International Economic Law and Policy Blog

Chris Christie on Trump's China Trade Policies

There was another Republican primary debate last night, and finally there was a discussion of trade policy, albeit briefly. The issue was raised by former New Jersey Governor Chris Christie. Here's what he said:

And I will say this about what I heard from Nikki [Haley] earlier. She said that Donald Trump was good on trade.
He wasn't. And the proof that he wasn't good on trade with China is that all he did was impose tariffs, which raise the prices for every American. You want to know what has contributed to inflation in this country? Yes, it's more government spending. Yes, it's the fact that we're printing too much money. Absolutely. But it is also the increase in prices that were driven by Donald Trump's tariffs.

 

And one last thing. You can't say he was good on trade because he didn't ... change one Chinese policy in the process. He failed on it.

Did any Chinese trade policies change as a result of Trump's trade actions? (Putting aside China's retaliatory tariffs on U.S. products of course, which I assume is not the change anyone was looking for). The Phase One Deal does talk about some changes, but were these changes things China was planning to do anyway? Were Trump's actions the actual cause of any changes?

Tim Scott's Trade Plans

The second Republican presidential primary debate is tomorrow. It would be great if there were some questions about trade policy, and maybe because Fox Business is one of the hosts, economic issues such as trade will be on the agenda. In the meantime, here are a few more details on GOP presidential candidate Tim Scott's trade policy views, from his recently released economic plan:

- "I’ll stop China from buying up our farmland"

- "I will take back our vital supply chains from China and the six-figure jobs they’ll bring with them.

o Our nation has lost millions of manufacturing jobs and closed almost 100,000 plants and factories in just the last quarter-century.
o I will work with Congress to further expand “Made in America” requirements in targeted sectors that are crucial for our national security, and where government has a thumb on the scale anyway.
▪ Medical
▪ Microchips
▪ Minerals
▪ Military technologies and defense-industrial base"

- "I will avoid blunt trade wars with our friends and allies that hurt consumers and set us back in the mission of isolating China. If we want to isolate China, we need to hold our friends close and have free and fair trade with our allies that protects both our American jobs and our alliances at the
same time."

There was also this from an interview with the Washington Examiner:

Sen. Tim Scott (R-SC) said China should be stripped of its “developing nation” status, an international designation that grants it special privileges and flexibility over the United States, as a means of ensuring the U.S. is not put at a disadvantage in trade.

Scott, who is vying for the Republican nomination for president, outlined some of his economic vision during an interview this week with the Washington Examiner. In response to a question about what the trade and tariff policy of a Scott administration would look like, he noted that China is able to receive perks in the international economic system because it is still designated as a developing country.

“Their developing nation status allows them to have an unfair advantage over our economy,” the 57-year-old South Carolina senator said.

...

For instance, the WTO provides countries with the status longer periods of time to meet certain financial and trade obligations. Additionally, because of the designation, the World Bank gives Beijing billions of dollars’ worth of loans despite the country’s income level otherwise making it ineligible for such funds, according to the Wilson Center.

Scott mentioned stripping China's developing nation status as an alternative to 10% across-the-board tariffs, which former President Donald Trump has floated recently. Scott said to impose such a regime “is to actually tax the American people and increase the prices of everything that we need.”

...

Scott noted that targeted tariffs — that is, imposing tariffs strategically and not in the blanket sense like Trump has proposed — have been effective in the past.

Trump's Latest Tariff Talk

Former president Trump had the following exchange with his former economic adviser Larry Kudlow the other day:

Kudlow:

Let me ask you, what's your thinking here? Would you want tariffs on foreign goods coming into the US, take those revenues and cut taxes on American goods and American families here? Would that be something in the second Trump term?

Trump:

Yeah, there's a couple of things. Number one, I think we should have a ring around the collar, as they say. I think when companies come in and they dump their products in the United States, they should pay automatically, let's say a 10% tax. That money would be used to pay off debt. It's a massive amount of money, even a 10%. It's not going to stop business because it's not that much, but it's enough that would really make a lot of money.

