Small Business Wants A Bigger Voice on China, The Wire China, Apr. 23, 2023.
By Doug Barry
Owners of thousands of companies across America are dismayed at the path of relations with China.
As relations between the United States and China sour, there is one important constituency keen on maintaining close trade ties — small American companies across all 50 states, many of which have done business with China for decades and hope to be doing so decades from now.
Owners and managers of such businesses — none of them Fortune 500, or even 50,000 — fret that no one in authority is trying to resolve the many areas of disagreement between the two countries, from the trade war, to the origins of COVID-19, to the future of TikTok. They seek reassurance that the bilateral relationship they’ve spent decades helping to build really is the world’s most important, not the most threatened. Such reassurance does not appear imminent.
These bosses overwhelmingly oppose decoupling, or even significantly reducing trade between the world’s largest economies. Their solution to the fraying relationship is instead to increase trade with due respect to matters of national security; and to keep working on their trade channels and people-to-people exchanges, while governments work harder on other, broader problems bedeviling the relationship.
Source: The Wire China
A first step for policy makers to find the middle way that so many business owners desire is to realize that radical uncoupling is not desirable or even feasible.
They engage with Chinese customers and suppliers as Americans who follow America’s laws and support American values. They earnestly believe that their engagement with Chinese counterparts improves worker rights, and human rights more generally, by the way they treat their domestic employees and, if they have them, their Chinese employees. They rightly bristle when referred to as naïve or unpatriotic.
Above all, these business owners seek a middle way where there is a deliberate avoidance of extreme positions: neither simply tolerating China whatever it does, nor treating it like an existential adversary, closing national borders and minds to keep their goods and people out.
Today, however, the dominant narrative in the U.S. is that China is both bad, and an implacable adversary. ‘Bad’ China was the target of former President Trump’s tariffs: President Joe Biden has continued with them despite substantial evidence they do not work as promoted, a fact Biden all but admitted during his presidential campaign.
The tariffs remain in place despite reports that they have cost U.S. businesses and consumers $125 billion and counting over three years. Smaller businesses believe they have suffered more from the added tariffs than larger corporations, which have deeper pockets and myriad ways of making money. One study by Oxford Economics estimates that at least 250,000 American jobs have been lost since the start of the trade war because of the tariffs, and they have hurt Americans in other ways such as raising prices on goods purchased by lower income consumers.
To give just one example of the practical impact, take Polaris Rare Earth Minerals, a magnet maker based in Indiana with eight employees. It says it has paid $1 million dollars in tariffs on one item from China that’s used in a device fabricated in the U.S. for the auto industry. Owner Mitchell Spencer says that the money it has had to shell out could have hired new engineers and support staff to grow his business.
The dangerous state of U.S.-China relations is an existential threat to many small businesses.
“These tariffs are crippling many of us who have worked decades to build relationships with reliable Chinese manufacturers, particularly small and midsize ones,” he says.
Or take Dan Digree, owner of Minnesota-based loudspeaker manufacturer MISCO, who says that the way in which the tariff scheme was created means it is cheaper for his customers to import a competing product from other Asian countries than it is to buy his ‘Made in America’ speakers which contain some Chinese components. He employs about 80 mostly older workers who will be challenged to find new jobs if MISCO goes under.
Such protagonists feel frustration with both U.S. and Chinese governments that are overly antagonistic towards each other and largely dismissive or ignorant of the key economic and informal diplomatic roles played by smaller companies and their support systems at the subnational level. They consistently express a sense of disappointment bordering on sadness as they contemplate decades of work learning languages, traveling back and forth — all coming to naught because of geopolitics and extreme attitudes.
“I’m very disappointed that the Biden administration hasn’t taken time to look at the China trade policy from the perspective of small business,” says Digree, the loudspeaker maker. “The dangerous state of U.S.-China relations is an existential threat to many small businesses.”
For sure, there is a sense of guarded optimism among some that common sense will prevail, and that the two countries will arrive at a place where important areas of bilateral cooperation can coexist, despite their profound disagreements.
A first step for policy makers to find the middle way that so many business owners desire is to realize that radical uncoupling is not desirable or even feasible. The next move should then be to identify and ring fence those areas where cooperation can flourish. Among the concrete steps American small businesses would like to see are the removal of the tariffs put in place by the Trump administration, and greater support for government programs that help U.S. companies export to China.
Also on the wish list: more frequent meetings between U.S. and Chinese leaders to talk face-to-face about their differences. At home, business leaders seek the avoidance of harmful legislation such as prohibiting the sale of agricultural land to Chinese nationals, more of a welcome for Chinese students to private and public universities, and the prompt resumption of outward and inward trade missions.
The U.S. and China are lucky to have had small business people working on the relationship since it began nearly 50 years ago… It is in the interests of both countries and the world to ensure that they don’t end up in a dead end.
The U.S. needs to remain engaged with China. In large part this involves people-to-people contact. The exchange of things is an activity that has occupied humans since antiquity. Even today, in the most remote corners of the world, people gather at dusty roadsides to buy, sell, and socialize, having figured out systems to weigh, measure, and price. As humans, it’s harder to kill those you do business with.
The U.S. and China are lucky to have had small business people working on the relationship since it began nearly 50 years ago. Thousands of Americans made this journey. Many Chinese have also made their own journey in return. It is in the interests of both countries and the world to ensure that they don’t end up in a dead end.