Unequal Deal

TRUMP’S “PHASE ONE” TRADE DEAL LEAVES CHINA WITH MASSIVE ADVANTAGE
One of the key reasons Trump launched his trade war has yet to be resolved.
BY BESS LEVIN

Donald Trump denies leading a pressure campaign on Ukraine in remarks to the press outside the White House November 20.

Back in October, financial markets and other interested parties woke up to the exciting news that, according to Donald Trump, the United States had reached a “very substantial phase-one deal” with China, constituting the first step in a series of steps that would hopefully end the longtime trade war with Beijing and make the pain that American farmers, companies, consumers, and the economy at large had suffered over the last two years all worth it in the end. 

Like most Trump proclamations, though, this one turned out to be a lie. 

We knew this both in real time, as news outlets reported that China wanted another round of talks before even thinking about signing “phase one” of the trade deal and on Tuesday, it was made yet more clear when Trump again announced striking a phase one deal—more than two months after he’d already claimed one had been clinched:


Donald J. Trump
✔@realDonaldTrump
I will be signing our very large and comprehensive Phase One Trade Deal with China on January 15. The ceremony will take place at the White House. High level representatives of China will be present. At a later date I will be going to Beijing where talks will begin on Phase Two!
94.4K
3:16 PM - Dec 31, 2019


While Trump has lied about negotiating a deal with China numerous times by now—in December 2018, he bragged to reporters that he’d struck an “incredible” deal with Xi Jinping that blew up in his face less than 24 hours later; in August, a breakthrough call with China turned out to be fictional—at this point, there’s no suggestion that he is, once again, just making shit up as he goes along. That’s the good news.
The less-good news?
His big, terrific phase one deal appears to accomplish very little, and on a matter that both the president and his top advisers have said is crucial to bringing fairness to the markets, literally no progress has been made. 

Per the Washington Post:
President Trump’s trade deal with Beijing leaves untouched the marriage of business and government known as China Inc. that American executives for nearly two decades have said tilted global markets against them. 
Trump insisted for months that he wanted to resolve all outstanding trade issues with China in a single, comprehensive accord that would refashion the Chinese state’s economic role. 
As late as September, he rejected talk of a partial agreement, saying instead that he wanted “the big deal.” 
The two sides discussed industrial subsidies in the early rounds of negotiations over an agreement that exceeded 150 pages. 
But Chinese officials resisted making structural changes, and by the time officials settled this month on an 86-page partial accord, any commitments to reduce subsidies had been excised.

Chinese steel mills, solar panel manufacturers, electric battery developers, shipbuilders and oil producers all benefit from a vast web of government support. 
Officials in Beijing arm Chinese companies against their foreign rivals with discounted loans from state banks, cheap land, low-cost electric power, and cash infusions from officially approved investment funds...
China now devotes more than 3 percent of its annual output to direct and indirect business subsidies — a share of the economy that is roughly equivalent to what the United States spends on defense, according to economist Nicholas Lardy of the Peterson Institute for International Economics, a nonpartisan research group.
Some of that aid is similar to programs in the United States and other advanced nations, encouraging companies to retrain workers, use less energy or otherwise support government goals. 
But much of it is divorced from any consideration of profit and loss. 
So it fuels excess production of goods like steel, which spill into global markets, depressing prices and making it hard for American companies to compete. 
Trump last year imposed tariffs on steel after the Commerce Department warned that the U.S. share of global production had fallen by nearly two-thirds since 2000, under pressure from heavily subsidized Chinese mills. 
At the same time, signs that China was lavishing state aid on efforts to supplant the United States as the global leader in advanced technology triggered Trump’s decision to launch his trade war with Beijing.
In a report published last year, Robert Lighthizer, Trump’s top trade negotiator, said that government subsidies were a major element of China’s plan to surpass the U.S on technological leadership.
China is “grossly subsidizing and taking over our markets,” he insisted to the Senate Finance Committee this summer. 
And yet!
White House officials have acknowledged that some key issues remain unresolved.
Lighthizer has said “a lot of hard things” have been left to future talks, which most analysts say will be arduous and unlikely to bear fruit before the November election.
Bargaining over industrial subsidies is expected to be particularly tough. 
Though Trump launched the trade war to get China to change practices including its numerous subsidies, the commercial conflict has only convinced Xi to accelerate efforts to become self-sufficient — no matter the cost.
In other words, one of the major reasons Trump launched his trade war has yet to be resolved, and while getting a “phase one“ deal sounds well and good, it’s not at all clear that President Art of the Deal will be able to advance to beyond that (though he’ll assuredly claim as much in an quickly debunked tweet some time soon.)