The other thing I want to have is a matching tax where if India charges us -- India is very big with the tariffs, okay. I mean, I saw it with Harley Davidson, I was saying how do you do in a place like India? Oh, no good sir. Why? They have 100% and 150% 200% tariffs. So I said so they can sell their Indian motorbike -- they actually make a bike, Indian motorbike -- they can sell that into our country with no tax, no tariff. But when you make a Harley, when you send it over there, because they were doing no business, I said, how come you don't do business with India? The tariff is so high that nobody wants it. But what they want us to do is they want us to go over and build a plant, and then you have no tariffs. I said, well, that's not good. That's not our deal. Okay, that's not our deal. And I came down very hard on them. But India is very big, Brazil is very big on tariffs. I mean, very, very big. And we had a couple of people like the Senator from a place called Pennsylvania that I love. But this guy was just horrendous. I said, let me ask you a question. If India's charging us 200%, and we're charging them nothing for products, can we charge them 100%? No, sir, that's not free trade. Can we charge them 50% No. 25? 10? Anything? No. I said what the hell is wrong? This is something wrong. You know who I'm talking about?

Kudlow:

I do.

Trump:

Every single thing we tried to get through, he would try and block. So if India's charging us too, so what I want to have is called retribution, you can call whatever you want. They charge us, we charge them.

Kudlow:

Reciprocity.

Trump:

You could call it many names. You call it equalization. If they charge us, we charge them. Very simple. Now two things will happen, one of two things. Either they'll wipe out the tax and so will we, or we'll take in a lot of money and that's okay, too. But eventually what they'll do is they'll stop doing it. But we don't do that. We have countries that charge 100 and 150 and 200%. And we charge them absolutely nothing. ...

Not surprisingly, these statements generated a lot of attention, although it was frustrating that they didn't come up in last night's GOP primary debate, in which Trump did not participate. This would have been a good opportunity to press the candidates on their trade policy views.

As for Trump's statements, I don't see them as that much different than what he has said previously. He is stuck in a 19th century mindset, when tariffs were the primary source of federal government revenue. While his latest statements remind me that I would worry about the direction of U.S. trade policy if he became president again, I would have been worried even without those statements, and I'd worry about other policy areas more.

He's also stuck in an outdated way of thinking about trade agreements as mostly about tariffs. I wonder if anyone has pointed out to him that trade agreements also require intellectual property protection, and without such requirements U.S. intellectual property (including his own) would be at much greater risk. 

Finally, one thing that struck me as a bit funny is his use of the word "dump": "when companies come in and they dump their products in the United States, they should pay automatically, let's say a 10% tax." I can imagine many U.S. trade lawyers would be excited to have only a 10% anti-dumping tariff imposed on their client's products! But of course, Trump is probably just using the word "dump" to mean sell, rather than thinking about how to calculate normal value.

Pence and Ramaswamy on Trade

I've got two more entries in my GOP presidential candidate trade policy monitoring exercise: Former Vice-President Mike Pence; and entrepreneur Vivek Ramaswamy, who has no political background but seems to be polling well enough to get into the upcoming Republican primary debate. What are the chances that either of these two becomes president? Probably pretty small, but you never know, so here goes with their statements on trade policy.

Pence talked a bit about trade policy recently, which you can see on these two videos.

Host:

Part of engaging China, as you mentioned, is our trade policy. And I think trade policy has really been sort of indicative of the division in the GOP, the change in the Republican Party from more free trade, beat China with our economy and make friends around the world by making goods that are cheaper and better than communist countries do. That was sort of the theory of Reaganism and really much of the conservative movement up through recent years really. That does not seem to be the case, you know, the Trump administration passed something like $80 billion worth of tariffs on $380 billion worth of imports, and not just from China, but from other countries -- allies like Canada and Mexico. This was on steel, aluminum, washing machines, sort of you name it. And the Biden [administration] admits this has sort of been bipartisan agreement to some extent between the Trump administration and the Biden administration, who's left a lot of those tariffs in place. Would a Pence administration change that tariff regime? Would free trade and economic relationships -- Trans Pacific Partnership TPP, for instance -- is that in the toolkit of a Pence administration in terms of reengaging China, or putting pressure on China? How do you see America's trade policy moving forward?

