‘Unrealistic’ to think tariffs will change Chinese internal policies: expert
Mary Lovely, senior fellow at the Peterson Institute for International Economics, joins Yahoo Finance Live to discuss the trade landscape for 2021 and how President-elect Biden might approach China — and trade in general — differently.
Video Transcript
- As Joe Biden prepares to take office as President of the United States, he's left with the legacy of a trade war between the US and China that, of course, has spread from tariffs to now, including potential listings of Chinese companies in the US, as the NYSE prepares to delist three Chinese telecom companies. To talk about where we should go from here, joining us is Mary Lovely. She is of The Peterson Institute for International Economics. She recently wrote about what the Biden administration should do.
Mary, thank you for being here. And so as we head into the new year, you give sort of an agenda of what the Biden administration needs to do. What do you think is of the highest priority in terms of repairing the relationship, if indeed it should be repaired, between the US and China.
MARY LOVELY: Well, perhaps counterintuitively, the most important thing right now is to repair our relationship with the European Union, Japan, and other allies. As we've seen, the US is increasingly seen as a bit unreliable. The European Union has gone ahead and negotiated a comprehensive investment agreement with China on its own. Recently, president advisors-- national security advisor tweeted that he looked forward to very prompt meetings with the Europeans, suggesting that they would like the Europeans to wait on finishing this agreement. So they need to get the allies on board in terms of reestablishing, or reorienting, the relationship with China.
- Well, and Mary, thinking more broadly about US trade policy right now. I mean, the last four years have been unique, to say the least. Is there going to be an effort, maybe by the Biden administration, at least as far as you can tell, or as far as you can surmise, to just back out that four years and say, hey, don't worry. That didn't happen. We don't really want to proceed along these lines. And you know, let's get back to sort of the way that a 2010 Obama administration would have approached things.
MARY LOVELY: Well, I think we're at a different place today. The tariffs are in place already. So President Biden and Harris, a much changed landscape. I think that the tariffs have been very burdensome to American manufacturers. But there is a way to back out of that slowly through a process of exclusions. That is, granting exemptions to certain manufacturers who can show that they are unduly burdened, as many have tried to do.
So I think there is a way to roll back some of the tariffs without rolling back the whole program. I think it would be wise for the Biden administration to work with allies. And then to work through negotiations with China on how these tariffs might be rolled back.
There were some very important issues on the table in these negotiations between the Trump administration and the Chinese, including the treatment of American companies in China. We see now that the Chinese have made promises to the European Union in the comprehensive agreement on investment that the US would like to match, perhaps exceed. And so these tariffs might be a handle, a way into that discussion.
- Mary, what do you think some of the aftershocks will be of a President Biden really executing on his buy America pledge? What are the aftershocks to the global trade scene?
MARY LOVELY: It really depends on how it's carried out. There is great popular support for this, even though from an economic perspective it doesn't make a whole lot of sense. We still already buy critical parts and components from American companies. So it really depends on how much our allies are locked out of US procurement. So I think the devil is going to be in the details here.
- I do want to ask you about China and the sort of human rights abuses when it comes to the Uyghur minority, when it comes to some of the other issues China's grappled with, I know that you favor getting rid of tariffs, for example. And tariffs haven't really been used as a lever, perhaps, on those issues as much as they could have. What do you think is the correct approach? It sounds like you think multilateralism would certainly be a part of it.
MARY LOVELY: Yes, I mean, first I should say I'm in favor of getting rid of the tariffs, now that they're here, through a process of negotiation. The human rights dimension of the US-China relationship is of prime concern to many people. However, I think it's unrealistic to think that tariffs are going to change the Chinese internal policies. We have to look for areas where we may have some leverage.
For the first time ever, the Chinese have promised to a state-to-state dispute settlement agreement over forced labor. And this is an opening that we haven't seen before. So perhaps there is a way to build on what the European Union has been able to achieve. And the Biden administration may be able to take that farther through diplomacy.
We've seen the tariffs have simply not worked. If anything, the repression has gotten worse in the last four years. So we can keep hitting ourselves over the head with things that don't work, or we can look for more effective tools. And I think that they're beginning to emerge.
- Well, here's hoping, going into 2021 and beyond. Mary Lovely, thank you so much for joining us. Mary is a Senior Fellow at the Peterson Institute, also a Professor of Economics at Syracuse University. Thank you so much for your time today. Appreciate it.
MARY LOVELY: Thank you. A pleasure.