China's predatory trade practices

President Trump, a global loner, finds his hard line toward Beijing draw a crowd

By David J. Lynch

After almost a year of going it alone, President Trump finds himself with a surprising weapon in his trade confrontation with China: allies.
Pressure from Europe and Japan is amplifying the president’s vocal complaints about Chinese trade practices that he says discriminate against foreign companies and threaten U.S. economic growth — as fresh economic data Friday in Beijing showed the economy slowing more than expected.
To eliminate one major irritant, Chinese leaders already have begun scaling back an industrial policy aimed at dominating 10 technology industries, after concluding the president’s objections were widely shared and could not be resolved merely by waiting out the mercurial U.S. leader.
“One thing the Chinese have had to acknowledge is that it wasn’t a President Trump issue; it was a world issue,” said Jorge Guajardo, senior director at McLarty Associates and a former Mexican ambassador to China. 

“Everybody’s tired of the way China games the trading system and makes promises that never amount to anything.”
Administration officials say President Trump deserves credit for driving a hard line toward Beijing at home and abroad. 

Attacking Chinese protectionism now has bipartisan support in Washington; Germany and the United Kingdom joined the United States this year in tightening limits on Chinese investment.
But critics say the president has not done enough to capi­tal­ize on those shared grievances, instead alienating European and Japanese officials this year by imposing tariffs on their shipments to the United States of steel and aluminum.
President Trump’s resolve to pursue his confrontation with China is doubted amid administration infighting and suggestions that the United States might settle for increased Chinese purchases of American products rather than demand wholesale changes to China’s economic system in ongoing trade talks.
“It makes sense to get the other countries more involved... But they don’t know how serious Trump is on the systemic reform bits,” said Chad Bown, a senior fellow at the Peterson Institute for International Economics.
China has tried to defuse the global irritation over its mercantilist stance by signaling a willingness to revise a program of state subsidies and market share targets called “Made in China 2025.”
The new flexibility comes as Chinese industrial production figures Friday fell short of economists’ expectations and retail sales grew at their slowest rate in 15 years.
Analysts in China and the United States say China is modifying the Made in China program because of pressure from all its major trading partners.
In September, trade ministers from the United States, European Union and Japan issued a joint statement that blasted the use of subsidies in turning “state owned enterprises into national champions and setting them loose in global markets.”
The statement, which did not name any country, also rejected forced technology transfer and cyberattacks — underscoring key elements of the president’s attacks on Beijing.
U.S. Trade Representative Robert E. Lighthizer has described the subsidy program, which sets market share goals for Chinese industry, as imperiling U.S. technology leadership. 

China wants its semiconductor manufacturers to provide 70 percent of domestic needs, up from less than 20 percent today, threatening the $6 billion in annual U.S. exports.
But roughly a dozen other countries are even more dependent on high-tech manufacturing and exports of advanced factory gear, and are more exposed to China’s desire to replace purchases of foreign products with domestic alternatives, according to the Mercator Institute for China Studies in Berlin.
“The pushback from other trading partners is a really important piece of the dynamic here,” said Michael Hirson, a former Treasury Department attache in Beijing who is now with the Eurasia Group. 

“That’s because the Made in China 2025 program is more of a threat to Germany, South Korea and Japan than it is to the United States.”
External pressure drove China this year to open markets for financial services and automobiles, according to economist Andrew Polk, a partner in Trivium China, a Beijing-based consultancy.
On Friday, the Chinese government also temporarily rolled back a tariff increase on U.S. autos, implementing part of a trade-war truce Chinese dictator Xi Jinping and President Trump agreed to during their meeting in Buenos Aires this month.
Over the past year, Chinese authorities have eliminated the foreign ownership cap for life insurers, approved foreign financial institutions underwriting domestic bond offerings and agreed to lift limits on foreign stakes in automotive joint ventures by 2022.
“This isn’t just President Trump bellyaching. It’s the only bipartisan issue in Washington. It’s a concern for Brussels and Canberra and that recognition is what has helped drive accelerated market openings,” Polk said. 

“They’re desperate to change the narrative. They realize how the ground has shifted under them.”
From the outset, the president has pursued his plans for an “America First” remake of U.S. trade policy with little regard for sentiment abroad. 