Pence:

Well, I think it's a wonderful question. I'll give you a really short answer, which might be more welcome than my previous ones. My policy would be free trade with free nations. Look, I think you can create a tremendous incentive for reform by rewarding access to the most powerful economy in the world to nations that respect the right of contract, private property or free market countries. And ... I don't know why the Biden administration hasn't moved out on a free trade agreement with the UK.

...

The way we move forward with China, because I saw them move, is when we imposed those tariffs on Chinese goods coming into the United States, China came to the table, Heath. And a lot of people forget about January of 2020, before that pandemic struck our nation, China came forward with a Phase One trade deal. They haven't lived up to a whole lot of it from what I read in the newspapers, but it's what finally got them to move.

And I really do believe that the principle that I would bring to the Oval Office is free trade with free nations. Let's lean in to expanding access to markets around the countries that respect the rule of law, private property, the right of contract, free markets.

But at the same time, let's use access to the most powerful economy in the world to drive the kind of reforms -- not just open access to China's market, but also to drive the other kinds of reforms that will ultimately advance human freedom in that notion.

The China part here is interesting because he starts out by saying that the China tariffs worked by getting China "to the table," but then he seems to acknowledge that the Phase One deal didn't actually work very well, and then he goes back to arguing for using tariffs to bring reforms to China. For whatever it's worth, at this particular moment, I'm not sure anything is going to move any administration away from tariffs on China, and objective evidence about what has worked and not worked in recent years in terms of market access and other reforms in China won't make much difference.

The non-China part seems like it would take us back to a more traditional Republican trade policy. I'm not sure how much can be achieved, though, as a lot would depend on who is in Congress.

And here is Ramaswamy:

Ramaswamy:

... what I basically stand for is a level playing field. That's what we need. And I think that that doesn't exist. I think most people acknowledge that. I think that that's not going to happen automatically. That's going to require, by the way, a policy that I think is also really important that goes straight along with it, is reentering the Pacific trade relationships around the rest of the rim of the Pacific. The CPTPP. I think we should reenter it. I think this is a little bit different than ... the course of action taken by Trump and exiting the TPP. I think that was actually a poor decision.

Host:

Maybe one that makes more sense for the people over here, right? Because I think Trump canceled it because first of all, it wasn't fair to Americans, right?

Ramaswamy:

Exactly.

Host:

It really wasn't, but also it was unfair to people over here. It was beneficial to corporations, but not to the, you know, local farmers here, your mom and pop stores, who would have been completely obliterated by the TPP. So maybe a fairer version of that would make more sense.

Ramaswamy:

Exactly. And I think that I'm a silver lining guy. I think that I can use the leverage of the fact that we did exit to be able to say, alright, here's what we need done differently, in a number of the countries from Japan on down, to be able to say here's how we reenter that on fairer terms. And so that's what I'd like to see. And I think that's one of the things early on, actually, even ... forgetting about where we get to on China, the first thing that's easiest to do is actually to reenter the rest of that Pacific trade relationship, including the other members of the CPTPP. That puts us in a strong position from a trade perspective to then take a look at where we stand vis-a-vis China.

I'm not sure how familiar Ramaswamy himself is with any of the details of the TPP/CPTPP, but I do think that some experienced Republican trade policy folks could do a decent job with this approach, although it's not clear whether they would have better luck than Obama in getting a final deal through Congress. I do think it could be done, but it won't be easy, and miscalculations are possible.

