China, trade and national security: The tools we need

The Daily Retina

In the Biden administration’s National Security Strategy released in late 2022, China features front and center. The recent violation of American airspace by a Chinese spy balloon further justifies the administration’s concerns with China. But while the news is focusing on Chinese intelligence and military capabilities, the National Security Strategy makes clear that America’s trade relationship with China is equally important and worrisome. What’s more, tensions in the Sino-American trade relationship are likely to become worse, rather than better, over time. Fortunately, this realization is also a bipartisan one as the objectives of the newly created House select committee on China make clear.

As a former trade negotiator, I know three combined tools are necessary to advance U.S. global economic priorities. We must negotiate trade agreements that strengthen our national and economic security. We must legislate to support domestic priorities that cannot be met by market forces alone. And, crucially, we must enforce our trade laws. These tools are especially critical in the case of China.  

The recently created House select committee on China is expected to prioritize reducing America’s reliance on China. Both Speaker Kevin McCarthy (R-Calif.) and Chairman Mike Gallagher (R-Wis.) cited restoring American supply chains and ending critical economic dependencies as top priorities of the committee in a recent op-ed. Chinese trade abuses — which include unfair labor practices, theft of intellectual property, environmental degradation and more — have led directly to American job losses and economic dependence on China. The Biden administration has taken welcome steps to begin to wean America from this reliance, but America still has significant vulnerabilities that can only be solved with cooperation from Congress and the White House.

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Our current reliance on China for our solar capacity is a cautionary tale of the cost of failure. Solar energy is foundational for America’s transformation of its energy grid. Once a global leader in solar design and manufacturing, America’s solar manufacturing has been steadily replaced through deliberate, market distorting efforts by China to dominate the solar industry. China’s solar manufacturing has increased to nearly 85 percent today, up from virtually zero in 2000. Meanwhile, America has seen its global share of solar manufacturing drop to less than 1 percent in 2021. A recent Commerce Department preliminary ruling found that China is still illegally subsidizing and dumping Chinese solar panels into the U.S. in violation of our trade laws and harming our domestic producers.

Enactment of the Inflation Reduction Act last summer partially changed the equation toward America’s favor. The legislation’s solar energy manufacturing provisions put us on the right track by incentivizing domestic solar manufacturing and innovation, allowing us to simultaneously confront the climate crisis and Chinese economic dependence. However, America must also be tough and calculated in using our trade laws to curtail U.S. dependence on China for clean energy, as we must in other areas of U.S.-China trade.

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The solar provisions in the IRA represent an unprecedented U.S. legislative effort to rebuild an important industry that has withered in the face of China’s unfair practices. It is transformative and essential legislation. But, alone, legislation will not guarantee a renaissance of American solar manufacturing — it must be encouraged with a whole-of-government approach.

The 301 tariffs on imports from China put in place by the Trump administration and kept by the Biden administration are a blunt instrument. Strategic enforcement requires precise calibration of the tariffs to meet U.S. objectives today rather than being fossilized as they existed in 2018 when the tariffs were first imposed. We must zealously protect our solar supply chain’s strategic core by maintaining tariffs on Chinese imports of those products and components incentivized by the IRA. We must at the same time enable machinery and non-strategic manufacturing inputs we don’t currently make ourselves to enter the country without additional tariffs. By striking the right balance, we can rapidly — and cost effectively — build and operate U.S. solar manufacturing factories to produce the core products and components needed to successfully reshore the strategic solar supply chain.  

America’s dangerous overreliance on China for key energy supply chains should be curtailed as soon as feasibly possible, and that requires the cooperation of Congress. It means rebuilding and supporting our domestic industry here at home. Long-term, it means working with our allies to counter China’s market abuses and directly calling China to account.

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I am heartened to see the Biden administration and our elected representatives in the Congress focusing on the need to move America away from dependence on China and reforming our trading relationship. The administration should continue to refine its policies on Chinese energy imports as facts on the ground change. And I hope that the House select committee on China is willing to support them. Solving both climate change and America’s dangerous reliance on China are both of the utmost priority: As our U.S. Trade Representative Katherine Tai says, “we must walk and chew gum and play chess at the same time.”

Robert Holleyman is president and chief executive officer of C&M International, the global trade and regulatory policy affiliate of Crowell & Moring based in Washington. He previously served as the deputy United States trade representative from 2014 to 2017.

Source: Opinion: Op-Eds, Editorials, and Political Commentary | The Hill