Surrender is not success in trade wars

Reno Gazette Journal April 8, 2018

Last week, the US unveiled a list of 1300 Chinese imports worth $50 billion that would be subject to a 25% tariff. China retaliated by imposing tariffs on 128 US imports worth $3 billion. While there are concerns about this possible trade war, it is important for us to understand the underlying issue.

For decades, China has practiced unfair trade. For example:

  • Chinese nationals can buy just about anything in America. Even iconic structures like Disney or the Empire State Building are not protected. Yet, Americans cannot own property in China.
  • For a long period of time, China manipulated its currency to make the dollar more expensive, resulting in an artificially inflated price (and, consequently, lowering demand) for American manufactured goods in China.
  • China has long imposed tariffs on American goods making American products more expensive while subsidizing Chinese goods making them less expensive. This artificially increased the consumption of Chinese goods while suppressing the import and consumption of American goods.
  • China has no respect for Intellectual Property. In the US, if you come up with an idea for a product and patent it, no one else can build that product without your permission and licensing fees. Such rights are respected in most western countries, but not China. Music CDs and software discs are regularly pirated in China .
  • The Chinese government pays Chinese companies that export goods, resulting in a lower cost for Chinese goods in overseas markets like the US.

It is difficult to compete against a nation which engages in such practices. If you add to it the fact that Chinese labor is very inexpensive, and their labor, safety and product laws non-existent, you find that American companies simply cannot compete. The result: thousands of US factories have shut down and millions of Americans have lost their jobs (over 40,000 factories were shut down and over 33 million jobs were lost just in the first decade of this century).

For decades, we have sacrificed millions of American jobs to China at the altar of free trade, and it is time for us to reverse course. Any subsidy or tariff by China (or any other nation, for that matter) should automatically result in a reciprocal tariff. America is the biggest consumer market in the world and they need us more than we need them. Sure, it will result in uncertainty in the short run but a better deal in the long term. Despite the bravado, China does not want a trade war with America. All we need is the courage to stand up and fight for a level playing field.

One final point: As a nation, we have become timid. Russian fighter jets buzz our warships around the world, we sit idly by and watch because we are worried about starting a war. Iranian military vessels harass US Navy ships in international waters, capture our sailors (including one woman) and humiliate them by videotaping a forced apology, we express “gratitude” for their eventual release. China (and scores of other countries) impose tariffs on our goods, steal our patents, impose unreasonable restrictions on our goods and services, and we quietly go along because we don’t want to start a trade war. Surrender is too big a price to pay for peace, both in the theater of war and in the arena of trade.