Bare Knuckles Ag ™

Why Trump Won’t Back Down on Trade Sanctions with China

Farmers are still looking at prices substantially lower than they would otherwise be if China hadn’t responded to the President’s tariffs where they knew it would hurt him most, politically: Imports of farm goods; especially soybeans. But by responding with a $12 billion “Market Facilitation Program”, the President bought time with farmers and most farm groups. In his view, he didn’t start the war. He’s fighting unfair trade practices by a host of countries dating back decades. 

Initially, Trump had angered many farm groups by pulling out of the Trans-Pacific Partnership (TPP) on his first day in office. Next, he followed through on campaign promises to confront both Canada and Mexico on NAFTA, which most U.S. farmers feared would cost them hard-won markets. But since then, the U.S. has renegotiated the North American Free Trade Agree­ment with Canada and Mexico and signed a new bilateral trade deal with South Korea to boot.

Trump’s trade team is still working towards better trade deals for farmers with the European Union and Britain.  Better trade deals with Japan, Australia and New Zealand are also in the works. If he comes through on these, Trump will have effectively made trade agreements with 95% of the combined economies of the original TPP.  U.S. negotiators have been charged with essentially preserving and improving what’s good for the U.S. from existing deals, while purging unwise, unfair or outdated provisions.

Trade issues with China date back to the Clinton era. Testifying in March 1992 before the U.S. Senate, the head of the Business Software Alliance (BSA) put the stolen value of software alone at $225 million; the value of music and movie DVDs in the “hundreds of millions more.”  By 1994 the BSA estimated 94% of all the packaged software in use in China was pirated. The Office of the United States Trade Representative identified 29 factories producing pirated software, music and video CDs. By the end of ’95, that number had grown to 34.

President Bill Clinton dispatched his lead negotiator, Charlene Barshefsky, to do something about it. Over the next year, U.S. negotiators made nine trips to China and held 40 meetings with their Chinese counterparts aimed at curbing the theft.

To show he meant business, Clinton threatened 100% tariffs on $2 billion worth of U.S. imports from China if Beijing didn’t enforce its new laws. They didn’t have to. Under howls of protest from U.S. businesses profiting from cheap Chinese imports, Clinton backed off.  By the time China was admitted to the World Trade Organization in 2001, the BSA now put the value of pirated software in China at $9 billion per year and that was just the tip of the iceberg. In 2015 the U.S. Commis­sion on the Theft of American Intellectual Property (IP Commission) added these two additional categories: a) pirated copyrights and patents on tangible goods, $50 – 100 billion per year,  b) theft of commercial and trade secrets: $180 – $540 billion per year.

These figures don’t even include the inestimable losses in U.S. farm trade after decades of Chinese manipulation of their currency, domestic farm subsidies and “quotas” on imports of U.S. farm products.  It’s easily in the billions, but nothing much beyond “strong condemnation” emerged from Washington and Beijing only grew bolder in ways to pilfer technology from U.S. firms.

For Trump, issues with China transcend economics.  He will not back down on sanctions because to him and military advisors, the issue of technology theft is even more alarming. This fall, a public hearing was held on October 10. Richard Ellings, head of the U.S. Commission on the Theft of American Intellectual Property has estimated such thefts have totaled $1.6 trillion over the past four years.

Another reason farmers show surprising patience with Trump trade tactics is that they are generally a highly patriotic lot and generally agree that China’s unfair trade practices have been in place for decades. They are also well read. They see the reports by U.S. military intelligence that stolen U.S. technology is readily apparent in China’s increasingly sophisticated military hardware.  

What too few realize, however, is that military advisers have also warned Trump that China is also using stolen software technology to develop ways to disrupt banking, power grids, and GPS technology as weapons of 21st Century cyber warfare.  That is why the President will not back down. USDA Secretary Sonny Perdue is keenly aware patience is wearing thin in farm country, but equally aware President Trump will not back off sanctions. That’s why as he travels the country, he tells farmers straight out that it’s in the long-term best interest of farmers to work with USDA to diversify markets and become far less dependent on sales to a hostile adversary like China.

Dan Manternach, President
Perfect Fit Presentations, LLC

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