He withdrew the United States from the 12-nation Trans-Pacific Partnership as one of his first official acts, and he has imposed unilateral tariffs to a degree unseen since the 1930s.
His attacks on the World Trade Organization also undermined any chance that China’s trading partners would unite in a comprehensive complaint in Geneva.
The United States did win E.U. and Japanese support for a complaint to the WTO alleging China has violated U.S. intellectual property rights. 

But rather than use the global trade body for a broader attack on China, the administration has demanded changes in the way the organization operates.
To critics, the administration missed an opportunity to marshal China’s trading partners behind an across-the-board indictment of its state-led economy.
Jennifer Hillman, a professor of practice at Georgetown University Law School, told the Senate Finance Committee last month that the United States “ought to be bringing a big and bold case, based on a coalition of countries working together to take on China.”
On their own, U.S. allies have responded to China’s ambitions to acquire foreign technology via acquisitions, cybertheft or coercive licensing requirements with heightened scrutiny of its investments.
The E.U. agreed last month to establish a new screening mechanism for foreign investments, motivated largely by a sharp increase in Chinese activity on the continent. 

But the E.U. measure leaves final decisions to national governments and falls short of the Committee on Foreign Investment in the United States.
The German government in July blocked two potential acquisitions by Chinese investors, following similar action by Canada two months earlier, and lowered to 15 percent from 25 percent the foreign ownership stakes that require review. 

British Prime Minister Theresa May’s government also announced plans for closer scrutiny of investments by foreign entities.
Despite his reputation as a global loner, President Trump’s views on China are becoming the conventional wisdom. 

Last month, as the president prepared to travel to Buenos Aires for an international summit and dinner with Xi, a top administration official claimed broad support for U.S. goals.
“The rest of the world knows that China has been violating common trade practices, WTO trading practices and laws. The rest of the world knows full well about the issues of IP theft and forced transfers of technology. They know that and they’ve said so. This idea that other countries are not with us — it’s just not true,” said National Economic Council Director Larry Kudlow. 

“The rest of the world knows this, and China knows the rest of the world knows this.”
U.S. and Chinese officials are racing toward a self-imposed March 1 deadline to negotiate a trade deal that would involve changes to China’s state-directed economy. 

Many Trump allies are skeptical China will agree to turn away from its state-directed system and embrace additional market changes.
With the United States and China locked in a geopolitical competition, it is easier for revision-minded officials to advocate changes in programs like Made in China 2025 by citing shared concerns among all the country’s major trading partners, Hirson said.
Chinese authorities have changed course under pressure before. 

In 2015, regulators scrapped plans to require foreign financial institutions to install Chinese software amid complaints from U.S., European and Japanese diplomats and business groups, said Erin Ennis, senior vice president at the U.S.-China Business Council.
“We have seen progress like this in the past when the U.S. and other trading partners had a nearly universal view,” she said.
Administration officials scoff at the proposed changes as cosmetic and designed to sap U.S. negotiating willpower.
Michael Wessel, a member of the U.S.-China Economic and Security Review Commission, called disclosure of plans to allow foreign companies a greater role in the Chinese technology program “an influence operation at its best.”
He questioned whether changes in relevant Chinese laws would mean much so long as the courts remained under the control of the Communist Party.
“What the Chinese are talking about are really just baby steps,” he said.

U.S. Intelligence Sees China's Military Expanding Bases Globally

• China has world’s fastest-modernizing military after U.S.
• Officials share insights on China’s ambitions, activities

By Nafeesa Syeed

China’s first overseas military base in the small African country of Djibouti is “probably the first of many” the country intends to build around the world, which could bring its interests into conflict with the U.S., according to American intelligence officials.
“China has the fastest-modernizing military in the world next to the United States,” according to insights provided Thursday by U.S. intelligence officials, who asked not to be identified discussing the information. 

That will create “new areas of intersection -- and potentially conflicting -- security interests between China and the United States and other countries abroad,” according to the officials.

The opening ceremony of China’s new military base in Djibouti on Aug. 1.

The People’s Liberation Army announced the establishment of a logistics support base in Djibouti in July, saying it would back up China’s military’s naval escort, peacekeeping and humanitarian missions in Africa and western Asia as well as military exercises and emergency evacuation.
As part of China’s expanding military and economic clout, the country is taking a stronger stance on territorial claims in the South China Sea, relations with Taiwan and in promoting its “One Belt, One Road” trade initiative. 

