With the U.S. House of Representatives debating a punitive bill targeting Chinese products, the “trade war” stories are all over the place in the press. One that seems to have received quite a bit of attention is an Op/Ed by Robert Samuelson in the Washington Post. I used to be a fan of Samuelson’s columns, but since Obama took office last year, his conservative rants have become rather grating. Still, it’s surprising for a guy like him to throw in with the protectionists like this.
In arguing for the pending currency bill, or something like it, Samuelson makes this basic point:
The trouble is that China has never genuinely accepted the basic rules governing the world economy. China follows those rules when they suit its interests and rejects, modifies or ignores them when they don’t. Every nation, including the United States, would like to do the same, and most have tried. What’s different is that most other countries support the legitimacy of the rules — often requiring the sacrifice of immediate economic self-interest — and none is as big as China. Their departures from norms don’t threaten the entire system.
I suppose that part of Samuelson’s argument is debatable. Has China broken trade rules? Of course. But doesn’t China at least support the legitimacy of the rules? I say yes, and Samuelson says nothing that convinces me otherwise.
Just a few reasons why I think Samuelson is talking out of his ass:
1. China reformed a large number of its laws when it joined WTO. It has continued to do so in the decade since, harmonizing many laws to international norms.
2. China has followed through with most of the market access promises it made when it acceded to WTO.
3. China has utilized the WTO dispute resolution system, and it has abided by the decisions of the panel/appellate body, even when the decision was unfavorable to China (e.g. A/V products case).
4. China’s legal system, including procedures relevant to foreign investment, is much more transparent than it used to be, another consequence of promises made upon WTO accession.
OK, you get the point. China has broken rules, maintains a discriminatory industrial policy, and may not have an ideological connection to the WTO system, but it follows the rules most of the time. What more can we really expect?1
What I find most ridiculous about the position of many China critics these days is their insistence on viewing U.S. trade policy through rose colored glasses. Check out Samuelson’s take on the ideological gap between the U.S. and China when it comes to trade:
The post-World War II trading system was built on the principle of mutual advantage, and that principle — though often compromised — has endured. China wants a trading system subordinated to its needs: ample export markets to support the jobs necessary to keep the Communist Party in power; captive sources for oil, foodstuffs and other essential raw materials; and technological superiority. Other countries win or lose depending on how well they serve China’s interests.
You see? China’s trade policy is self-serving, while U.S. policy is all about fairness for everyone. Since China is at heart a protectionist Commie stronghold that doesn’t play by the rules, implies Samuelson, a bit of U.S. trade chicanery is not really protectionist at all.
Does anyone really believe this stuff? Yes, the WTO system as a whole is quite fair, for the most part. I’m a big fan of national treatment and most-favored nation, the two principles of the General Agreement on Tariffs and Trade (the GATT). But Samuelson’s deflection of U.S. trade sins as being minor when compared to that of China misses a very long list of egregious acts, ranging from outrageous agricultural subsidies (cotton, rice, grain), some of which continue to this day, to aggressive intellectual property policies (e.g. TRIPs plus).
The post-World War II trading system was supported by the U.S. because it was in its national interest to do so. It helped the U.S. economy and that of its allies during the Cold War. China is a relative newcomer, and as a former Communist power certainly has some issues with the international trading system; and yet, here they are playing by most of the rules because doing so is in its national interest. Samuelson needs to Google “national interest” and click out of that “ideology” window, which leads him to laughable, melodramatic statements like this:
The collision is between two concepts of the world order. As the old order’s main architect and guardian, the United States faces a dreadful choice: resist Chinese ambitions and risk a trade war in which everyone loses; or do nothing and let China remake the trading system. The first would be dangerous; the second, potentially disastrous.
Stay tuned. I’m sure there will be more wacky opinion pieces penned in the days to come.
- Just for the record, I am a firm believer in using the WTO dispute resolution system. China, along with all other member states, should be held to the relevant rules. If China violates the law, it should be taken to task for it. This does not mean, however, using unilateral measures like the punitive currency bill being debated in D.C.[↩]