U.S. Industrial Policy Can’t Succeed Without Trade Enforcement

By Cathalijne Adams
Jan 16 2024 |
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America’s manufacturers are still grappling with China’s economic manipulation.

The United States cannot invest in its factories and expect to reclaim its position as the world’s leading manufacturer and innovator without addressing the role trade has played and continues to play in eroding the sector, a recent New York Times story spotlights.

Since President Biden took office, private companies have invested $640 billion in American factories, and a factory construction boom that more than triples the average factory construction rate in the 2010s promises huge jobs gains. But all of this progress stands at risk should the U.S. fail to level the playing field for American manufacturers and workers. Here’s the New York Times:

As U.S. factories spin up to produce electric vehicles, semiconductors and solar panels, China is flooding the market with similar goods, often at significantly lower prices than American competitors. A similar influx is also hitting the European market.

American executives and officials argue that China’s actions violate global trade rules. The concerns are spurring new calls in America and Europe for higher tariffs on Chinese imports, potentially escalating what is already a contentious economic relationship between China and the West.

The United States is right to invest in its own industries, especially in sectors critical to our national security and energy independence. Decades of offshoring have proven what happens when we neglect our own industries; it is well past time to put some money back into American manufacturing.

But the United States will never be able to outspend China, and that shouldn’t be our goal, anyway. It’s vital to keep in mind that China’s state-backed manufacturers aren’t out to turn a profit; they’re out to dominate global industry, which distorts the market. The NYT continues:

In the United States, when the supply of solar panels exceeds demand, factories idle their lines, lay off workers and try to bring capacity back into alignment, said Michael Carr, the executive director of the Solar Energy Manufacturers for America Coalition, which represents U.S.-based solar manufacturers.

“That’s not the way it works in China,” he said. “They’ve just continued to build and build and build.”

So, how can the United States fight back against China’s trade malfeasance and create a level playing field for American manufacturers and workers? It starts with enforcing our trade laws, which includes putting tariffs in place when needed.

The good news is that stronger trade enforcement may be on the horizon. The Biden administration is reportedly considering raising tariffs on some of these goods as part of its review of “Section 301” tariffs on Chinese imports.

It would be a smart move, but, even with these tariffs in place, China is finding backdoors into America’s market. As imports from China decline, Mexican imports are taking their place. It’s a disturbing pattern and illustrates how persistent and insidious China’s economic manipulation is.

That’s why the United States must enact legislation like the Leveling the Playing Field Act 2.0 and implement additional innovative trade tools to take on China’s increasingly sophisticated trade cheating.

As our own President Scott Paul has said: “The Inflation Reduction Act, the Bipartisan Infrastructure Law, and the CHIPS and Science Act must be viewed as first steps, and not the last word.” That includes both continuing to invest in our homegrown manufacturing, and be willing to enforce our trade laws to defend that investment.