Ross makes threats on China trade

US Commerce Secretary Wilbur Ross on Tuesday called on China to allow more market access to US companies and threatened more trade-enforcement measures.

In a speech at the Atlantic Council, Ross recalled how he led 28 CEOs of US companies to China during US President Donald Trump’s state visit to Beijing last month. The trip produced more than $250 billion in trade and investment deals.

“That’s a big number. But it’s small relative to the magnitude of our recurring trade deficits,” he said, adding that President Trump and President Xi Jinping personally witnessed the signing of 15 of the largest agreements.

“I hope that can provide a solid foundation for a stronger, more reciprocal trading relationship,” Ross said.

The former businessman said there is much to be done, noting that US bilateral goods deficit with China has risen every month this year since February.

Most economists believe the bilateral trade deficit does not matter, and the growing US trade deficit with China has been a result of China becoming an assembly line of East Asia in the past 15 years, when Japanese and South Korean companies moved their production lines there.

The counting of the total value, rather than the added value in China, of exports to the US is also seen as misleading. Apple’s iPhones are assembled in China, which adds about 10 percent of the value, but 100 percent of the value is counted in China’s exports to the US.

Economists also believe that the US trade deficit has more to do with US fiscal policy and the consumption and saving behavior of Americans.

The US tax-cut reform, if it passes, is expected to cause more US trade deficits with China and other countries.

Caroline Freund, a senior fellow at the Peterson Institute for International Economics, believes the obsession of the Trump administration on trade deficits might be a tactic to gain more benefits in negotiation with other countries.

At the Tuesday event sponsored by the Korea Foundation, Ross also lashed out at the non-tariff barriers and other unfair trade practices by South Korean companies. The US and South Korea are renegotiating the Korea-US free trade agreement, or KORUS. The deal, inked during the Obama administration, has been described by Trump as “a horrible deal”.

Ross said the bottom line is that China must do more to assure fair market access for US companies. “We want US businesses and workers to have the same trading opportunities that we have offered foreigners in the rest of the world for decades,” he said, adding that the US has already initiated 61 percent more anti-dumping and countervailing duty investigations against other countries so far this year than in the same period last year.

On Nov 28, the Commerce Department self-initiated a trade case for the first time since 1991 on Chinese common alloy aluminum sheet, triggering strong protests from China.

China’s Ministry of Commerce said the country will take necessary measures to ensure Chinese aluminum companies’ legal rights.

“And we intend to self-initiate more cases when that is necessary,” Ross said.

Ross said the US welcomes foreign investment on the same basis as domestic investment.

Chinese businesses have long complained that their investment in the US has often been overly and unfairly screened by the Committee on Foreign Investment in the United States, or CFIUS.

More deals have been stalled this past year as US lawmakers and the Trump administration plan to expand the scope of CFIUS, targeting primarily Chinese companies.

Gary Hufbauer, a senior fellow at PIIE and a former deputy assistant secretary for international trade and investment of the US Treasury, believes the ongoing CFIUS reform is going too far.

He argued last week that the ongoing legislation, known as the Foreign Investment Risk Review Modernization Act of 2017, “would expand government bureaucracy, hamper the global competitiveness of US corporations, and subject the process to unwarranted political considerations”.