Rep. Rick Crawford: Trump’s tariffs against China are working

Written by: Rep. Rick Crawford
Published by: Washington Examiner

There’s an old joke about a man who rolls past a stop sign in his car, not noticing a police cruiser parked nearby. The officer in the squad car immediately responds with flashing blue lights. The driver obediently pulls over and begins pleading his case.

“Didn’t you see the stop sign?” the officer demands.

“Officer,” he explains, “I did slow down.” The officer responds by producing his night stick and raining down blows on the non-compliant driver while asking, “now, do you want me to slow down, or stop?”

The point is, slowing down and stopping are two very different ideas that should not be used interchangeably. The same could be said about free trade and fair trade. Way back in 2009 when I began my first campaign for Congress, I pointed out the difference between free trade and fair trade. I have been an ardent supporter of the latter, which is why I recognize the value of the policies currently being implemented by the administration to achieve fair trade deals — particularly with China.

While there has been much debate over the last year or so about the merit of tariffs as a tool to bring China into compliance, consider this: Since China’s accession into the WTO in 2001, they have flouted the rules of the trade organization and conducted themselves in a belligerent economic manner. Further, the WTO has been content to look the other way as China attempts to steamroll global trading partners — the U.S. among them — through forced technology transfers, intellectual property theft, currency manipulation, false data reporting and more. All while receiving the added benefit of being designated a “developing economy” by the WTO.

A case in point: soybeans. The casual observer might point to the implementation of tariffs as the precipitating factor in the sharp decline in soybean prices a year ago. In fact, one could argue that tariff action implemented by the administration had little to do with it. Not surprisingly, China itself is more likely the culprit.

The markets hovered around $10.40 a bushel until such time as those reports were amended, leading to a roughly $2.00/bu. decline in soybean futures (pre-tariff mind you). The ensuing fallout resulted in a net positive to the Chinese of about $4/bu., realizing a cash savings of $2/bu., and their $2/bu. gain from a short position in the futures market, strategically taken prior to amending supply and demand estimates.

Adding insult to injury for U.S. farmers, untimely rains at harvest led to widely reported poor soybean quality, resulting in high dockage at the elevator and in some cases refusal of delivery on 2018 soybeans.

This calendar year hasn’t shaped up much better for U.S. farmers so far, considering both terrible weather and global market conditions. But I do believe there is daylight on the horizon. As of this writing, China has agreed to purchase over 500,000 metric tonnes of US soybeans, teeing up the potential for an additional 14 million tonnes going forward. That’s welcome news to American farmers.

Moreover, the tariffs implemented by the Trump administration appear to be driving a decline in foreign direct investment in China, a critical component of their economy. The revenue generated from foreign direct investment is essential to China’s Belt and Road Initiative, which Beijing believes will facilitate its march to global economic supremacy and military preeminence.

Foreign direct investment now appears to favor more attractive destinations in the Pacific rim — Vietnam, India, and Malaysia, for example — increasing the likelihood that China will bend and play by the rules for the long term good of their own economy. The need to keep over a billion Chinese employed will also likely be a key consideration as Xi Jinping seeks to avoid a prolonged economic contraction and a potential challenge to his “president-for-life” status.

While many will likely continue to rail against President Trump’s “blunt instrument” of tariffs as misguided and/or excessive, it’s hard to argue with results. Americans need to take a page from the Chinese book and start to think more strategically and about the longer term. When it comes to China’s continued bad behavior in the global marketplace — intellectual property, forced tech transfer, currency and market manipulation, global expansion, and more — we should ask ourselves, do we want China to slow down, or to stop?