DeSantis on Trade Policy: More China Comments

As part of a speech yesterday called "A Declaration of Economic Independence," Ron DeSantis had the following comments on China trade issues:

So the elites in this country have failed. Time and again, they've imposed policies that have proven short sighted and have proven counterproductive. And just look back a quarter of a century ago with what we were told would happen with China. They said if you granted China special trading status and put them in the World Trade Organization, that China would become more democratic, that it would guard against forced transfers of technology, that you wouldn't have a mass relocation of American manufacturing to China, and that we would be safeguarded against surges of Chinese imports. What actually happened over these past 25 years, China has become more authoritarian, more powerful and more ambitious. We've seen our relationship marred by the theft of our intellectual property, trade dumping, currency manipulation, and espionage. Our industrial base here in the United States has hollowed out. We've developed a dangerous dependence on Chinese supply chains, and our companies have been exposed to a hostile security apparatus. The elite sold us a bill of goods when it came to China. They were wrong and we need to get it right.

...

We have to restore the economic sovereignty of this country and take back control of our economy from China. The abusive relationship, the asymmetric relationship between our two countries must come to an end. No more massive trade deficits, no more importing of goods with stolen intellectual property, no more preferential trade status. We need to incentivize the repatriation of American capital and investment here in the United States so we can recapture our supply chains and build a strong durable industrial base. And in Florida, we've actually taken action against the CCP. We have banned the purchase of land in Florida by members of the Chinese Communist Party or its affiliates.

In response to questions after the speech, DeSantis had this exchange:

Question:

I'm just curious. So you spoke about electric vehicles. You announced your presidential run with Elon Musk. Do you have a problem with the business he's doing in China? Can you talk a little bit about that?

DeSantis:

Well, look, I think that if you ask him, I think he's acknowledged that we need to do more of the rare earth minerals here in the United States, or at least in countries that are not as adverse to us. So I certainly recognize that and I think that that's something that our China policy is going to look to address. That will take time. That's not going to happen tomorrow, but we got to do that. In the meantime, forcing people to do the EVs, you know, I think is a big mistake. First of all, a lot of Americans, they just don't want it. And I think that Tesla creates really good product. It's not necessarily something that I would be able to afford or would want, but I get [that] people like it, but to make the Fords and the GMs do all this for electric, you are not going to see the demand for that.

DeSantis is repeating a lot of his earlier comments on China trade here. I hope that at some point the GOP presidential candidates are pressed to offer some details about their overall trade policy plans.

Nikki Haley on China/China Trade

As I cover what the Republican candidates say about trade policy, I keep hoping for some general statements on these issues, but what we mostly see is talk about China trade. Nikki Haley was interviewed recently by a couple CNBC people -- in the transcript below, I didn't bother to distinguish between the CNBC people asking questions -- on China/China trade issues. While they covered a mix of general and trade issues related to China, I included everything, because often these days it's hard to separate out the trade from the non-trade issues when we talk about U.S.-China relations. Here's the transcript:

CNBC Person:

We have such a strange relationship with China. It's so important to the world and yet so fraught with risk and peril. Do you have a way to try to walk that line?

Haley:

Well first, let's open our eyes. Let's be honest about what's happening. You know, you sit there and you see Blinken going and and trying to appease China, and Yellen saying "oh let's do more business with China." But the reality is, you know, if you look at Yellen's conversation, she said, "Well, you know, it shouldn't be a winner take all scenario, it should be something where, you know, we play by the rules and we can be fair competitors." But to even say that means you don't understand China. China only plays with a winner take all scenario. They've never played by the rules. They don't see us as a competitor. They see us as an enemy. This is the biggest threat we've had since Pearl Harbor. And just look at what they've done. The infiltration they've done in our country. They bought 400,000 acres of US soil, most recently near Grand Forks Air Force Base, where our most sensitive drone technology is. They bought the largest pork producer in the country. They have spy balloons going over us. But you look, they go and they spend millions of dollars in our universities to spread Chinese propaganda. They have Chinese front companies lobbying our Congress on behalf of the Communist Party. And then you look at the military, at what they're doing. The largest naval fleet in the world, 350 ships, they'll have 400 ships in two years. We won't even have 350 ships in two decades. And now they've become a big developer of neuro strike weapons, which go and impair brain function. And they use that for military leaders, for major populations. They're developing hypersonic missiles. We barely started. I mean, the list goes on in how much ... they're stealing $600 billion of intellectual property from us every year.

