How much longer do protectionists get to gloat about free-traders being wrong until they have to present the results of their alternative approach?
Protectionists are fond of pointing out that opening up trade with China has not made China more politically free. There was plenty of optimism in the 1990s that economic liberalization would loosen the communists’ grip on power. It turned out to be false. China is, in some respects, more totalitarian today than it was then, despite considerable trade liberalization.
This error in judgment by some free-trade proponents is at least understandable since, in general, it is true that political liberalization and economic liberalization go together. Think of many of the countries of the former Eastern Bloc, especially the Baltic States, Poland, and the Czech Republic, which, after the fall of communism, were able to transition to market economies and democracy at the same time. On the other side of the coin, most African countries remain unfree economically and politically.
China is an exception to the rule, and since it is also one of the world’s most populous countries with one of the world’s largest economies, it is a major exception that needs better explanation. Free-trade supporters should acknowledge the error.
(They should not, however, apologize for the fact that even the limited market liberalization that China did has lifted hundreds of millions of human souls out of grinding poverty. Just because the Chinese are ruled by a criminal, communist enterprise does not mean they deserve to starve. It illustrates the tremendous power of free markets that even their incomplete adoption can make so many people better off.)
Protectionists are now at risk of falling into the same mistaken way of thinking about China.
The protectionist argument seems to go like this: Free-traders thought economic liberalization would weaken the CCP, but it didn’t; therefore, undoing economic liberalization would weaken the CCP.
I assume both sides of the argument agree that the CCP is oppressing the Chinese people. I assume we’d both like to see the CCP weaken and ultimately fall from power. We free-traders have already made the mistake of thinking that the U.S. trade policy could help make that happen. Now, some protectionists are making the same mistake.
The U.S. has had tariffs on China, at varying levels but nonetheless continuously, since 2018. Have these tariffs made China any less communist? Have they weakened the CCP’s grip on power? Have they reduced China’s unfair trade practices?
The answer to all three of those questions is pretty clearly “no.” Since 2018, Xi Jinping broke convention by taking a third term as general secretary of the CCP, securing his stranglehold on power. China’s Covid lockdowns were brutal, far more so than any other major country, and the CCP has engaged in cover-up efforts to shield China from any responsibility for starting the pandemic. The Uyghurs continue to be abused, and China’s military buildup continues apace.
As for trade-specific questions, the U.S. Trade Representative’s Office (USTR) has reviewed whether the China tariffs have been helping, most recently when Biden renewed many of the tariffs last year. As Bryan Riley of the National Taxpayers Union wrote at the time:
The Review of Necessity that led to this action required USTR to review the effectiveness of existing Section 301 tariffs, including whether China has agreed to eliminate or phase out the unfair acts, policies, or practices targeted by the tariffs. The answer is a resounding “no.” According to the USTR review: “China Persists in Technology Transfer-Related Acts, Policies, and Practices … Industrial Planning and Targeting Continues to Motivate Technology Transfer … Cyber-Enabled Theft Has Continued Unabated … Chinese State-Owned Enterprise Attempts to Steal U.S. Telecommunications … Foreign Ownership Restrictions Persist in Multiple Sectors … … China Forces Joint Ventures Through Indirect Pressure … Opaque Administrative Reviews Continue to Facilitate Technology Transfer … China Continues to Drive Outward Investment Toward Advanced Technology … Industry Surveys Affirm the Continued Prevalence of Technology Transfer in China.”
Maybe the right takeaway from the failure of free trade to liberalize China is that U.S. trade policy simply doesn’t have that much of an effect on how free China is politically. The alternative approach to trade policy, in practice now for seven years under presidents of both major parties, has been similarly futile.
The question then becomes: Why should Americans be made worse off for a policy that isn’t achieving its goals? The China tariffs are ultimately paid by Americans, and they apply in most cases to goods that have nothing to do with national security.
In theory, there’s an argument for targeted tariffs on China for national security reasons. In practice, that’s not what the U.S. has done, and what it has done is not working. How much longer do protectionists get to gloat about free-traders being wrong until they have to present the results of their approach?