President Donald Trump has signed three executive orders targeting trade abuse since taking office. The latest one calls for an investigation into unfair trade practices that contribute to U.S. trade deficits.
The United States has racked up a $3.5 trillion trade deficit with China since China joined the World Trade Organization. Some of this is caused by China’s high tariffs.
“Many people don’t understand that the actual WTO treaty that the United States helped China to sign is very unfavorable and it still allows China to have very high tariffs to begin with, for example, the latest average tariffs for China is 10 percent, compared to the United States’ 3.5 percent. And normally this is done to help developing countries develop, but now China is the world’s second largest economy and still allowed to have three times the tariff rates as the United States. So that’s one thing,” said Valentin Schmid, business editor of the Epoch Times.
But there are also many non-tariff trade barriers China employs to give it an unfair advantage.
“For example, in China, the rule that if you want to invest in China, you have to have a joint venture, 50 percnet Chinese owned, and then most of the time they force you to transfer technology, so that’s a big one, IP (intellectual property) technology theft, forced technology transfer. Then you have the standards, where the Chinese invent standards by themselves so they have Chinese standards that don’t comply with global standards that cost a lot for foreign companies to adhere to. And then you have the banking system, which is state controlled and decides who gets the money and who doesn’t get the money. Obviously, the state-owned companies get preferable treatment, better than foreign treatment, and then you have active legislative actions against foreigners, like the so called anti-monopolistic behavior, which a lot of companies got hit [with] in 2014, which is absolute nonsense because all of the state companies—well most of them—are monopolies, oligopolies, including the state banks, so China is using a variety of these measures, also including a certain component of forced local productions. If you want to produce something, you have to use 70 percent local content, all this kind of stuff China’s using. And subsidiaries as well. So we have the whole array of unfavorable deals and then you have a whole bunch of cheating going on as well,” said Schmid.
Another factor is the use of slave labor. Many Chinese products are made in labor camps.
“If you look at the starting point, when China was in the 1980s, when they started to open up, as well as the 1990s, why was labor so cheap? Because of mismanagement by the state, by the Communist Party for 50 years. So they caused all these problems, and what you mentioned, the slave labor, there’re some estimates, which is really egregious if you think about it. 500,000 people in slave labor camps, and there are always reports are products that big companies have produced in China and they don’t even know it’s being produced by slave labor. And while in the context of let’s say a working population of 500 million, 500,000 is not that large, you just have to imagine if that was the case in the United States, in the West, and in Europe. If any country tried to do that everybody would be up in arms and stop dealing with them altogether but for some reason for China, this has always been tolerated,” said Schmid.