Like almost all economists and most policy analysts, I prefer low trade tariffs or no tariffs at all. How, then, can US President Donald Trump’s decision to impose substantial tariffs on imports of steel and aluminum be justified?
Trump no doubt sees potential political gain in steel and aluminum-producing districts and in increasing the pressure on Canada and Mexico as his administration renegotiates the North American Free Trade Agreement.
The EU has announced plans to retaliate, but in the end, the EU might negotiate and agree to reduce tariffs on US products that exceed US tariffs on European products.
However, the real target of the steel and aluminum tariffs is China.
Beijing has promised for years to reduce excess steel capacity, thereby cutting the surplus output that is sold to the US at subsidized prices. Chinese policymakers have postponed doing so as a result of domestic pressure to protect China’s own steel and aluminum jobs.
The US tariffs would balance those domestic pressures and increase the likelihood that China would accelerate the reduction in subsidized excess capacity. Because the tariffs are being levied under a provision of US trade law that applies to national security, rather than dumping or import surges, it would be possible to exempt imports from military allies in NATO, as well as Japan and South Korea, focusing the tariffs on China and avoiding the risk of a broader trade war.
The US administration has not yet said that it would focus the tariffs in this way, but — given that they are being introduced with a phase-in period, during which trade partners might seek exemptions — such targeting seems to be the likeliest scenario.
For the US, the most important trade issue with China concerns technology transfers, not Chinese exports of subsidized steel and aluminum. Although such subsidies hurt US producers of steel and aluminum, the resulting low prices also help US firms that use steel and aluminum, as well as US consumers who buy those products, but China unambiguously hurts US interests when it steals technology developed by US firms.
Until a few years ago, the Chinese People’s Liberation Army was using its sophisticated cyberskills to infiltrate US companies and steal technology.
Chinese officials denied all wrongdoing until former US president Barack Obama and Chinese President Xi Jinping (習近平) met in California in June 2013.
Obama showed Xi detailed proof that the US had obtained through its own cyberespionage.
Xi then agreed that the Chinese government would no longer use the army or other government agencies to steal US technology.
Although it is difficult to know with certainty, it appears that such cybertheft has been reduced dramatically.
Current technology theft takes a different form.
US firms that want to do business in China are often required to transfer their technology to Chinese firms as a condition of market entry. These firms “voluntarily” transfer production know-how, because they want access to a market of 1.3 billion people and an economy as large as that of the US.
These firms say that the technology transfer requirement is a form of extortion.
Moreover, they worry that the Chinese government often delays their market access long enough for domestic firms to use their newly acquired technology to gain market share.
The US cannot use traditional remedies for trade disputes or WTO procedures to stop China’s behavior, nor can the US threaten to take Chinese technology or require Chinese firms to transfer it to US firms, because Chinese companies do not have the kind of leading-edge technology that US firms have.
So, what can US policymakers do to help level the playing field?
This brings us back to the proposed tariffs. In my view, US negotiators will use the threat of imposing the tariffs on Chinese producers as a way to persuade Beijing to abandon the policy of “voluntary” technology transfers.
If that happens, and US firms can do business in China without being compelled to pay such a steep competitive price, the threat of tariffs would have been a very successful tool of trade policy.
Martin Feldstein is a professor of economics at Harvard University and president emeritus of the US’ National Bureau of Economic Research.
Copyright: Project Syndicate
Recently, China launched another diplomatic offensive against Taiwan, improperly linking its “one China principle” with UN General Assembly Resolution 2758 to constrain Taiwan’s diplomatic space. After Taiwan’s presidential election on Jan. 13, China persuaded Nauru to sever diplomatic ties with Taiwan. Nauru cited Resolution 2758 in its declaration of the diplomatic break. Subsequently, during the WHO Executive Board meeting that month, Beijing rallied countries including Venezuela, Zimbabwe, Belarus, Egypt, Nicaragua, Sri Lanka, Laos, Russia, Syria and Pakistan to reiterate the “one China principle” in their statements, and assert that “Resolution 2758 has settled the status of Taiwan” to hinder Taiwan’s
The past few months have seen tremendous strides in India’s journey to develop a vibrant semiconductor and electronics ecosystem. The nation’s established prowess in information technology (IT) has earned it much-needed revenue and prestige across the globe. Now, through the convergence of engineering talent, supportive government policies, an expanding market and technologically adaptive entrepreneurship, India is striving to become part of global electronics and semiconductor supply chains. Indian Prime Minister Narendra Modi’s Vision of “Make in India” and “Design in India” has been the guiding force behind the government’s incentive schemes that span skilling, design, fabrication, assembly, testing and packaging, and
Singaporean Prime Minister Lee Hsien Loong’s (李顯龍) decision to step down after 19 years and hand power to his deputy, Lawrence Wong (黃循財), on May 15 was expected — though, perhaps, not so soon. Most political analysts had been eyeing an end-of-year handover, to ensure more time for Wong to study and shadow the role, ahead of general elections that must be called by November next year. Wong — who is currently both deputy prime minister and minister of finance — would need a combination of fresh ideas, wisdom and experience as he writes the nation’s next chapter. The world that
As former president Ma Ying-jeou (馬英九) wrapped up his visit to the People’s Republic of China, he received his share of attention. Certainly, the trip must be seen within the full context of Ma’s life, that is, his eight-year presidency, the Sunflower movement and his failed Economic Cooperation Framework Agreement, as well as his eight years as Taipei mayor with its posturing, accusations of money laundering, and ups and downs. Through all that, basic questions stand out: “What drives Ma? What is his end game?” Having observed and commented on Ma for decades, it is all ironically reminiscent of former US president Harry