After being ejected from the White House on Friday, Steve Bannon told the Weekly Standard: “The Trump presidency that we fought for, and won, is over.”
It’s not entirely clear what he meant, or whether he was saying anything worth paying attention to at all, but if he was, it was probably to do with trade, and specifically China.
In the interview with Robert Kuttner of American Prospect on Wednesday, while he was still chief political strategist, and which seems to have brought about his sacking, Bannon said this:
“We’re at economic war with China. It’s in all their literature. They’re not shy about saying what they’re doing. One of us is going to be a hegemon in 25 or 30 years and it’s gonna be them if we go down this path. On Korea, they’re just tapping us along. It’s just a sideshow.
“To me the economic war with China is everything. And we have to be maniacally focused on that. If we continue to lose it, we’re five years away, I think, ten years at the most, of hitting an inflection point from which we’ll never be able to recover.”
He wasn’t fired for that, of course, more likely for calling the white supremacists a “collection of clowns”, and also for big-noting himself about daily fights with Treasury and with National Economic Council chair Gary Cohn.
The fights, according to Bannon, were over the section 301 complaint against China that was put on hold when Donald Trump and North Korean President Kim Jong Un started slagging each other off recently, and Trump needed Beijing on board.
“Oh, they’re wetting themselves,” Bannon said, and explained that the Section 301 complaint would be revived in three weeks. That’s what he was talking about when he said “that presidency is over”. But it will not be revived.
Section 301 empowers a US president to take “all appropriate action, including retaliation, to obtain the removal of any act, policy, or practice of a foreign government that violates an international trade agreement or is unjustified, unreasonable, or discriminatory, and that burdens or restricts US commerce”.
In the 1980s, before the World Trade Organisation, the US used it to force Japan to restrain its exports into the US and a variation, called “Special 301 amendments”, was used to name Chinese copyright violators in the 1990s.
The WTO brought all that to end by ruling Section 301 non-compliant following a European Union suit against it, and the section fell into disuse.
The truth is that the antitrade presidency that was meant to revive it never really got started, and the threat of a trade war between America and China is nothing more than broken promise, which will be a great relief to the Turnbull government in Australia, notwithstanding its aversion to broken promises. It’s one less thing our embattled Prime Minister will have to worry about.
Even the supposedly hated NAFTA has been retained with only minor modifications: all the zero-tariff trade stays, while a few non-tariff barriers are reduced and there some new rules on state enterprises, cross-border data flows, and financial services trade, and many of those, ironically, were items negotiated in the Trans-Pacific Partnership, which Trump abandoned in January as one of his first acts as President.
Even if the section 301 action against China were revived, it would be toothless. That’s first, because any sanctions that the US attempts to impose on China will be ruled out of order by the WTO, and second, because in the real world, as opposed to Donald Trump’s and Steve Bannon’s fevered imaginations, the problem is no longer Chinese access to the US market, but the other way around.
The real problem American firms are facing at the moment is China’s demand for technology transfer in return for market access, and the Chinese firms getting hold of the technology are using it to keep American firms out of the Chinese market, not for exports to the US.
China’s technology exports to America are mostly for American and Japanese companies, like Apple and Sony.
Throughout Trump’s election campaign the most consistent theme was trade, and the cost to American jobs of China and free trade agreements generally; his victory was mostly about that, with some racism, anti-environmentalism and tax cuts for the rich thrown in.
The reason his chief political strategist has now had to be removed, and the Trump administration reset after seven months, is that the antitrade strategy on which it was founded has been mugged by reality.
The truth is that the main beneficiaries of free trade are American companies and the manufacturing jobs that have been lost are never coming back.
Steven Bannon is far better off complaining about China in the media, where reality doesn’t always matter.
By Alan Kohler