On China, Congress Is Its Own Worst Enemy

If the US wants to regain a competitive edge over its biggest rival, it needs to get over its kneejerk opposition to free trade.

Mihir Sharma

12:33 PM IST, 11 Jan 202312:33 PM IST, 11 Jan 202312:33 PM IST, 11 Jan 202312:33 PM IST, 11 Jan 2023

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Customers walk past shops selling Christmas decoration goods in Panjim City, Goa, India, on Saturday, Dec. 17, 2022. India's retail inflation slowed below 6% for the first time in 2022 December, amid cooling global commodity prices and higher borrowing costs, providing reprieve for policymakers.

(Bloomberg Opinion) -- Fresh off a leadership election that transfixed the world, the United States House of Representatives is, supposedly, getting down to business. High on the agenda: a bipartisan committee that will examine the possible sources of China’s competitive edge over the US.

I can save the House some time. That committee, if it does its job well, will quickly discover that a large part of the problem is … the U.S. Congress. And, as the past week’s dysfunction showed, that problem is going to get worse.

The biggest reason China remains central to the economic architecture in much of the world, especially the Indo-Pacific, is the lack of any alternative. Even countries concerned by China’s heavy-handed foreign policies recognize that the country is an essential trading partner. As a source of investment, as an efficient producer and as a potential market, the world’s second-largest economy is impossible to ignore.

And it doesn’t help when the largest seems to have decisively turned its back on economic integration. Forget new trade deals: The US is building walls even against partners in the developing world that it has cultivated for decades. China’s real competitive advantage over the U.S. is that it is the only one competing, while the US closes itself off.

Emblematic of these big, beautiful new American walls is the failure to renew trade measures such as the Generalized System of Preferences and the Miscellaneous Tariff Bill, which singled out countries and sectors for easier tariff treatment. Both measures expired in 2020, costing US businesses billions.

Trade legislation requires experienced advocates in Congress who are willing to work across the aisle and strong party leaders who don’t have to answer to every maverick or lobbyist. After the chaos in the House, the rest of the world would be safe in assuming that neither bipartisanship nor leadership will be much in evidence over the next two years.

Many in Washington don’t care. The age of trade is over, they insist. The Donald Trump wing of the Republican party shares the former president’s doubts about trade deals. Meanwhile, influential Democrats are calling for a “new economic patriotism.” Many of them presumably think the rest of the world has similarly soured on freer trade.

In fact, other countries — including many the US hopes to enlist in its efforts to shore up the liberal world order — do not agree. Despite doubts about the uneven benefits of globalization over the past two decades, other nations have by and large forsworn higher tariff barriers. The European Union continues to push for new or updated trade deals, including with Mexico, Chile and India. New Delhi, long skeptical of trade pacts, has concluded new agreements with Australia and the United Arab Emirates.

The African Continental Free Trade Area is chugging along towards implementation. Expanding membership in the Comprehensive and Progressive Trans-Pacific Partnership remains at the top of Japan’s geo-economic agenda. And post-Brexit Britain’s hunger for trade agreements with anyone on anything is palpable. Trade skeptics in Washington cannot claim that they are merely acting in line with global trends.

Central to all these efforts is a recognition that global integration is critical to increasing competitiveness and prosperity at home. Leaders in all these nations understand that economic walls promote stagnation and reduce ordinary citizens’ purchasing power.

Unfortunately, too many in the US political class seem to have forgotten that lesson. And their leaders are either, like US President Joe Biden, unwilling to lift a finger for freer trade or, like the GOP’s new House Speaker, too insecure to do so. The same Kevin McCarthy who, as majority leader in 2016, refused to back Trump’s tariffs has now been forced by the anti-woke fringe of his party into refusing even to take a meeting with the pro-trade US Chamber of Commerce.

If Washington can’t agree on an economic proposition to offer the world, the field lies open for China. One analysis of trade data in recent years found that China’s total trade with significant Asian neighbors grew 71% after the Trump tariffs kicked in. Yes, trade with the US also grew during the pandemic, in many cases more than with a locked-down China.

But, if the US political class is serious about containing Chinese influence in the coming decade, it cannot afford to ignore the most potent weapon in its arsenal. China knows how to use its position at the center of the world’s trading networks to increase its power. An isolationist US leadership will only ensure America steadily loses both partners and influence.