Foundation capital

Freeing up its market is America’s way of beating China

It’s unclear where things are going in Congress on the so-called Chinese bill, otherwise known as the America COMPETES Act.

The House and Senate each adopted their own versions and appointed more than 60 congressmen and senators to find a compromise. Where they finally come out is anyone’s guess.

Both bills have so little to do with China that the best outcome would be to throw it all out and start again next year.

Given the possibility that speakers will pass, however, it is worth commenting on one of the provisions of the two bills which, in fact, will seriously affect America’s competitive position vis-à-vis China. ; namely, those focused on commerce.

How the United States interacts with the world through its trade policy is central to its competition with China. You can’t beat something with nothing.

Americans can complain about the economic relations that friends and allies are establishing with China. They may try to shame them about China’s abysmal human rights record or scare them about its strategic intentions.

None of this will work.

The United States must offer these countries a set of viable and attractive alternative advantages. Now, that doesn’t just mean giving them whatever they want. It never meant that.

Anyone who thinks US trade negotiators have been chicks hasn’t spoken to anyone on the other side of the table. The United States benefits enormously and concretely from the trade agreements that previous presidents have entrusted to it.

But with the United States currently in something of a trade hiatus – apparently waiting for China to get so far ahead in signing trade deals that Washington will eventually be forced back into the game – the least Congress can do is refrain from hobbling our own economy and the value it offers to the world.

Neither the House nor the Senate versions of the America COMPETES Act are perfect on trade, but the House version is terrible. Among other things, it removes restrictions from the anti-dumping and countervailing duty process that prevent it from fully becoming a tool of crony capitalists seeking unfair protections from foreign competition.

Overreach like this can be good for well-sworn companies. It is not good for Americans who will pay the price.

China is already subject to more anti-dumping and countervailing orders than any other country, by far. The US imports virtually no steel from China due to appeals by the US steel industry for the current law.

It’s not about China. This is to block imports from other countries as effectively as it has been done with steel made in China.

Another provision of the House COMPETES bill removes de minimis values ​​on imports from countries that are not part of “market economies” and do not sufficiently protect intellectual property. Of course, this will affect Chinese imports – $800 at a time. (No, there are no missing zeros.)

Ultimately, however, this could impact Americans, especially small businesses, who also import from other countries. And it will increase the cost of processing goods at the border with no added benefit to US security.

Then there are the provisions of the bill widely referred to as “reverse CFIUS.” This section, authored by House Appropriations Committee Chair Rosa DeLauro, D-Conn., is so called because, like the Committee on Foreign Investment in the United States, it covers investment.

Instead of guarding against inward investment that could compromise American security, the “reverse CFIUS” would filter outward investment. And it would do so, not for quiet impacts on U.S. security interests, which is warranted, but when such an investment could result in “risk to critical national capability.”

The bill attempts to define the term, but it is still so broad that it constitutes a kind of capital control, as China imposes on its people, but the United States has always refrained , to his great advantage.

Finally, the House COMPETES Act reauthorizes unnecessary and ineffective trade adjustment assistance, a program that, by the way, has historically only been reauthorized because its proponents hold new free trade agreements “in hostage”.

The problem is that, given Washington’s current gloom on trade, no free trade agreement, or even the power to negotiate one, is on the horizon. COMPETES is the new leverage point, or hostage, for proponents of trade adjustment assistance. Only then, the nation would be much better off if Congress shot the hostage.

House and Senate legislative packages include the Miscellaneous Tariff Bill and the Generalized System of Preferences, two programs that provide duty-free treatment of imports in certain areas of little or no competitive interest to the United States, except by providing low-cost inputs for American manufacturing.

Both bills, however, add new stipulations regarding environmental standards and human rights. The House version does the same on labor standards and adds “finished goods” to goods not eligible for miscellaneous tariff bill treatment.

Banning new imports by restricting access to these programs would only harm the US economy, contribute to inflation at home, and make it harder for us to make friends abroad.

The United States will not win this global fight against China by increasing regulation and government spending. We need to do the exact opposite, unleash the US market and use its extraordinary allure to counter whatever China has to offer.

Congress better start over and create something to do it.

This piece originally appeared in The Daily Signal