WSCRC

Washington State China Relations Council

WSCRC Welcomes Phase One Trade Deal with China

The Washington State China Relations Council welcomes the signing of the Phase One Trade Deal with China. The Council sees the agreement as a modest step in getting the two economies back to business, however, the deal does not address the underlying issues of conflict between the two countries.

Under the terms of the agreement China has pledged to purchase $200 billion of US products along with commitments to address intellectual property and currency concerns as well as to improve market access in sectors such as financial services.  The US will cancel tariffs that had been scheduled to be enforced on Dec. 15, 2019 and cut in half a previous round of 15 percent tariffs on $120 billion worth of products.

Key issues, such as subsidies and industrial policies were not included in this agreement and remain major sources of friction between the two countries.  These issues will supposedly be tackled in the Phase 2 discussions which have yet to be scheduled.

WSCRC will host an event “Unpacking the U.S. – China Phase 1 Trade Deal” on February 6th in Seattle to exam the newly signed agreement and to outline opportunities for Washington State Companies. Please REGISTER HERE.

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WSCRC Comments on U.S.-China Phase One Deal

The WSCRC welcomes today’s announcement by the U.S. and Chinese Governments of a “Phase One” trade agreement between the two countries, putting a temporary pause to the trade war. The agreement covers issues that have been at the center of the trade negotiations, including intellectual property, forced technology transfer, agriculture, financial services and the currency and foreign exchange. Under this agreement, the U.S. would remove new tariffs on $156 billion of products that are scheduled to take effect this Sunday and would also reduce the tariff rate on roughly $120 billion of goods from 15% to 7.5%. China, in turn, would also remove tariffs and purchase agricultural products from the U.S., but the Chinese government has not yet disclosed the scale of the tariff reduction or purchase amount.

We believe the resumption of trade with China across many product categories will be beneficial to businesses in Washington state. We look forward to reviewing the details of the agreement and will comment further when they are available.

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WSCRC Shares Opinions on U.S-China Trade War on Seattle Times

4 Steps for Trump Administration to Resolve the China Trade War

By: J. Norwell Coquillard

Published online on Seattle Times September 12, 2019

The future of U.S.-China relations is critical to the economic well-being of Washington state. China is our state’s most important export destination, source of investment, and trade and commercial partner. The members of the Washington State China Relations Council are deeply concerned with many of the issues and grievances underpinning the current impasse between our two countries. However, we fundamentally disagree with the approaches being taken to address these challenges and the long-term trajectory of the U.S.-China relationship.

China’s economic importance to Washington state cannot be overstated. In 2018, Washington exported $14.3 billion in goods there, including aircraft, medical devices, cherries and machinery. China is also a vital market for many of our state’s leading software, technology and professional-services firms, as well as a leading source of foreign students, tourism spending and investment.

Washington’s ports handled 15.5 million metric tons of cargo to and from China in 2018, although this was down from 25 million metric tons in 2017. More than a third of all containers handled in Washington arrive from or are heading to China. Our state’s global trade and supply chain management system directly employs nearly 100,000 workers in such fields as stevedoring, intermodal and transloading (transferring a shipment from one mode of transportation to another), warehousing, logistics and trade finance.

There are no true winners from a trade war, and Washington is a case in point. China’s retaliatory tariffs weaken the competitiveness of Washington products exported there, hurting our businesses, farmers and workers. Through the first half of 2019, products shipped from Washington subject to China’s retaliatory tariffs were down 31% year-over-year by value, while imported and exported cargo handled at our ports subject to tariffs from either side were down 22%.

Despite the dire state of our trade relationship with China, there is a constructive way forward.

• First, the U.S. and Chinese governments should immediately resume trade talks, and negotiators should come to a resolution on reducing barriers to trade and strengthen provisions that enable businesses to compete in a fair and transparent manner.

• Second, move forward with a positive, incentive-laden framework and set of milestones that effectively address the challenges at the core of trade tensions. The current administration’s approach has thus far been entirely punitive. However, Chinese leaders cannot, and will not, be viewed as capitulating to foreign demands.

Instead, we believe that solution-oriented approaches that establish a framework with the highest standards for trade and enforcement will provide a more constructive, long-term solution. An example of this is the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, the 11-country trade pact that established universal rules of trade, including strong provisions on intellectual property protection and state-owned enterprises.

