Through Action on China, Averting a Trade War

By April 14, 2007Trade

When the Bush Administration took action against unacceptable Chinese trade practices — heavy subsidies of the coated paper industry, theft of intellectual property and counterfeitingallies of China, your predictable Administration critics, and some on the free-market right warned of fueling protectionist sentiment in the United States and even starting a trade war with China.

The reaction struck us as, well, reactive, that is, the kind of automatic response made any time the doors are not thrown wide open to trade. And generally, that’s a pretty good reaction to have. The NAM supports free-trade because it promotes wealth and opportunities for U.S. manufacturing exports; the last thing the U.S. economy needs is a trade war.

Nevertheless, the United States was acting according to the rules of international trade, rules that China agreed to when it acceded to the WTO in 2001. Specific actions against specific infractions of those rules are the signs of a mature (or at least maturing) trade relationship. Indeed, these actions may well serve to ease trade tensions over the long term.

And, wonders of wonders, the freest of the free-traders at the Cato Institute agree with that assessment. Daniel Ikenson, Cato’s associate director of the Center for Trade Policy Studies, made the argument in a column, A Trade War Averted.

Trade disputes, particularly between the world’s largest and fastest growing economies, are inevitable. Fortunately, there is a functioning and respected venue for arbitrating those disputes in the World Trade Organization. As far as I can tell there is nothing particularly provocative or unjustified in the Bush administration’s assertion of U.S. rights in its WTO complaints, and I see a silver lining in the Commerce Department’s decision to apply countervailing duties.

By bringing its actions through the WTO, in a manner that appears to be consistent with U.S. obligations, the Bush administration may be preempting the Congress from passing legislation that would take the kind of unilateral action that could justify retaliation, and ultimately spark a trade war.

Ikenson does not anticipate retaliation from the Chinese, and he concludes, “As an advocate of unfettered trade who recognizes that trade disputes are inevitable, I see these recent trade actions as part and parcel to an evolving, mutually beneficial relationship.”

Great column. Read the whole thing.

Join the discussion One Comment

  • John Bello says:

    It appears that the Bush Administration is acting ahead of the Fast Track vote in the hope that it will be renewed..It still looks like it will have a very rough time gaining enough votes to pass as the groundswell of anti-illegal trade opinion that now exists in both houses will undoubtedly continue as more and more legislation is being drafted and introduced..the majority of our Senators and Congressmen have reached their tipping point visa vie illegal, unfair trade, not only where China is concerned, but across the board..the voters (and workers)of America have sent a very clear message to Congress..if our elected representatives don’t act to restructure the trade policy the voters will once again act to throw them out of office..