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On China, right direction, wrong approach: The Whiteboard

By ,
Richard Randall, founder and president of New Level Advisors
Richard Randall, founder and president of New Level Advisors - (Photo / )

If you've paid attention, you could see a battle over trade between the U.S. and China on its way for some time. I'm not surprised by the battle, but I am surprised by the form it is taking and the quality of execution by the United States.

Trouble has been brewing in the U.S./China relationship for many years. When Richard Nixon made his historic visit to China in 1972, the plan was to build better relations and draw China from isolation into the broader community of nations. Over time, a strategy developed revolving around trade.

The idea was that if the West could bring China into the global network of trade, the effects would all be positive. The U.S. would benefit from low-cost imports and access to a huge market. Factories built by American businesses would employ Chinese workers, raise incomes and send profits back to American parent companies. Chinese industries would grow, further raising standards of living.

Culturally, it was widely believed that increased exposure of the Chinese people to the benefits of capitalism and the democratic ideals of the U.S. and other Western countries would gradually force the Chinese government and its leaders to change. The government would become less repressive.

In recent years, it has become increasingly obvious that things are not working as planned. I’m not talking about trade deficits. The U.S. does have a large trade deficit with China, but that was to be expected, and strong arguments can be made that it isn’t the problem that the Trump administration claims it to be. I’m referring to infringement and theft of intellectual property and the increasingly autocratic and repressive Chinese regime.

The U.S. Chamber of Commerce recently expressed “serious concerns regarding a range of Chinese government policies and practices that restrict access to its market, condition participation in the market on technology transfer, and broadly seek to undermine the value of intellectual property held by American companies. These are global concerns that have also been voiced by stakeholders from around the world over many years.”

We can’t afford to have China institutionalizing the theft of our intellectual property, especially in areas of high innovation or importance to our national security. And we can’t have the Chinese government turning a blind eye to blatant trademark, copyright and patent infringement. U.S. trade representatives and presidents have been talking about this for years. There has been glacially slow improvement, but honestly, the talk has only produced lip service from China.

The Chinese regime continues to repress dissent and is increasingly aggressive, occupying disputed areas of the South China Sea to build military bases. China recently lifted its two-term presidential limits, allowing Xi Jinping to remain president for life. It is clearly a repressive dictatorship with little regard for Western values.

So I don’t have a problem with getting tougher on China. I support it. I’m fine with the military pushing back in the South China Sea. I’m fine with building a consensus to challenge China on trade. What I have a problem with is the helter-skelter approach taken by President Trump and his administration.

Using broad-based tariffs to cure a trade deficit that is arguably not a problem is a fool’s errand that will harm American business and consumers. Let’s sanction specific businesses that break the IP rules and use tariffs judiciously. Let’s regulate the transfer of key American technologies to China. Let’s build a strong coalition and jointly take the case to the WTO. Stop the ad-hoc tweeting.

Blanket tariffs and a trade war by tweet are not the solution.

Richard Randall is founder and president of management-consulting firm New Level Advisors in Springettsbury Township, York County. Email him at info@newleveladvisors.com.

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