The administration’s decision to withdraw the U.S. from the predecessor TPP agreement not only deprived U.S. farmers, producers and consumers from the benefits of the agreement, but eliminated one of the strongest points of leverage for the U.S. and its Asia-Pacific partners to encourage China to step up its market opening and reforms.

• Third, the U.S. must leverage our allies more effectively. Multilateralism is a proven strategy for inducing positive behavior and providing constructive pressure on China. We can work with our allies to identify practices and rules of engagement we expect from China, and thus more effectively hold them accountable.

• Fourth, and most important, define what a successful trade deal looks like. Any subsequent negotiations and resulting Chinese behavior should be evaluated based on this measuring stick.

The relationship between the U.S. and China is, and will continue to be, the most important geopolitical relationship of the 21st century. The council and its members stand ready to support our Congressional delegates and other leaders as a resource and partner. The future health of this relationship matters significantly for Washington state businesses, communities and workers.

The Washington State China Relations Council is the nation’s leading statewide organization dedicated to promoting stronger commercial, educational and cultural engagement with China. The council’s members, comprising more than 100 companies, civic organizations and individuals in Washington state, believe that increased trade, economic cooperation and business activity will lead to greater prosperity in both countries and provide a platform to enhance mutual understanding between the two nations.

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The Tariff Battle With China Threatens Washington’s Well-Being

By:  Spencer Cohen

Published online on Seattle Business Mag, August 2019

A prolonged trade war would devastate Washington’s economy

If left unchecked, the trade war between the U.S. and China has the potential for long-lasting damage to the Washington state economy. U.S. businesses have many legitimate grievances toward China, including intellectual property theft and industrial policies that seemingly disadvantage them in China. But the longer the dispute remains unresolved, the greater the risk to Washington’s historically prosperous trade relationship with China. Trade wars, as a general rule, yield no true winners. The collateral damage — in terms of lost overseas market share, aggravated supply chains, a reduction of cargo handled at our ports, reduced investment, and impacts to households in the form of higher costs — can be pernicious.

China is Washington’s most important export market. In 2018, after removing some pass-throughs such as soybeans, Washington state exported $14.3 billion in goods to China, of which $11.4 billion were aerospace products, defined largely by Boeing aircraft. Between 2011 and 2018, Washington cumulatively exported, in 2018 dollars, more than $106 billion in goods to China. The sales help drive economic growth across the state, bringing in new capital that is further spent throughout the economy.

Exports also aren’t just about aerospace. In 2018, Washington exported to China $364 million in ultrasound equipment, $70 million in wheat, and $68 million in cherries, as well as various other food, materials and machinery. Add to all of this the many billions of dollars in services exports, including software royalties, foreign student tuition and related expenses, tourism spending, and various professional services such as architecture design and engineering projects.

Many of the new tariffs have yet to fully materialize, according to the latest U.S. Customs data. Overall exports to China, adjusted for inflation, fell by just 1%. However, products subject to China’s list of 6,000 retaliatory tariffs experienced an inflation-adjusted 7% decrease year over year in 2018. Some of the biggest declines were in frozen potato products (23%), rough wood products (50%) and cherries (30%). There are many factors shaping export flows, but tariffs no doubt have a negative impact. Products included on China’s full retaliatory list support 29,000 jobs statewide, including direct employment and through multiplier effects.

Beyond exports originating from Washington, our state is a major Pacific gateway for the movement of millions of containers (measured in 20-foot equivalent units), plus bulk and break-bulk cargo between China and locations in the U.S. More than a third of all containerized cargo by weight handled in Washington state is from trade with China.

Handling these shipments supports an extensive logistics system in our state that includes thousands of jobs in stevedoring, trucking, warehousing, transloading, rail services and freight forwarding. At The Northwest Seaport Alliance, a partnership between the ports of Seattle and Tacoma, 60% of all inbound containers come from China, while 32% of outbound containers are headed there. Containerized cargo, primarily linked to China, in 2018 directly supported nearly 15,000 jobs in the greater Seattle area. There also are shipments to China of soybeans, grain, and other bulk commodities and breakbulk, the handling of which supports economic activity in our state. A prolonged trade war with China could mean fewer products shipped through our state, hurting this important source of job creation.

