“The US has a complicated relationship with China,” says National Council of Textile Organization (NCTO) president and CEO Kim Glas, kicking-off a live discussion on the ‘Progressive prescription for US-China trade’.
She claims China’s “predatory trade practices” and its accession to the World Trade Organization (WTO) over the last year has crystallised even more with the economic headwinds the Chinese economy is facing.
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“Unemployment in China is ramping up some of the predatory trade practices that are impacting industries in the US,” Glas asserts.
The WTO’s ninth review of the trade policies and practices of China, which took place on 17 July 2024, says China has remained an important driving force for global economic growth and argues its economy recovered well from pandemic-related shocks with its exports and imports continuing to increase.
It suggests the growth of trade in intermediate goods strongly outpaced the growth of merchandise trade in general, “indicating China’s further integration into international supply chains”.
The US and EU remain the most important destinations for China’s merchandise exports, according to the intergovernmental organisation.
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By GlobalDataBut, it also points out the EU and US, alongside the Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu (Chinese Taipei) and Japan, are its most important import sources too.
Ryan Mulholland, a senior fellow of independent nonpartisan policy institute Center for American Progress, suggests during the live online discussion that China deserves “some blame or even a lot of the blame” for “hollowing out” the US middle class and the US’ wider economy challenges.
He states: “China’s predatory non-market practices really put a dampener on US manufacturing.”
But, Mulholland continues: “Let’s not lose sight of the fact that we ourselves have had some pretty poor trade policy and industrial policy decisions over the last several decades.
“And those have had a pretty negative impact as well, so it’s about addressing China’s practices, but also improving the way we do things on our own.”
He makes the case that the US can’t expect China to change its ways, so the US needs to play both offense and defence with trade and industrial policy working together to have the biggest impact.
What is progressive trade policy?
Mulholland is an advocate for this kind of “progressive trade policy” and clarifies it’s defined as two things: First it’s viewing trade as a tool rather than a goal in itself: “Previous trade policy and neoliberal tradition is trade for trade sake. Progressives use trade as a way to advance the interests of workers and advance the interests of our communities, partners, allies and I would also add the climate as well.”
In addition to it being a better way of organising trade, he notes it’s also about linking trade to investments to boost the US’s own competitiveness: “Previous administrations have tried tariffs and corporate tax cuts, but this had limited impact in changing trade flows to the benefit of our workers. Progressives say that’s because in addition to those tools you also have to invest in your own country. That’s where all the investments in chips and semiconductors and science have come from and a lot of the investments through the Inflation Reduction Act (IRA).”
The impact is real and the US has seen massive amounts of investment flowing into US manufacturing for the first time in a very long time because of that, he says.
Progressives don’t think about trade policy in terms of trading market access in exchange for corporate profits nor is it in exchange for foreign policy benefits.
“We know the impact of that kind of neoliberal way of doing trade on workers, communities and across the country, and it wasn’t pretty. We have a different way of doing it,” he shares confidently.
Expanding US garment manufacturing opportunities
A report published earlier this year by the Center for American Progress titled ‘Trade: A Progressive, Principled, and Pragmatic Approach Toward China’ lays out a vision of what policymakers should be thinking about to expand opportunities in the US and to level the playing field for American workers and the US industrial base.
Glas says it highlights that certain defensive trade tools should be more easily accessed by impacted workers and communities.
The reality, she shares, is the tools in the toolbox are outdated for the time we’re living in.
“We should be getting rid of trade loopholes like the de minimis rule that give China free trade agreements to the United States and we should be doing everything in terms of effective enforcement on human rights. We also need to figure out solutions on climate change to address what I consider one of the worst heat waves ever to hit the US – we’re all living in that today,” she states.
In terms of manufacturing, she declares there’s no question that communities have been hollowed out that once were powerhouses. There are empty factories and in many of these communities the children now qualify for free breakfasts and school lunches.
Glas represents US domestic garment and textile manufacturing but she shares no industry is immune to global competition and the race to the bottom.
“We need to hold all predators and countries, including China, accountable when subsidies are being used to undermine our workforce and our people and we need to ensure the workforce of the future is still the manufacturing sector,” she insists, before adding: “You cannot have an industrialised economy, a modern economy without having a strong manufacturing sector here at home.”
Are tariffs the answer?
Center for American Progress senior fellow Dave Rank points out the Biden administration imposed 100% tariffs on some strategic Chinese imports in May and the Trump campaign is talking about 60% across the board minimum tariffs on Chinese goods and 10% tariffs across the board on any imported items coming into the US.
It begs the question are tariffs the right tool?
