World Politics

‘Without China, we’re dead.’ Houston entrepreneurs cringe as GOP escalates international clash

WASHINGTON — David LaPrade is an oilman, a lifelong Republican who was gung ho for President Donald Trump in 2016.

But now LaPrade winces almost daily as Trump and like-minded Republicans in Congress let loose on China — jeopardizing his relationship with a client that LaPrade says is “one of the best things that’s ever happened” to his Houston company selling drilling equipment globally.

LaPrade agrees with some of what the politicians are saying, but he has a lot more on the line than they do. The trade war has already cut into his profits, and now he’s worried about where the growing tension between the two nations — sparked anew by the coronavirus outbreak — will lead.

“Calmer heads must prevail,” LaPrade said. “I’m not sure if Trump’s got one.”

Texas has much to lose as the GOP turns up the heat on China, a strategy that has emerged both as a way to insulate Trump from criticism over his administration’s response to the coronavirus outbreak, and as a way to finally dial back America’s economic dependence on a totalitarian regime.

International trade supports a third of all jobs in the Houston area, with more than 5,000 Houston companies engaged in global trade. China is the region’s second-largest trading partner. But the trade war has already taken a swipe at that, with both exports and imports from China seeing sharp declines.

CLASH OF THE TITANS: Opposing policies in U.S.-China trade negotiations spell trouble ahead

“My biggest fear really, in business, is how badly can the government screw up our deal and how quickly,” said LaPrade, who sells equipment to PetroChina, the state-owned Chinese oil company. “That’s my greatest fear: Where the two governments — where it’ll all end. At the end of the day, without China, we’re dead. Without the U.S., China’s dead. Without commerce, everybody dies.”

Texas Republicans have emerged as some of the biggest hawks on China, calling for a fundamental rethinking of the U.S. relationship with the nation they say misled the world about the severity of the coronavirus outbreak that originated in the Wuhan province.

“We can’t be so reliant on China and so vulnerable at the same time,” said U.S. Rep. Michael McCaul, a Houston-area Republican leading a GOP congressional task force focused on China. “This is like a biological bomb that hit the world.”

U.S. Sens. Ted Cruz and John Cornyn, U.S. Reps. Dan Crenshaw and Will Hurd and other Texas Republicans have all made similar pronouncements in recent weeks.

And the rhetoric is only likely to escalate as the November election nears.

Cornyn, an influential Republican who faces what many expect to be his toughest reelection fight yet as he runs for a fourth term, said it bluntly in a campaign email to supporters this month: “CHINA is to blame, NOT President Trump.”


Poking the bear

Houston has found itself at the center of disputes with China before.

When Houston Rockets General Manager Daryl Morey tweeted out support for pro-democratic protesters in Hong Kong last year, it sparked a geopolitical firestorm that some estimated cost the Rockets between $10 million and $25 million. It also jeopardized American jobs in China, Houston and around the NBA, which has spent years breaking into the Chinese market — and spent weeks doing damage control.

Now China is issuing new threats, recently vowing to sanction of handful of GOP Congress members, including Rep. Crenshaw of Houston, in response to a bill they are pushing that would allow Americans to sue the Chinese government over the coronavirus.

The sanctions and the lawsuits would both be largely symbolic. But America’s reliance on China, especially for medical supplies, came into focus with the coronavirus outbreak as China leaders there threatened to stop supplying medicine to the U.S. and started stockpiling protective equipment.

“This is really the defining issue in this generation, I would say: How are we going to compete with China?” said McCaul, the top Republican on the House Foreign Affairs Committee and former chair of the House Committee on Homeland Security. “A lot of Americans are waking up to — they didn’t realize how dependent we are on China for medical supplies, pharmaceuticals, our technology — all of this.”

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McCaul says the task force will study where the virus came from, and to what extent the Chinese government tried to cover it up. But it’s also taking a broader view of China’s attempts to steal intellectual property and spy on American university research.

So far the House GOP effort is a partisan one, but McCaul says he hopes Democrats will join.

“I think they think maybe if we focus on China or the communist party we may be taking our eye off — they want to focus on the president,” McCaul said. “I think you can probably do both.”

The White House, meanwhile, rolled out a strategy for dealing with China that said U.S. policy has long been “premised on a hope that deepening engagement would spur fundamental economic and political opening” there. It called for a “reappraisal of the United States’ many strategic advantages and shortfalls, and a tolerance of greater bilateral friction.”

