19/07/2018
Tariffs: How'd we get here, and what do we do now?
Charles Wu, board director, JWJ Express (Korea)
Having been involved in international shipping for the last four decades, I have learned much about international trade, geopolitical factors, influences on America’s trade business with others, and the pros and cons for US companies that conduct business in overseas, especially in China.
In addition, I have been able to observe the foreign policies the US government has adopted in dealing with different countries, partly because of my travels with then-Rep. Gary Ackerman, D-N.Y., where we met with government officials in Taiwan and South Korea, as well as listened to the private reports given by senior officials with local US embassies and the American Institute in Taiwan. I learned how the US government conducted its business and executed foreign policy.
Those meetings and my experience in the shipping industry have informed my views on the intersection of commerce and global politics. The following is some clarification on this current state of tit-for-tat trade tariffs and ways for us to make trade fairer without risking a global recession.
Has the United States been treated fairly by foreign countries on international trade?
No. If you go to Korea and Japan, you won’t see many American-made cars running on the streets as they are either being imposed with high import duties or not meeting the unrealistic environmental requirements set by the government. In the meantime, Japanese and Korean cars are being sold in the United States with few restrictions.
In China, countless rules and regulations are imposed on foreign companies that operate business there. In international shipping, for example, for years it has been extremely difficult for US companies to obtain shipping licenses from the Chinese provincial governments, whereas Chinese forwarders have been operating their business in the United States with no restrictions at all.
In addition, in order to protect the Chinese businessmen and firms, China does not allow Americans to carry 100 percent of the ownership of the companies they have established, but insists on having joint ventures with Chinese partners should we intend to establish our own operations in China. (This situation has been improving slowly in recent years, but it is still serious in the insurance, financial, and pharmaceutical sectors.) Another issue involves state-owned large Chinese export manufacturers. Foreign forwarders are not given fair chances to obtain their business.
Another interesting but terrible thing is the fact that China only allows 34 American films imported into China each year, up from 20 films each year in the past, and foreign distributors only have enjoyed 13 percent of that revenue.
In EU countries, 10 percent of import duty is added on American-made cars whereas the United States only imposes 2.5 percent tariffs on European cars brought into the United States. The list goes on and on. President Donald Trump’s complaints over unfair trade are true and legitimate in many cases.
Why didn’t previous US administrations do much to stop or improve the worsening trade situation between the United States and other countries in the past?
There were numerous reasons, but the No. 1 reason, perhaps, was the US intention of offering trade and economic benefits to certain countries in exchange for gaining their political and military support/assistance on various issues. (Whether it was a smart strategy remains debatable.)
For example, the strong sanctions against Iran during the Obama administration would not have been passed in the United Nations had China vetoed the bill. In addition, the United States was seeking China’s support against North Korea during the six parties’ negotiation (which was originally initiated by then-president George W. Bush). Furthermore, the United States needs close cooperation from Japan in preventing China from expanding its military influences and aggression in the region, including the South China Sea.
EU countries generally have been exercising better trade practices with the United States compared with China, Japan, and Korea, yet not to the extent of completely fair. Meanwhile, the United States has very important interests in Europe that require the support and cooperation from Germany, France, etc. The military threats from Russia are always a factor, and US Air Force bases in Europe have often supported the military actions in the Middle East as well. (The United States has nearly 800 military bases in more than 70 countries and territories worldwide. And the United States has the largest overseas military hospital in Germany.) Sometimes the US government, therefore, may have gone easy on trade issues with certain EU countries in order to maintain political and military ties with them.
Another reason for the government’s failure in improving the unfair trading relationships, especially with China, was administrations in the past, including those of former presidents Bill Clinton, George W. Bush, and the first term of Barack Obama, did not expect China to become such a strong economic threat to the United States in such a short period of time. (Obama was busy dealing with the US financial crisis in his first term). It was their serious misjudgment of China.
Numerous American business people who traveled to China had complained about a lack of aggressive US policy toward China’s unfair treatments to US companies. Generally speaking, the US government over the years has not done enough to protect the interests of US companies conducting business with foreign countries. Many issues and unfair practices we endured were ignored or treated as secondary issues by our government. Trump is doing the right thing by strongly addressing the issues in the past year.
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