The on-going trade war between the U.S. and China is not only having an impact on farmers, manufacturers and consumers, is threatening – and in some cases, already has – undermined the very nature of 21st Century global value chains.
Erin Ennis, U.S.-China Business Council
Beth Hughes, International Dairy Foods Association
John Neuffer, Semiconductor Industry Association
Scott Paul, Alliance for American Manufacturing
Hun Quach, Retail Industry Leaders Association
Moderator: Steve Lamar, American Apparel & Footwear Association
For more information on the event and information on the speakers, visit the events page here.
U.S. – CHINA TRADE AND THE IMPACT THE TRADE WAR IS HAVING ON GLOBAL VALUE CHAINS
By: Jasmine Mitchell
On Wednesday, May 5th, 2019, WITA welcomed distinguished U.S.-Chinese trade specialists Erin Ennis, Beth Hughes, John Neuffer, Scott Paul, and Hun Quach for a panel discussion on the impact the U.S.-China trade war is having on global value chains. The discussants detailed these impacts with respect to the U.S. Industrial communities (technology, retail, business, and agriculture) they each represented. The event began with introductory remarks from Kenneth I. Levinson, Executive Director of WITA. Following opening remarks, moderator Steve Lamar, Executive Vice President of American Apparel & Footwear Association, began with panelist introductions and opened up discussion shortly thereafter.
The panel discussion began with Erin Ennis, Senior Vice president of the U.S.-China Business Council. Offering a generalized business perspective on U.S.-China trade relations, Ennis provided a detailed overview of the history of U.S.-China relationship, the current state of U.S.-China affairs, and offered her own speculation as to how the trade-war could affect future. In her discussion of the current conflict between the U.S. and China, Ennis admitted that there hasn’t been any significant evidence indicating progress towards a resolution. Ennis argued, however, that the focus should not be to simply lift the tariffs of Chinese goods but rather focus on improvements and reforms made on China’s Intellectual property rights system that are sustainable. She urges that the creation of a rule of law system outweighs a quick resolution on trade disputes, and would ensure that American companies are able to protect their rights and the market without having to go to the Chinese government. Speaking on the future of the U.S.-China Trade war, Ennis states, “There have been negotiations, but we don’t actually know when those are going to restart. So as a consequence all of these tariffs, for the moment, are things that we are advising companies to assume this is currently the cost of business is going to be with China”.
Beth Hughes, Senior Director of International Affairs of the International Dairy Foods Association, detailed how the Dairy industry, and the agricultural industry to a larger extent, has been negatively impacted by the U.S.-China trade war. Hughes begins by detailing how the Dairy Industry is especially being impacted by the Trade War due to its reliance on China; their third largest market for export revenue. She does note, however, that due to the most-favored-nation (MFN) tariffs with China, the Dairy Industry was not given a level playing field to start with; and now the current trade war has further hindered business. After the anticipated June 1st Tranche 4 tariffs, Hughes estimates that tariffs will dramatically spike from around 10% to an estimated 25% to 45% on average depending on the dairy product. While detailing the many difficulties with doing business in China, Hughes briefly explained the uncertain future for the U.S. dairy industry in China. An issue at the forefront for U.S. dairy companies is their ability to maintain a presence in Chinese markets; once you are out of the market and lose your market share, you will probably be out long term. Hughes concluded by stating, “It’s not an opportune time for the dairy industry when we already have an oversupply of milk, but it’s across the board for agriculture that we are collateral damage in Trade wars with retaliatory tariffs, and this is no exception”.
John Neuffer, who serves as President and CEO of the Semiconductor Industry Association offered a comprehensive look into the semiconductor industry and the current and projected impact the trade war has on this sector. Neuffer centered most of his discussion around the effect Section 301 tariffs on China concerning China’s Acts, policies and Practices related to technology transfer, intellectual property, and Innovation has on consumers. He stated that almost all products produced in the semiconductor industry were capture until tranche 2, and as a result, much of those burdens have been passed on to American consumers. Unlike other electronic manufacturers, Neuffer explained, the semiconductor industry remained in the United States. Despite maintaining a presence in the U.S., the semiconductor industry has a large exposure to the Chinese economy through its consumers. Neuffer summarized the issues of the semiconductor industry by stating, “Our problems with China is not market access, China is our biggest and fastest growing market, around 35%, the bigger problem is that we need those Chinese consumers.”
Scott Paul, President of the Alliance for American Manufacturing echoed a similar point raised by the other panelists: to spare consumers and American families the passed down costs. Paul’s discussion centered around four main ideas: the composition of the China price, value chains, and macroeconomic impacts. Paul began his discussion by arguing that government policy with misalignment and manipulation of currency has led to devaluation, which in turn has made it difficult for U.S. manufacturers to compete in Chinese markets. Additional the nature of the “China price” leaves many questions regarding labor, environmental concerns, and currency. Paul concluded by echoing Erin Ennis point regarding the lingering uncertainties that linger in the trade community as to the long-term effects on American consumers and businesses.
Hun Quanch, Vice President of International Trade of the Retail Industry Leaders Association concluded the panel discussion with an optimistic tone by offering ways for U.S. industries to mitigate the issues and challenges caused by the U.S.-China trade war. Quanch began by emphasizing the importance of directly engaging with the public about your product or industry, so there is knowledge of the many U.S. jobs that bring items “made China” to American retailers’ shelves. She stated this was an effective method used by the U.S. retail industry to avoid tariffs on toys, clothes, and shoes. Quanch concluded her discussion by arguing, “tariffs are taxes on consumers”.
WITA’s panel comprehensively examined the many impacts the U.S.-China Trade Dispute is having on global value chains. The discussion provided an informative look into key U.S. industries and offered a forum to discuss the current tensions and anxieties about the unknown future with the U.S.- China trade relationship felt throughout Washington’s trade community.