GOP Senators Sound the Alarm on China’s Unfair Trade Practices

White House Economic advisor Larry Kudlow reacted to the stock market jitters following China’s decision to levy tariffs on American products in response to President Donald Trump’s tough actions on China.
AFP/Nicolas ASFOURI

A group of Republican senators who recently traveled to China are sounding the alarm on what they see as a serious threat to America: unfair Chinese trade practices.

“I come to the conclusion that they’re going to do everything legal or illegal, immoral or moral, ethically or unethically, to dominate us in trade and dominate the world, and be number one. And they’re well on that,” Sen. Chuck Grassley (R-IA) told reporters during a briefing about their trip.

“They deny all these — that they steal [intellectual property], that they subsidize their industry, that they make us give up our trade secrets to do business in China, that they steal our trademarks,” he continued.

“There’s no enforcement by their government, they have non-tariff trade barriers, they have fake products and counterfeiting, and mandatory licensing practices,” he said. “And you wonder then, why they have a $350 billion dollar trade deficit with us.”

The trip, planned months in advance by Sen. Steve Daines (R-MT) and attended by Sens. Grassley, David Perdue (R-GA), Ben Sasse (R-NE), and Ron Johnson (R-WI), occurred just as a trade fight between the U.S. and China was heating up.

The senators — who met with China’s premier, vice premier, and other top officials — credited Trump for getting Beijing’s attention after announcing plans to raise tariffs on $150 billion worth of Chinese goods.

After first threatening to raise tariffs on U.S. goods, Chinese President Xi Jinping on April 10 pledged he would cut Chinese auto tariffs and allow more competition in banking and better protect intellectual property.

“The president has put in almost a disruptive force into the mix here,” Daines said. “Suddenly President Xi is talking about concessions on automobile tariffs. That’s a significant win for us.”

The senators said it is well past time for China to stop behaving as if it is a developing country and play by the same rules as the U.S.

Daines noted when he worked in China in the 1990s, the country’s gross domestic product was $400 billion. Now, he said, it’s $12 trillion, only second to the U.S.’s $19 trillion. Japan runs at a distant third, at $5 trillion.

“There’s just no reason we shouldn’t have access to them like they expect to have access to us. I think that’s a basic principle,” said Grassley.

“My expectations are that they start living up to what they are. They’re very much a 5,000-year-old society. We’re — what, 400 years old? They’re fully in the community of nations. So they ought to live like an adult member of the community of nations.”

The senators’ tour of China seemed to only underscore that transformation, which Daines called “profound.”

They visited the headquarters of Alibaba and Tencent — two of three Chinese companies that are in the world’s top five internet companies, after Amazon and Google.

He said Alibaba — which is China’s Amazon — recently bought Hema, a grocery store chain, and now customers can purchase groceries using facial recognition, and have them delivered to them by bike in 30 minutes.

“Seventy percent of their customers in their stores there don’t even come in the store. They order on their mobile phone. Delivered to their door under 30 minutes using electric bikes,” he said. “We had a chance to see that firsthand.”

They also had a chance to travel via China’s bullet-train system.

“We were on bullet trains where there used to be dirt roads 20 years ago. Literally,” Perdue said. In contrast, he said, “It’s taken 19 years to try to deepen the Port of Savannah five feet. They created their third largest port in five years.”

They also visited headquarters of DJI, a Chinese company and the world’s leader in consumer drone technology, which has 70 to 80 percent in global market share for consumer drones.

“It was a real eye opener,” said Grassley.

Grassley, as the only senator on the trip who voted for China to join the World Trade Organization in 2000, expressed some remorse.

“There’s questions as to whether I did the right thing,” he said. “I figured it was better to have them in the tent than outside the tent and to live by the rules of international trade. These expectations have not materialized. What am I to think?”

“They want to be considered a developing nation. Well how do you be the second economy in the world and be a developing nation?” Grassley said. “They’re developed — very well! But so they’re living off of this sympathy that we’re supposed to have for them. I don’t have any more sympathy. And this trip brought home that reality.”

The senators cited one example after another of China’s unfair business practices with the U.S. They said China’s Alibaba can have a cloud computing business in the U.S., but a U.S. company is not allowed to have a cloud computing business in China.

If Oracle wanted to set up a data center in China, it would be required to turn over source code and other information, although the same is not required of Alibaba in the U.S., they said.

And they said Chinese government is also making it more difficult for American companies to do business in China, by giving preference to local and state owned enterprises.

And now, they warned, China is now on its way to surpassing the U.S. in developing artificial intelligence, due to the sheer data that China has been able to amass on its citizens from Alibaba.

“All that data in Alibaba is basically owned by the federal government and they have access to do whatever they want to with it, and are,” Perdue said. “That aggregation of data will allow China to really far surpass us in our development of AI.”

The microchip market could be next, he warned.

“We dominate the chip market in the world, the U.S. We control that. That is a strategic industry, we control that. China just put $150 billion to develop the Chinese chip industry,” he said.

China is also expanding its reach globally, Perdue said. China’s One Belt One Road strategy aims to tie Europe, Asia, and Africa together in one trading bloc, he said.

Already, he said, China has 19 overseas ports it is co-developing in Africa, and is also building a trade route through Pakistan, which will help connect its western provinces to the oil-rich Persian Gulf area.

The senators warned Americans not to be naive about China’s intentions to become the world’s dominant power, and its progress towards that goal.

“China is a very long-term strategic thinking nation [versus] America. We become ever-shorter-term thinkers. Our timeframe continues to shrink and that puts us, truthfully, at a huge disadvantage,” Johnson said.

He argued that America needed to “fully expose and publicize their trade abuses.”

The senators expressed optimism that Trump could finally change China’s behavior.

“These are choppy seas we’ve been navigating, but something had to be done to kind of mix this up and this early message from President Xi I think is very important,” Daines said.

“This automobile tariffs is an issue that has been talked about for years and suddenly President Xi announces we’re going to lower the tariffs. That shows me there’s movement, and that’s a good thing.

“I’m hopeful that we’ll see some progress in the next few months. Who would have thought six months ago that you’d have President Trump and Kim Jong Un actually having a summit?” he said.

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