Where Chinese interests conflict with the U.S., Beijing is actively seeking to undermine U.S. influence.
The rare comments on how U.S. intelligence agencies view China’s ambitions come as Xi Jinping seeks to consolidate support at this month’s Communist Party Congress, held once every five years. Donald Trump plans to visit China next month and, while the two countries have found areas of cooperation, including over United Nations sanctions against North Korea, they have unresolved disagreements over trade, Beijing’s territorial claims and Syria’s civil war.

Steel Dispute
Commerce Secretary Wilbur Ross, visiting Beijing last month, stressed his intent to cut the U.S. trade deficit with the world’s largest exporter through “increased exports of high-value U.S. goods and services to China and improved market access.” 

Ross also announced a probe into China’s stainless steel flanges for unfair subsidies, the latest move after the U.S. trade representative opened an investigation into China’s intellectual property practices.

Wilbur Ross

Chinese leaders see the U.S.-led world order, most notably the U.S. alliance network and promotion of U.S. values worldwide, as constraining China’s rise and are attempting to reshape the world order to better suit Chinese preferences and growing clout.
Ahead of the Communist Party Congress, officials in Beijing have increased control of domestic dissent.

The world’s second-largest economy is on track to reach its 6.5 percent annual growth target, the officials said. 

The country is fueling that growth, in part, by seeking deeper technology "collaboration" with U.S. companies.

Bannon’s Warning
Former Trump adviser Stephen Bannon has called the transfer of U.S. technology to China “the single biggest economic and business issue of our time,” adding that “if we don’t get our situation sorted with China, we’ll be destroyed economically.”
The U.S. intelligence officials suggested China’s government is aware of the threat that perception poses to its ambitions.
“Beijing is trying to downplay concerns that this state-led technology acquisition drive creates an unlevel playing field, forces technology transfer to China, limits foreign companies’ access to the Chinese market, and is a threat to U.S. and other countries’ economic strength.”

Chinese Dumping

EU e-bike makers make complaint against Chinese imports
Reuters 

A fuel station for e-bikes is pictured in the historic city centre of the western German city of Koblenz, March 1, 2016. 

BRUSSELS -- European producers of electronic bikes (e-bikes) have filed a complaint with the European Commission against cheap Chinese e-bike imports, saying that they are sold in the bloc at excessively low prices with the help of unfair subsidies.
The European Bicycle Manufacturers Association (EBMA) lodged the complaint alleging dumping of e-bikes by Chinese companies which they say are flooding the market at prices below the cost of production.
The Commission has until late October to determine whether to start an investigation.
The EBMA is also preparing a related complaint alleging illegal subsidies and asking for registration of Chinese e-bike imports, which could allow eventual duties to be backdated.
Such an investigation would be the latest in a string of probes into Chinese exports ranging from solar panels to steel and could raise trade tensions with Beijing, particularly with a subsidy inquiry into the support provided by the Chinese state.
Bicycles have already been a flashpoint. 

The EU blamed China last December for scuppering a global environmental trade deal by insisting that bicycles be included as a tariff-free green product. 

Chinese conventional bicycles have been subject to EU anti-dumping duties since 1993.
The EBMA says more than 430,000 Chinese e-bikes were sold in European Union in 2016, a 40 percent increase on the previous year, and forecasts the figure will rise to around 800,000 in 2017.
EBMA secretary-general Moreno Fioravanti said Europeans buy some 20 million bicycles per year, of which about 10 percent are now e-bikes, with the potential to rise to a quarter within five years.
European companies had pioneered the pedal-assist technology that e-bikes use and had invested about 1 billion euros ($1.2 billion) last year, he said, but was risking losing its industry to China.
“Today the European bikes are the best in the world and we have to invest every year to renew the range. The Chinese are getting the money from the government and the subsidies have an impact of 30, 40, even 50 percent of the price of the product,” Fioravanti said.
“You have subsidies, which generate overcapacity, which generate dumping,” he said.

