The United States has fired its first shot in what looks like a potential trade war with China, with the US Trade Representative, on orders from President Donald Trump, opening an investigation into China's restrictive trade practices that impede American businesses on the mainland as well as the alleged theft of intellectual property. These are powers available to the President under Section 301 of the Trade Act of 1974, and consistent with the approach prescribed by the now ousted Trump strategist Stephen Bannon, who believes, in his own words, that keeping the Democrats focused on race and Republicans on trade nationalism is the way to perpetuate the Trump allure. Optically, it certainly is a most significant strategy.
Section 301 is the key available to the President to bypass the World Trade Organisation and make a direct determination on a trade issue that affects America. The US had said previously that it would use 301, if ever, only in a manner that conforms to WTO rules. This fairness should not be given the go-by in the interest of political expediency. At the same time, while it is unquestionably a blunt instrument, it must be remembered that triggering an investigation is not the same as ordering retributive or punitive measures. The first public hearing on the probe is not due until Oct 10. Certainly, nothing will take place before Mr Trump meets his Chinese counterpart, Mr Xi Jinping, later this year.
In fact, the investigation could take years, and may result in no action taken at all. Even so, Beijing should be aware that even if it crosses this hurdle, China scepticism is no longer limited to sections of the White House, but is spreading across the American spectrum. Statistics tell their own tale. In the first six months of 2017, according to the US Census Bureau, the total US trade deficit went up by US$27 billion (S$37 billion), or 11 per cent, from the year-ago period. While exports rose, imports rose even more. Such data add grist to the mill of those who believe that America is being "robbed blind" by the mercantilism of putative challengers to its power.
Beijing, naturally, has complained about the 301 move and warned that protectionism will "certainly damage bilateral economic relations and hurt the business interests of companies in both countries". While it has a point, it should know that its current global economic profile depends greatly on access to the US market and its technology. Besides, trade does not operate in a vacuum. In 2001, when China was admitted into the WTO, the expectation was that it could be socialised into playing by the rules of fair trade. That expectation remains. It is to be hoped as well that, having learnt to use the WTO's dispute settlement mechanism for its purposes, which is legitimate, it should pay equal heed to other global rules. A Sino-US trade war would help nobody.
