Testifying last week in front of a hostile House Ways and Means Committee, the U.S. Trade Representative (part of the Executive Office of the President) made a startling statement that traditional trade policy instruments had become ineffective.

As expected, China was at the center of policy concern as lawmakers kept blasting the government for failing to “hold China accountable” for its “predatory trade practices and human rights abuses.”

And, true to form, in a broadside at the Republicans, the Democrats’ government claimed that Trump administration’s trade tariffs on China did not work either.

That, of course, was true, but mainly because trade tariffs were the wrong remedy for a decades old structural problem of the U.S.-China trade. The mad periods of America’s offshoring of its manufacturing industries to literally set up shop in China offered Beijing total access to U.S. markets, free technology transfers, huge net trade incomes and soaring foreign currency reserves. That made the Middle Kingdom an increasingly powerful creditor to the world with trillions of dollars in bank loans and direct and portfolio investments.

America’s Chinese trade disaster

Consider this: Only during the last 13 years (a period of 2010 to and including 2022), China took a net income of $4.5 trillion on its U.S. merchandise trades. That is a gigantic transfer of wealth and technological know-how that go with colossal trade flows.

And this is a provisional bottom line: As of September 2022, China’s net international investment position reached $2.3 trillion. At the same date, the U.S. net foreign debt stood at $16.7 trillion, with a nearly half-a-trillion dollar increase from the year earlier.

How in the world do American legislators want to “hold China accountable” for this disastrous U.S. trade and national security policy? They should hold the White House accountable for allowing such a systematic and excessive imbalance in U.S.-China trades.

Here is an example. Las year’s American merchandise trade deficit with China rose 8.3% to $383 billion on $536.8 billion imports from China and $153.8 billion exports to China.

This is not just a trade imbalance. We are looking here at a humiliating trade disaster, where China’s sales to the U.S. are 3.5 times higher than what China buys from the U.S.

Why has the U.S. government tolerated such a grossly unbalanced trade relationship – and an unacceptably high degree of economic dependence – with a country it calls “a systemic and strategic competitor” allegedly hellbent on changing America’s world order?

The last week’s Congressional testimony offers no direct answer to those questions, but it shows that Washington is getting nowhere in its trade talks with China. Indeed, U.S. trade officials now publicly admit that attempts to have Beijing deliver on commitments to step up purchases of U.S. farm products have been “unduly difficult,” and that they cannot “just wait for China to change.”

So, what’s the solution?

Washington wants to bring some of outsourced manufacturing back, and to rebuild the country’s manufacturing industries.

U.S. friends and allies want a piece of business in China

Apart from that, the U.S. intends to do more trading with “allies and friendly partners.”

The real answer, however, will have to come from the U.S. business community, which, so far, has shown no particular interest in “reshoring.”

And while all that trade talk was going on in Washington, top American business leaders were participating last Saturday at the China Development Forum in Beijing.

Apple’s CEO Tim Cook was “thrilled to be back in China” to celebrate 30 years of the company’s good business in that country. The forum was also attended by the CEOs of Pfizer and Procter & Gamble.

With U.S. businesses apparently determined to defend, and expand, their Chinese market shares, Washington will have a tough time convincing friends and allies to sever or downgrade their China ties.

Will, for example, South Korea and Japan give up a quarter of their total exports to China, and their large business presence in their neighbor’s markets?

The E.U. is an even bigger question mark. Ostensibly, the Europeans are on a “peace mission” to China that would drive a wedge between Moscow and Beijing, but all of them are also looking for a piece of China business.

The European rush to China began last November with a visit of the German Chancellor Olaf Scholz. He reaffirmed strong bilateral ties with a country where German car makers and the world’s largest chemical company BASF have staked their future.

Scholz will now be followed by the Spanish prime minister on March 30-31, 2023, who will do some business networking at the Boao Asia Forum before going to Beijing.  The French president won’t be far behind with a visit April 5-8, 2023, including a business stop in the booming Chinese Province of Guangdong. And then, the Italian prime minister will shortly conclude this European travel season to China.

To succeed, Washington’s economic, political, security and trade agenda with China needs a total support of the American business community -- with a solid and united front of Asian and European friends and allies.

Don’t hold your breath for it.