In 2018, Washington’s ports handled 15.5 million metric tons of cargo to or from China, down from 25 million just a year earlier. By value, imports and exports subject to U.S. and China tariff lists fell from $27.2 billion to $24.1 billion in 2018, though imports actually increased. Agriculture exports handled at Washington ports experienced the most acute pain from the trade war, such as soybeans from the Midwest shipped through Washington ports.

Washington’s close linkages with China make this region all the more vulnerable to an extended contraction of trade, impacting local businesses and communities across the state. For years, U.S.-China economic ties have helped mollify impulses for more aggressive agitation and flare-ups. A reduction in economic interdependence means less economic benefits are immediately at stake from a more strained relationship or even confrontation, a dangerous scenario for the world and Washington state’s economic well-being.

Spencer Cohen is a senior economist at Seattle-based research firm Community Attributes Inc. He can be reached at spencer@communityattributes.com.

Original link:  http://seattlebusinessmag.com/economy-policy-regulations-ceo-advisor/tariff-battle-china-threatens-washingtons-well-being

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For Northwest Fishermen, Latest Catch is Trade-war Trouble: Input from WSCRC

By: Ann Scott Tyson

Published online on Christian Science Monitor August 6, 2019 https://www.csmonitor.com/USA/2019/0806/For-Northwest-fishermen-latest-catch-is-trade-war-trouble 

As President Donald Trump announced new tariffs on China last week in a trade war with no end in sight, American salmon fisherman Sven Stroosma set his sights on the blue waters of the Gulf of Alaska, piloting his boat Voyager in search of a big salmon catch.

Alaskan salmon are running, and Pacific Northwest fishermen like Mr. Stroosma have only a few intense weeks in July and August to catch enough to sustain their family income for the coming year. Rough seas, equipment failures, and dry streams that limit spawning all threaten to hurt their haul.

This season, the U.S.-China trade conflict has increased pressure on salmon fishermen by depressing the price offered for their hard-earned catch. China, the biggest importer of Alaska seafood, included the industry in a 25% tariff increase imposed last year.

Mr. Stroosma, who has fished salmon for 35 years, says he is being offered only 30 cents a pound for pink salmon this year, compared with 45 cents last year. Chum salmon dropped from 90 cents to 50 cents over the same time period, he says.

“I know the government feels that … China has unfair trade practices with us so we’re playing hardball with them,” Mr. Stroosma says in a call from aboard Voyager, his 58-foot purse seine boat, during a refueling stop. “But this is a small sector of the economy that is being affected pretty seriously.”

The Pacific Northwest and many of its key industries are being hit hard as the U.S.-China trade conflict worsens, raising questions about what localities and businesses can do to defend their economic interests against policies coming from Washington, D.C. With new tariffs in the offing and China no longer the top U.S. trade partner, according to data released last week, groups and officials in areas that rely heavily on the trade relationship with China are speaking out against the economic decoupling.

“We need to get the message inside the Beltway that we are hurting out here and these tariffs are the reason,” says J. Norwell Coquillard, executive director of the Washington State China Relations Council. While he and others agree China should be challenged for its unfair trade practices, including limits on market access and the lack of intellectual property protections, he disagrees with the Trump administration’s tariff strategy. With more than 100 corporate and other members including Boeing, Microsoft, and Starbucks, the council issued a statement in July strongly urging both sides to “find common ground quickly” and move to expand and strengthen U.S.-China trade.

No end in sight
Washington, Alaska, and Oregon are among the top seven states most affected by China’s tariffs, based on a percentage of gross domestic product. U.S. industries most heavily impacted, as measured by total employment, include aircraft manufacturing and fruit farming, according to research by Deutsche Bank. Governors, mayors, and other local leaders are taking the initiative to keep doors open with China for the long term, while lawmakers are lobbying for relief packages.

Washington is the most trade-dependent state in the country, with about 40% of all jobs linked to international commerce, and historically it has been the state with the most trade by value with China, according to a June report by the Seattle-based Washington Council on International Trade. China is Washington’s largest trade partner, with $32.4 billion in two-way trade including $16 billion of exports and $16.4 billion of imports, the report says.

Chinese tariffs will directly or indirectly affect an estimated 28,700 jobs, $1.7 billion in labor income, and $6 billion in business revenue in Washington state, according to a May report by Community Attributes Inc. (CAI), a Seattle-based economic research firm.

Apart from salmon fishermen, Washington’s cherry, apple, and wheat farmers have been hit by the tariffs, allowing producers in other countries to make inroads in China, says Mr. Coquillard. “All these things are devastating to our businesses here.”

