Mon, Jul 23, 2018 - Page 6 News List

Walter Lohman on Taiwan: A free-market approach to US-China trade troubles

Over the last couple of weeks, the US has entered into something resembling a trade war with China. It started with complaints about Chinese treatment of intellectual property (IP). But like the tariffs on steel and aluminum are not actually about national security, this quasi-war with China is not about IP.

So what is it about? To answer that you have to look at the views of those advocating it. They can be divided into two camps: economic nationalists and geopoliticians.

The economic nationalists see the US economy as a collective good. They speak in terms of “our” companies — whether or not they personally own stock in them. They talk about the sacrifice that some workers must take in order to benefit those who work in more “critical” industries. They are essentially central planners seeking, through government fiat, to reorder global value chains in ways that require greater industrial production in America.

Political party is not a reliable indicator of who might be an economic nationalist. Yes, they are well-represented in the upper reaches of the current administration, especially at the Office of the US Trade Representative (USTR) and the Commerce Department. Their weight is clear on a whole range of issues, from the above-mentioned steel and aluminum tariffs and pending auto tariffs to a dramatic increase in anti-dumping cases. But, in fact, the nationalists remain most comfortable on the Left, a position from which they have mounted opposition to virtually every American FTA.

The geopoliticians, by contrast, are mostly on the right. They share the collective mindset of the nationalists, and they define economic strength in a similar way. But their goal is different. For them, the strength of the American economy is not important as an end in and of itself; it is the sine qua non of great power competition with China. Their manifesto is the President’s National Security Strategy. That otherwise very sound document states very directly that “economic security is national security.”

This would all just be political science, though, if it were not for the real impact of their policy prescriptions. The problem is that their grand visions restrain the choices Americans can avail themselves of in structuring their businesses and ordering their households.

There is another way to approach China, one that can maximize the value Americans extract from the market, and at the same time, actually serve as a basis for addressing the real issue at hand, the security of IP in China.

It is an approach centered on economic freedom.

Its first rule is “economics is economics and politics are something else.” In the relationship with China, the US has to keep these separate. It cannot be naive. Beijing does have the aim of squeezing the US out of its leadership role in the Western Pacific. More concretely, the US and China have directly opposing interests in several of the region’s hotspots — Taiwan, North Korea, the East and South China Seas, and on the India-China border. Still, these differences need not interfere with the way the US conducts its economic relationship with China. It is challenging enough without a new layer of complexity.

No, the Chinese state-led capitalism does not lend itself to a similar firewall. But the US need not become more like China in order to secure its interests. There are costs to the mixed Chinese model, some of which, like environmental degradation and ballooning debt, are already apparent.

Comments will be moderated. Keep comments relevant to the article. Remarks containing abusive and obscene language, personal attacks of any kind or promotion will be removed and the user banned. Final decision will be at the discretion of the Taipei Times.

TOP top