Why Not a China-California Free Trade Agreement?

By: Tho Bishop

While Trump’s presidency has largely been a disappointment in terms of policy, he has been very successful in forcing progressives to reconsider their love of the Federal government.

While we still have a ways to go before reaching CalExit, we have seen California’s government make some moves to distance itself from Washington on the world stage. Most notably, Governor Jerry Brown signed an agreement with China to work together on climate change following the Trump Administration’s decision to withdrawal from the Paris accord.  

As former California Governor Gray Davis put it:

If Obama was still in office, this phenomenon would not be occurring. But Jerry keeps pushing … People, when they think of climate change, see Jerry Brown as a legitimate alternative [to Washington]. It’s not make believe. It’s real.

Regardless of the wisdom of the Paris accord, I choose to view the willingness of state leaders to work beyond the Federal government as a positive phenomena. So why shouldn’t the Golden State look to make a similar move on trade?

After all, a few of California’s signature industries will face a direct impact from China’s retaliation to Trump’s tariffs. As Reuters reports:

China said at the weekend that it was imposing retaliatory tariffs of between 15 and 25 percent on $2.75 billion worth of U.S. imports, including frozen pork, nuts and wine, in response to steep duties on aluminum and steel announced by the Trump administration….

Almonds are China’s second-biggest import from California farms. In 2016, China took 12 percent of California’s almond crop, which was valued at about $518 million.

The Chinese levy on U.S. almonds goes up from 10 percent to 25 percent, said Richard Waycott, president and chief executive of the Almond Board of California…

California wine is also taking a hit.

The latest import levy on wine will increase the total tariff and tax paid on a bottle of U.S. wine imported into China from 48.2 percent to 67.7 percent, according to the Wine Institute, which represents 1,000 wineries and affiliated businesses in California.

The United States, predominantly California, exported wine valued at nearly $79 million to China last year, according to the Wine Institute.

In order to protect his state’s exporters, maybe it’s time for Governor Brown to try his hand at the art of the deal.

Though there is little he can do to nullify the new tariffs, he could exempt some Chinese goods – perhaps LED lights, machinery, and appliances – from California’s 6% sales tax. In exchange, China could exempt California good from their new policies. While such a deal may not perfectly balance out, this mutual disarmament would allow Xi Jinping to demonstrate that his stated desire to defend the benefits of free trade is more than just empty talk. Governor Brown would have to defend the loss of state revenue – and the anger from competing manufacturers of those goods – but it would provide him yet another opportunity to stick it to a federal government that continues to threaten his state.

While not perfect, the move would also offer an example of what a true genuine free trade agreement would look like. Instead of trying to create a new complicated regulatory structure in the hopes of creating some new managed common market, you would have two parties simply agree to drop their own imposed costs on peaceful commerce.

Of course I don’t expect to actually see this happen. But, like the creation of New California, it’s fun to think about. 

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