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Members of the US House select committee on China debated trade policy on Thursday. Photo: AFP

Divide grows in Washington over US-China trade, as hawkish bipartisanship starts to crack

  • At the latest hearing of the House select committee on China, Republicans argue for decoupling while Democrats contend the move would hurt American businesses
  • ‘We’ve got to stop everything going to China; if we don’t they use everything against us,’ one panel member says

US lawmakers’ debate over how best to handle the US-China economic relationship was on full view at a congressional hearing on Thursday, with many Republicans arguing for a complete decoupling while some Democrats contended such a move would weaken American companies.

Representative Blaine Luetkemeyer, a Missouri Republican, took aim at Thea Rozman Kendler, assistant secretary of commerce for export administration, during her testimony before the House select committee on China.

Luetkemeyer suggested that approvals for exports to Chinese companies including Huawei Technologies, along with the long-running US trade deficit with China, helped Beijing “build detention camps against their own people, subsidise their industries against ours and build up their military”.

“We’ve got to stop everything going to China,” Luetkemeyer said. “If we don’t, they use everything against us, and your willingness to continue to play games with them and be a partner with them endangers us down the road.

“When they overtake us [economically], we’re done,” he added, citing a Goldman Sachs estimate that China “will finally be able to overtake the United States within the next 10 years”.

US Representative Blaine Luetkemeyer, a Missouri Republican, during the hearing of the House select committee on China on Thursday. Photo: C-Span

“They will be able to dictate all sorts of things to all their economic partners around the world.”

Kendler contended that the Commerce Department had taken “a litany of steps … to make sure that the Chinese government” did not gain “technology that they can use to threaten US national security interests”. She cited the restrictions on the export of “dual-use civilian technologies by the military”.

The rhetorical battle over US trade and investment with China underscored a growing divide on Washington’s approach to Beijing, one of the few fronts on which the two parties have increasingly converged in recent years.

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Republicans have seized on a recent resumption of dialogue between high-ranking officials in US President Joe Biden’s administration – including Secretary of State Antony Blinken and Treasury Secretary Janet Yellen – and their counterparts in Beijing, characterising these efforts as appeasement.

As Kendler did on Thursday, the Biden administration often touts restrictions it placed last year on exports of the most advanced semiconductors and their production equipment to China.

But Republicans have cited statistics showing high rates of approval for US exporters seeking permits to sell such items to the country.

Thea Rozman Kendler, assistant secretary of commerce for export administration, during the hearing on Thursday. Photo: C-Span.
Earlier this year, Under Secretary of Commerce for Industry and Security Alan Estevez told the House Foreign Affairs Committee that the department and other government agencies approved about 70 per cent of export licence applications involving China in 2022.

Representative Jake Auchincloss, a Massachusetts Democrat, sketched the administration’s position on trade and investment with China by leading Kendler through a series of questions, all of which she answered positively.

Could trade with China “give America incorporated scale economies, especially for high fixed costs, low marginal cost industries like biopharmaceuticals or semiconductors or telecoms, so that we can invest more in R&D here”?

Could such trade allow the US industry “have standard-setting and other soft-power prerogatives”?

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Might it help “prevent Chinese dominance of large internal markets in a way that would give them that standard setting and soft power”?

Yet not all Democrats completely disagreed with the hawkish assessments by Luetkemeyer and other Republicans that trade with China undermines American interests.

Representative Ro Khanna of California, whose Bay Area district includes Silicon Valley, called the offshoring of manufacturing to China and the resulting growth in US bilateral trade deficits “a bipartisan mistake for 40 years”.

However, Khanna said, addressing the problem should start with efforts to bring steel, aluminium and other “critical industries” back to the US.

US Representative Jake Auchincloss, Democrat of Massachusetts, essentially laid out Biden administration arguments in his questioning of Kendler. Photo: C-span

“We said we’re going to do all the invention and we’ll do all this stuff in Silicon Valley,” he said. “You go to places like Lordstown, Ohio, and they’re hollowed out.

“If I was there, I’d be terribly upset at failed American leadership for 40 years while we just watched as steel left, as aluminium left.”

The hearing Thursday was the committee’s third public event in a week that included economic disengagement from China as a focal point.

On Wednesday, it hosted a debate with four experts on whether the US should revoke China’s permanent normal trade relations (PNTR) status.

PNTR, a US legal designation for most-favoured nation status, was granted to China by then-president Bill Clinton in 2000, letting the two sides align their bilateral trade relationship with the rules of the World Trade Organization, which China acceded to the following year.

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While one side argued for ending PNTR to eliminate incentives for companies to source from China, the other contended that revoking the status would raise taxes on American consumers and lead to retaliatory measures from China without bringing manufacturing jobs back.

In light of the debate, committee members appeared to be considering relatively moderate changes to the status quo.

One “middle path”, as Auchincloss called it, included reauthorising the generalised system of preferences, a trade programme that provides duty-free treatment for certain US imports from developing countries. Auchincloss said it could help reduce the US trade deficit with China.

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