Wednesday, November 18, 2009

Looking Back on China Trade Policy

I consider myself a free trader, but I'm not sure why.  It just seems to me that open markets around the world represents a desirable global economic system.  And protectionist policies are a slippery slope.  Still, it gets difficult when everyone doesn't play along.  In today's Washington Post, Harold Meyerson looks back on the debate in the U.S. around normalizing trade relations with China.  He points out that, during the debate:
Advocates' central contention was that the deal would eventually lead to a political liberalization of China -- which it hasn't -- and would enable the United States to so increase exports to China that our Chinese trade imbalance would end -- precisely the opposite of the effect that normalizing trade relations has actually had.

Economists often distinguish between the short term effects of policy change versus the long term.  Yes, free trade does create some short term pain, but the long term effects are positive.  We are now ten years later and things have only gotten worse for the U.S. 

How long is "long term?"  I'm reminded of the comment by the legendary economist John Maynard Keynes, "In the long term, we'll all be dead."

Tuesday, November 17, 2009

Quote of the Day

Obama is clearly walking a fine line in his visit to China.  It is in the interests of the whole world that the U.S. and China find ways to cooperate.  Still, the Chinese government can be pretty brutal in terms of human rights.  Obama has to touch both bases.  You can imagine the exchange with President Hu where Obama says, "I'll talk about all the good things we're doing together and how well we're getting along, but I'm going to have to whack you on some human rights issues, OK?"  And Hu says, "Sure, and I'll whack you about your outrageous deficits that are going to kill us in terms of the debt we hold for you.  Deal?"  Obama says, "Deal."  And off they go to the press conference.

Still, I have to say that Obama's response on the Internet did take the obsequiousness a step too far.  No wanting to say that he opposes the Chinese government's censorship of web sites because that would, in effect, accuse them of same, he said:

"I'm a big supporter of non-censorship."

C'mon Barack.  Though I strongly support engagement with China, even I think that was weak.