State governors delve into foreign diplomacy on trade war

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SANTA FE, N.M. | State governors discussed ways Thursday to court foreign investment in the wake of President Donald Trump’s trade disputes with countries including China, Canada and Mexico.

Several of the more than 20 governors attending the annual meeting of the National Governors Association said shifting U.S. trade policies are rattling markets for agricultural commodities and complicating decisions by foreign investors.

“It gets damaging when you get into these very frictional relationships where people are trying to measure this tariff or that tariff,” said Democratic Gov. John Hickenlooper of Colorado. “I’m not saying the previous system was fair.”

Republican Arkansas Gov. Asa Hutchinson said he is sending the state’s economic development director on an additional trip to China this year to meet with companies that are making investments in his state, amid concerns about deteriorating U.S.-China trade relations.

“It’s important that we look for a solution very quickly so that we don’t have an increase in tariffs and escalate the tariff war, as some would describe it,” said Hutchinson, who is running for a second term this year.

Brookings Institution Fellow Joseph Parilla said governors don’t decide U.S. trade policy but can engage in direct economic diplomacy to encourage investment, while funding things like education and research at home.

“They’re certainly not helpless,” he said. “They can increasingly conduct economic policy themselves.”

In Washington on Thursday, Trump’s proposed tariffs on imported cars, trucks and auto parts ran into opposition from automakers, dealers and suppliers. Opponents of the new trade restrictions lined up to vent as the Commerce Department held a hearing on whether auto imports pose a threat to U.S. national security.

At the governor’s conference in Santa Fe, emissaries from the Chinese government and enterprises warned that a trade war with China could lead to negative consequences for ordinary Americans, such as higher prices on consumer goods and greater inflation.

“We should let those who advocate trade war know that trade war is not something that can be easily won,” China Consul General to Los Angeles Zhang Ping said. The comment appeared to be a direct response to Trump’s statement via Twitter in March that “trade wars are good, and easy to win.”

The U.S. and China are threatening a trade war over Trump complaints that Chinese companies steal trade secrets and force U.S. firms to hand over technology in return for market access. Trump has slapped tariffs on imported steel and aluminum, provoking retaliatory measures by Canada, Mexico and U.S. allies in the European Union.

Hickenlooper described the approach as a “sledgehammer.”

He and Utah Republican Gov. Gary Herbert extolled long-term strategies for state economies to increase foreign trade, from foreign language schools to Utah’s expansion of airport cargo-flight capacity.

Republican North Dakota Gov. Doug Burgum said soybean growers in his state have an enormous stake in the U.S. trade confrontation, as commodities markets recoil from the threat of retaliatory tariffs. Trump’s approach deserves more time to win concessions on important issues such as China’s treatment of U.S. intellectual property, Burgum said.

New Mexico Farm and Livestock Bureau President Craig Ogden said retaliatory Chinese tariffs on U.S. pecans and new tariffs from Mexico on U.S. cheese products are likely to hurt producers in New Mexico.

“What makes them nervous is once you lose these markets, they’re going to be hard to get back,” he said.