February 05, 2024

Rep. Auchincloss: Select panel must sell idea of more trade with Global South

The economic and technological competition between the U.S. and China has two core elements, according to Rep. Jake Auchincloss (D-MA): Getting tougher on trade with China while increasing U.S. engagement with the Global South. And the House Select Committee on the Chinese Communist Party, he tells Inside U.S. Trade, must sell both to Congress.

During the first year of the House Select Committee on the Chinese Communist Party, Auchincloss has emerged as a vocal advocate for expanding trade. He voted against the adoption of the panel’s economic and technological recommendations in December; he and Rep. Dusty Johnson (R-SD) instead offered a parallel opinion. Auchincloss at the time said he voted against the recommendations because “threads of industrial policy and protectionism” ran “too strongly” through the report.

In their parallel opinion, Auchincloss and Johnson said they took issue with recommendations to establish a new tariff regime, use revenue from new tariffs to subsidize farmers and expand the authority of the Committee on Foreign Investment in the U.S.

In an interview late last week, the second-term congressman discussed that dissent from the panel’s consensus as well as his outlook for the select committee in 2024.

The panel, he told Inside U.S. Trade, should be looking to strike a balance involving restrictions on China and increased trade with developing countries. “My hope is that at the core of that entire economic agenda that this committee puts forward is a basic bargain,” he said: “Get tougher on trade and export restrictions and licensing restrictions with China and be more engaged with the Global South in exchange.”

Auchincloss described the U.S.-China competition as a disconnect between two operating systems. “There’s the United States’ operating system, which has rule-of-law, trade, investment, diplomacy, military dimensions to it,” he said. “The U.S. operating system has a host of institutions and norms and conventions that have been built up since World War II around it. And the Chinese Communist Party operating system at this point has the Belt and Road [Initiative], and it has the South China Sea militarization, and it has their axis of resistance and authoritarianism with Iran and Russia as its main components.”

“The U.S. OS has tons of advantages over the CCP OS, but we’re depriving ourselves of those advantages by flinching from trade and investment ties,” he added.

“What we need to be doing is competing for the Global South to plug into our operating system rather than to [China’s] operating system and that requires more engagement, not less,” he continued.

China’s courtship of Nigeria and Indonesia -- regional powers with young populations and important natural resources that are positioned for significant economic and technological progress in the coming years -- epitomizes why the U.S. must step up its engagement with the Global South, according to Auchincloss.

Nigeria is being courted by China through the promise of hard infrastructure projects, he said. “The United States needs more robust engagement with Nigeria to counter that. With a booming population that’s dynamic and entrepreneurial, we should be trading and investing with Nigeria because our operating system is much more compelling to their young population than the [CCP] operating system.”

When given the opportunity, Nigerians choose to emigrate to the U.S. instead of China, Auchincloss said. “That’s the core argument,” he said. “Our society is much more appealing to populations of the Global South than China’s is. And trade and investment ties help us to double down on that comparative advantage.”

Similarly, Indonesia has a fast-growing population and key natural resources, Auchincloss continued. It also is strategically positioned in the Indo-Pacific region, where maritime tensions are increasing, he noted. “But we don’t have -- and Australia has long urged us to -- a strong economic and investment strategy for getting Indonesia to plug into the United States’ operating system,” Auchincloss said.

The Biden administration’s Indo-Pacific Economic Framework for Prosperity is far from sufficient, according to the congressman. “IPEF is a PowerPoint slide,” he said. “It needs to have much more binding consequential commitments associated with it before it is a meaningful geoeconomic institution -- and that includes market access.”

Trade deals with market access are not in the cards, Auchincloss acknowledged, noting upcoming national elections. Absent traditional deals, Congress should take other steps like reauthorizing the Generalized System of Preferences, which provides favorable trading conditions for developing countries, he said. GSP expired at the end of 2020. The program has traditionally enjoyed bipartisan support in Congress.

