Former House Transportation Committee Chairman Peter DeFazio has sounded the alarm over China’s control of the shipping industry, warning that the Asian superpower could “weaponize” its dominance against the United States.
Currently, China controls a vast proportion of shipping vessels and equipment, while the United States has lagged behind in its control of shipping.
Speaking at an event hosted by the Hudson Institute in Washington, DeFazio criticized the decision to grant China full trade rights at the end of the 20th century, saying it was a “mistake.”
During that period, the United States committed to a series of free trade agreements, including the North American Free Trade Zone (NAFTA) agreement, which vastly limited U.S. tariffs on goods produced in Canada and Mexico.
DeFazio said that NAFTA and most other such agreements benefitted other nations far more than they benefitted U.S. interests. When NAFTA was signed, DeFazio noted, Mexico’s economy was smaller than that of the state of New Jersey.
“Who’s really benefitting here?” DeFazio said.
But of greater concern than NAFTA, DeFazio said, was the United States’ decision to grant China full trading rights.
In 1979, the United States and China normalized diplomatic and trade relations, which had been frozen since the communist takeover of China in 1949. This caused a rapid uptick in trade between the two nations and ultimately helped China on the path to becoming the global superpower it is today.
Proponents of giving trade rights to China “thought that China would democratize, but it didn’t,” DeFazio said.
Though the United States remains the world’s largest economy, China is close behind, and its economy is growing more quickly than the U.S. economy. As its economy has boomed, so too has China’s control of shipping; meanwhile, DeFazio said, the United States has neglected its own control of shipping.
He highlighted the fact that three major shipping conglomerates control 95 percent of U.S.–Asia shipping. The United States, the world’s largest economy by several trillion dollars, controls and owns 85 of approximately 50,000 shipping vessels on earth.
This lack of control could have serious consequences. DeFazio cited as an example of such consequences that the United States had to borrow foreign ships for the Gulf War.
Tracking Cargo
China’s dominance in shipping, DeFazio said, means that it can track most U.S. cargo—including U.S. military cargo.Through software installed on cranes, which China is a major producer of, DeFazio warned that the Chinese Communist Party could spy on U.S. cargo.
DeFazio warned that if the United States doesn’t increase its control of shipping, China could “weaponize” its dominance against the United States.
“We need to take control over shipping more seriously,” he said.
DeFazio also said that the U.S. tariff rate on average is “the lowest in the world” at 3.4 percent and urged the U.S. Congress to reconsider its trade relations with China.
Congress could be set to do just that, as a bipartisan bill pending in the Republican-controlled House would reconsider U.S. trade relations with China.
‘National Security Has to Come 1st’
Critics of freezing trade with China have argued that the effects of limiting trade between the nations, which have become economically codependent, could be economically disastrous for consumers.Because of its lax labor laws and the harsh sweatshop conditions permitted by the law, China provides some of the cheapest labor on earth. Cheaper labor means lower prices for consumers.
A drastic change in U.S.–China trade relations would inevitably mean higher prices for consumers.
Asked how to balance the evident national security concerns with the needs of consumers, DeFazio suggested that ideally, the United States would be able to craft policy to progressively decrease reliance on China.
But, he said, where national security and consumer prices conflict, “national security has to come first.”
DeFazio’s warning comes at a time when tensions between the United States and China are high, and China’s control of the shipping industry is likely to become an even more critical issue in the years ahead. If China does weaponize its control of the shipping industry, it could have serious implications for both trade and national security.
As such, DeFazio said it’s essential for the United States to take action to increase its control of the shipping industry to avoid such a scenario.
