Second, is the “punishment” appropriate for the “crime?” The penalties are all found in tariffs to be imposed on American firms and American consumers. How will tariffs on goods result in changes in IP policies inside Chinese companies? Or how will tariffs imposed on US consumers alter decisions in China about technology transfer? Third, the original use of Section 301 was meant to be about negotiation, not about punishment. But the Trump team discontinued the primary mechanism for US-China talks more than 8 months ago and has not resumed negotiations under any other pathway. Hence, even if China had wanted to head off these tariffs through a negotiated solution, there would have been no way to do so. Now, the Trump team has gotten 301 entirely the wrong way round—punishment first and talk later.
On the eve of US President Donald Trump’s visit to China, the trade waters have been stirred up further by a pair of rulings issued by the US Department of Commerce late on Friday, October 27. In a 205-page memo, Commerce officials argued that China remains a non-market economy (NME) because “it does not operate sufficiently on market principles to permit the use of Chinese prices and costs for the purposes of the Department’s antidumping analysis.” This determination was promptly employed in a case over aluminum foil, where a preliminary determination calculated that Chinese companies will need to pay antidumping duties ranging from 97-162 percent. The debate over China’s economic status has been long and fraught. The crux of the issue, to simplify matters significantly, is really two-fold. First, it is about practical consequences related to classification determinations. Second, it is about issues of identity and obligations.
Normally, we would not do CNBC interviews or roll out a blog post on the eve of Christmas, New Year’s celebrations and the end of the year “dead time” in the office. But our friends in Washington DC are continuing to make trade and trade policy too interesting to ignore. The latest is the elevation of Peter Navarro to a newly created post of trade “czar” in the White House. Navarro started life as a fairly normal Harvard-trained economist, but has gained a reputation as an economic nationalist and a strident anti-China proponent. The terms may sound too strong. Watch the opening 30 seconds of his video documentary in which he urges viewers to “defend America and protect your family” by not buying Chinese products. The film is called “Death by China: How America Lost Its Manufacturing Base.”