Bipartisan lawmakers on Tuesday called for cutting more U.S. economic and financial ties with China, including reversing the low tariff rates the U.S. granted Beijing after it joined the World Trade Organization more than two decades ago.
The House Select Committee on the Chinese Communist Party released a broad set of recommendations to restore the United States’ economic relationship with China. The reportwhich was signed by both House Democrats and Republicans, argued that China had carried out a “multi-decade campaign of economic aggression” that had undermined American businesses, dominated crucial global industries and left the United States very vulnerable. vulnerable in the event of a broader military conflict. .
The 53-page report included nearly 150 recommendations that Congress and the administration could take to offset those vulnerabilities. They ranged from imposing new tariffs on older types of Chinese chips to further cutting off the flow of capital and technology between the world’s largest economies.
Among the report’s other recommendations was requiring publicly traded U.S. companies to disclose their ties to China and invest more in U.S. research and manufacturing capacity to counter China’s dominance in sectors such as pharmaceuticals and critical minerals. . He also suggested developing plans to coordinate economically with allies if the Chinese government invades Taiwan.
Many of the recommendations may never be adopted by a fractured Congress. But the report could open a path to some bipartisan legislation on China in the coming months.
Rep. Mike Gallagher, R-Wis., the committee’s chairman, said in an interview that he would like to see Congress meet on a major China bill next year before the presidential election. He said that while some American companies opposed restrictions on doing business with China (a large and growing market), legislation that clarified what was allowed would be beneficial to many companies.
“If Congress doesn’t step up and do something legislative,” Gallagher said, “we’re just going to go back and forth between different executive orders that have wildly different rules that create chaos for Wall Street and the market.”
The report is a tangible sign of how much the bipartisan consensus toward China has changed in recent years.
The most prevalent argument a decade ago was that economic interdependence between the United States and China would be a force for peace and stability. Some, including Biden administration officials, still say trade ties can help stabilize the relationship and promote peace.
But that theory has increasingly given way to fears that ties to China could be weaponized in the event of a conflict. It could be catastrophic for the U.S. economy or military, for example, if the Chinese government cut off its shipments to the United States of pharmaceuticals, minerals or components for weapons systems.
Beijing’s subsidies to Chinese companies and incidents of intellectual property theft have also become a growing source of friction. In some cases, China has allowed foreign companies to operate in the country only if they form partnerships that transfer valuable technology to local companies.
The report said the United States had never before faced a geopolitical adversary with which it was so economically interconnected, and that the full extent of the risk of relying on a strategic competitor was still unknown. The country lacks a contingency plan in case a new conflict occurs, he said.
“Addressing this new contest will require a fundamental reassessment of U.S. policy toward economic engagement with the PRC, as well as new tools to address the PRC’s campaign of economic aggression,” the report says, using the abbreviation for Republic Popular China.
This year, the committee organized a practical exercise to simulate how the United States would respond if the Chinese government invaded Taiwan. It found that U.S. efforts to deter China through sanctions and financial punishments “could carry tremendous costs for the United States,” according to the report.
Lawmakers said they were not advocating a complete “decoupling” of the U.S. and Chinese economies, but that the country needed to find a way to reduce Beijing’s influence and make the United States more economically independent.
The report includes a variety of other recommendations, including increasing the authority of a committee that reviews foreign investments for national security threats and designing new high-level trade agreements, especially with Taiwan, Japan and Britain.
But the report’s first, and perhaps most important, recommendation is the gradual introduction of a new set of tariffs on China over a short period of time.
When China joined the World Trade Organization in 2001, the United States and other members began offering China lower tariffs to encourage trade. In return, China began to undertake a series of reforms to align its economy with the organization’s rules.
But the report argued that China had consistently failed to deliver on those promised reforms, and that the “normal and permanent trade relations” that the United States had granted to China after its WTO succession did not lead to the benefits or economic reforms it hoped for. Congress had waited. The report says Congress should now apply a different, higher set of tariffs to China.
This measure has been debated by lawmakers and has been endorsed by former President Donald J. Trump and other Republican candidates. Last year, Congress voted to revoke normal, permanent trade relations with Russia after its invasion of Ukraine.
But raising tariffs on China, one of the United States’ largest trading partners, would provoke greater opposition from businesses, raising the costs of goods imported from China and most likely slowing economic growth.
The United States already has significant tariffs on many Chinese goods, which were imposed during the Trump administration’s trade war and which President Biden is still reviewing. The additional changes suggested by Congress would increase taxes on other items, such as toys and smartphones, that have not generated additional taxes.
TO study published by Oxford Economics In November, commissioned by the US China Business Council, it was estimated that these tariffs alone would cause a loss of $1.6 trillion to the US economy over a five-year horizon. It would also likely cause more friction at the World Trade Organization, where the group’s strongest supporters have already accused the United States of undermining its rules.
The Retail Industry Leaders Association, a trade group that includes Target, Home Depot and Dollar General, said in a statement Tuesday that it was concerned about the recommendations. Raising tariffs on Chinese goods “would only hurt American companies and invite retaliation from China,” he said.
To diversify supply chains, the United States needed a proactive trade agenda that reduced tariffs, set high standards and facilitated alternatives to China, “rather than punishing American businesses, workers and consumers,” the group said.
The lawmakers’ report acknowledged that such a change would be an economic burden and suggested that Congress consider additional allowances for farmers and other support for workers.
Gallagher said extricating the United States from its “deep economic entanglement” with China would not be easy, and that Washington should work to develop alternative markets and prepare for possible retaliation from Beijing.
Reaching consensus on the report required months of negotiations between Democrats and Republicans, which its authors said should send a message to China.
“One of the theories that the CCP has about America is that we are divided, that we are tribal, that we are unable to come together to meet challenges,” said Rep. Raja Krishnamoorthi of Illinois, the committee’s top Democrat, referring to the Chinese Communist Party. “On this particular issue of competition between the United States and the CCP, we agree.”