State of the Union: Spotlight on Trade with China

Among the many issues President Obama highlighted in last night’s State of the Union address was trade with China.

He announced the creation of a Trade Enforcement Unit that will look into unfair trade practices in places like China.

Host Lisa Mullins talks with Bruce Gilley, associate professor at Portland State University, about what the move means for US relations with China.

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Lisa Mullins: President Obama seemed to make reference to the rescue operation in Somalia last night. As he entered the House chamber for his state of the union address he was heard this to Defense Secretary Leon Panetta.

Barack Obama: Good job, tonight, good job tonight.

Mullins: The president made no mention of the operation in his speech though. When he did venture into foreign policy last night, the president focused elsewhere, and one topic he mentioned several times was trade with China. Here’s what President Obama said for instance, about counterfeit goods that are made in China.

Obama: It’s not right when another country lets our movies, music and software be pirated. It’s not fair when foreign manufacturers have a leg up on ours only because they’re heavily subsidized. Tonight, I’m announcing the creation of a Trade Enforcement Unit that will be charged with investigating unfair trading practices in countries like China.

Mullins: That’s President Obama speaking last night. Bruce Gilley is an associate professor of political science at the Hatfield School of Government at Portland State University. There has been as you know, a lot of anti-China rhetoric in domestic politics. This new unit, this Trade Enforcement Unit that he talked about last night, just politicking or for real?

Bruce Gilley: Well, both, it’s politicking in terms of the timing of the creation of the unit, which is clearly to do with the elections this year, but for real in the sense that once you create an institution it takes on a life of its own and this does come at a time in China-US relations when you know, for the first time the United States is feeling a real sense of threat from the challenge of a rising China.

Mullins: Can you describe for us in terms of trade anyway, where that threat stands right now? How serious it is.

Gilley: For a long time the United States policy towards Asia has been to keep its markets open and turn a blind eye to trade subsidies and unfair subsidies of state companies in Asia. And the logic has always been that ultimately the United State benefits because it makes Asia more prosperous and integrates it with the American economy and the liberal trading order. The problem is that China is of a size that the United States has never dealt with this strategy, and China’s size is starting to have notable impacts on American exports, of products that can be copyrighted, as well as impact on manufacturing here in the US.

Mullins: But if there is some kind of enforcement unit does that combine with perhaps any kind of tax incentives, make it more likely that manufacturing jobs will come back here to the US instead of going to or staying in China?

Gilley: No, I don’t think so. I think if you listen to the speech, what he really had in mind was IPR protection.

Mullins: This is intellectual property rights.

Gilley: Intellectual property rights, plus of course, he did mention the question of health and product safety, which is you know, making sure that products coming into this country not just, are not being dumped, but also are meeting the regulatory standards that they’re supposed to meet.

Mullins: Meaning what? This will all be strengthened, but it doesn’t mean necessarily more jobs here.

Gilley: No, I don’t think it does. I think this is part of a broader strategic rethinking of the United States’ relationship with China in which China is being in some sense graduated from the status of a developing country to one that is the United States is equal and which the United States is now going to no longer give the benefit of unalloyed access to the American market irrespective of how the state subsidizes products there.

Mullins: Okay, so if the tide is turning does that mean there is likely to be a backlash on the part of the Chinese?

Gilley: Of course, we’ll see if there is an immediate backlash when the presumptive Chinese leader in weighting, Shee Jeen Ping, visits the White House I believe in a couple of weeks. And I think the view in China is going to be this is kind of a strategic singling out of China because the United States is afraid of our growing strength.

Mullins: Bruce Gilley is associate professor at the Hatfield School of Government at Portland State University. Nice to have you on the program.

Gilley: Thank you.

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