Rogue Nation

US business group urges Washington to 'use every arrow' against China

Reuters

The United States should "use every arrow" in its quiver to ensure a level commercial playing field in China, a U.S. business lobby said on Tuesday, warning that 2017 could be the toughest year in decades for American firms in the country.
China's policies designed to support domestic companies and create national champions have narrowed the space for foreign companies, the American Chamber of Commerce in China said in its annual business climate report.
The White House has said U.S and Chinese officials are fleshing out a pledge by Donald Trump and Xi Jinping for a 100-day plan to cut the U.S. trade deficit with China, which reached $347 billion last year.
But the chamber said it hoped more attention would be paid to market access for American firms in China.
"Right now basically we are recommending everything you have in your quiver -- please use every arrow possible," chamber chairman William Zarit said, referring to possible backlash from Beijing.
He was speaking at a briefing on the report.
U.S. business groups want U.S. officials to take measures against Beijing on market imbalances.
More vociferous complaints from the American business community mark a shift from years past, when many companies eschewed the idea of forceful action by Washington for fear of retribution by China.
Foreign technology companies, in particular, fear what they see as Beijing's plans to pump billions of dollars in subsidies into domestic competitors and push regulations that could force the surrender of key technology or hit competitiveness.
"With uncertainty stemming from political and economic transitions in both the U.S. and China, perceptions of a deteriorating investment environment for foreign companies in China, and a slowing economy, 2017 will likely be one of the most challenging years in decades for U.S. companies in China," the chamber said in its report.
U.S. business leaders also worry that Trump's focus on curtailing North Korea's nuclear and missile programmes could undercut U.S. commercial interests in China. 

Last week, Trump tweeted that Beijing would get a better trade deal if it helped resolve the U.S. problem with Pyongyang.
"I'm sorry to see there is a possibility we may lose some momentum on helping to level the playing field with China in our economic relationship, due to the situation in North Korea, if there is some kind of trade-off," Zarit said.

US aluminum group files trade complaint against China

By JOE MCDONALD
In this Aug. 22, 2016 photo, workers remove air ducts made from aluminum sheet metal in Beijing, China. American aluminum producers have filed a complaint on Thursday, March 9, 2017 accusing Chinese smelters of exporting at improperly low prices in the first case of its kind for the administration of President Donald Trump.

China appealed to Washington on Friday to refrain from imposing sanctions on Chinese aluminum suppliers after U.S. producers filed a complaint against them in the Trump administration's first trade case.
An industry group, the Aluminum Association, accused Chinese producers of selling at unfairly low prices that hurt foreign competitors in the case filed Thursday. 

It asked the U.S. Commerce Department to impose anti-dumping duties of 38 percent to 134 percent on aluminum foil for consumer and industrial uses.

A flood of low-cost Chinese aluminum exports has pushed global prices so low that U.S. and European smelters are closing. 

Producers say thousands of jobs are at risk.
Trump promised during his campaign to raise duties on Chinese imports to offset unfair action by Beijing but has yet to take action.
Aluminum is one of an array of Chinese industries including steel, coal and glass whose production mushroomed over the past decade until supply vastly exceeded demand.
The ruling Communist Party is shrinking steel and coal production but has yet to announce plans for aluminum.
Chinese smelters that make more than half the world's aluminum are adding millions of tons of capacity, supported by improper subsidies.
After a dip in early 2016, Chinese aluminum production rebounded to a new high of 2.95 million tons in the month ending in mid-February, according to data compiled by the International Aluminum Institute in London.
The Aluminum Association said it was the first trade case it has filed in the group's 85-year history. The complaint was filed with the U.S. Commerce Department and the International Trade Commission.
"This unprecedented action reflects both the intensive injury being suffered by U.S. aluminum foil producers and also our commitment to ensuring that trade laws are enforced to create a level playing field for domestic producers," said the association president, Heidi Brock, in a statement.

China Threat

White House panel urges U.S. defence of clout in high-end chip market
Reuters

WASHINGTON -- A blue-ribbon presidential panel on science recommended on Friday that the United States take steps to defend its dominance of the high-end semiconductor market against a stiff Chinese challenge.
The report follows plans by China to use a massive, $150 billion government investment in its semiconductor industry to expand the share of Chinese-made integrated circuits in the domestic market from its current 9 percent. 

Semiconductor chips are used in everything from computers to automobiles.
The President's Council of Advisors on Science and Technology said the United States needed new tools to ensure China did not replace the United States as the leader in making high-end semiconductors that are key to national defence.
The report urged policy-makers to "respond forcefully" if Chinese economic policies, such as subsidies aimed at building Chinese expertise in semiconductors, limit the access of U.S. companies or thwart U.S. exports.
"The main goal here should be to deter dangerous Chinese actions," the report said.
Tools that could be used include the Committee on Foreign Investment in the United States (CFIUS), an inter-agency panel led by the Treasury Department that assesses Chinese investment to ensure it does not harm U.S. national security, the panel said.
Concern about China is one of the few areas where the administration of Barack Obama and President Donald Trump's incoming team appear to agree.
In November, U.S. Secretary of Commerce Penny Pritzker said the United Stated would not accept China's "$150 billion industrial policy designed to appropriate this industry."
Under Obama, CFIUS stopped a series of Chinese acquisitions of high-end chip makers. 

