‘Tweetable job announcements’ are not enough from China meetings

President Trump hosted his first meeting with Chinese President Xi Jinping at Trump’s Mar-a-Lago resort this past week. The Financial Times reported that Xi likely arrived bearing a package of investments that could result in “easily tweetable job announcements.” However, these investments are a “lose-lose-lose” for U.S. workers and the economy.

Foreign investment harms the U.S. economy in three ways: First, the inflow of foreign capital bids up the U.S. dollar, which reduces the competitiveness of U.S. manufacturing by making imports cheaper and exports more expensive. This will increase the U.S. trade deficit and reduce employment in U.S. manufacturing. 

{mosads}Second, foreign investment in the U.S. economy is dominated by foreign purchases of existing U.S. companies, which has led to layoffs or divestiture as these firms move operations overseas.

Third, U.S. subsidiaries of foreign multinational corporations have consistently run trade deficits in every year from 2000 to 2014, as shown in the figure below — contributing substantially to growing U.S. goods trade deficits, which are responsible for the loss of millions of U.S. manufacturing jobs over the past fifteen years.

While exports by U.S. subsidiaries of foreign multinational corporations did support some jobs, imports by those same firms eliminated substantially more domestic jobs. 

Trump should focus instead on addressing the causes of China’s huge, structural trade surpluses with the United States and the world as a whole. He should follow the advice given by Senate Democrats in a letter sent by Senators Baldwin (D-Wis.), Schumer (D-N.Y.), Stabenow (D-Mich.) and nine other members of the Senate on April 5.

They urged the president to make good on his campaign promises to get tough with China on key trade issues, such as China’s excess capacity and production in aluminum and steel, industrial espionage, and “to reaffirm the position of the United States that China is a non-market economy.” 

The United States should also clearly establish that China’s currency remains massively undervalued as a result of nearly two decades of currency manipulation, subsidies, dumping and other unfair trade practices, including the widespread influence of state-owned enterprises in core sectors of the economy.

Mr. Trump should insist that the time has come for a major currency realignment that would substantially increase the trade-weighted exchange rates of all the major surplus countries including China, Japan, Korea and the European Union. 

The U.S.-China summit was the first of several opportunities for Mr. Trump to demonstrate statesmanship by advancing the national interest in resetting U.S. trade and investment relationships with China.

He should ignore the temptations of tweetable deals that are offered by the Chinese and focus discussions on the big picture issues of excess production capacity, industrial espionage, non-market economy treatment and the need for broad-based currency realignment. 

It is time for the President to start keeping his promises to American workers.  

Robert E. Scott is the director of trade and manufacturing research at the Economic Policy Institute, a Washington, D.C.-based think tank with a focus on labor issues. 

The views expressed by contributors are their own and not the views of The Hill.