“For 2024, I think the goal should be the reauthorization of GSP,” Auchincloss said. “I think that is the right first step for trade. I don’t think in 2024 people are expecting trade deals.”

Politics is the primary reason GSP has not been authorized and is also behind Congress’ inability to make progress on market-access-oriented policies, according to Auchincloss. “The major hangup is Donald Trump and the fact that he is campaigning on closing down America,” Auchincloss said. “He has rejected the basic post-war global order, the Pax Americana.”

The Republican party, he added, is “reconfiguring its principles and that’s highly disruptive.”

The Republican reconfiguration caused by Trump -- what Auchincloss described as the cratering of the Reagan wing of the party in favor of the MAGA faction -- is a core driver of instability to the global order.

The outcome of the 2024 presidential election could destroy the bargain Auchincloss wants the select committee to sell by ruining the American operating system, Auchincloss said. “The election of Donald Trump would be the implosion of the U.S. operating system and the de facto of primacy of the CCP OS,” he said.

‘Tough sledding’

The committee’s target audience, according to Auchincloss, is composed of his fellow lawmakers. “I view this committee as basically being a broader bipartisan launchpad that we then build bipartisan support for its recommendations within Congress,” he said. “Our audience is Congress.”

But Auchincloss acknowledged that getting members outside of the select committee on board with the balance he advocates -- increasing trade with developing countries and increased restrictions on China -- has been challenging. “It’s tough sledding,” he said. “I led a letter urging GSP authorization, bipartisan and signed by almost every member of the China select committee, and we’re still bogged down.”

“But this is the work that the committee needs to do is building support for both elements of the basic bargain,” he continued. In getting tougher on China, the committee must build support for the Leveling the Playing Field 2.0 Act, explain export restrictions on semiconductors to China and craft legislation to address TikTok and genetic gene harvesting by Chinese companies, Auchincloss said.

The committee must be “doing these very surgical things that reduce our liability relative to the Chinese Communist Party,” he said, while naming other steps Congress could take including “building support for Development Finance Corporation expansion, fixing equity scoring, reauthorization of GSP, and having [the U.S.-Mexico-Canada Agreement] have a dock-on principle and having more infrastructure investments in Africa” through the U.S. Agency for International Development.

“The committee’s job is to build support for both as part of the basic bargain,” he added.

Domestic investment

De-risking with China and increasing trade with the Global South should be happening in parallel with increased domestic investment, Auchincloss said. But investment, he clarified, does not mean industrial policy. “Instead of trying to close down and hunker down behind both oceans and rely on protectionism to shield our economy, we should be investing in our economy so we’re outcompeting on a level playing field. And that means better science and math and literacy education, that means higher-quality infrastructure from our ports to our railroads, that means rule of law in contract enforcement and intellectual property protections -- the basics.”

“I’m always a little impatient with Washington’s fixation on tech strategy, quantum or [artificial intelligence] and cyber,” he continued. “Those things matter, and we need to have a point of view and a plan. But what matters a lot more is how are 15-year-olds in America scoring on our math scores?”

U.S. students are losing ground compared to Chinese students, Auchincloss said, while China recently surpassed the U.S. in the publication of scientific papers.

The U.S. also is falling behind on infrastructure, he said. “How are our ports relative to Chinese ports?” he asked. “Not as good. What’s our shipbuilding capacity relative to Chinese shipbuilding capacity? It’s less. The basics -- let’s get the basics right.”

Auchincloss -- who supported the Chips and Science Act, which included billions of dollars’ worth of subsidies for semiconductor manufacturing and authorized research and development funding -- said he opposes industrial policy that is focused on particular sectors and corporate engagement. “I reject an industrial policy that is centered around specific sectors or corporate engagement,” he said. “Industrial policy, if you want to call it that, that I support -- I would just view it as economic stewardship -- ... is investing in people, education, science funding. It is upholding the rule of law … and it is high-quality infrastructure.”

By:  Brett Fortnam
Source: Inside Trade