John Tamny Should Share Our View of China
FreedomWorks’s John Tamny recently took serious issue with us for an opinion piece we had in the Wall Street Journal titled The Trade War Hits China Where It Hurts. The piece explained our support of President Trump’s trade strategy, through which the United States is, finally, imposing costs on China for its systematic evasion of its obligations under the world trading system.
We made the point that China has for two decades engaged in a comprehensive campaign to exploit the benefits of the world trading system while avoiding their obligations and the commitments they made when they entered it.
Beijing’s “techno-national toolbox” includes walling off their domestic markets from foreign competition, massive subsidies to its companies so that they can undercut their competitors and capture markets abroad, regulatory discrimination against foreign companies, manipulation of what passes for the Chinese legal system to deny protection to foreign intellectual property, forced technology transfers as a condition of selling or producing in China, China-specific technology standards to raise the costs of market entry for foreign competitors, and outright, systematic theft of valuable technology through espionage and cybertheft. (Estimates are that Beijing steals anywhere from $225-600 billion dollars from the United States every year.)
We emphasize that this is a partial list. The whole economic system set up by the Chinese Communist Party (CCP) – what Beijing calls “socialism with Chinese characteristics” -- is essentially designed to con, cajole or steal wealth from the rest of the world, in support of what Xi Jinping has called “the Chinese Dream.”
Now there is plenty of market activity in the Chinese economy. After the death of Mao Zedong, Deng Xiaoping and his leadership cohort realized what the Soviets never figured out: that unless the CCP granted its people a substantial degree of freedom to work, invest and profit, the Chinese economy would never produce enough for the CCP to realize its ambitions both at home and abroad.
However, the leaders of the CCP do not believe in freedom for its own sake. They are simply smart enough and disciplined enough to understand that, for instrumental purposes – to produce the wealth that the State needs for its purposes -- they must provide the dynamic and hardworking Chinese people with the opportunity to accumulate wealth for themselves and their families. But the regime’s policies are designed to, and do, ensure that the Chinese economy operates first and foremost to serve the State.
Tamny’s piece doesn’t deny any of this specifically. His argument seems to be that Beijing can’t really be stealing or coercing technology from the rest of the world, because there would be no benefit in doing so, since no one can possibly know which technologies will have real value for the future. But we certainly know which technologies have value now, just as we know that a company, or a country, can gain an advantage for itself by appropriating the benefits of the work, research and investment others make.
That’s why people steal in the first place; that’s why enterprises go to such lengths to protect their technology; and that’s why it is so dangerous when a country of China’s size and power purposely dedicates itself to evading the rules everyone else must follow.
Mr. Tamny notes correctly that, like his organization FreedomWorks, we have always been committed to economic freedom in general and free trade in particular. He suggests that it is therefore inconsistent for us to support the Trump Administration’s China trade policies. But we invite Freedom Works to recognize the difference between tariffs designed to protect inefficient domestic industries and tariffs designed to impose costs on a foreign dictatorship for its comprehensive subversion of both the letter and the spirit of the free trading system.
The latter is the purpose of the Trump Administration’s policies towards China.
What Mr. Tamny seems willing to ignore is that trade is not free unless it’s fair. When one party’s outright theft, fraud, deception and protectionist policies define a trading relationship, it is neither free nor fair. In fact, it’s not even legal.
Mr. Tamny also asks how China could be experiencing its worst economy since 1992 if its technology theft were so effective, although he calls the question “rhetorical”. We answered this at some length in an earlier joint piece in Real Clear Politics. For one thing, China has an export dependent economy, and the United States – the world’s largest consumer market – is China’s biggest customer. President’s Trump’s trade policies have hit the Chinese economy where it is vulnerable. At the same time, the Administration’s tax, regulatory, and energy policies have sustained strong growth, job creation, and wage increases in the United States.
For decades the attitude of the United States government, under administrations of both parties, was that China was headed inexorably towards a fully liberalized economy and responsible membership in the international community. That’s the outcome Mr. Tamny wants; it’s what we want too, and it’s what the Trump Administration wants as well. But it’s not what the leaders of the CCP want, and President Trump was right to recognize that they would never move in that direction as long as they could exploit the rest of the world with impunity.
Mr. Trump is using the tools at his command to pressure the CCP to abandon its illicit and exploitive approach to the global economy. We support those policies, and as we wrote in our earlier article, we are pleased that the President’s decisive actions have succeeded in imposing consequences on Beijing in terms the regime understands. As a supporter of free markets, Mr. Tamny should be pleased as well.
