The United States had a $375 billion trade deficit with China in manufactured goods last year, so why are some manufacturing groups pushing for a trade deal with the country?
At last week's official, three-day long (yes!) hearing on the Trump administration's China tariffs and its get-tougher policy, that's exactly what the National Association of Manufacturers was doing.
It seems counterintuitive, like you'd be making tough situation tougher.
But NAM and others make the counterintuitive argument that the U.S. should lean into the China trade situation and go for a full-on trade deal, rather than throw up tariff barriers.
The argument boils down to this — the U.S. government can have more leverage to set trade terms within an free trade agreement (FTA), like NAFTA, than it can under the World Trade Organization rules, which governs trade with China.
It's a point the plastics industry's lobbying groups in Washington have made. There's some analysis to support their case.
In a report last year, the Plastics Industry Association noted that among those 20 countries that have formal FTAs with the United States, the polymer sector has a surplus in both resin and plastics products of more than $8 billion and $4 billion, respectively.
That contrasts with a trade deficit of more than $10 billion in plastics products with non-FTA countries. The association gives the credit to FTAs.
"The U.S. plastics industry maintains its trade surplus due to agreements like NAFTA, and other free trade agreements the U.S. maintains with other friendly nations," the report said. "The U.S. has a significant trade surplus in resin and plastic products with these countries."
Within the industry, though, it's a controversial topic.
The plastics association did not testify at the hearing, but in comments in the last few weeks, CEO Bill Carteaux has acknowledged splits within its members over the question of China tariffs (and presumably China policy in general), between those who will benefit and those who will be hurt.
NAM, however, was not shying away at the hearing. It repeated calls its CEO Jay Timmons made in January for a China trade deal as the best path forward.
"The only effective path forward is a comprehensive and strategic approach that has at its core the conclusion of a modern and innovative bilateral trade agreement that restructures our economic relationship with China," said Linda Dempsey, NAM vice president of international economic affairs, who called it "the best way to treat the disease, not just the symptoms."
A trade deal, she said, would give the U.S. "flexibility to cover longstanding China issues such as [intellectual property] IP theft, investment restrictions, currency manipulation, labor practices, competition enforcement and industrial policy" and provide more enforcement tools than WTO.
China gets much of the industry's attention. Another chart in the plastics association report contrasted the industry's trade picture with China and other countries.
It noted an overall $10 billion deficit with China in 2016, offset by an overall $10 billion surplus with Canada and Mexico.
With the rest of the world, the group said the plastics sector has an overall surplus of just under $5 billion, although that has dropped from more than $10 billion a few years ago.
I'm sure an FTA with China is not in the cards now, but it's a thought-provoking question: does the economic performance of FTAs suggest those are really what the U.S. should push for, rather than tariffs?
I'm not going to pretend to know the answer to how to structure global trade.
To me it looks like the NAFTA trade pact is far and away the biggest of the 20 FTAs for plastics, and maybe that skews the results. Or maybe they would be good, because they'd provide better tools for building good global trade.
There was pretty much universal testimony from U.S. businesses against what they see as difficulties with China, like the country's restrictions on foreign investment in areas like automobiles and what they labeled China's mercantilist approach. But agreeing on a solution, that was a different matter.