One of the world’s superpowers is in trouble — economically, politically, socially. Its manufacturing industry is hurting. Businesses are reluctant to make investment decisions, thanks to arbitrary and capricious regulators. Corruption scandals abound. The country is drowning in debt. Social unrest is brewing, as is a pernicious fear of foreigners. Some argue the country’s very sovereignty is being threatened.
Fortunately, President Trump and his Republican congressional allies are working hard to turn things around.
That’s right: They’re doing their best to Make China Great Again.
What, you thought I was talking about the United States?
Nope. China has faced some challenges over the past several years. But on multiple fronts, unified Republican leadership in Washington is making life easier for Beijing.
Take, for example, the Trump administration’s decision to pull out of the Trans-Pacific Partnership, the 12-country trade pact that excludes China.
The treaty, the centerpiece of President Barack Obama’s “pivot to Asia,” set new standards for environmental and labor laws. It also was an explicit attempt to prevent China from writing “the rules of the road” for international economic policy, given that China has been simultaneously shaping a separate 16-country Pacific trade deal that the United States isn’t party to.
In killing our participation in the TPP (not to mention picking an unnecessary fight with Australia, one of our most important allies in the Pacific), Trump boosted China’s effort to set the global economic agenda.
Not content to cede only economic influence to China, the White House has also signaled its intention to take a more laissez faire approach on international moral leadership.
Both Trump’s insular “America First” rhetoric and Secretary of State Rex Tillerson’s confirmation hearing testimony indicate a reduced interest in promoting human rights abroad. This is excellent news for China. It has an abysmal record of jailing, torturing and denying medical care to dissidents — and telling the United States to butt out whenever we suggest it treat its people better (or that it stop doing business with perpetrators of genocide).
Trump could always change his mind and decide to be more vocal about China’s (and other countries’) human rights abuses. Even if that happens, though, he’ll have little moral high ground to stand on, given his public backing of torture and other war crimes.
Sure, Trump has otherwise pledged to be “tough” on China. His chosen strategy early on was to threaten the long-standing U.S. commitment to a one-China policy, the diplomatic recognition of only one country called China, headquartered in Beijing.
Trump first signaled his willingness to chuck this precedent when he took a congratulatory call from the Taiwanese president in December, the first known contact between leadership in Taiwan and a U.S. president or president-elect in some 40 years. In subsequent days, he suggested that he, a world-class negotiator, would use the one-China policy as a bargaining chip to extract painful concessions from Beijing.
“I fully understand the one-China policy, but I don’t know why we have to be bound by a one-China policy unless we make a deal with China having to do with other things, including trade,” he told Fox News.
Less than two months later, Trump backed down, unequivocally pledging his commitment to one-China after all.
What did our great dealmaker get in return? Nothing — or nothing public, anyway. Beijing must be pleased as punch.
The last way in which U.S. politicians are doing China a solid is the least well-known, because it’s somewhat technical. But it’s potentially the most valuable of all these giveaways.
It has to do with a proposed change in tax policy called a “border adjustment tax.” U.S. companies no longer would have to pay taxes on money they earned from exports, though in return, they would no longer get to deduct spending on imports.
Republicans and many economists have argued that the tax wouldn’t hurt importers (or help exporters) because foreign exchange rates would quickly adjust. That is, the value of the dollar would increase by about 25 percent, making imports cheaper and exports more expensive, and thereby offsetting the changes in the tax code.
An increase in the value of the dollar by 25 percent, however, would have another, underappreciated effect: It also would make dollar-denominated U.S. debt held by foreigners 25 percent more valuable. And China holds $1 trillion in U.S. debt. That means that if exchange rates adjusted as predicted, a border adjustment tax would hand China a multi-hundred-billion-dollar windfall. All for free!
Think of how that money could be used to help all the forgotten, hard-working people of the Chinese heartland.
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