William Alan Reinsch
Those of you unlucky enough to be bored by one of my speeches know that I frequently point out that there is no World Trade Organization rule against hypocrisy. In fact, it appears there is no rule anywhere against hypocrisy, and certainly not in the Trump administration. Conveniently, proof of my hypothesis has recently emerged.
For the past week we have been treated to cries of outrage from both political parties over China’s imposition of stricter export controls on rare earths and port fees for U.S.-built or -owned ships. This has been deemed a hostile act, and Trump has responded by threatening an additional 100 percent tariff on Chinese goods effective November 1. That date comes immediately after the potential Trump–Xi Jinping summit meeting in South Korea at the end of October. The obvious conclusion is that both sides are playing a leverage game in the run-up to the meeting, and attacking each other’s good faith is as much a part of that as the actual substance of what the two governments are doing to each other. The Trump administration appears to have been surprised by China’s action, which itself is a surprise because China always retaliates. This should have been expected. The charitable explanation was that the two sides interpreted the most recent ceasefire agreement differently, with China believing it was a commitment not to take any additional actions, and the United States seeing it as a simple export controls for magnets deal that did not prevent other steps.
But this column is not about the tactics or wisdom of either side. Instead, it is about the failure of anybody on the U.S. side to acknowledge that China is doing pretty much the same thing the United States just did to them. A few weeks earlier, the Department of Commerce’s Bureau of Industry and Security imposed stricter export controls on U.S. chips and semiconductor manufacturing equipment, and on October 14, previously announced fees on Chinese-flagged or -built ships landing at U.S. ports went into effect.
China’s response was directed at rare earths rather than chips, which is its point of leverage against the United States (and the rest of the world), but in imposing stricter controls, China also adopted its own version of the U.S. foreign direct product rule (FDPR) by claiming Chinese jurisdiction over products that contained even a tiny amount of their rare earths. Sound familiar? The U.S. FDPR takes a similar approach in claiming U.S. jurisdiction over products manufactured with U.S. equipment or based on U.S. designs, even if there is no other U.S. content.
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