CNBC Person:

What do you say to American companies that are doing business there? Do they need to get out?

Haley:

I think American companies need to look at what happened with the Europeans in Russia. What I said -- I spoke to 400 CEOs last summer -- and what I said is, if China pulls the rug out from under us tomorrow, will you be ready? Every company needs to have a plan B. And the way America needs to look at is just from a national security lens, are we ready?

CNBC Person:

But is it a Plan B when something happens? Or is it a Plan B right this minute? I mean, are you saying if Tim Cook is watching right now, are you saying, Tim Cook and Apple you need to actually withdraw from China, both for yourself and for the country? Is that what you're really saying?

Haley:

Let's first talk about what Americans need to know. President Xi started a commission that he personally chaired, that says any company that does business in China has to cooperate with the Chinese military. So look at our tech companies. Look at all of our financial data. Look at all of our health care data. Look at our children's lifestyle data. And now know the Chinese military has it. What I'm saying is we look at it through a national security lens. So when COVID happened, they wanted you to put on a mask. It was made in China. They wanted you to take a COVID test. It was made in China. You go to the drugstore and everything is made in China. Let's just say if China pulls the rug out from under us tomorrow, will we be ready. And for American companies, what they need to understand is, this is no longer a competitor, this is an enemy. And they need to start looking at doing business with our friends: India, Australia, Japan, South Korea. Let's start doing more business with our friends. And let's become less dependent on China. That's what India is doing. ...

CNBC Person:

Right, but the message is "get less dependent on." It's not, "you need to get out right now, because ..."

Haley:

Well, I mean, look, the number one cause of death of adults 18 to 49: Fentanyl. Don't think for a second China doesn't know what they're doing when they have the cartels do that. You know, I personally think if it means us ending normal trade relations, you go to China and say we'll end normal trade relations until you stop killing Americans, look at how ...

CNBC Person:

Would you be prepared to do that?

Haley:

I think China's an enemy. I think we have to take them incredibly seriously. And the problem is, you can look at dollars and cents, or you can look at a threat to America. And I will tell you that companies and people have said for too long, we'll deal with China tomorrow. But China's dealing with us today. We've got to address this.

CNBC Person:

Nationalism is not something that is foreign in this country either. America First. Is it absolutely impossible that China just wants to be a superpower along with us in this great world that we have, with us selling to them, them selling ... ?

Haley:

No, I think if you look, everything they say is about destroying the West. Everything.

CNBC Person:

So it's not just about coexisting in the future?

Haley:

They never once said they want to coexist. Everything they've said is about defeating the West. And read President Xi's own statements where ...

CNBC Person:

You don't think there are elements of things that we need to work on with China to actually have a future as a globe ...

(Other) CNBC Person:

You don't want to destroy your biggest trading partner that you sell all your stuff to ...

Haley:

So that's the problem. Too many people are thinking about the dollars and cents. Are you still going to be thinking about the dollars and cents, do you still think about the dollars and cents knowing that China's now a military installation in Cuba and if they put Chinese military there, are you still going to think about dollars and cents? Because that's what they're doing.

CNBC Person:

The scariest things that people don't even speak about have been written on the op-ed pages of the Wall Street Journal. One is developing a bio weapon that you could inoculate your own population against first, by saying it's a flu vaccine, and coinciding with a cyber attack. They could wipe off the map with those two things.

Haley:

They are trying to beat us on artificial intelligence. They are already doing it with cyber, they're doing it with space. They are coming at all fronts to us and we keep thinking, "oh, but they're such good trade partners." If we don't wake up, we will end up like the Europeans did with Russia. This is the biggest wake up call we've had. And no one's talking about China, but I will continue to talk about it. We can do business with other friends. We can do business with other partners. But if we don't wake up to what they're doing ... and don't listen to what I'm saying, look at what China's done. Look at that infiltration. And if that doesn't send a chill up your spine, I don't know what else to say.

