China’s Entrance into the WTO was ‘Disaster’ for the American Economy

Twenty years ago this week, the People’s Republic of China became a member of the World Trade Organization. And there was great rejoicing across Washington by lobbyists, politicians, and bureaucrats, and for that matter among corporate CEOs and Wall Street bankers, and, perhaps most of all, the communists in Beijing.

But for Americans in the heartland in places like Arkansas, China’s entrance into the WTO was nothing to celebrate. That was the moment their leaders left them exposed to the predations of the Chinese Communist Party.

Millions of Americans lost good-paying, blue-collar jobs to the “China trade shock” in the years that followed. Countless small towns, main streets, and working-class neighborhoods were gutted and boarded up. Michigan lost 24 percent of its manufacturing jobs, Ohio lost 27 percent of its manufacturing jobs, and my home state lost 26 percent of all of our manufacturing jobs since China joined the World Trade Organization. Families were shattered and communities crumbled. The opioid crisis then killed thousands of those who were left behind.

Twenty years ago was nothing less than the beginning of the Great Hollowing of our nation’s industrial base, economy, and working class.

It’s worth recalling what our leaders said and what they promised when they unleashed this disaster.

During the years-long lobbying campaign for China, then-President Bill Clinton said it was “ironic … that so many Americans are concerned about the impact on the world of a strong China.”

From an economic standpoint, he said, “this agreement is the equivalent of a one-way street.” In other words, it was all upside for America, if only all those knuckle-draggers opposed to the Chinese Communist Party joining the World Trade Organization would get out of the way.

That attitude was the conventional wisdom in Washington for years—and it was in both parties to be sure. Four years after China joined the WTO, U.S. Trade Representative Bob Zoellick reflected that “our policy has succeeded remarkably well: the dragon emerged and joined the world.”

Well, it turns out, not surprisingly, that dragon has fangs and claws—and now it’s sitting on top of a vast pile of looted wealth. It’s clear that our leaders, in their naivete, have created a monster by admitting China to the WTO.

Let’s just review some of the numbers.

Since 2001, China’s economy has grown nearly 1,200 percent, transforming a third-world backwater into the second-largest economy, largest exporter, and dominant industrial power in the world. The PRC today makes one out of every four automobiles in the world—more than the United States, Japan, and South Korea combined. It makes one out of every three merchant ships; in the United States we make virtually none. In addition, China produces 40 percent of mobile phones, 70 percent of televisions, and 96 percent of shipping containers on which global commerce moves.

Equally worrisome, China has gained a stranglehold over the production of essential materials. China produces more than half of the world’s steel, two-thirds of its active ingredients in our generic drugs, and processes 85 percent of rare-earth elements, 85 percent, which are used in everything from the smart phone in your pocket to fighter jets.

China is also making strides in advanced technology. A few years ago, China’s space agency sent the world’s first quantum communications satellite into orbit. It already possesses 200 of the world’s 500 fastest supercomputers. And Chairman Xi Jinping has pledged an astounding $1.4 trillion over six years to help China take the lead in cutting-edge fields like semiconductors and Artificial Intelligence.

The stark fact is that China controls nearly a quarter of global trade. A stunning 70 percent—70 percent, seven out of ten counties in the world trade more with China than with the United States.

Now it would be one thing if China had gotten rich and powerful the honest way—through fair competition and trade with other countries. Instead, China has gotten rich through a criminal spree of intellectual-property theft, industrial espionage, strong-arm trade agreements, and illegal subsidies and protection.

Or as the Office of the U.S. Trade Representative wrote, “China has continued to embrace a state-led, non-market and mercantilist approach to the economy and trade, despite WTO members’ expectations—and China’s own representations—that China would transform its economy and pursue the open, market-oriented policies endorsed by the WTO.”

Despite WTO’s member’s expectations. WTO members are stupid if they expected China to change its ways.

But in other words: China lied, and the rest of the world has paid the price.

The PRC is the world’s most prolific IP thief, stealing the equivalent of Arkansas’ economy two times over every year, year after year. And that’s just the beginning.

The Chinese government recruits its citizens working and studying in our country to act as spies, infiltrating our research laboratories and companies and college campuses to steal valuable secrets. Chinese nationals are the subjects of nearly half—half—of all FBI counterintelligence cases involving economic espionage.

The Chinese Communist Party also uses illegal subsidies and trade practices like dumping to help its “national champions” offload their stolen goods at below-market prices. The Chinese government has poured tens of billions of dollars into its steel industry, encouraging overcapacity to flood foreign markets with cheap Chinese steel. As a result, China’s production of crude steel rose from 15 percent of the world’s total to 50 percent between 2000 and 2017—while 64 percent of America’s raw steel producers were totally wiped out. Two thirds of them gone.

Of course, the World Trade Organization exists—allegedly—to curb just these sorts of trade abuses. But it has utterly failed to get China to change its ways and live up to its promises. If anything, under Chairman Xi, China has dropped even the pretense, even the pretense, that it is on the path to freeing its economy and society.

Twenty years after China entered the WTO, it is clear that China has betrayed our trust and is waging an economic war against us. We didn’t seek out this conflict, but now that it has started we have no choice but to finish it.

Congress can start by passing my bill, the China Trade Relations Act, to terminate China’s Permanent Normal Trade Relations status. We ought to acknowledge that there is nothing normal about our trade relationship with China, and we cannot afford for this state of affairs to be permanent.

We should return to the pre-WTO status quo that recognized China as a non-market, communist country, to which I would add now committing genocide against its own people.

If we do this, we can begin to fix the historic mistake that our leaders made 20 years ago, when they welcomed China into the WTO with open arms and open wallets—and unleashed that dragon upon the world.

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