It is surprising how many critics of the administration’s foreign and domestic policies support the United States’ finally taking a hard stand on emergent Chinese mercantilist protectionism. Prominent political commentators such as David Ignatius and Fareed Zakaria have joined respected economic analysts such as Greg Ip of The Wall Street Journal and Robert Samuelson of The Washington Post in agreeing, in Zakaria’s words, that ‘Trump is right: China’s a trade cheat’. Douglas Irwin, the distinguished US trade economist and historian, has recently argued that one cannot ‘really defend the way China has moved in the past few years, violating intellectual property and forced technology transfer’.

While there is general agreement across a wide spectrum that China’s discriminatory state capitalism must be challenged, there is less agreement on how and when to proceed. There are two general schools of thought on mounting a challenge. One group argues that the United States should rely heavily on the World Trade Organization (WTO) and should proceed only as part of a coalition of the willing. A second group supports using the WTO and working with trading partners but is also willing to support unilateral action by the United States in parallel with potential joint efforts.

Under the latter group’s suggestions, the Trump administration should proceed with its proposed bilateral negotiations with Beijing, though the threat of 25 per cent tariffs to reduce the US trade deficit is a mistake. Rather, the administration should invoke Section 301 of the 1974 Trade Act with an emphasis on areas where WTO rules do not extend. The priority should be a focus on the complex heart of Chinese mercantilist policies — namely Beijing’s disregard for intellectual property and its IT protectionism. These joint issues have manifested themselves as forced technology transfers, discriminatory practices against foreign patent and copyright holders, sweeping definitions of national security in the Chinese national security and cybersecurity laws that allow for anti-competitive practices, exclusion of foreign investment in numerous sectors, forced data localisation and cloud service restrictions, and special privileges and subsidies for Chinese state-owned enterprises.

Should Beijing’s leaders refuse to make major reforms in China’s mercantilist system, then the United States should reciprocally move to exclude Chinese participation in the US economy through investment and capital-market restrictions. Employing investment restrictions and using Section 301 for policy areas not covered by WTO rules will lessen the potential that the United States itself runs afoul of the WTO.

Paralleling these bilateral negotiations, the United States should mount a sustained effort to enlist the support of key trading partners. The European Union and Japan will be key allies: both have signalled that they would join a coalition against Chinese protectionism. These issues are especially urgent for the European Union, as the continent is struggling with a wave of state-directed Chinese incursions into key technology areas. Canada, South Korea and India offer themselves as other potential partners in this endeavour.

This is not to say that Washington should ignore the WTO. International legal scholars differ over the extent to which WTO rules extend to alleged Chinese trade and industrial policy practices. Even those urging maximum utilisation of the WTO admit (given that the last WTO negotiations ended in 1995) that key issues related to digital trade and information technology are not covered. But the United States and its trading partners can and should still challenge China in the WTO for a number of potential violations.

A direct challenge to China’s Great Firewall (censorship) system is one such avenue. China tends to justify its censorship by a bogus invocation of the WTO rules’ ‘public order’ exceptions, and there is some case law indicating that WTO panels look on such arguments with disfavour. As a result, they may be sympathetic to reining in China’s closed internet platforms.

Another avenue comes from former WTO Appellate Body member James Bacchus, who advocates that the United States should mount a systemic attack on China’s intellectual property system as a whole. Unusually for WTO rules, the intellectual property agreement mandates an affirmative requirement to enforce obligations with effective remedies against infringement. There is a strong argument that Beijing’s procedures and laws do not fulfil these responsibilities.

Finally, the United States could invoke the rarely used ‘non-violation nullification and impairment’ clause of the WTO Dispute Settlement Understanding. This clause allows for dispute resolution mechanisms to be invoked if one WTO member nullifies a benefit that another member could have reasonably expected before entering an agreement. The United States could argue that it is being denied market access benefits that it could have reasonably expected when it assented to China’s membership in the WTO, since such benefits have been systematically undercut by persistent Chinese mercantilist policies.

Chinese state capitalism has evolved into a complex, all-encompassing system that is buttressed by a myriad of market-inhibiting practices and regulations. Random tariffs will not effect change. Change — if it comes at all — will be the result of a comprehensive strategy (hopefully with trade allies) that combines negotiations, case law, and ultimately the threat of retaliation.

Claude Barfield is Resident Scholar at the American Enterprise Institute (AEI), Washington DC.

This article appeared in the most recent edition of East Asia Forum Quarterly, ‘Trade wars and Asia’.