There are a lot of mischaracterizations and exaggerations here, but she is speaking as a politician running for office rather than as someone trying to provide an objective analysis of the situation, so that's to be expected. Regardless, how politicians (and media people) talk about things has a big impact, so it's useful to see what they say, because their views filter down to the public.

On trade, I thought it was interesting that when asked directly about repealing normal trade relations, she avoided answering. It may be that she wants to keep her options open on that point. Vague toughness can be politically useful, whereas specific toughness can get you in trouble.

More Ron DeSantis on China Trade

As I track U.S. presidential candidates' statements on trade policy, I'm not always going to offer commentary. Sometimes I'll just post the full text, as part of an effort to document everything being said. Here is Ron DeSantis talking to Maria Bartiromo on Fox News last weekend:

DeSantis:

I think we need to recognize [that] this experiment with the CCP over the last three decades where they were granted most favored nation status, put in the World Trade Organization, you know, that's been a failure. We need independence from China. We cannot subcontract out key aspects of our industrial base to a country that doesn't have our interests at heart and that is our number one geopolitical threat, and we will get that done as well.

Bartiromo:

And yet, Janet Yellen just went to China and bowed to Communist Party officials; a couple of weeks after Antony Blinken pretty much did the same. What are you going to do to stop this aggression from communist China in your first week in office then? Give us specifics that you want to change with regard to the relationship with China. Will you reverse the most favored nation trade status on China? What else can be done?

DeSantis:

So I favor doing that. I think we probably need Congress, but I would take executive action as appropriate to be able to move us in that direction. Too, I would recognize that China's a threat. This idea of the happy talk that you hear from Yellen, oh, we're just, you know, it's a healthy competition. No, they're the number one geopolitical threat this country faces. And what we're gonna do is we're going to have a new commitment to hard power in the Indo Pacific. At the end of the day, what China respects is strength. And if you're showing strength and we have hard power to back it up, they're going to be much less aggressive ...

Nikki Haley on Chinese Trade and Investment

At AEI today, Republican presidential candidate Nikki Haley gave a speech on the Future of US-China Policy, and in that context said some things about issues related to trade and investment with China.

First up, like many other people these days, she wants to revisit the decision to let China in the WTO:

China became a member of the World Trade Organization in 2001. This proved to be a fateful decision. America brought China into the WTO. Democrats and Republicans supported it. At the time, and for more than a decade after, there was a bipartisan consensus that this was all reward and no risk. Our leaders told us it would bring China into the modern economy and open its huge market to the world. They said it would make China more free, open and democratic, that China would become more like us.

I understand why this dream was appealing. We saw it happen with Japan after World War II. And then again with one Asian country after another. From South Korea to Singapore, they moved into the company of free and open nations. But not China. This American assumption proved disastrously false.

Our thinking neglected the role of communist ideology. The Chinese Communist Party didn't want to be like us. It still doesn't. China grew stronger by taking advantage of our open markets, but it also grew less free.

I found her reference to "for more than a decade after" useful, although not in the way she intended, because actions during that decade may have contributed to the U.S.-China trade problems we see today. If we had spent that decade focusing on China's integration into the world economy rather than getting caught up in the War on Terror, we might be in a better situation today. (Or it might have all come apart even sooner -- who knows! But I suspect it's the former.)

Next, she gives a mixed review of Trump's trade/China policies:

President Donald Trump deserves credit for upending this bipartisan consensus. He made both parties take off their blinders. Despite the divisions in our politics today, both parties are now more clear eyed about the Chinese threat that has been there for a very long time. That's a good thing. But being clear eyed is just not enough. It's not the same as having the right solutions and the necessary determination to protect America. President Trump was almost singularly focused on our trade relationship with China. He was right about [the] trade abuses. It was and still is a critical issue. But Trump did too little about the rest of the Chinese threat.

He did not put us on a stronger military foothold in Asia. He did not stop the flow of American technology and investment into the Chinese military. He did not effectively rally our allies against the Chinese threat. Even the trade deal he signed came up short when China predictably failed to live up to its commitments.

