What Warren’s trade plan means for China | Opinion by Daniel Schoolenberg | SupChina
Free

We're a new type of news publication

China news you won't read elsewhere.

Weekly Newsletter

Get a roundup of the most important and interesting stories coming out of China.

Podcasts

Sinica, TechBuzz China, and our 6 other shows are the undisputed champs of China podcasts. Listen now.

Feature Articles

Interactive, web-based deep dives into the real China.

Premium

Join the thousands of executives, diplomats, and journalists that rely on SupChina for daily analysis of the full China story.

Daily Newsletter

All the news, every day. Premium analysis directly from our Editor-in-Chief Jeremy Goldkorn.

24/7 Slack Community

Have China-related questions and want answers? Our Slack community is a place to learn, network, and opine.

Free Live Events & More

Monthly live conference calls with leading experts, free entry to SupChina live events in cities around the world, and more.

"A jewel in the crown of China reporting. I go to it, look for it daily. Why? It adds so much insight into the real China. Essential news, culture, color. I find SupChina superior."
— Max Baucus, former U.S. Ambassador to China

Free

We're a new type of news publication

China news you won't read elsewhere.

Weekly Newsletter

Get a roundup of the most important and interesting stories coming out of China.

Podcasts

Sinica, TechBuzz China, and our 6 other shows are the undisputed champs of China podcasts. Listen now.

Feature Articles

Interactive, web-based deep dives into the real China.

OR… for more in-depth analysis and an online community of China-focused professionals:

Learn About Premium Access Now!
Learn More
Minimize
Learn More
Minimize

What Warren’s trade plan means for China

Frustrated with the lack of progress on a U.S.-China trade deal under Trump? Warren’s “economic patriotism” agenda would nullify any trade agreement with China.

There seems to be no end in sight to the U.S.-China trade war, even as both economies slow down and the need for stability in trade grows. President Trump, though, remains defiant — even calling himself “Chosen One” to “economically take on China.” He’s clearly reveling in his status as the toughest president on China in living memory, and that may pay off politically, trade deal or not. But having only focused narrowly on issues like IP theft and trade deficits, he’s left himself wide open for the Democrats to outdo him. So far, that’s been Elizabeth Warren and the plan she released last month to completely overhaul U.S. trade policy.

The document, in Warren’s words, is “my plan for using economic patriotism to overhaul our approach to trade.” Thoroughly ambitious, her plan would be the most progressive vision for trade ever proposed by a major party candidate. It stipulates certain preconditions that every country, if they want to trade with the U.S., must meet. The list includes upholding international labor standards, protecting human rights as determined by the State Department, and also meeting certain environmental requirements. For example, every nation would have to be on track to meet the commitments they made under the Paris Climate Agreement. These and other preconditions, writes Edward Alden of the Council on Foreign Relations, seems meant to check “the wish list of every Democratic Party activist.” Its standards are so high, in fact, that even Warren says that “America itself does not meet many of these labor and environmental standards today.”

Her trade plan was challenged almost immediately, just a day after it was released, at the first night of the July round of Democratic primary debates in Detroit. John Delaney said that she and other candidates wanted to build an “economic wall” to free trade, with standards so high America wouldn’t be able to trade with its allies. Delaney is, in fact, right ­­— developed and developing countries alike would need to make heavy economic and even political concessions before they can trade with America.

But it’s China that would have an especially difficult time meeting the preconditions. In fact, given how China’s leaders operate, it’s hard to imagine a trade policy like this leading to anything other than a full-on retrenchment behind tariffs and further economic decoupling. And it wouldn’t matter if President Trump manages to reach a trade deal before then, because Warren pledges to renegotiate any agreement made previously in order to ensure trade partners meet her preconditions. If American and Chinese negotiators had a difficult time agreeing on pork and soybeans, imagine how they would do with these two roadblocks:

Roadblock #1: Human Rights

From Warren’s trade plan:

Uphold internationally recognized human rights, as reported in the Department of State’s Country Reports on Human Rights, including the rights of indigenous people, migrant workers, and other vulnerable groups.

Trade with China hasn’t been linked with human rights since President Bill Clinton, who, in order to get China into the WTO, worked with Congress to pass the Permanent Normalized Trade Relations with China (a.k.a. “PNTR”, one of Bernie Sanders’ least favorite acronyms). At the time, Clinton argued that China’s entry into the WTO would spark profound, long-term positive change in China’s domestic system, which before long became the prevailing bipartisan consensus in Washington. Warren, for her part, called Clinton’s sentiment a “happy-face story that never fit with the facts.”

Let’s also keep in mind that Warren has also previously sponsored the Uyghur Human Rights Policy Act of 2019 (US – S178), which might have a chance at passage with her as President. How well will trade negotiations go when the State Department is issuing new reports on China’s mass internment policy, and Magnitsky sanctions are being levied against officials responsible for the human rights atrocities in Xinjiang?