Last month, he upheld a recommendation by CFIUS to block Aixtron's 670 million euro ($717 million) sale to Fujian Grand Chip Investment Fund over national security concerns.
Last January, CFIUS prevented the sale by Philips of its U.S. lighting business to GO Scale Capital, made up of GSR Ventures, Oak Investment Partners, Asia Pacific Resource Development and Nanchang Industrial Group.

Aluminum Billionaire Planning Escape From China: Lawyer

Giant aluminum stockpile in Mexico and Vietnam may represent an effort to get wealth out of China by Liu Zhongtian, chairman of China Zhongwang Holdings.
By SCOTT PATTERSON

Liu Zhongtian, chairman of aluminum giant China Zhongwang Holdings Ltd., in his office in 2009. 
A giant stockpile of aluminum that has crisscrossed the globe remains a puzzle for American executives and investigators trying to unravel the logic behind its movements.
A Dallas attorney’s correspondence suggests a surprising possibility: that the stash is a Chinese billionaire’s retirement fund.
Like all Chinese citizens, Liu Zhongtian, the 52-year-old chairman of aluminum behemoth China Zhongwang Holdings Ltd., isn’t supposed to move more than $50,000 a year out of the Communist Party-led country. 

To get around the restrictions, Chinese nationals have used Hong Kong money changers to illicitly transfer cash between bank accounts, combined their $50,000 quotas to make large-scale transfers and even carried cash across borders in suitcases.
Mr. Liu developed an industrial-scale approach involving boatloads of aluminum which he stockpiled with plans to sell the metal over time, according to the Dallas attorney’s correspondence and people who have worked for Mr. Liu whose accounts are supported by shipping and corporate records.
Mr. Liu sought to establish companies that could control his wealth outside China and set up an office in Switzerland, according to a 2012 email from attorney Herman Randow of Dallas firm Munsch Hardt Kopf & Harr.

An aerial view of the aluminum stockpile around Aluminicaste Fundición de México’s San José Iturbide plant in 2014. 

“We are at the early stages of this family office,” Mr. Randow wrote in the email reviewed by The Wall Street Journal. 

“It will not be robust until Mr. Liu retires and leaves China to live in Switzerland. That is his ultimate goal.”
A China Zhongwang spokeswoman wrote in an email that Mr. Liu “does not know this law firm, and has never had any business dealing with it.” 

She added: “We have no knowledge of the correspondence to which you refer and question its authenticity.”
A spokeswoman for Munsch Hardt Kopf & Harr said the firm doesn’t currently represent Mr. Liu “nor have we represented Mr. Liu or his interests for quite some time.” 

She said Texas ethics laws prevented her from commenting further. 

Mr. Randow, who still works for the firm, didn’t respond to requests for comment.
The law firm email is a tantalizing clue that could help explain why several large aluminum stockpiles have mysteriously popped up around the world. 

Metal caches in Mexico and Vietnam have been the subjects of Wall Street Journal articles that have traced the metals’ connections to Mr. Liu and businesses tied to him and his family.
Mr. Liu has denied any connection to the aluminum or to the companies moving it around the world. “As we have repeatedly stated, neither China Zhongwang nor Mr. Liu has connections to the ‘stockpile’ in Mexico, or the metal in Vietnam,” his company’s spokeswoman wrote.
Most of the Mexican aluminum stockpile was moved to Vietnam, according to trade records and people familiar with the matter. 

All told, about 1.7 million tons of aluminum has been stored in Vietnam since 2015 by a company co-owned by one of Mr. Liu’s business associates, according to trade and corporate records and people familiar with Mr. Liu’s business operations. 

Data provided by Global Trade Information Services, which tracks world-wide trade, values the aluminum at about $5 billion. 

The metal has been extruded, or turned into various shapes, for sale as products.
The stockpiles are so big that metals-industry officials have been worried they are depressing global aluminum-extrusion prices. 

The market for aluminum, like other commodities such as steel, has been plagued by a glut driven by supercharged Chinese production.

A plant owned by China Zhongwang Holdings in Liaoyang, China. 

American executives have accused Mr. Liu of routing inexpensive, government-subsidized aluminum into the U.S. through Mexico and Vietnam to avoid U.S. tariffs. 

China Zhongwang’s products have faced tariffs as high as 374% because a 2010 Commerce Department probe found the company received illegal Chinese subsidies and was “dumping”—selling aluminum products below market prices.
The Department of Homeland Security is investigating whether U.S. companies linked to Mr. Liu illegally avoided punitive import tariffs on Chinese aluminum, according to people familiar with the probe. 

