MTPR

Baucus: 'America First' Trade Policy Won't Work

Apr 6, 2018

How might the trade sanctions President Donald Trump is proposing for China affect Montanans? We put that question to former Montana Senator Max Baucus, who also served as U.S. Ambassador to China in the Obama administration. In October, Baucus joined former Republican Senator Richard Lugar of Indiana to form an advocacy group called Farmers For Free Trade, which represents the National Wheat and Corn Growers Associations, the National Pork Producers Council and the American Farm Bureau Federation, among others. 

Eric Whitney: I understand that the new policies are not in effect, but do you have a sense for if what President Trump is talking about does go into effect, how that will affect people in Montana?

Max Baucus: The Chinese tariffs are aimed primarily agriculture and aircraft, a third to a half are agriculture. Now, it's true a lot of those agriculture products are aimed at the midwest; soybeans, corns, hogs and so forth. But beef is included as well, that's a Montana product, clearly, and it's going to hurt.

EW: I know you disagree with what President Trump is saying about how the U.S. should change its trade policies with China, but do you agree with him that the Chinese are stealing U.S. intellectual property, and engaging in other unfair trade practices that the US really must take some kind of action to address?

MB: I think Trump is right in calling China out here. Certainly during my experience when I was representing the United States in China, I had a lot of complaints by American Companies. I mean, almost constantly. Trying to sell products in China, finding all kinds of barriers, a requirement that there be a joint venture, forced technology transfers, a lot of non-tariff trad barriers, rules and regulations put up, it's very difficult. There's no question it's a problem, it's a very major problem. And I think our past American efforts to deal with inadequate market access in China, and very discriminatory investment barriers in China, have not produced results because we've been pursuing them basically assuming that China is going to, you know, negotiate the same way we Americans do. That is, above board, with transparency and give and take back and forth. So I think Trump's right, he's absolutely right in trying to raise the stakes here in calling more attention to it. I just think he's going about it in the wrong way.

EW: Do you have specific policy ideas or trade practice ideas that you think will be a better alternative to what the Trump administration is proposing?

MB: Well first of all we have to have a plan. We have to have a strategic plan with respect to China. Once we've figured out what it is - what can we live with, with China, and what can not live with with respect to China? And when we decide what it is what we can live with, OK. When we find something we cannot live with we need to be very firm. The American president, whoever he or she might be, should then look President Xi directly, straight in the eyes and say: Mr. President, we cannot do this anymore. And if you proceed, you're going to face very strong actions, not telling you what they're going to be, but don't do it. We've done that a couple times in the past, once with banking regulations that China proposed a few years ago, the other is with actions they undertook in the South China Sea. So, first of all, we need a plan, and a plan that's developed with resolve, that's supported by the American people, by and large, that's supported by the Congress. We've not done that. Trump certainly has not done that. I don't think there's any agreement within the administration with what the US trade plan is, even on these tariffs, and that's short term. Second, we have to, wherever possible work with other countries. And we did that once when I was over there, and it worked. When China came up with these proposed banking guidelines.We Americans stood tall, we stood firm, but with other countries. China saw it could not divide and conquer. So, working together with other countries, working if possible within the WTO as well.

EW: As the immediate past US ambassador to China, has the Trump administration reached out to you to get your input on how the US should deal with trade policies?

MB: No. I wish they would. They haven't. No. I'd like to help.

EW: Do you think it's fair for people who are upset with the president's trade policies to be upset with him for Chinese retaliation? After all, isn't it the Chinese who are going to be doing the harm to our economy with these tariffs?

MB: Well, we're hurting ourselves, too. Don't forget President Trump is suggesting $50 billion worth of tariffs on Chinese products coming into the United States. American consumers are going to have to pay a lot more. There are secondary costs, supply chain costs are gonna go up. Some American manufacturers are going to have to charge more. Both sides are getting hurt on this. A deeper point here is, we do have time, during this 60-day window, for cooler heads to prevail. And that's where efforts should be made, both sides.

EW: As someone who's won five elections to represent Montana in Congress, do you think President Trump's actions on trade are making it easier for Jon Tester to win in November?

MB: Oh, gee. I'm not going to comment on political election. I think Jon is doing an excellent job. But I do think it's true President Trump's tariff actions are going to cause at least uncertainty, and maybe even more direct and deeper financial harm than would've occurred had he not taken these actions.

EW: You've said Americans shouldn't be "suckers," and shouldn't allow the Chinese to take advantage of us in trade. Do you think that happened during the Obama administration?

MB: I think it's happened to some degree over the last 20-30 years, with both Republican and Democratic administrations. That's a bit strong. The past several years we've kind of let China do its thing. But don't forget, there's a huge, powerful counter dynamic here, and that's American business. China is - they're very clever, they're very smart. They know, because they're the largest market in the world, American companies doing business in China, have to be in China. If a lot of American companies are not in China, they're going to lose out. They're gong to lose out at home, they're going to lose out to other countries; the EU, Australia, Canada, you name it. And China takes advantage of that, by saying, 'OK, you Americans, if you want to do business in our country, these are some of the conditions that you're going to have to agree to, which hurt Americans, but also help the Chinese counterparts in China.' So, we've gone along with that for a while, and now the time has come, you know, there's enough of that, and we've got to just stand up more, and more in a smart way, and that's going to take a lot of hard work on the part of our president. It must be a president that works together with people, not a divider. But works together with members of Congress and the other party.

I might add here, during the time I served over there, the most important geopolitical matter to cross my desk, was the Trans Pacific Partnership, where we Americans put together with Japan and 11-12 other countries in Asia, an extremely important trade agreement. It would have raised the standards of trade, raised environmental, labor standards, protected intellectual property. It would have very much helped the American economy, and it would have forced China to raise its standards up a little bit, too. When we withdrew from that, we very dramatically hurt ourselves. It was so important to me, I flew back to Washington, DC and met with 45 members of Congress two months before the election, Republicans, Democrats and I could tell of the top it was just so toxic, liberal Democrats were criticizing it, Trump was criticizing it. It was just going nowhere. But as a consequence, we've lost an opportunity to put together a good trade agreement with the countries over there, lost leverage with respect to our military over there, but third we lost a huge geopolitical edge over there. Those countries now are wondering, where's America? Does America care about us over here? And the signal is, meh, probably not. And China is stepping in and filling the void. So my point here is, you've got to get involved. It's tough. You've got to negotiate, fairly, but strongly, protect yourself. And go out in the world. America First policy is not going to work. Why? Because other countries are going to take advantage of it. China certainly is. Japan stepped in, and it's helping them tremendously.