With both sides retreating to their respective corners, it appears the trade conflict between the United States and China, the two largest economies in the world, isn’t going to end anytime soon.
That’s why it’s crucial that, rather than alienate allies around the world, Washington should push forward to broaden and deepen our commercial alliances, particularly in Asia. If the Trump administration is willing to make some concessions, they will find trading partners willing to do the same in ways that benefit U.S. businesses and strengthen our hand in dealing with China.
Since President Donald Trump’s inauguration, the United States has made a series of trade policy missteps. It levied “national security” tariffs on steel and aluminum imported from every country in the world, including several allies. The president withdrew the United States from the Trans-Pacific Partnership (TPP), a promising trade pact with Pacific Rim nations, designed in part to pressure Beijing to raise its commercial standards. And most disturbingly, it rushed headlong into a conflict with China with no discernable exit strategy and without longstanding allies who share some of our concerns with Beijing’s trade-policy practices.
Now should be the time to spread U.S. commercial diplomacy, given the rising tensions between Washington and Beijing. There are several steps we can take that will reaffirm our commitment to international economic engagement.
First, the United States should move quickly to negotiate a bilateral free trade agreement (FTA) with Japan. Though the two countries were the major players at the center of the TPP, American farmers and ranchers struggle to reach the lucrative Japanese agriculture market as the rest of the TPP nations moved forward with the agreement without the United States. In order to enhance market access for American agricultural products, the Trump administration should back off its claims that Japanese auto companies pose a national security threat to the United States. Toyota and Honda, for example, employ hundreds of thousands of Americans. Corollas and Civics do not pose national security threats to Americans. Likewise, lifting the steel and aluminum tariffs for Japanese producers would help pave the way for a quick resolution to FTA negotiations between the two allies.
Likewise, the United States and Taiwan should deepen their trade and investment ties. Though Taiwan is a flashpoint in U.S.-China relations, Washington does maintain a strong commercial relationship with Taipei. The Taiwanese government wants to create a thriving environment for businesses and startups and has succeeded in information and communications technologies, but more can be done.
The United States does have some legitimate complaints about Taiwanese protectionism. The tiny island is too protectionist in its agricultural markets, particularly pork and beef, and is increasingly hostile to investment by U.S. multinational corporations. Locked in a regulatory dispute that looks an awful lot like disguised protectionism, transportation network companies (TNCs) are currently struggling to maintain market access in Taiwan, one of the few Asian markets open to American TNCs. The United States can help facilitate Taiwan’s further economic growth, but President Tsai Ing-wen’s government must be open and transparent about regulations and willing to treat foreign investment fairly.
In order to improve market access for American pork and beef producers in Taiwan and end the standoff over TNCs, the United States has several options. It can offer to remove the steel and aluminum tariffs for Taiwan. Likewise, the United States maintains several special anti-dumping and countervailing duties on products from Taiwan. By lifting these duties in exchange for more favorable treatment of American products and investment, the two sides can each claim victory that will benefit consumers and producers in both countries.
If economic relations with China are going to be rocky for the foreseeable future, the United States should do everything it can to expand commercial ties with partners across the Asia Pacific region. There are several willing trading partners if the Trump administration is willing to make some small concessions that will ensure broader goals are achieved.