In a separate investigation, the Commerce Department ruled this year that China Zhongwang had sidestepped U.S. trade sanctions by disguising its metal in a form not specifically covered by the 2010 trade restrictions.
China Zhongwang said it was no longer selling the type of aluminum targeted by Commerce.
The Dallas attorney’s email raises another possibility for the metal: Aluminum, which is commonly traded in dollars, provided a way of moving currency out of China.
In his email, the Dallas attorney, Mr. Randow, emphasized the secret nature of Mr. Liu’s plans to set up businesses outside of China and live in Switzerland.
“I want to reinforce that all this information and these relationships absolutely are confidential, and I am not typically authorized to freely disseminate this information to third parties outside of the family office,” Mr. Randow wrote.
Mr. Randow’s email was related to two Swiss companies that he said were owned by Mr. Liu: Eighty Eight Investments AG and Grand Provenance Holdings AG.
Grand Provenance is the parent of GT88 Capital, a Singapore aluminum-trading firm that shipped more than $1 billion worth of aluminum from 2010 to 2013 to a Mexican facility once owned by Mr. Liu’s son called Aluminicaste Fundición de México, according to shipping and corporate records. The GT88 shipments formed part of the Mexican stockpile under investigation by the Commerce Department, people familiar with the matter say.

Liu Zhongtian toasts the listing of the shares of China Zhongwang Holding at the Hong Kong Stock Exchange in 2009. 

Mr. Randow wrote that Grand Provenance and Eighty Eight “are simply the confidential holding companies for the family office for Mr. Liu Zhongtian.”
The companies “simply direct all his investments out of the People’s Republic of China,” Mr. Randow wrote.
The email was sent to a business associate of Mr. Liu’s in response to questions from Banque Heritage, a Swiss bank conducting due diligence on the companies as they tried to open an account.
If the bank had more questions about Mr. Liu, Mr. Randow suggested: “Google him.”
Banque Heritage declined to comment.
Mr. Liu, through a spokeswoman, denied any involvement with Grand Provenance and Eighty Eight. Mr. Liu’s main company, Liaoyang-based China Zhongwang, says it sells most of its aluminum to Chinese companies.
A U.S. attorney who has represented Mr. Liu, Charles Pok, says Mr. Liu’s name was fraudulently connected to the two Swiss companies by a former U.S. business associate named Eric Shen. 

“Eric Shen and Herman Randow definitely know that Mr. Liu never instructed them to establish these companies,” Mr. Pok wrote in an email.
Munsch Hardt said the firm and Mr. Randow denied Mr. Pok’s allegations. 

Mr. Shen also denied them.
American executives who have investigated the shifting stockpiles of metal say they suspected Mr. Liu may have been motivated in part by a desire to move wealth offshore. 

Even though he ultimately failed to sell large amounts of metal into the U.S., they point out that it still serves as a store of value.
Mike Rapport, who owns an aluminum business in Southern California, said an Aluminicaste salesman told him Mr. Liu planned to use the Mexican metal to fund his retirement.
Mr. Liu has made moves that indicate he may be preparing to leave China.
Last year, he paid €650,000 to become a Maltese citizen, taking advantage of a new policy introduced by Malta’s government in 2014, according to government records there. 

With Maltese citizenship, Mr. Liu can live and work in any country in the European Union. 

Chinese law forbids the country’s citizens from holding dual citizenship.
Mr. Liu also has a Social Security number in the U.S., where his family owns several homes, according to a records search.
The China Zhongwang spokeswoman said the company doesn’t comment on personal matters.
In August, Zhongwang USA LLC, controlled by Mr. Liu and affiliated with China Zhongwang, agreed to acquire Cleveland-based aluminum producer Aleris Corp. for $1.1 billion, which would mark the highest price ever paid by a Chinese firm for a U.S. metals producer.