The question I'd like to put to all the presidential candidates is: How well do you think the Section 301 tariffs imposed by Trump (and continued by Biden) are doing to change China's trade practices, and would you suggest any alternatives?

Switching to investment, she says:

China treats our homeland like its personal playground. In recent years, Chinese investors have bought nearly 400,000 acres of land in our country. That's twice the size of New York City. We aren't just talking about any old property. China has bought miles of farms near sensitive military facilities. And China has taken a majority control of agricultural industries. This must end. The line between Chinese investors and the Chinese Communist Party is exceptionally thin. The national security risk is too great. We must prevent China from buying more land and force it to sell what it already has.

400,000 is a big number and sounds like a lot of land! But it's actually very little, both in comparison to what other countries own and in general.

On permanent normal trade relations, other politicians want to revoke it for China as a general matter, but Haley has a narrower suggestion here:

China is also behind the fentanyl crisis that's killing tens of thousands of Americans every year. Chinese companies make nearly all of the precursor chemicals that Mexican cartels turn into fentanyl. China cannot plead innocence here. It knows exactly what it's doing by putting these chemicals into the hands of the cartels. We've tried sanctions, but they're not working. We must ratchet up the pressure. As President I will push Congress to revoke permanent normal trade relations until the flow of fentanyl ends. If China wants to start normal trade again, it will stop killing Americans.

This is not a trade policy point, but I don't understand the fentanyl crisis very well. If China put a stop to selling those precursor chemicals, would people just get them from somewhere else?

Haley then lays out the following trade and security concerns:

That brings me to the second big policy shift. In addition to protecting our homeland, we must protect our economy. I'm a firm believer in economic freedom. But it has long been recognized that not all trade with trading partners is the same. The father of capitalism, Adam Smith, wrote in The Wealth of Nations that Great Britain's interest in preserving naval supremacy was more important than free trade in the maritime sector. Defense, he wrote, is of much more importance than opulence.

The challenge today is that national security is affected by almost every part of our relationship with China. No one understands that better than the Chinese. They have desperately pursued American investment and innovation, precisely to strengthen their military. American companies are banned from selling military hardware and services to China. But they still sell billions of dollars worth of goods to the Chinese market. We must look at these sales through a national security lens. Much of its military application simply slips through the cracks of US law. But Chinese law requires US companies to transfer technology to Chinese companies as part of the price of doing business on Chinese soil. This cannot continue. US businesses must recognize the threats to themselves and to our American security. Beijing's focus on military fusion demands it. China already steals up to $600 billion of American intellectual property every year. Our loss is the Chinese military's gain. Advanced technology is especially important. Right now our federal government keeps a detailed list of the most sensitive technologies that are dangerous to export. But it's not a blacklist. We still let companies send this tech to China. They just have to file the right application. It happens all the time. In 2022, the Biden Administration approved 70% of licenses for export in controlled technology to China. Think about it. We must end the export of sensitive technology to China, full stop.

And relatedly, she also lays out the following technology/investment/security concerns:

And we must keep China away from our biggest breakthroughs and cutting edge companies. We know Beijing wants to beat America in artificial intelligence, quantum computing and a host of other advanced technologies. We also know that American innovation is still the best in the world. The Communist Party knows that too. Their approach is basically, if you can't beat them, then buy them or steal it. We should block any Chinese purchase of an American company specializing in advanced technology. No more exports and no more acquisitions period. For that matter, we should have no more investments that undermine America. China can't buy certain technologies from American companies. But Americans can still invest in Chinese companies developing those same technologies. Talk about a loophole. It's a massive one. By one estimate. US portfolio investment in China rose $800 billion between 2017 and 2020 alone. Not all this money is funding military and technology breakthroughs, but much of it is. China's using our federally invested pensions to leapfrog America. The American people deserve better. I will protect our investors and our national security. No more investments in any company that helps the Chinese military or support the Chinese [Communist] Party, period.