The negative impact on Washington’s economy comes not only from falling exports to China, but also the reduction of cargo flows to Pacific ports. The value of cargo subject to tariff increases passing through Washington ports fell from $27 billion in 2017 to $24 billion in 2018, according to the CAI report.

“There are a lot of longshoremen and tugboats and a lot of work done to get those [exports] to China, and we all lose out if that disappears,” Mr. Coquillard says.

Despite such concerns, the U.S. and China appear locked in the trade conflict that experts say is unlikely to end soon. Mr. Trump announced Aug. 1 that the U.S. will impose a 10% tariff on another $300 billion of Chinese imports, starting Sept. 1. On Monday, Beijing appeared to retaliate by allowing its currency to weaken – and the Trump administration promptly designated the country a “currency manipulator.”

China experts doubt Beijing will bow to Mr. Trump’s pressure tactics, but say Washington is also unlikely to back down. “Prosecuting the trade war is a political winner for [Mr. Trump], so for reasons of substance and politics it will be very difficult to move this administration off its current trajectory,” says Scott Kennedy, who directs the Project on Chinese Business & Political Economy at the Center for Strategic & International Studies in Washington, D.C.

Mixed view on “bailouts”
Businesses damaged by the trade spat can move production or investments to avoid tariffs, increase efficiency to absorb added costs, and apply for tariff exemptions. Indeed, “individual company announcements and aggregate trade and investment flows show companies are far into their adjusting to the trade war,” Mr. Kennedy says.

Still, some small-business owners, including salmon fishermen, have limited choices.

“It’s not like they can switch to other species that are not subject to the tariff or have markets beyond China,” said Robert Kehoe, executive director of the Purse Seine Vessel Owners’ Association, a Seattle-based nonprofit organization with nearly 300 members – most of them salmon fishermen – located along the West coast and throughout Alaska. “They don’t have any good options, other than just to keep fishing and get less money for their product.”

Mr. Stroosma and his deckhands – two sons, a nephew, and a friend – use Voyager and a small aluminum skiff to set the large weighted seine, or net, which hangs 100 feet deep in the ocean. They then tighten a purse line at the bottom of the seine to trap schools of salmon and haul them on board with a mechanized winch called a power block. It’s dangerous and demanding work.

“Right now, everybody hopes to be on their A game and be as productive as possible,” says Mr. Stroosma. “When the fish stop running it is like a faucet just turned off. … If you didn’t get what you needed to get or you broke down during the peak times, that can be disastrous for your season.”

By shrinking already narrow price margins, the Chinese tariffs are threatening to push some salmon fishers out of business.

“A lot of people fish year-round to keep the house payments made and the boat payments made,” says Mr. Stroosma, who lives north of Seattle in Mount Vernon. “There are definitely a lot of people struggling right now to make ends meet.”

Lawmakers from Alaska, Washington, and Oregon have lobbied the Trump administration to provide relief for the fishing industry, as it has for farmers, after Mr. Trump announced in May as much as $16 billion in aid for domestic agriculture impacted by China’s tariffs.

“China’s retaliatory actions are taking a heavy toll on Alaska seafood and the consequences … are getting worse,” Alaska’s congressional delegation wrote in a June letter to the U.S. agriculture secretary, saying it is not sustainable for fishermen to continue to absorb the costs. “The Alaska seafood industry cannot effectively compete in the Chinese domestic market” and is losing its edge to Russia and other competitors, the letter says.

In another initiative by lawmakers, Oregon Sen. Ron Wyden and Massachusetts Rep. Seth Moulton introduced legislation in June that seeks to amend the law on disaster relief for fisheries to include harm from tariffs.

Mr. Stroosma has mixed feelings about any government relief.

“Fishermen – probably very similarly to farmers – we are very independent,” says Mr. Stroosma, who first fell in love with salmon fishing when he joined a crew one summer as a 19-year-old University of Washington student to help pay for college. “We don’t like to rely on government bailouts.”

Most important, though, is the strength of U.S. fisheries and the fleet as a food producer. “We are not looking for handouts,” he says, “but if that is what we need to stay viable and make it through this trade problem – it might not be a bad idea.”

Image courtesy of Sven Stroosma

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1301 5th Avenue, Suite 1500 Seattle, WA 98101-2611

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