. Or he could have sent the agreement to Congress for our review, potential modification, and approval or disapproval. Instead, he made a unilateral decision that will have multilateral consequences for years to come.
Many of my congressional colleagues on both sides of the aisle have been less than forthcoming on this subject, so let me be clear. I think America’s withdrawal from TPP was a serious strategic error. I assume it was met with cheers in Beijing loud enough to drown out the groans in Tokyo and Hanoi. We had an opportunity to unify the region around an American-designed system of commerce and to check China’s rising influence, and we squandered it. Thanks to Japanese leadership, the 11 other TPP nations went ahead with the agreement in our absence, lowering tariffs among themselves and leaving American companies at a competitive disadvantage. How anyone could argue this result is in our national interest is beyond me.
In my view, the U.S. has compounded this error though the President’s impulsive use of tariffs on friends and foes alike, which is my third source of concern.
I suppose we can have a reasonable debate over the wisdom of President Trump’s decision to impose 25 percent tariffs on $250 billion dollars worth of Chinese imports and to threaten tariffs on the remaining $300 billion, in response to Chinese trade practices that nearly everyone agrees are abusive. For my part, I view tariffs as the foreign policy equivalent of punching someone else in the face, and then punching yourself in the face even harder. Despite the President’s constant claims to the contrary, it is American companies and American consumers that bear the brunt of these taxes on imports.
In addition, U.S. exporters have been harmed by China’s shrewd application of counter-tariffs, raising tariffs only on select products from the United States and lowering tariffs for their other trading partners.
With no end in sight to this trade war between the world’s two biggest economies, it’s never been more vital for the U.S. to work closely with its allies in Asia and Europe who share our concerns about China’s unfair trade practices. We should be building a unified coalition along the lines I used to witness every day at the Department of Defense, to maximize the chance of getting China to make structural changes.
But instead of joining forces to take on China, we are fighting with our friends over secondary issues. That’s because the President has imposed steel and aluminum tariffs on our allies as well as our adversaries, based on a flimsy “national security” justification. Affected countries have imposed retaliatory tariffs on us, just as the Chinese have. In some cases, importing firms in these nations have shifted their supply chains in order to source products from other, non-tariffed countries.
American exporters are paying the price right now. And they may be paying the price well into the future. Even if these various tariff wars come to an end, there is no guarantee that foreign importers will shift their supply chains back to firms in the United States, because we are viewed by many as an unreliable trading partner.
To be clear, the Chinese are opportunistic. In the same way that they took advantage of the American military’s preoccupation in the Middle East to vastly advance their own military capabilities, they are now taking advantage of our retreat from the global trading regime to advance their own economic position.
If this is what U.S leadership looks like, we can do better. If this is what U.S. economic engagement in the Asia-Pacific looks like, we can do better. If this is how we intend to prevail in this generational competition against China, we can do better. We must do better.
In summary, I am concerned that the Trump administration’s policies on TPP and tariffs are undermining the effectiveness of our broader policy toward China, which we must get right given the stakes involved for our security and our economy.
That’s one reason why I’ve come to the conclusion that Congress, acting on behalf of the American public, should play a far more muscular role when it comes to U.S. trade and tariff policy.
It starts with better and more bipartisan oversight by Congress of the President’s trade policies. For example, I think Congress should hold a hearing on the benefits and costs of rejoining TPP and on additional ways to fortify our trading relationships with countries in the region—always in a way that strengthens labor, environmental and other standards in those nations. We should have the vigorous debate that President Trump foreclosed.
But I think we need to go beyond this. Over the years, Congress has chosen to delegate much of its constitutional authority to regulate foreign commerce to the executive branch. The current President has used this authority recklessly at best and has abused this authority at worst—harming America’s businesses, consumers and alliances in the process.
The time has come for Congress to reclaim its fair share of this authority, so we have a greater say in tariff decisions before they are made, especially tariff decisions that are justified on the dubious “national security” logic. I intend to introduce legislation in the coming days that would fine-tune the balance of power between Congress and the president.
With that, I want to thank again for inviting me, and I hope you enjoy the rest of today’s event.
***Today’s Talking Trade is reprinted from the second half of Congresswoman Murphy’s speech at CSIS/JETRO on June 19, 2019. Murphy is a Member, Subcommittee on Trade, House Ways and Means Committee, US Congress ***