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OP-ED: TRADE WAR "WE'RE IN IT TO WIN IT"
Source: blog by Jeff Nunley, Executive Director for South Texas Cotton & Grain Association

Calling the ongoing trade war with China anything less than war completely understates the existential threat China poses to the United States. I believe China has viewed trade with the U.S. as a strategic war from the outset, with nothing short of global domination as their ultimate goal.

In my 21 years at South Texas Cotton & Grain Association, China has always been a bad actor when it comes to trade. Previous administrations from both parties paid lip service to the issue but were never willing to face the consequences of a trade war. In politics, where planning horizons rarely stretch past the next election, it was easier to kick the can down the road.

As a nation of capitalists, the allure of China's massive market has been overwhelming. While the U.S. complained about China's actions on trade, there was reluctance to fight back for fear of losing access to China's market. This pacifism resulted in the loss of vital industries. For cotton, it was the devastation of our domestic textile industry. Agriculture has been on the front line of the trade war with China for decades. We have been the first and worst casualties.

Forced transfer of technology and intellectual property for companies operating in China has put China on a trajectory to surpass the U.S. in innovation and productivity. For years, China has sent their best and brightest to study at U.S. universities and pursue advanced degrees.

Armed with knowledge, training, and intellectual property, these academics have returned home and allowed China to build an intellectual base that rivals our own. While China's co-opting of U.S. technology to advance their industrial base is troubling, the fact that this same technology has advanced their military might is terrifying.

China began this war years ago. Left unchecked, China increased its strength to the point it could no longer be ignored if the U.S. was to remain unsurpassed as a global economic and military superpower. President Trump recognized the threat of China, made it a central issue of his campaign, and followed through on facing the threat head-on as President.

President Trump faced harsh criticism for initiating tariffs on Chinese imports to force adherence to trade rules that protect U.S. interests. China and the U.S. have since exchanged volleys by imposing tariffs on an expanding list of products.

The impact in the U.S. has been a roiling of financial markets and a devastating drop in agricultural commodity prices. Daily news stories report the impact of the trade war here in the U.S. but very little is reported on the impact in China, where the communist government controls the narrative.

President Trump was mocked for stating that "this trade stuff is easy". His reasoning was likely based on the relative negotiating strength of the U.S. versus other nations. At a National Cotton Council meeting years ago in Tampa, a USTR representative stated the U.S. represented 37% of total global demand. We are the biggest buyer in the world. As economist A. Gary Shilling said in an interview in June, "When you've got plenty of supply in the world, and I think you do...it's the buyer that has the upper hand not the seller...If we weren't buying all those consumer goods from China...where would China sell them?"

To further illustrate the relative bargaining power between China and the U.S., our exports to China are just 0.55% and imports from China just 2.38% of America's GDP, while China's exports to the U.S. are 18% of its GDP. China is a huge market for the U.S. and is the second largest importer of global goods behind the U.S., however much of this is for processing and export rather than domestic use. Netting this out, Shilling estimates that two-thirds of the net value of all Asian exports are bought by Americans.

While the U.S. has an overall negotiating advantage, China has an advantage when it comes to rare earth metals used in modern electronics. Most of the world supply of rare earth metals originates from China. Unknown to many is that Greenland, which President Trump recently offered to buy, has untapped reserves of rare earth metals. While the media ridiculed Trump's attempt as an imperialistic land grab, it was likely viewed by China as a shot across the bow.

China's first round of tariffs aimed squarely at America's heartland that was key in electing President Trump. However, China underestimated President Trump's willingness to support farmers, in the form of Market Facilitation Payments, which blunted the blow of tariffs on U.S. agriculture and demonstrated our resolve.

While President Trump knows he has a strong negotiating position, he underestimated China's willingness to subject its people to extreme suffering in order to win. President Trump has admitted that China may wait until after the next presidential election to move on an agreement.

I believe most Americans cannot comprehend a war where everything is on the line. Our most recent experience was World War II. When we entered that war, we were committed to fight to the very end. We were in it to win it, no matter the cost.

Like it, or not, we are in a trade war and the future of America as we know it could very well rest on the outcome. Partisan politics, an antagonistic media, and a willingness of some to concede to China's demands in order to end the short-term economic pain of war make this as challenging as anything we've faced as a country. This is war. We all need to be in it to win it.


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