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By John Ubaldi
Contributor, In Homeland Security

Since the Group of Seven (G-7) met in Canada earlier this month, the United States, our allies and China have engaged in an acrimonious fight over international trade, with President Trump complaining that the U.S. has been getting a raw deal.

Trump campaigned on renegotiating current trade deals or completely abandoning those deals which he claims are one-sided. At the G-7 summit, however, Trump dropped a bombshell when he called for the elimination of all trade barriers.

Was Trump being serious or was this some sort of grand starting point?

US May Be Starting a Possible Trade War

Many economists sense a trade war may be in the offering with all sides losing. However, the U.S. might be better positioned than our allies because in a trade war we are less export dependent than many members of the G-7.

According to the Organization for Economic Cooperation and Development (OECD), exports account for some 13 percent of U.S. gross domestic product (GDP); by contrast, exports (mostly to the United States) represent about 30 percent of Canada’s GDP.

Within the European Union, French exports, mostly to the rest of Europe, make up about 30 percent of that nation’s economy. About 45 percent of Germany’s economy comes from exports throughout the world, including to the United States. Exports account for 30 percent of Italy’s economy, 28 percent of Britain’s, and 16 percent of Japan’s.

The issue of our allies benefiting from international trade spans both Republican and Democratic administrations. Indeed, international trade was hotly contested in the 2016 presidential election, not only by Trump but also by Democratic presidential candidate Senator Bernie Sanders (I-VT).

Obama Administration Reports Trade Concerns

In 2014, the U.S. International Trade Commission reported that many U.S. small and mid-size enterprises (SMEs) that do business with the European Union are treated as major corporations by the EU and must meet a large number of its technical regulations and other requirements.

These companies often complain that the EU forces them to hire representatives to help maneuver through the cumbersome regulatory bureaucracy and to perform additional tasks. All of that raises the cost on their products in relation to their European counterparts.

Small and mid-size companies often cite rules imposed on them by the EU that affect them more than they affect large companies. Large companies with a greater volume of sales can spread out the costs of those rules, while the small and mid-size companies cannot. That puts them at a greater disadvantage.

US Trade Representative Lists Foreign Trade Barriers

The United States Trade Representative, Ambassador Robert E. Lightizer, issued a report this past March  that listed 10 key core areas of concern with regard to foreign trade barriers:

• Import policies (e.g., tariffs and other import charges, quantitative restrictions, import licensing, customs barriers, and other market access barriers);
• Sanitary and phytosanitary measures and technical barriers to trade;
• Government procurement (e.g., “buy national” policies and closed bidding);
• Export subsidies (e.g., export financing on preferential terms and agricultural export subsidies that displace U.S. exports in third-country markets);
• Lack of intellectual property protection (e.g., inadequate patent, copyright and trademark regimes and enforcement of intellectual property rights);
• Services barriers (e.g., limits on the range of financial services offered by foreign financial institutions, restrictions on the use of foreign data processing, and barriers to the provision of services by foreign professionals);
• Investment barriers (e.g., limitations on foreign equity participation and on access to foreign government-funded research and development programs, local content requirements, technology transfer requirements and export performance requirements, and restrictions on repatriation of earnings, capital, fees and royalties);
• Government-tolerated anticompetitive conduct of state-owned or private firms that restricts the sale or purchase of U.S. goods or services in the foreign country’s markets;
• Digital trade barriers (e.g., restrictions and other discriminatory practices affecting cross border data flows, digital products, Internet-enabled services, and other restrictive technology requirements); and,
• Other barriers (barriers that encompass more than one category, e.g., bribery and corruption, or that affect a single sector).

Trump Keeps Campaign Promise on Trade Changes

During the past few months Trump has accused China, Canada and the EU of unfair trade practices. As a result, he began instituting tariffs against these nations. Only this week, Trump threatened to place another $200 billion in new tariffs on Chinese goods. And if China retaliated, Trump promised “to escalate even further by placing tariffs on another $200 billion in Chinese goods,” The Wall Street Journal reported.

Previous administrations of both parties have raised the issue of unfair trade practices. The difference is Trump is actually doing what he stated he would do during the presidential campaign.

The issue that the U.S. has with China is that Beijing seeks to limit market access for U.S. exports while providing substantial assistance and regulatory relief for Chinese products at the expense of other trading countries.

US Lists Chinese Trade Barriers

One of the biggest U.S. concerns –and one that Lightizer has highlighted — revolves around intellectual property. The USTR has focused on four areas where the Chinese government seeks to gain an unfair advantage:

• The use of a variety of tools to require or pressure the transfer of technologies and intellectual property to Chinese companies.
• Depriving U.S. companies of the ability to set market-based terms in licensing negotiations with Chinese companies.
• Intervention in markets by directing or unfairly facilitating the acquisition of U.S. companies and assets by Chinese companies to obtain cutting-edge technologies and intellectual property.
• Conducting or supporting unauthorized intrusions into U.S. commercial computer networks or cyber-enabled theft for commercial gains.

EU Follows China’s Lead on Intellectual Properties

China has been stealing or seizing U.S. companies’ intellectual property for decades at a cost of billions of dollars to the United States, in addition to national security implications.

The EU has followed China’s lead on intellectual property. One has only to view the actions of Microsoft and Google as clear examples of harming U.S companies in favor of their European competitors.

With trade imbalances a central theme of this administration, we just don’t know if we are heading into a full-scale trade war, or if Trump’s proposal at the G-7 summit is part of some grand strategy or just more bluster from him.

As the popular adage puts it, ‘No one knows what the future will bring.”