Magical Thinking on Chinese Economic Policy
Robert Samuelson offers a familiar and largely accurate litany of grievances against Chinese economic policy and then concludes with a bold call for . . . something to be done!
The U.S. response has been mostly carrots – to pretend that sweet reason will persuade China to alter its policies. Last week, President Obama and Hu exchanged largely meaningless pledges of “cooperation.” Alan Tonelson of the U.S. Business and Industry Council, a group of manufacturers, says U.S. policy verges on “appeasement.” We need sticks. The practical difficulty is being tougher without triggering a trade war that weakens the global recovery. Still, it’s possible to do something. The Treasury could brand China a currency manipulator, which it clearly is. The administration could move more forcefully against Chinese subsidies. America’s present passivity encourages China’s new world order, with fateful consequences for the United States and everyone else.
So I guess I don’t disagree with this. After all, who could? Like Samuelson, I think we should adopt strategies that are more effective at getting the PRC to do what we want than are our current strategies. But like Samuelson, I think strategies that trigger a trade war that weakens the global recovery would be a cure that’s worse than the disease. Do such strategies really exist? I’m not convinced. “Move more forcefully” and “brand China a currency manipulator”—what does that mean exactly?
Suppose you were the leader of a foreign country and you were very upset about some set of American policies that distort global trade patterns but are backed by politically influential constituencies in the United States. Farm subsidies or the embargo on Cuba, say. What would you do to make Barack Obama give in to you? What could you do? What would Washington Post columnists write in response to your coercive efforts? What would your domestic press say about you once your efforts failed? I think it’s easy to overstate the range of potentially effective tools of coercion available to national leaders.