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Foreign Policy

The US wants extra wine to resist Chinese language bullying

The United States needs a strategic Shiraz reserve. China has used its economic weight to harass Central Powers to no avail, and the United States must consider radical deviations from its normally firm trade policy to aid allies in the face of Chinese aggression.

Angered by Australia's call for an independent investigation into the origin of the novel coronavirus and its policies on Hong Kong and Xinjiang earlier this year, China has been targeting Australian exports with a vengeance. Its actions have taken a range of products from beef and barley to wine and lobster. If China's antics continue, their moves could wreak havoc on the Australian economy after three decades of unprecedented growth as China buys 34 percent of its total exports.

The White House announced it would serve Australian wine at a Christmas party, but much more is needed to ensure the United States has the backs of its closest allies. In a recent interview in the New York Times, US President-elect Joe Biden said, "The best China strategy … puts every one of our … allies on the same page." In the first few weeks of a Biden administration, the top priority should be to respond vigorously to Beijing's bullying against one of Washington's closest allies.

So what should the United States do?

Yes, the United States must appear at the World Trade Organization to support Australia's complaint against China's recent measures, use the WTO's formal review of China's trade policy in July 2021 to create a real stink, and consider joining a modified comprehensive and Progress Agreement for the Trans-Pacific Partnership (the successor to the Trans-Pacific Partnership).

But American politicians have to think bigger than these routine steps. The United States has allowed allies like Japan, South Korea and Canada to suffer from China's trade bullying for years, with Washington receiving little but rhetorical support. The two to three years it takes for the WTO to respond to clear cases of wrongdoing by China are too slow, and ultimately the WTO can only offer its blessings to snap back with retaliation. The current WTO system clearly does not offer enough clout to deter Beijing or to repair the damage to the affected countries.

China clearly sees the use of economic coercion as a central part of its foreign policy toolkit, but U.S. allies shouldn't fear that attitudes toward Xinjiang, Hong Kong, 5G or the South China Sea will cost them economically. To change the state of affairs, the United States should consider assisting domestic allied industries affected by Chinese actions, as Washington does when its own producers are hit.

The most creative idea comes from business journalist Matt Klein, who proposed a “strategic Shiraz reserve”. According to his idea, the government could create a special instrument to buy and hold foreign goods that are losing revenue thanks to aggressive Chinese trade measures funded either directly from Congress funds or from Federal Reserve loans. After all, the US government already has experience in handling oil, cheese and even mohair reserves. The money would not be thrown away, as the United States might at some point begin to sell these non-perishable goods back to the world market, perhaps at a profit.

While economists may be faced with quality issues with the guaranteed market for products, sommeliers affected by pandemic issues in the hospitality industry would be only too happy to support Uncle Sam's efforts to stock up. And even if the United States does not fully close the loophole that China's import restrictions are opening, the symbolic effects of such a policy on the psychology of US allies would be far more powerful than a marginal naval ship docked overseas.

While a policy like a Shiraz Strategic Reserve would mitigate the economic impact of China's actions, China should also be forced to pay a price for such behavior. The United States already has mutual defense agreements with countries like Australia and Japan – maybe they could consider mutual trade defense too? The US government could organize like-minded countries to impose automatic tariffs on selected Chinese exports that would not be lifted until China stopped its economic coercion. Biden could also link the handling of the current US tariffs on China to China's coercive behavior.

Yes, a quick and multilateral move to create costs would short-circuit the WTO dispute settlement process. However, the current WTO system has clearly not stopped China from resorting to forced trade measures. More action is needed if the United States and its allies can even hope to change China's cost-benefit calculations.

Finally, Biden should consider visiting Australia on his first trip abroad after inauguration. Australia is one of America's staunchest allies. For more than 100 years she has been fighting with the United States in all major conflicts – even in Vietnam. Bringing Australia to the top at this moment would send a clear message to both China and US allies in the region that the United States has its friends' backs in the face of Chinese aggression.

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