China is not willing to play by free-market rules, so the United States should adopt a new, tougher strategy that allows higher import tariffs and other measures to prevent reliance on Beijing, said a House select committee on Tuesday. In anticipation of retaliation, the committee said, the government should look for alternative markets for U.S. food and ag exports, and Congress should consider a new round of trade-war assistance for farmers and ranchers.
The House Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party also recommended that the Agriculture Department should become a voting member of the powerful Treasury-led committee that decides whether to allow foreign investment in America. The USDA role would be limited to transactions involving farmland and agricultural technology.
China is the No. 1 market for U.S. food and ag exports. This year, its purchases would account for 17 cents of each $1 in overseas sales. Beijing targeted U.S. ag exports for high tariffs during the Trump-era trade war and slashed its purchases to $10.1 billion in fiscal 2019, equal to 7 cents of each $1 of ag export revenue. The White House sent $23 billion to farmers in aid during the trade war.
“For a generation, the United States bet that robust economic engagement would lead the Chinese Communist Party (CCP) to open its economy and financial markets and in turn to liberalize its political system and abide by the rule of law,” said the select committee in a report. “Those reforms did not occur….In response, the United States must now chart a new path that puts its national security, economic security, and values at the core of the U.S.-PRC [People’s Republic of China] relationship.”
Committee leaders said there was bipartisan support for the nearly 150 recommendations in the report to reset economic relations, limit access by China’s defense industry to U.S. capital, and strengthen economic ties with allies to reduce reliance on Chinese products.
The committee said it spent a year in “investigating the CCP’s decades-long campaign of economic and technological warfare.” Witnesses at committee hearings called for stronger tools to prevent China from exploiting U.S. markets, “including by revisiting the PRC’s permanent Normal Trade Relations and returning to annual renewal.”
Congress should “defend America from PRC retaliation and prescribe allowable uses for revenue raised from increased tariffs to advance American national security and competitiveness and to expand American market opportunities,” said the report.
“In anticipation of PRC retaliation, the U.S. Department of Agriculture (USDA) and USTR [U.S. trade representative’s office] should collaborate to determine alternative market access for agriculture exports that predominately rely on the PRC market and offset the adverse effects of PRC retaliation,” it said. “Congress should also consider additional appropriations to offset retaliation for farmers and ranchers, U.S. exporters, and other American workers. A broader strategy must also be developed to support workers to prepare for a period of increased trade tensions and uncertainty.”
Biden administration officials said the newly created Regional Agricultural Promotion Program will focus on developing nontraditional and growth markets as a way to diversify and stabilize farm exports. At present, China, Mexico, Canada, and the EU generate $6 of every $10 in purchases. During the trade war, Trump officials spoke of the need to find alternative markets, but it was hard to readily replace China, the world’s largest importer of soybeans and cotton.
A number of lawmakers have suggested, as the committee did, that the USDA should have a formal role in the Committee on Foreign Investment in the United States. Legislation also has been proposed to ban ownership of U.S. agricultural land and companies by China.
The select committee’s report was available here.