Congress is ignoring ‘reciprocity’ in US-China economic relations

The House Select Committee on the Chinese Communist Party needs to expand the scope of its policy recommendations to tackle a fundamental, longstanding issue: reciprocity.

The idea is simple: Chinese commercial interests should not be able to do in the United States what U.S. firms cannot do in China. And the idea is not new. American businesses in China have long advocated reciprocity, but the idea never took root because implementation would be complicated and costly.

Select Committee Chairman Rep. Mike Gallagher (R-Wisc.) recognizes the importance of reciprocity in U.S.-China trade relations. Hearing witnesses reinforced the need for reciprocal treatment during early committee hearings in mid-2023, but the topic faded from view. While reciprocity is a theme implicit in the committee’s final recommendations, it made no specific recommendation establishing an interagency mechanism to develop reciprocity policy.

The U.S.-China commercial cold war and China’s apparent intention to revive its economy by exporting its overcapacity overseas highlight the need to impose reciprocity now. Meanwhile, TikTok’s assertions that the First Amendment guarantees its right to do business in the U.S. stand in stark contrast to China’s “national security” policy blocking dozens of American social media and other websites. Adding hypocritical insult to injury are Chinese Foreign Ministry claims that the “robber’s logic” of pending TikTok legislation is “on the wrong side of the principles of fair competition and international trade rules.”

If the committee — or policymakers elsewhere in Congress or the Biden administration — accept the reciprocity challenge, it is important to identify action priorities. Top priority should be ensuring that China can only sell goods and services in the U.S. that Americans can sell in China. Conditions on doing business, including the endless administrative approvals and licenses that hinder American businesses in China, should be replicated if and when possible.

All of this is admittedly much easier said than done, because the American and Chinese bureaucracies are so different and direct regulatory parallels may not exist in many cases. But this work could be guided by annual white papers on Chinese trade barriers issued by the American and European Chambers of Commerce in Beijing as well as a 2012 U.S. Chamber of Commerce study analyzing China’s protectionist framework.

A reciprocity priority overseas would serve to push back against Chinese claims that it is a “developing country” entitled to special trading privileges. The Chinese have little in common with the developing world in the trade sphere because China is essentially a colonial power that imports raw materials and exports manufactured products at great profit.

The term “reciprocity” features in much of former President Donald Trump’s trade rhetoric, but Trump’s concept is different from the notion advocated in select committee hearings. Trump casts reciprocity in terms of tariffs, while committee hearings focused on discriminatory patterns in Chinese trading behavior. The wisdom of Trump’s proposed tariffs is beyond the scope of this essay, but Trump’s mere use of the word “reciprocity” should not distract the select committee from the priority of confronting Chinese trade practices and policies.

The Chinese reaction to American policies imposing reciprocity will be predictable, hostile and emotional. Accusations of “containment” are among the typical Chinese responses to any American policy that displeases China — and should therefore be ignored.

In a new wrinkle in Chinese policy, officials announced last year the removal of all barriers to foreign participation in China’s manufacturing sector. These assertions are misleading because they ignore the realities of China’s formal and informal approval practices, as well as new national security restrictions barring basic market research, due diligence and other routine business practices. No one should be fooled by future Chinese propaganda alleging that restrictions on China’s intention to export its unprecedented overcapacity are unfair because China’s manufacturing sector is open to foreigners.

The need to emphasize reciprocity in the American trade toolkit is clear, but where does it belong in the U.S. bureaucracy? The select committee has a broad mandate to recommend action on the full range of issues in the U.S.-China agenda and should have recommended a concerted, interagency effort to finally impose trade reciprocity on China.

Fortunately, this oversight can still be corrected. The committee could assign this task to any of the various federal agencies participating in the trade arena, but the only one with sufficient resources and expertise is the Commerce Department. Accordingly, the select committee should recommend a new program office within Commerce assigned to develop, coordinate, track and implement interagency reciprocity policies.

Jeff Moon is a China trade consultant and a former assistant U.S. trade representative for China, State Department diplomat and business executive in China-related roles.