Polling suggests the anti-China rhetoric has a growing audience. More than 30 percent of American voters now say China is an “enemy” — up 11 percentage points from January, according to a Politico/Morning Consult poll released this week. That poll also found just 9 percent of voters say China is a friend or ally, down from 23 percent in January.

But it is becoming an increasingly partisan issue as Republicans accuse Democrats of being soft on China, while Democrats point to a rise in hate crimes against Asian Americans as a reason to temper the message.

More than 1,700 incidents of verbal and physical attacks against Asian Americans were reported to the group Stop AAPI Hate over six weeks early this year, the group said.

Trump in late March said he would stop calling the coronavirus the “Chinese virus” as such reports of harassment emerged. But that concession has not slowed the GOP’s advance.

“One of the things that drives me crazy about Democrats is they have this nasty little habit of apologizing for communist dictators,” Sen. Cruz said in a recent video published by Trump’s reelection campaign. “They think they’re cute.”

‘Economics always follow the politics’

Jason Jing, who owns a Sugar Land company that sells spices, used to get the vast majority of his products from China and has spent the last two years trying to find other sources as the trade war has driven up costs.

Eighty-five percent of his products were imported from China before, Jing said. Now it’s about 40 percent. The new suppliers cost more, but not as much as paying to import from China with increased tariffs.

He’s keeping a close eye on politics these days.

“I guess I have to,” Jing said. “The economics always follow the politics, or the politics are working for the economics. You cannot separate it.”

IN DEPTH: For Texas, promise and pitfalls in China

Houston imported $12.7 billion in goods from China in 2018 — more than a quarter of the city’s total international imports, said Pablo Pinto, director of the Center for Public Policy at the University of Houston’s Hobby School of Public Affairs, who has studied the effects of the trade war on Houston.

Since the Trump administration upped tariffs, exports to China fell from more than $1.1 billion in March 2018 to $230 million in November 2018 — an 80-percent hit in just eight months, Pinto said. Exports fell nearly 40 percent from 2018 to 2019. Imports fell more than 18 percent that year.

Tariffs on Chinese imports skyrocketed, hitting an average 18 percent. They had been as low as 3 percent in 2013. The costs spilled beyond the companies directly engaged in trade, said Pinto, as the tariffs hit everything from iron and steel to goods made in China and sold at stores like Walmart.

“People rebuilding their homes for Harvey … all of a sudden you had to pay 25 percent more in iron and steel used in construction,” Pinto said. “It is a huge deal.”

State Rep. Gene Wu, a Houston Democrat, said it’s hard to overstate China’s importance as an economic partner of Houston.

“I’m not here to defend China in any sense of the word — in any sense,” he said. “But you cannot talk about the U.S. economy without talking about our trade relationship with China — especially in Texas.”

“Almost everyone here has some type of relationship in China,” Wu said. “I don’t mean just the Chinese people. I would struggle to think of a single firm that is a national corporate firm that does not have business in China or wants to have business in China and is trying to set it up.”

Increasingly that has meant Chinese firms looking to set up shop in the Houston area. But Wu said some are concerned by the chilling relationship.

“When I talk to companies trying to move here … they ask me about Trump, they ask about Cruz and Cornyn and all the crap they say,” Wu said. “It’s becoming harder and harder for me to convince people that it’s just talk, it’ll blow over.”

Still, some business owners are willing to take a financial hit if that means confronting the Chinese government.

Jeff Wang, who runs an audio and video technology company in Sugar Land that relies heavily on imported parts from China, said that even though the trade war has increased costs for his company, he thinks China has long gotten the best of the trade relationship.

“Although there are short term losses from the U.S. side, I truly believe it will be offset by long term benefits for the U.S.,” he said.

Others are wary of what comes next as Trump beats the drum.

“He has said several times over the past 72 hours how he has info that China did this deliberately, intentionally,” LaPrade said earlier this month. “I just can’t imagine, no matter how corrupt the government is, anybody unleashing this on the world, through their own citizens.

“That doesn’t make a great deal of sense,” LaPrade said. “That’s what is lacking in a lot of our international exchanges: Common sense.”

ben.wermund@chron.com

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