IT’S AN IRON LAW of U.S. politics: You can’t go wrong bashing China. Polls show the public believes that this country is losing jobs due to unfair economic competition from abroad, especially from China. And so, every four years, presidential candidates fall all over themselves promising to get tough on imports.
Still, there are more and less blatant ways to go about it. President Obama’s announcement Monday of a new international trade case against China in swing-state Ohio strikes many as a transparently political use of his incumbency. The crassness is mitigated only somewhat by the fact that the president was responding to Republican challenger Mitt Romney’s ads promising to do more than Mr. Obama has done to punish China for manipulating the value of its currency on international markets — or “cheating,” as the ads describe it.
As to the merits of the president’s case against China, if Beijing is violating trade law, then a complaint to the World Trade Organization (WTO) may be called for. Mr. Obama alleges that the Chinese have provided $1 billion in illegal subsidies over the past three years. Is that responsible for the growth in Chinese auto-parts imports to the United States, which now total $10 billion? Hard to say. But remember: To the extent that imports from China — or Mexico, which sells almost three times as much to the United States — reduce the cost of auto manufacturing, and hence the price of cars, they may help create more American jobs than they cost. Is the Mr. Obama who charges China with subsidizing its industry the same president who takes credit for bailing out General Motors and Chrysler? China imposed import duties on U.S. cars in July, partly in response to U.S. aid to the carmakers; it has filed a case at the WTO in response to Mr. Obama’s latest move.
Litigation at the WTO will take months. Would Mr. Romney’s idea, to brand China a currency manipulator, with sanctions to follow, get faster results? No doubt China’s effort to hold down the value of the yuan artificially boosts the competitiveness of its products overseas, to the detriment of U.S. industry. But it also imposes costs and distortions on the domestic Chinese economy, which the Obama administration has repeatedly invoked while jawboning Beijing to change its policy. The Obama strategy has yielded some modest success over the past three years, arguably more than would have been achieved by the open confrontation Mr. Romney advocates.
The fact is that China has plenty of ways to retaliate when this country protects specific industries; on balance, that retaliation may cost more American jobs. Even if China does not retaliate, the higher production costs and higher consumer prices that trade protection imposes are not evenly distributed. Protectionist measures may “save” jobs for higher-paid workers at the expense of those who make less. These are the sorts of nuances and trade-offs to which we hope the winner of this election will pay more attention. Though the United States and China are competing for global market share, avoiding an actual trade war is very much in both nations’ interest.