Finally, World Loses Patience With Anti­-Competitive China Trade Practices

China has maliciously dumped products to eliminate not only competitors but also entire industries, as it did in solar panels. 
By Gordon G. Chang

Friday, Shen Danyang, Commerce Ministry spokesman, said Beijing will employ “necessary measures” against World Trade Organization members that do not treat China as a market economy after December 11.
His country, he said, will “resolutely defend its lawful rights and interests against the members who persist with the ‘surrogate country’ approach in their antidumping investigations into Chinese products.”
China is legally entitled to be treated as a market economy for anti­dumping purposes, but many WTO members will not accord it such status.
Today is the 15 anniversary of China joining the global trading body.
Its accession agreement appears to provide that other members are required to grant it MES, market­economy status.
Having such status makes it more difficult to prove that China has, for WTO purposes, “dumped” its products in another country, in other words, sold goods so that their price in the importing market is below the price of those same goods in China.
If China has MES, complaining nations must, for purposes of determining the existence of dumping, use China’s domestic prices when they make the comparison with export prices.
If, however, China does not have such status, complainers can use prices in so­-called surrogate countries, countries other than China.
Prices in those other countries are almost always higher than China’s, making dumping allegations against China relatively easy to prove.
Although technical arguments can be made to the contrary, the better interpretation is that Article 15 of China’s accession protocol automatically grants market ­economy status on the 15th anniversary of its membership.
That is how other nations in fact have read their obligations up to now.
Now, however, China’s trading partners are reading the accession protocol differently.
Japan, last week, and the U.S., before then, have stated they will not grant China market­ economy status.
As Commerce Secretary Penny Pritzker told Chinese officials last month, “it is not ripe for us to change our protocols.”
The European Union is not as direct as Secretary Pritzker.
It has devised a “country­ neutral” rule that permits it to use third­ country prices for anti­dumping purposes to counteract subsidies and other forms of state intervention.
Shen, not surprisingly, said the new EU rules are “disappointing.”
It is, in one sense, disappointing that major trading nations are welshing on their agreements.
If the international community wants China to abide by its trade obligations, other nations should abide by theirs.
As Claude Barfield of the American Enterprise Institute has written, “a deal is a deal and should be honored.”
Yet there are, aside from arguments based on the technical wording of China’s accession protocol, good reasons for other nations to reconsider their deal with China.
As Robert Pittenger, Republican Congressman from North Carolina, wrote on the Fox News Opinion site, “Why should we reward anti­-competitive practices?”
Virtually everybody 15 years ago thought China would evolve into a market economy by now. Almost nobody saw the rise of leaders like Hu Jintao and Xi Jinping, economic nationalists, who sought to close off the Chinese economy.
Xi, in particular, has used Beijing’s resources to bolster state­-owned enterprises as he has pursued his “Chinese dream,” his signature concept contemplating a China dominated by a strong party­-state.
His moves have resulted in many regressive trends including the market playing less of a role in setting prices.
Most observers believe Beijing will take a case to the WTO’s dispute resolution process if some nation does not use China’s own prices in a dumping case.
Chinese officials will feel aggrieved that others are not honoring their promises to China, but they should remember they have routinely violated their WTO obligations and forced others to go through the WTO process, wasting years in the process.
They should also remember the Gordon G. Chang corollary of Confucius’s Golden Rule.
Confucius famously said, “Do unto others as you would have them do unto you,” and I say “Others will do unto you what you have done unto them.” 
China has maliciously dumped products to eliminate not only competitors but also entire industries, as it did in solar panels.
The Wall Street Journal reports that Beijing is now going after the semiconductor and mobile phone sectors.
And don’t forget steel.
China has been “pumping out” more of the product “than the world wants or needs,” and that does not make China look market­-oriented.
The WTO is not a “suicide pact,” and countries are not—and should not—allow China to continue to game the system in such a destructive matter. 

One way or another, they will protect their industries from increasingly predatory behavior.
So what can other countries do?
They may force a renegotiation of the WTO agreement, withdraw from the pact altogether, or simply club China into not complaining.
China’s trade partners, especially those running deficits with Beijing, can do almost anything they want.
Why?
As George Friedman’s Geopolitical Futures tells us, “China must have access to U.S. consumer markets, and Donald Trump knows it.”
The president has already weighed in on the market­ economy issue, saying China is not one.
Moreover, last Thursday he accused the Chinese of “product dumping.”
As he declared at his rally in Des Moines, “They haven’t played by the rules, and I know it’s time they’re going to start.”
“We are playing by the rules and you need to keep your promise,”said Xue Rongjiu of China’s State Council, speaking this month.
“It’s unfair to blame China for your problems, which have resulted from bad management and operations.”
No, Xue, our problems result from your country’s bad behavior. 
As evident in recent days, China’s major export markets have just signaled their patience with Beijing has run out.
Chinese officials can huff and puff, but there is not much they can do when others just refuse to buy their goods.
It’s called a trade war, and other nations are beginning to recognize it exists and are starting to respond.