Roadblock #2: Open negotiating drafts

Warren’s plan also calls for a changing up the entire “undemocratic and obviously corrupt” negotiation process, by requiring a much higher degree of transparency:

Trade negotiators will publicly disclose negotiating drafts and provide the public with an opportunity to comment.

Adding some transparency might sound good, but consider this precedent: In April 1999, President Clinton met with Premier, and de-facto head of China’s economic reforms, Zhū Róngjī 朱镕基 in Washington, D.C. They met to discuss the concessions China would have to make in order for the U.S. to support its entry into the WTO. But the talks ended without an agreement, as the U.S. side found China’s concessions insufficient. Shortly after the meeting, though, the text of the concessions Zhu submitted to Clinton found its way to the USTR’s website. The move, maybe an attempt to prevent the Premier from reneging, completely backfired. The publication of the concessions prompted an intense backlash in China against Zhu. As Joseph Fewsmith recounts:

With the posting, the Chinese government lost control of the flow of information…By the time Zhu returned to China, the opposition, which had been muted before his trip, began to burst forth. Ministries that felt that the concessions would hurt them lost their inhibitions in voicing their complaints…Moreover, the USTR posting allowed the broader public to weigh in, and Zhu was abused mercilessly by public opinion. Articles on the internet as well as student demonstrators in May labeled him a ‘traitor’ (maiguozei).”

China’s leaders and negotiators are just as vulnerable to public sentiment today. For example, online commentators have begun to compare Vice Premier Liú Hè 刘鹤 with Lǐ Hóngzhāng 李鸿章, the Chinese admiral who narrowly survived assassination after signing the Treaty of Shimonoseki with Japan. And let’s be clear, Liu isn’t giving away anything on par with what Warren’s plan would demand of him. Regardless, negotiators like Liu, no matter how liberal-minded they are, require a certain amount of discretion to meet American negotiators halfway, but because Warren’s plan denies them that, the most likely scenario is simply no negotiations at all.

Analysis

Soon after Warren released her plan, Politico described her trade policy as “closer to Donald Trump’s agenda than Barack Obama’s.” It’s a fair point. Like most Americans, both Warren and Trump have developed ideas about trade tempered in large part by the experience of America’s trade relationship with China. In that regard, it’s no coincidence that Warren’s plan seems like it would make trade agreements with China all but impossible. The preconditions it lists, such as protections for human rights, labor, and environmental standards have developed in large part from the experience of America and China’s economic relationship, and a willingness to put these issues at the forefront of trade and at the center of the U.S.-China relationship.

Of course, in party primaries, it is typical to make big promises to party bases. So even if the candidates try to out-do each other with increasingly ambitious proposals, it might mean less for the actual winner. Still, though, if Warren becomes the Democratic nominee — as betting markets are now predicting — it’s hard to see either her or Trump moderating their stances in a general election matchup. And although Warren has endeared herself to many with her detailed proposals, plans are promises, and preconditions are not goals ­— they’re hard requirements. So her trade plan, as early as it is, deserves being taken seriously, and at face value.

For China’s leaders, if a Warren administration becomes increasingly likely in the coming months, they will likely see what Delaney sees: an economic wall. That might be enough to make them see President Trump in a new light, leading to a recalculation where China seeks to give him what he needs for his re-election: a deal and a win. As for Trump, attacking China and continuing to up the ante with tariffs might pump up his base for now, but he would do well to take note that his trade war has actually increased support for free trade among regular Americans, so inking some kind of deal might be the best thing he can do to boost the economy and to earn swing voters. If that happened, while Warren would be able to make a strong argument for why she’s the one most capable of taking on China, by election time she could very well find the game has changed.

Daniel Schoolenberg

Daniel got his start in China by joining Peace Corps, serving for two years in Guizhou province where he taught English. Since then, he has continued to expand his knowledge of China by studying Chinese in Beijing, and studying U.S.-China relations at the Hopkins-Nanjing Center. He previously worked for the China-focused research and consultancy firm Trivium. At SupChina he assists in editing the daily newsletter and doing research for feature projects.

2 Comments

  1. Jim Harkness Reply

    Hmmmmm. So you see two roadblocks: Human Rights and Transparency. In describing the human rights issue, you admit that Clinton got PNTR passed with the promise that it would lead to better human rights in China, which then became a conventional view in both parties. But (as I hope you recognize) that was a fiction, and human rights are as bad or worse than they were when PNTR was granted. Is your argument that human rights should never have been on the table or what? I would add that during his campaign in 1992, Clinton attacked Bush Sr’s China policy as “coddling dictators.” This is a standard position before elections. I wish it wasn’t, but it is. And I don’t think it is too cynical to say that after Nov 2020 there may be some adjustments.
    As for transparency in negotiations, the issue in 1999 was that the text was leaked. That’s not the same thing as insisting on transparency from the get go. The EU has strong transparency rules for its intl trade negotiations and they still manage to get big deals done, including with China.
    For forty years, US-China trade has been negotiated in secret and the US position has been entirely dictated by the interests of companies seeking to profit from laying off US workers and moving production overseas. The US middle class has been hollowed out: in return for slightly cheaper consumer goods, workers who used to have good jobs now survive on multiple minimum wage jobs. (Yes, there has also been mechanization, financed with the profits from offshoring!) These are empirical facts.
    Trump understood the situation and used it to con his way into office. His trade war is just making things worse, because it’s neither smart nor principled nor based on a genuine concern for outcomes other than scoring political points.
    So the status quo pre-Trump was not working (except for shareholders) and what Trump is doing isn’t working. I am ready to try something new, and I am confident that Senator Warren has a strong enough commitment to positive outcomes that she wouldn’t unilaterally nullify all trade agreements with China if the net impact on American families would be negative.

