Exactly Wrong on China Trade
For some time, Chinese manufacturing plants have been egregiously counterfeiting compact disks, videos and computer software. In conducting such blatant piracy, China violates U.S. copyright laws and denies the U.S. firms that created the original goods the opportunity to sell them in China. Last year, in trade negotiations with the United States, China agreed to discontinue the practice, but it has failed to do so. Simply put, China remains an intellectual-property thief. The question is: What should the United States do about it?
President Clinton announced on Wednesday his intention to impose 100 percent tariffs on at least $2 billion worth of Chinese exports to the United States by June 17 unless China takes remedial action by severely cracking down on the piracy. As expected, China immediately announced its own intention to impose tariffs on U.S. goods, especially agricultural products, autos and auto parts, telecommunications equipment and audio-visual products. The specter of a trade war looms, and Patrick Buchanan couldn't be happier.
Make no mistake about it. Protectionists see an opening, and have unsheathed their swords. The day after U.S. trade officials announced their sanctions, the New York Times, which supported them, published on its Op-Ed page a protectionist manifesto by Alan Tonelson of the United States Business and Industrial Council (USBIC) demanding Act II, the cancellation of China's most-favored-nation trading status next month. USBIC is one of the nation's most protectionist organizations, relentlessly arguing for anti-consumer measures to eliminate the U.S.'s merchandise trade deficit.
Protectionism doesn't solve problems. It worsens them. At best, trade barriers in the form of tariffs or import quotas will add costs to the consumer by enabling local firms to raise their prices. At worst, they might go a step further by inviting retaliation, which further limits export opportunities. Increasing the prices of underwear, sporting goods, cotton apparel and consumer electronics for American consumers hardly seems a wise way to penalize China. So the Clinton administration simply denies this impact. Standing international trade theory and economic reality on their heads, Charlene Barshefsky, the acting U.S. trade representative who announced the sanctions, declared that imposing $2 billion in tariffs would not increase costs to the consumer during her Wednesday appearance on "The NewsHour with Jim Lehrer. …