The Bad Assumption

At the Washington Post technology exec Robert D. Atkinson advises President Trump to stand firm with Chinese President Xi but to eschew threats of tariffs:

It would be one thing if China were just another middle-of-the-pack nation following international norms to reach ambitious industrial goals. But when the world’s second-largest economy makes by-hook-or-crook mercantilism the animating force of its economic and trade policies, that is a whole different kettle of fish. In addition to stealing intellectual property, forcing competitors to hand over their technologies and thumbing the scales on behalf of its state-owned enterprises, China’s unfair policies include a pattern of flatly denying some foreign firms access to its markets; weaponizing its antitrust laws to extort concessions; and underwriting acquisitions of foreign technology firms. These policies are especially damaging in the absence of a true rule of law or an independent judiciary to constrain Chinese officials.

The previous three U.S. administrations sought dialogue with Chinese leaders in the hope that they would have an epiphany and embrace the one true path of Western, market-based economics. But it should be clear by now that approach has failed miserably. Indeed, rather than reform, China has been doubling down.

Trump is right that China is flouting global trade rules to the detriment of the United States, but adopting a policy of economic nationalism — simply slapping tariffs on foreign goods, for example — will not solve the problem. In fact, it would simultaneously crimp U.S. prospects for growth, leave the global playing field wide open for China to dominate, and alienate allies who would have no choice but to cut flawed deals with the world’s new economic hegemon. But neither is it a viable option to blithely accept Chinese domination of advanced industries.

So what should the Trump administration do? One step would be to resurrect a new and improved version of the Trans-Pacific Partnership trade agreement. Much of the opposition to the TPP was based on a combination of ideology and misinformation, but it is true that the agreement could have been better. Trump should make it his own by adding new protections, such as strong curbs on currency manipulation, and then claim victory. Another step would be to more vigorously prosecute trade cases against China. But doing this would only chip away at the core problem. Neither approach represents a direct challenge to China’s systematic pattern of abuse.

To fundamentally change Chinese government behavior, Trump needs to assemble an alliance of nations that collectively raise the stakes. China won’t willingly abandon its mercantilist policies unless it is compelled to do so by outside pressure that goes beyond the narrow, legalistic limits of the World Trade Organization. This fight will be won or lost not in the tribunals of Geneva, but in the court of global opinion where countries are held accountable for delivering tangible results. That means the Trump administration needs to enlist the international community to pressure China to show by its actions that it can be a responsible player in the global trading system.

This is yet another of the 1,001 op-eds that make the same bad assumption: that it is possible for us by our actions to change the policies of China’s leaders. We can’t. China will continue the patterns of trade abuse I’ve documented here.

It’s long past time to recognize that admitting China to the WTO was an error as was granting the country MFN status. Mr. Atkinson is right. China is an exception. Sadly, there’s no use closing the barn door now.

We need to do what’s good for us and ignore what President Xi thinks of it. If it’s tariffs, it’s tariffs. If it’s embargo, it’s embargo. If it’s let ‘er ride, it’s let ‘er ride.

I do have one question for Mr. Atkinson. What does he think of U. S. technology companies colluding with the Chinese government to suppress the rights of the Chinese people?