How to Stop the Trade War and Equip America for the 21st Century
With each new round of proposed tariffs against China, President Trump gives America the impression that only if we end these unfair trade practices then our economic anxiety would go away. Starting a trade war, however, is not the solution to the immense challenges of globalization, trade, and automation. China’s unfair trade practices do affect American competitiveness, and we should negotiate to end them — but what we do after we end the trade war is even more important. We need a frank national conversation about how technology not only has made some jobs obsolete, but also will create some exciting new opportunities. The way to make America great and to address our economic anxiety is to enact policies that equip American economy and workers for the 21st century technology-driven economy.
First let’s negotiate our way out of the trade dispute. China’s trade practices around intellectual properties are indeed troubling. For example, as a condition for entering the Chinese market, China mandates that American companies set up joint ventures with local Chinese companies and then transfer technology to the Chinese partner. Over time, Chinese companies master the technology and displace the need for American commercial know-how. Though this practice violates World Trade Organization (WTO) rules, Beijing argues that entering Chinese access is “voluntary,” and American companies acquiesce to the demand because they do not want to lose access to one of the largest growth markets in the world.
One proposal for how to handle China’s trade practices comes from President Reagan’s Chairman of Council of Economic Advisors, Martin Feldstein. He suggested that the United States should negotiate an end to the current trade dispute based upon the Obama Administration’s negotiation with Beijing in 2013 over ending Chinese government-backed cyber espionage against American companies. Both sides subsequently established “rules of the road” and agreed to not use their governments’ cyber capabilities to obtain commercial technologies. This is a model we can use again to end the current trade dispute.
Washington and Beijing can use the negotiation to establish rules of the road for intellectual property transfer and market entrance for technology firms. On the United States’ end, the forced technology transfer to Chinese joint venture partners must no longer be a condition for entering Chinese market. Meanwhile, China’s burgeoning technology companies with world-class artificial intelligence capabilities and aspiration for global market presence need a clarification of rules of the road for entrance to the American market.
During negotiations over those rules of the road, America would also need to coordinate with our allies from industrialized nations — such as Britain, France, Germany, and Japan — in order to ensure that China does not play off companies from these countries to get the best deal on technology transfer. America wants to avoid the situation, for instance, where Beijing pits Boeing against Airbus so as to secure the best deal on technology transfer.
The end of the trade dispute is also a golden opportunity to have a frank conversation with the American people about the source of our economic anxiety and how America could win the future. According to a study by the Center for Business and Economic Research at Ball State University, up to approximately 85 percent of the manufacturing job losses between 2000 and 2010 are due to technological changes. Therefore, though unfair trade practices matter and must end, our leaders also must talk about how we could make technology our friends in the 21st century. We need to prepare for the future.
One way to do so involves increasing funding to America’s world-leading research universities and federal laboratories so as to create jobs of the future. After all, many of the technologies that are changing the world, from the internet to fracking, had roots in federally-funded research. In addition, we can also prepare our workers for jobs of the future by giving them more training, especially considering that today’s manufacturing jobs are much more knowledge intensive than the ones in the past. For example, a career in additive manufacturing, or 3-D printing, requires engineering and software skills. One way to give our workers these advance skills is to make the first year of community college free, as California has done.
Let’s use negotiation to end a trade war and to end unfair trade practices. However, for the sake of America’s future, let’s not stop there. The country needs to have a frank conversation about how technology is changing our working world and how we could win the future with the right policies. Then we are truly on the path of making America great.
Kenneth Wun is a Security Fellow with Truman National Security Project. He is also the author of How to Reinvigorate the American Dream. Views expressed are his own.