Along the same lines as the speech, Haley said the following in a WSJ piece from yesterday entitled "My Plan to Confront the Chinese Threat":

Chinese investors have bought nearly 400,000 acres of American land, much of it near military bases. I’ll do everything in my power to prevent China from buying any more land and force it to sell what it already owns.

...

• Protect our economy. I’m a firm believer in economic freedom. But I also agree with Adam Smith that defense “is of much more importance than opulence.” National security is affected by almost every part of our relationship with China. Beijing knows it and uses American investment and innovation to strengthen its military.

American companies sell billions of dollars worth of goods in the Chinese market, much of it with military application. China also forces technology transfer and steals up to $600 billion of American intellectual property every year. I will push American businesses to leave China as completely as possible.

Advanced technology is especially important. The U.S. Commerce Department keeps a detailed list of the most sensitive technologies that are dangerous to export, but companies can still send them to China. In 2022 the Biden administration approved 70% of licenses for exporting controlled technology to China. I will end these exports.

Ron DeSantis on China Trade

Unfortunately, U.S. election season is upon us, and perhaps it would be useful if I documented the presidential candidates' statements on trade. That's mostly going to feature the Republican presidential hopefuls (and hopelesses, if that's a word!), but if Biden says anything new and interesting I'll mention that too.

Here was leading contender Ron DeSantis being interviewed on Fox News last night:

Kayleigh McEnany:

Some hawkish folks on China, on the right, say we need to decouple from China. Is it your view we need to decouple from China?

Ron DeSantis:

Kalyeigh, we are dependent on China for major parts of our economy. You saw it during COVID. Almost everything we needed came from China. So I think we need to reestablish our economic sovereignty. I think we need to produce more critical items here in the United States. And I think they have a huge amount of leverage over us because of, really, policy choices that have been made over many decades. You know, when China was put into the World Trade Organization and granted most favored nation status almost 25 years ago, we were told by DC elites that this would make China more free, more democratic, and make the world better. In reality, it hollowed out parts of our country. It made China very rich, and what did Xi used that money for? To build up more military capacity. He now has grand ambitions, not just in the Pacific, but even in our own hemisphere, and we see news where China is going to be working with Cuba to establish eavesdropping, maybe a military outpost. That's a huge, huge threat to this country.

So yes, we need to declare independence from China economically, and we need to make sure that we have the ability to project the appropriate strength in the Pacific, to work with our allies to deter China. China understands the language of strength. And I think what Joe Biden has done since his first day in office, he's projected weakness. A lot of bad actors around the world see that and that really whets their appetite to be able to do things that are going to be very harmful for the world.

Kayleigh McEnany:

Would you be willing to use tariffs to get China to the negotiating table?

Ron DeSantis:

Yeah, I would. I think that what you need to do, if you're going to target a particular industry in China like that, you need to make sure we have incentives here in the United States to bring that industry home. It will raise the price of the China product, but we got to make sure it's economical here in the United States. So you need to couple that with tax incentives, tax credits, and even for things that are really important like semiconductors, you know, I would be willing to support government support on that. I typically wouldn't do that because, you know, generally the market does. But I think some of these things are so important for national security, we got to be willing to lean in on that.

My sense of DeSantis is that he was traditionally a free market person, but he has tried to become more of an interventionist populist. On China in general, everyone is trying to out-hawk each other, and DeSantis' statements here on decoupling are not surprising. We don't know what they actually mean in terms of degree, of course. It probably won't be complete decoupling. But just saying "decoupling" -- and throwing in "independence" and "sovereignty" -- is probably the safe play for any Republican candidate.

(As a side note, on the substance of what DeSantis said, as I like to bring up there's an interesting counterfactual of how China's economic integration with the U.S. and the world would have gone if the U.S. hadn't been distracted by the War on Terror.)

And then on tariffs specifically, he sticks with the current establishment view that tariffs get China to the table and government subsidies are needed for "security"-related sectors such as semiconductors. Does any of this work? We're going to do it regardless, and in a few years we can see how it all played out!