    1. Daniel SchoolenbergDaniel Schoolenberg Reply

      Regarding the Human Rights obstacle:

      My argument is simply that of all the preconditions in Warren’s trade plan, the issue of human rights is the biggest obstacle to having a stable, liberalized trade relationship with China. I think that much is clear, regardless of how important you think free trade is, or how effective you think denying access to U.S. markets will be in forcing China to change its behavior.

      In the interest of keeping the article brief, I didn’t expound too much on whether Clinton’s argument was correct or not, and I didn’t weigh in on what the consequences of PNTR are. For the most part, I just wanted to illustrate that Warren’s trade plan would bring us back to something resembling the early 90s, back when Tiananmen had changed our outlook entirely on China’s political system. But the first several years of Clinton’s presidency didn’t do much to promote peace between the U.S. and China, which led him in large part to pursue a policy of rapprochement and eventually led to the world’s normalization with China.

      And here is where I don’t completely agree with your characterization that Clinton’s argument was “a fiction.” It wasn’t even a promise, because what Clinton had said was:

      “…the path that China takes to the future is a choice China will make. We cannot control that choice; we can only influence it. But we must recognize that we do have complete control over what we do. We can work to pull China in the right direction, or we can turn our backs and almost certainly push it in the wrong direction.”

      Later on, he says:

      “China is a one-party state that does not tolerate opposition. It does deny citizens fundamental rights of free speech and religious expression. It does defend its interests in the world, and sometimes in ways that are dramatically at odds from our own. But the question is not whether we approve or disapprove of China’s practices. The question is, what’s the smartest thing to do to improve these practices?”

      In light of that, I think it’s fairer to say the decision to normalize trade relations have been mixed. I realize that China’s human rights record today is in many ways deplorable, like you say, and it’s also clear that some of it can be tied directly to the wealth and economic power that it’s gained from trading with the world. But it hasn’t been a linear degeneration in China’s human rights record since PNTR. Rather, we’re currently living in a period (under Xi) of resurgent authoritarianism, greater centralization, and less toleration of dissent that comes after a relatively open period which saw the development of civil society under Hu. And it can also be argued that this authoritarianism is in part a reaction to the corrosive effects of globalization and engagement with the world, led by the U.S.. We should not make the mistake that current circumstances are permanent, and will only get worse.

      Furthermore, I’m critical of the implicit counterfactual behind the argument that American engagement with China has failed. That being, had we not normalized trade and integrated China into the world’s economic system, human rights in China would have somehow improved otherwise. I think it’s doubtful they would have improved over the last 30 years had China remained isolated and on the brink of hostile confrontation with the U.S.

      And if it was impossible to contain and pressure China into political reform and change behavior in regards to human rights back then, would we be any more successful in leveraging trade to promote change in China’s human rights record today?

      Regarding the Transparency roadblock:

      I agree with you that there’s a difference between having transparency rules going in versus leaking the draft as Clinton did. And I’ll admit I’m not familiar with those rules. But I still think the transparency mandate that Warren imposes on all negotiations will inevitably lead to a substantial amount of reticence on the part of Chinese negotiators, who are otherwise known for being pretty pragmatic. And unlike a deal with the EU, Warren’s trade plan will demand incredibly steep concessions, ones that get at the heart of how China governs the country politically and economically. Additionally, in terms of these optics and how they might stimulate nationalist feeling, I think the issue becomes even more sensitive coming from America than any other country.

      I disagree that the negative effects of free trade with countries like China are a natural result of the negotiating the terms of trade deals in secret. In fact, I think it’s somewhat of a moot point. As President, she can appoint the negotiators who go to China for trade talks. I’m not worried about anyone Warren appoints putting the interests of multinational companies ahead of all others. My concern is that it will ultimately be a hindrance to both sides reaching a common ground on trade. I’ve explained how it might auger a backlash and a political hardening in China, but I’m also wary about opening the trade process to scrutiny in the U.S. I may be cynical, but it’s not hard to imagine how publicly available records of the negotiations could be used by America’s right-wing media/political apparatus to assail her trade policy.

      I’d like to share your confidence that Warren’s trade plan will ultimately work out for everyone involved. But I can only go on what her plan says, and what I know about China. And my main concern remains that, while we might try something new in terms of trade policy, what good is it if we’re left with what we have today – an impasse?

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.