Yesterday I discussed the prospect of a Sino-US free trade agreement (FTA) from China’s standpoint. Today I am going to continue the discussion from an American perspective.
In the past, the Democrats tended to use the trade issue as a strategic lever to influence Beijing’s policies, whereas all the Republicans were concerned about was pure business.
Nevertheless, as investment banks on Wall Street and tech giants in the Silicon Valley have become the biggest donors of the Democratic Party in recent years, the Democrats are becoming increasingly obsessed with expanding business opportunities in China in order to please these big firms, which are so desperate to have free access to China’s vast domestic market, and which have been unable to do so due to Beijing’s protectionist measures.
In fact, there has already been almost a consensus among the high-tech, service and professional sectors in the US that China’s market is simply too big to ignore, and therefore their government must pressure Beijing into further opening its market to American companies. As such, big businesses and financial corporations in the US are in favor of an FTA with China.
According to a recent study conducted by the Peterson Institute for International Economics based in Washington, D.C, once an FTA with China is reached, it could boost American exports by a whopping US$400 billion annually, and could create as many as 1.7 million new jobs in 10 years.
However, by contrast, the vast majority of low-skilled, blue-collar workers in the US, who form the support base of the GOP and played a pivotal role in voting Donald Trump into office in the US presidential election last November, are strictly opposed to any FTA with China for fear that it might further encourage US companies to move their production lines to China, thereby costing their jobs.
In fact, one of the major reasons Trump managed to win the hearts and minds of the American blue-collar workers, particularly low-skilled white workers, in the election last year is that he put the entire blame on China for the decline of the American manufacturing industry and the nationwide shutdown of production plants, a theme that struck a deep chord among these low-skilled workers.
Therefore, the American blue-collar workers will lobby against the conclusion of any FTA with China through trade unions and industrial associations.
On the other hand, key players of civil society in the US, such as non-governmental organizations (NGOs), are likely to pile pressure on Washington to include provisions in any future FTA with China that regulate Chinese companies investing in the US in terms of corporate social responsibility, environmental protection and labor rights.
And I wouldn’t be surprised if these powerful NGOs gang up on Chinese investors who have failed to meet these requirements.
Lastly, since the “pragmatic faction” chiefly represented by the pro-trade State Secretary Rex Tillerson and Trump’s son-in-law Jared Kushner is now very much in favor with the president and is dominating US trade policy, I believe the prospect of Washington concluding some sort of FTA with Beijing has become more plausible.
As far as president Donald Trump is concerned, even though he is notorious for his protectionist and isolationist stance on international relations and trade, he is, after all, a businessman by nature. And like any other businessman, Trump is also always on the lookout for big, juicy business deals.
As such, he is not necessarily against concluding an FTA with China as long as the terms of the agreement are favorable to the recovery of the US manufacturing industry and can create new blue-collar jobs on American soil, something he pledged to achieve during his election campaign.
This article appeared in the Hong Kong Economic Journal on July 5
Translation by Alan Lee
[Chinese version 中文版]
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