Clash of titans: Washington state has a stake in historic U.S.-China trade battle

Lost in the frenzy over the Mueller Report and the calling out of the “squad” in Washington, D.C., is an event of truly epic proportions — the historic split being engineered by the Trump administration between the economies of the United States and China.

Seattle, Washington state and the whole Northwest have a tremendous stake in future relations between the United States and China. The whole process of the normalization of relations between the U.S. and China started in Seattle, when, on April 18, 1979, the Chinese freighter M/V Liu Lin Hai entered Elliott Bay to arrive at the Port of Seattle to begin two-way Sino-American trade for the first time since 1949.

In the 40 years since that event, the economies of Washington state and the Port of Seattle have greatly prospered, thanks in part to China trade and investment. China is the top trading partner of the Pacific Northwest, and the Port of Seattle and the Port of Shanghai are sister ports. China is Washington state’s top export market, amounting to more than $16 billion in 2016. The University of Washington has established a Global Innovation Exchange to develop new technologies with Tsinghua University, a top university in Beijing. Baidu, the leading Chinese internet search-engine company, has established research facilities in downtown Bellevue, joining other Chinese tech companies, such as Tencent, Huawei and Alibaba. Seattle’s Office of Economic Development is dedicated to encouraging foreign investment, and the state of Washington proudly touts the state as “Gateway to Asia.”

Now all this seems about to change. The Trump administration is acting on multiple fronts to “decouple” the economies of the United States and China. First, the Trump administration set tariffs of 25% on roughly half of Chinese imports, and it announced Thursday it will impose 10% tariffs Sept. 1 on all remaining imports. According to the Brookings Institution, these tariffs adversely affect nearly 154,000 workers in the state of Washington, about 4.8% of the total work force.

Second, in August 2018, Congress enacted two landmark laws aimed at China, highly important but ignored by the news media. The Export Control Reform Act authorizes the U.S. Department of Commerce to prohibit transfer or sharing of so-called “emerging and foundational technologies” to a non-U. S. person. These controls on technology transfer are aimed squarely to shut out Chinese companies from cooperative access to U.S. technology.

A companion law, the Foreign Investment Risk Review Modernization Act, expands the authority of the Committee on Foreign Investment in the United States to permit inbound foreign investment to be screened in order to prevent the foreign investor from obtaining access to U.S. technology. Since August 2018, the U.S. Department of Commerce has added scores of Chinese companies, including Huawei, perhaps China’s most prominent company, to the “Entity List” of foreign companies not allowed to purchase U.S. products or technology. A Committee on the Present Danger now functions in Washington D.C. as a focal point of anti-China sentiment.

The Trump administration’s policy of treating China as an enemy and trying to decouple China from the U.S. and global economy is mistaken and wrong. Making China a boogeyman is overkill; it is unnecessary and will end up hurting America and especially Washington state. These policies will not be effective to change China’s behavior and may backfire and isolate the United States. Demonizing China also raises the danger of a more serious, military conflict in the future.

Certainly China needs to be confronted over its policy of domestic repression, increased state control over private firms and failure to live up to its trade obligations. The proper way to confront China, however, is not through unilateral actions that flaunt international legal norms but through multilateral action, mustering traditional U.S. allies in Europe and Asia and effectively using multilateral institutions and international law to persuade China that change is in its own interest.

China and the United States have different economic and political systems, but China is not an enemy of the United States.