Ben Landy’s take on the trade dispute over glossy paper is worth a read. His point is that the effects of protectionism range far beyond direct economic inefficiencies. In this case, the U.S.-China relationship itself will take a hit, and in Ben’s mind, trade disputes are potentially quite dangerous:

The greatest threat for the 21st century is that these economic
flare-ups between the US and China will not be contained, but might
spill over into the realm of military aggression between these two
world powers.

Fair enough, although I think I’m more of an optimist about the whole situation. We are definitely looking at a protectionist trend, not just in the U.S. but in most of the world. Not too surprising and perhaps inevitable, given the amazing strides taken within the past 12 years on international trade issues (some good, some bad). Although one can trace the anti-globalization crowd to Seattle ’99, I think things were still moving forward in fits and starts until recently. Free traders should be quite concerned these days, however, ’cause things are getting scary.

I believe that the SVD decision may not open the floodgates to litigation, at least not right away. Sure, you will see some activity in certain sectors, but not on the scale suggested by some. It just doesn’t make much sense to do so, and there are too many supporters of China, notably some of the largest U.S.-based multinationals, that are going to throw their weight around at some point in D.C. to reel this stuff back in. Certainly the Bush White House will hear their pleas and help out, and I would guess that most centrist politicians from either side of the aisle will do the same.

Ben is right, however, that the U.S. is entering a new phase with China, a “delicate, dangerous dance.” Absolutely, and the SVD announcement has caused me more than a little trepidation, since I also agree that economic disputes will be the most likely source of significant bilateral tensions in the future. Remember that I make my living working with foreign companies in China, so I have a direct vested interest in stability. Rocky bilateral relations hit the old pocketbook, which does not make me happy.