Glas thinks tariffs continue to be an important tool when used appropriately to help respond to so-called “predatory trade practices”.
She highlights it’s one of the few tools the administration has to play with, but quickly adds these tools do need to be modernised.
She also takes the opportunity to speak in more detail about the de minimis loophole where if a product is less than $800 it can be delivered to an end consumers’ home duty free and without any scrutiny on whether it might have links to forced labour.
“We have this great law, the Uyghur Forced Labor Prevention Act, yet if you send a product in a little box on an international mail shipment, it can arrive duty free without scrutiny and doesn’t have to pay any of the penalty tariffs, the 301 tariffs or any tariffs whatsoever.”
So, she continues: “It’s one thing to have tariffs alone, but it’s another to ensure the effective enforcement of the rules that we have.”
Glas describes de minimis as “archaic” because it was created in the 1930s for a family member to go abroad and bring back a souvenir without having to pay a tax or tariff on it.
How de minimis is undermining US free trade agreements
Fast forward to today where it’s being used on goods bought online and instead of it’s original intention, she claims it’s facilitating products potentially made from toxic substances or items potentially made from forced labour.
She insists de minimis undermines everything the US is trying to achieve with its free trade agreements and trying to have a US worker-centric approach.
It needs to be abolished “immediately” and she points out it’s not hard to do as both the administration and US Congress are able to address it, plus she notes it isn’t a bi-partisan issue, it’s a US-wide issue as it’s hurting industry and costing jobs.
Glas uses the apparel and textile industry as an example for this, stating: “It has survived the great depression and the great recession, but the sector is not surviving this.”
Rank understands there’s legislation moving in Washington right now on de minimis and asks what the prognosis is for it by the end of the year.
Glas clarifies the House did make a first step on de minimis legislation so that any item with a trade penalty on it, like a 301 tariff would not qualify for de minimis treatment, which she describes as “a step forward”.
It’s clear everyone agrees de minimis is outdated, but what is the solution?
Mulholland says bluntly: “Pretty much all of our major tariff trade remedy tools date from the 1960s and 1970s and some earlier in the case of de minimis. It’s like we are fighting a modern great power like China with outdated technology. Modernising the toolkit to better reflect the needs of the modern economy is a big deal for building our competitiveness.”
He emphasises that since the 1960s and 1970s supply chains have become much more interconnected and it’s not just finished goods moving between borders. The materials, component parts and know-how all move back and forth across multiple borders many times before a product is destined for a consumer market, so he states: “The trade tools are just not aligned to what’s needed in the modern world”.
He points out that at the moment tariffs are assessed on the final good that arrives at the border and not what it’s made from, so should we be putting tariffs on the embedded emissions of a product for example, given the impact of climate on the whole economy, he asks.
He also questions the market failure being remedied. Most tools view success as a domestic manufacturer being able to sell at price parity with some sort of subsidised or predatory import.
But, he declares: “The reality is the market failure is often much broader than a company’s ability to sell at price parity. There could be lots of laid off workers, trainings needed to prepare the affected company to be able to not just survive, but out compete and grow against foreign competitors going forward.”
He believes we need to take a more holistic view of what the market failure is that we’re trying to remedy with some of the trade tools, as crucially he states: “The goal is not for a company to barely survive, but for it to be able to out compete its competition going forward.”
This requires investment, building out competitiveness, training workers and expanding factory floors so companies are more prepared to win going forward.
Glas says the key question is how can the US help to ensure its industries not just remain, but have opportunities to grow with next generation technology and research and development, so how can we capture market share from places like China?
She accepts the apparel industry does need to have a relationship with China, so it’s not about decoupling altogether but it is about de-risking, making sure assets are protected, and being able to serve the US market.
And lastly, she adds: “We have free trade agreement partners right at our border – Mexico, Canada, Central America – these are duty-free destinations to the US market so this gives consumers and importers opportunities to source more from other areas of the world.”
How can fashion companies help with US trade relations with China?
Glas believes US businesses, including global fashion companies that operate in China have significant leverage, especially if they are investing in plants and facilities and expanding their China operations.
But Mulholland argues: “Multinationals and big corporates have a fiduciary responsibility to their shareholders, not to the US government and not to their workers.
He explains: “We can argue about whether that’s appropriate or not, but it’s just the way it is, so, if you want corporations to make different decisions then you have to make the incentives different to what they currently are. And that’s where I think using the full complement of tools available to make it in their own interests to invest in the US, hire more US workers and pay them more. It’s all about putting in place the incentives that will push them towards that.”
In other words, he continues: “It means having trade policy, investment, procurement, regulation and tax policy – taking that whole suite of tools and making sure the incentives are in the right place.”
