Tough Talk on Trade with China

In the past few days, Romney and Obama have tried hard to establish themselves as the toughest talker on China. This is from Romney’s blog last week:

… I also want to make sure that if a nation cheats like China has cheated, we call them on the carpet and don’t let it continue. And the cheating takes on a lot of different dimensions. I mean, cheating occurs if you hold down your currency. You might wonder, what in the world has that got to do with jobs here? Let me tell you: When China manipulates their currency by holding down the value of their currency compared to ours, what it does is makes their products in this country artificially cheap. And that then drives American manufacturers and American producers out of business and kills jobs. The President’s had the chance year after year to label China a currency manipulator, but he hasn’t done so. And I will label China the currency manipulator they are on the first day.

The Romney campaign is also running television ads along these lines.


The basic gist of the Romney position: Romney will be tough on China, whereas Obama is weak.


In response, the Obama campaign has stepped up its own tough talk on China. Of course, because Obama is currently in office, he can do more than just talk: The U.S. Trade Representative’s Office initiated a WTO complaint against Chinese subsidies to the auto industry. And they have their own ads as well.


The basic gist of the Obama position: Obama is tough on China, whereas Romney would be weak.


All of this fits nicely with a piece I wrote for Investor’s Business Daily on the Republican and Democratic party platforms as they relate to trade. My argument there was that the parties aren’t all that different these days. They both try to bury the real debate over free trade, and instead focus on distractions like how tough to be on China:

… both parties point to China as “cheating” in the world trading system. The Republicans contend that “some governments” (China is mentioned as the “chief offender”) “have used a variety of unfair means to limit American access to their markets while stealing our designs, patents, brands, know‐​how, and technology — the ‘intellectual property’ that drives innovation.”


According to the Republicans, President Obama’s approach to this issue has been a “virtual surrender.” 


The Democrats respond that they have, in fact, been quite tough, having brought more trade complaints than the Bush administration, and having set up a new government office to deal with the unfair practices of China and other countries.

Now, in criticizing this tough talk, I don’t mean to imply that China is doing nothing wrong, and that we should ignore Chinese protectionism. The world would be better off if China, and everyone else, would rein in their protectionism. But, as I said at IBD:

… the reality of China’s trade policy does not match the rhetoric. Most countries, including the United States, use a wide range of policy tools to protect domestic producers. Nobody is pure in this regard, and many of the proposed responses to China are largely an excuse to use protectionism of our own.


There are legitimate complaints about Chinese protectionism, but it is important to tone down the rhetoric and make sure any actions are both productive and within the rules of the trading system.