- By Mark R. KennedyMark R. Kennedy is president of the University of North Dakota, author of "Shapeholders: Business Success in the Age of Activism," a member of the Council on Foreign Relations, and chairman of the Economic Club of Minnesota. He previously served three terms in the U.S. House of Representatives, was senior vice president and treasurer of Federated Department Stores (now Macy's), was a member of the Advisory Committee on Trade Policy and Negotiation under Presidents George W. Bush and Barack Obama, and led George Washington University’s Graduate School of Political Management.
Transformations sometimes emerge from the most unlikely of sources. The phrase “Nixon goes to China” heralded the surprise outreach by a president who had been China’s staunch critic. Hopefully President Donald Trump’s recent meeting with Chinese President Xi Jinping and his acceptance of Xi’s invitation to visit China marks the beginning of a similar metamorphosis. Past administrations have made progress in enforcing trade rules with China, but not in convincing the American public of their effectiveness. Perhaps Trump can convince Americans we are achieving progress, thereby permitting a more constructive path on trade policy.
Getting “tough on China” was not invented by the Trump administration. As President Barack Obama said in September 2016 when filing a World Trade Organization (WTO) complaint, “This is the 14th WTO case we’ve launched against China since I took office and the 23rd overall, and we’ve won every case that’s been decided.” The tough enforcement I witnessed as a member of a presidentially appointed trade advisory panel during the presidencies of George W. Bush and Obama seem to have escaped public view. Hopefully Trump has better luck.
The Trump administration is correct in concluding that current WTO agreements are insufficient levers for opening up China. But talk of bypassing the WTO would only be of strategic value if it were merely a tactical maneuver to strengthen the global trading system. Arguably nothing has done more to avert not just trade wars, but wars themselves, than the WTO’s globally acknowledged dispute resolution mechanism.
The Trans-Pacific Partnership (TPP) would have established a higher benchmark, including on state-owned enterprises, which would have pressured China to accept a higher standard. Commerce Secretary Wilbur Ross says he will “reexamine” his approach if there is no progress with China in 100 days. Any reexamination should include reconsidering the TPP or advancing a comparable effort. Otherwise, talk of progress with China would be just that — talk.
Yet even talk by Trump could be valuable if it convinces the American people to stop channeling all their economic frustrations against efforts to legitimately address them by enacting trade agreements beneficial to American workers. When I was one of the deciding votes in Congress in support of the Central American Free Trade Agreement, nearly everyone who expressed opposition began by mentioning China, even though it was not a party to the agreement. What makes this myopia more concerning is that it fails to recognize how such agreements strengthen our North American economic zone in its competition with China.
The talk has indeed begun. Commenting on the summit, Ross claimed that China had expressed for the first time in bilateral talks an interest in reducing its trade surplus with the United States in order to minimize impacts on money supply and inflation, while Trump opined, “lots of very potentially bad problems will be going away.”
Yet businesses must not outsource the task of renewing America’s faith in markets to any administration. They must not only become adept at engaging the non-market actors that shape individual opportunities and risks (what I call shapeholders), but also social attitudes that shape the environment for all businesses. It is in their best interest for more people to understand that the primary culprits for economic pressures on the middle class are advances in productivity-enhancing technology and the spread of globalization, neither of which are reversible.
Businesses must help the public understand that lower barriers to American products being sold overseas is a solution, not something to be demonized. They must educate not just members of Congress when a trade vote is pending, but their own workers on a continuous basis. Why not disclose how much of each worker’s paycheck is a result of trade, as former United States Trade Representative Carla Hills has long advocated? Why not host a picnic for employees at the point in the year marking the proportion of production exported?
If businesses hope to reverse poisonous attitudes towards trade, they must more aggressively push for actions that truly address economic angsts, including tax reform that levels the playing field for job-creating small businesses that can’t afford legions of lawyers and accountants to access loopholes, increased investment in lifelong learning to keep workers of all ages prepared for today’s economy, and enhanced encouragements to save for retirement.
When Trump goes to China, he could surprisingly catalyze a re-embrace of America’s free enterprise heritage. This will only happen if American businesses step up to both more aggressively make the case for markets and to make markets work for all Americans.
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