Has the U.S. government been going too easy on China? Commentators have certainly taken to this refrain recently. Right now, as some argue a better trade balance could help the American economy, pundits and politicians alike are condemning China's intransigence on trade and currency. Here's a sample of the debate over whether stiffening the U.S. stance towards China is wise, helpful, and just.
- China's Playing Us for Fools on Multiple 'Fronts' Paul Krugman, recently big on China-bashing in The New York Times, says that when you put China's bullying attitude on its mineral monopoly with "the state subsidies that help firms gain key contracts, the pressure on foreign companies to move production to China and, above all, that exchange-rate policy--and what you have is a portrait of a rogue economic superpower, unwilling to play by the rules. And the question," he concludes, provocatively, "is what the rest of us are going to do about it."
- Time for China to Play Fair, agrees Democratic senator Sherrod Brown from Ohio, writing in the Times. Regarding trade agreements, "Washington has ... relied on rhetoric and moral suasion. It hasn't worked. Only rigorous enforcement of trade rules by the Obama administration can reverse the harm caused by the permanent normal trade relations agreement."
- We Do Need Some Hardball, concurs Richard Hornik at the Harvard Business Review. "The rationale for admitting China to the World Trade Organization in 2001 was straightforward: Membership would gradually ensure that China viewed the world economy as something other than a zero-sum game." That hasn't happened. For starters, he thinks the U.S. should fight the Chinese government's subsidies to Chinese companies by barring "Chinese bidders ... from all US government-funded contracts" until China agrees to "honor its commitment and sign the agreement on government procurement." In addition, he's not so sure China should still be getting its original WTO "waivers," which were "due to its status as a developing country, permitting it to give special treatment to domestic industries." China's economy currently "ranks second in the world," he points out.
- Maybe There's a Middle Road, suggests Think Progress's Matt Yglesias:
We don't need to threaten them, or bribe them, or cajole them, or go to "currency war" or anything. What we need to do is to adopt monetary policies that are appropriate for our economic situation. The Chinese will learn to deal with it, and in the longer term we'll all be better off.
- A Trade War with China Wouldn't Even Help Us That Much, protests J.W. Mason
at New Deal 2.0. He calculates, with what he terms "wildly optimistic
assumptions," that "a 20 percent appreciation of the Chinese currency
only provides a boost to US demand of less than one half of one percent
of GDP in total, spread out over several years." He adds, too, that "if
Keynes were alive today, I suspect he would be telling American
policymakers to forget about China and focus all their efforts on
boosting US demand--by public investment in infrastructure, by
unconventional monetary stimulus, by paying people to dig holes and
fill them up again if need be."
- Other Assorted Vociferous Objections One of the most vocal dissenters is The Economist's Ryan Avent, who has repeatedly explained why he thinks the saber-rattling with regard to China is extremely unwise. Finance blogger Yves Smith has also taken some space to examine an argument from Peking University economics professor Yiping Huang--that American commentators are gunning for "a currency war the US cannot win."
- Also: China's Not Necessarily Being Deliberately 'Malign,' notes The Atlantic's James Fallows.
Anyone who has observed anything about China recognizes the gap between the power / influence it is gaining, and its understanding, experience, sophistication, and confidence about (a) the way that appears to the rest of the world, and (b) the responsibilities that inevitably come with greater power. Eg, see this article on Chinese authorities' frequent clumsiness in addressing world audiences, or this by Paul Krugman today.
Overall, I think these gestures by the Chinese government are "self-interested" as opposed to actively malign.