It’s obvious to most people that China isn’t playing fair on global trade, but few people can get to the heart of the problem like Robert Samuelson. He describes how China uses tactics like subsidies, currency manipulation and technology transfer to gain advantage. Then he closes:
It’s important to make several qualifications. First, Americans shouldn’t blame China for all our economic problems, which are mostly homegrown. Indeed, the ferocity of the financial crisis discredited U.S. economic leadership and emboldened China to pursue its narrow interests more aggressively than ever. Second, the point should not be (as Chinese allege) to “contain” China’s growth; the point should be to modify its economic strategy, which is predatory. It comes at others’ expense.
The U.S. response has been mostly carrots — to pretend that sweet reason will convince China to alter its policies. Last week, Presidents 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.
I think the current administration is in a bind, as the economic crisis has made it much more difficult to take a hard line with China and risk a trade war. Perhaps President Obama can reset the relationship and alter China’s behavior. If not, he will soon need to get tough with them.