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Who Reined in the China Committee’s Trade-War Proposal?

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Congress’ China hawks are meeting rare pushback in their campaign to crack down on Beijing — farm district Republicans and agriculture lobbies increasingly alarmed that Congress might just blow up American farmers’ largest export market.

Lawmakers and influential agriculture lobby groups led a campaign to soften the language in a high-profile new report this week from the House Select Committee on the Chinese Communist Party, prompting the panel’s leaders to pull back from an explicit call to revoke normal trade status for China — a move that would likely mean significantly higher tariffs on a wide swath of Chinese products.

Rep. Mike Gallagher (R-Wis.), the influential China hawk who heads the China Select Committee, acknowledged to reporters Tuesday that there was “robust debate on this issue.”

The dust up over the report language highlights how, despite general agreement on the need to be “tough on China,” the GOP and Congress remain deeply divided on the policy specifics as they gear up for the 2024 election.

Republicans, in particular, remain at odds over how to confront Beijing, especially when it comes to the risks for U.S. farmers and rural communities — a key GOP constituency. Some rural Republican lawmakers have already raised concerns about former President Donald Trump’s plans to slap new tariffs on China if he’s reelected next year, which they warn could lead to a new wave of Chinese retaliation on U.S. exports. But they and other business-friendly lawmakers have largely raised those warnings in private, wary of being painted as soft on China by members of their own party.

Gallagher told reporters the final report gave a nod to members who had concerns about issues like the “potential retaliation by China against American farmers,” of which he added, “we have to take that threat seriously.” Ultimately, Gallagher said, lawmakers “landed on” text that “at a minimum recognizes that the status quo hasn’t worked.”

As word began to circulate that the Select Committee might recommend a repeal of China’s Permanent Normal Trade Relations designation, enacted more than two decades ago to lower American tariffs on China, concerned Republicans quietly joined together with several Democrats who voiced their own reasons to push for revisions. They argued such a drastic step would have catastrophic consequences, especially for U.S. farmers and rural communities. The lawmakers, including ag district Republicans Dusty Johnson of South Dakota and Darin LaHood of Illinois, along with Democrats Jake Auchincloss of Massachusetts and Ritchie Torres of New York, managed to secure small changes to the trade language, which essentially made it palatable enough for some, though not all, of its critics.

“I do have concerns about going down a protectionist path, particularly as it relates to agriculture,” LaHood cautioned during a public meeting of the panel Tuesday where lawmakers unveiled the report. But both he and Johnson ultimately said they were pleased with the changes and voted to support the report and its recommendations.

Johnson, like LaHood, argued during the Tuesday meeting that the committee “could have made an error” in its recommendations, but noted “important tradeoffs” made by Gallagher and ranking member Raja Krishnamoorthi (D-Ill.). He also called for an ultimate trade policy that “furthers fair markets, rather than holds them back.”

Auchincloss and Torres opposed it.

The pushback among Democrats and farm state Republicans was so intense that Krishnamoorthi, the lead Democrat on the committee, argued that the panel was not actually recommending a repeal of China’s normal trade status, despite the report’s explicit recommendation to rethink tariffs on China.

“We’re not calling for a repeal of [permanent normal trade relations],” Krishnamoorthi told reporters after the vote.

Instead, he and Gallagher said, the report recommends devising a new tariff structure for China that would allow lawmakers to vote each year on tariff levels for a variety of goods. Though that would mean that China is definitionally not under “normal” trade relations enjoyed by U.S. allies, the lawmakers still argued that the suggestion would not amount to them repealing Beijing’s trade status themselves.

“One could argue that the era of [normal trade relations] status has pretty much been over since Trump levied his [Section] 301 tariffs” in 2018, Gallagher said. “We’re getting Congress back into the game and allowing Congress to have a voice in it with what would be an annual vote.”

That explanation raised eyebrows among some committee members who worried the reworded recommendation would still require Congress to end normal trade status — regardless of what Trump did before.

“We did our best to moderate the language, to water down the language,” Torres said in a brief interview. “But it remains alarmingly vague, so it gives me pause.”

Gallagher argued the report, which contains nearly 150 bipartisan recommendations for Congress to legislate next year, will help “reset” America’s relationship with China and “prevent the flow of American capital and technology from supporting its military advances and human rights abuses, and build collective economic resilience in concert with our allies and partners while ensuring American leadership for decades to come.”

United Steelworkers and other key groups from sectors that have suffered for decades from China’s unfair trading practices wholeheartedly applauded the effort to crack down on Beijing.

And Trump’s former trade representative and current campaign adviser Robert Lighthizer praised the panel’s finding that “giving China most favored nation treatment for trade 23 years ago was a tragic mistake,” adding the committee’s call for higher tariffs on China was “an historic event.”

But many agriculture groups and key retail and business groups remained alarmed, even as they reiterated their criticism of China’s trade practices and unfulfilled promises of reform.

Charles Freeman, senior vice president for Asia at the U.S. Chamber of Commerce, said that while China’s “unfair trade and economic practices deserve criticism and a strong policy response … a de facto repeal of PNTR is a blunt instrument that would heap high costs on American families and businesses without achieving its intended goals relating to supply chains.” Freeman noted, in particular, that the move would “inflict heavy losses on American farmers and ranchers in heartland states, U.S. manufacturers of all sizes, and families struggling with high prices.”

The Retail Industry Leaders Association took a similar line, saying it supported holding China accountable, but repealing China’s permanent normal trade status “will only harm U.S. businesses and invite retaliation from China.”

The leaders of top agriculture trade associations were among those actively pressing members of Congress to oppose such a move, according to two people familiar with the conversations who were granted anonymity to discuss private conversations.

More than a dozen influential ag organizations, including the American Soybean Association, Farmers for Free Trade, the National Corn Growers Association and the U.S. Dairy Export Council, also sent a letter to Gallagher and Krishnamoorthi warning that such a move would “open up U.S. farmers and ranchers to immediate, additional retaliation,” similar to Beijing’s tariffs amid Trump’s trade war, which U.S. soybean and other key commodity farmers are still reeling from.

Some farm state Republicans have acknowledged it’s important to diversify U.S. agricultural export markets going forward, but for now, the American agriculture sector remains reliant on China, which is, a major importer of U.S. soybeans, corn, pork, dairy and other key products that serve as the foundation of the U.S. farm sector.

“The sheer scale of the Chinese market is hard to replicate,” Rep. Jim Baird (R-Ind.) said during a House Agriculture Committee hearing this summer.

There are, however, some Trump-aligned farm state Republicans who argue Beijing’s economic coercion must be countered at any cost.

Sen. Josh Hawley (R-Mo.) has repeatedly tried to attach language to alter U.S.-China trade relations to any must-pass legislation this Congress. Hawley’s proposal would revoke China’s normal trade relations status and slap new 25 percent tariffs on Chinese imports as long as the U.S. has a trade deficit with China.

In an interview with POLITICO this summer, Hawley noted agriculture is a major industry in his state and he comes from a family that raises corn, soybeans and wheat.

“I can guarantee you we would take care of agriculture,” Hawley when asked about the potential fallout for American agriculture — possibly signaling support for additional bailouts akin to the more than $20 billion in payments the Trump administration funneled to farmers hit by tariffs. “But the bottom line is we have got to end these giveaways to China, and we have got to end the trade deficit with China,” Hawley said.

Source : POLITICO

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