The Trump administration is breaking with America’s long history of appeasing China. Long coddled by establishment Foggy Bottom types and by U.S. corporations salivating over China’s burgeoning markets – not to mention an Obama White House desperate for a legacy climate deal -- Beijing has met little resistance as it has cyber attacked U.S. corporate and military secrets, broken trade agreements, ignored international law courts, lied about its intentions in the South China Sea, fudged its climate regulations, worked to undermine American alliances in Asia and harbored the villains running North Korea. No more.
There’s a new sheriff in town, and the opening salvo came last week when the Commerce Department announced it had imposed record-level civil and criminal penalties of $1.2 billion on Chinese telecommunications firm ZTE. The fines were levied in response to ZTE’s illegal exports of equipment to Iran and North Korea – exports that violated sanctions imposed against Tehran. If approved by the courts, it would be would be the largest fine and forfeiture ever levied by the U.S. government in an export control case.
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Commerce’s announcement about the fees further rattled the cage. Secretary Wilbur Ross said, “We are putting the world on notice: the games are over. Those who flout our economic sanctions and export control laws will not go unpunished – they will suffer the harshest of consequences.”
The five-year investigation into ZTE found that the company had aggressively conspired to conceal evidence of its misdeeds and lied to U.S. officials. After being served with a subpoena in 2012, its shipments to Iran declined but then picked up again when management decided in November 2013 to thwart the U.S. embargo even as the federal probe was ongoing. Ross said ZTE made “283 more shipments to North Korea after the investigation had begun.”
Why not? Chinese companies and the government had little reason to fear the Obama White House. Several months earlier, President Obama had met at Sunnylands with President Xi Jinping, purportedly to deliver a stern message about cyber hacking and other bad behavior. Just before the summit, The Washington Post had published an explosive report about China hacking more than two dozen major advanced U.S. weapons systems, a breach thought likely to significantly shrink America’s military advantage. Access to the technology could save the Chinese 25-years’ of research and tens of billions of dollars as they race to match U.S. capabilities, experts said.
Naturally, Xi stonewalled the charges of cyber thefts, insisting that China, too, was the victim of hacks, and shared the U.S.’ concerns. Obama, whose position was admittedly weakened by revelations of NSA spying, went along with this nonsense despite a National Intelligence Estimate earlier in the year, which definitively identified China as the country most wantonly penetrating U.S. businesses and institutions.
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Increasing Chinese aggression (cyber and otherwise) has been met by American hand-wringing and dithering over issues such as whether employing the THAAD system (Terminal High Altitude Area Defense) in South Korea to counter North Korea’s growing arsenal might offend Beijing. Foreign policy wonks advise appeasement; a recent essay in Foreign Affairs, typical of establishment thinking, advises that “The United States should welcome a more influential China, so long as it respects other countries’ interests, contributes to the common good, and adheres to international laws and norms.”
It’s not clear what the U.S. should do when Beijing patently does not respect other countries’ interests, and it’s obvious the Obama White House was confused as well. Even as they pursued trade violations and won monetary settlements, they avoided offending China’s leaders by declining to collect the monies owed.
In a recent interview with Fox Business’ Varney & Company, Ross reported that the Obama administration had failed to collect penalties assessed of Chinese companies that broke U.S. trade agreements. Ross reiterated the charge in an interview with Maria Bartiromo asserting, “Billions of dollars of countervailing duties have not been collected.” As he pointed out, given the expense and labor of charging violators, it makes no sense whatsoever not to collect.
Especially since these are high-stakes situations that have hurt Americans.
For instance, the White House charged in 2015 that Beijing’s price supports of its domestic corn, rice and wheat exceeded its WTO commitment limit by $100 billion. Our government argued that American farmers were consequently unable to compete and to sell their goods to China.
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A study sponsored by the U.S. Wheat Associates, a lobbying group, and conducted by Iowa State University, estimated that those Chinese price supports cost U.S. wheat farmers alone between $650 and $700 million annually.
More recently, at the urging of eight U.S. senators, the Obama White House lodged a complaint with the WTO over China’s subsidies for its aluminum industry – support that critics say includes 27 different subsidy programs, costing thousands of American jobs. Excess capacity among Chinese producers has pushed down costs worldwide and driven numerous U.S. producers out of business. In 2000, there were 23 smelters operating in the U.S.; by the end of last year, there were only five.
Not all of China’s trade cheating is so straight-forward. The Chamber of Commerce issued a report in 2014 charging that Beijing’s enforcement of its 2008 anti-monopoly law was leading to unfair treatment of American companies like Microsoft and Qualcomm, possibly in violation of WTO rules. The report said that China’s antitrust “remedies often appear designed to advance industrial policy and boost national champions [while] intellectual property rights have been curtailed.”
It is cheering to see the Trump White House cracking down on Chinese misbehavior. Beijing’s policies have targeted job-creation, and now we do the same. As Ross said recently, “Under President Trump’s leadership, we will be aggressively enforcing strong trade policies with the dual purpose of protecting American national security and protecting American workers.” It’s about time.
