Challenging China
The Bush administration, facing congressional pressure on trade, has lodged complaints against China three times in the last three months. The big question for trade policy and American businesses in particular is what happens next.
If the answer is a methodical working through of some of the difficult issues raised by a large and growing trade relationship, this could still prove to be a productive effort. But if these complaints add up to the hesitant first steps toward an all-out trade war with China, everyone will lose, including American workers, whom the White House and lawmakers say they are trying to protect.
The administration announced on Monday that it was filing two cases against China at the World Trade Organization. The first is over China's failure to crack down on pirated goods like movies and books.
It also challenged Chinese restrictions on the distribution of foreign films, music and more.
The move came less than two weeks after the Commerce Department said it would impose duties on two Chinese paper manufacturers, which it says got an unfair boost from China's government. Experts say such duties could expand to steel, plastic and beyond unless China reins in its subsidies.
What must be avoided are the kinds of misunderstandings - intensified by growing anti-China sentiment in this country - that lead to tit-for-tat tariff reprisals until things spin out of control.
A trade war would do more harm to American business than to China's subsidies. What would happen to Boeing if the steel used in its jets became more expensive? The last thing a country with a record trade deficit can afford is to hurt its exporters.
The administration's decision to get tough on China appears to be intended in part to soothe Congress' antitrade passions long enough to win approval of a new free-trade agreement with South Korea that would be good for American consumers and exporters. But rather than posturing, the White House would do better if it educated Americans about free trade's benefits, which include cheaper clothes, televisions and cars, all of which hold down inflation. According to the Progressive Policy Institute, a Democratic Party research group, foreign manufacturers invest more in America than American manufacturers invest abroad.
It doesn't feel that way to workers, who know that their wages have stagnated and hear every day that overseas competition is to blame and that little has been done to help displaced workers. But China didn't break the piggy bank. President Bush and Congress did, with ill-conceived tax cuts for the wealthy and the war in Iraq.
If used correctly, pressures like the paper duties could help convince China's leadership that its businesses would be more efficient and its economy stronger if they were weaned off subsidies.
But America must also invest a lot more at home: educating its work force for the future, improving the infrastructure that manufacturers need, and succoring the older line workers who cannot make the transition to one more career. That would do a lot more good than starting a trade war.
