TDS Co-Editor William Galston: Is Romney Pandering with his Hard-Line Stance on China? Or Is He Onto Something?
This item by TDS Co-Editor William Galston is cross-posted from The New Republic.
The most significant policy disagreement in last week's Republican debate went almost unnoticed. The moderator asked Jon Huntsman, "What does Governor Romney not get about China?" After noting America's economic weakness and the need to focus on our tasks here at home, Huntsman remarked, "I'd have to say, Mitt, now is not the time ... to enter a trade war."
Behind this exchange lies a remarkable development. A few days before the debate, Romney's campaign released "Believe in America," a book-length economic plan. In most respects it summarized standard conservative positions. To be sure, the plan didn't go as far toward reducing individual income taxes as ardent supply-siders would like, and it kept its distance from Paul Ryan's politically explosive Medicare proposal. Still, it offered almost no outright surprises ... except on trade. In seven bluntly stated pages, Romney staked out the toughest position against China that any mainstream national politician has adopted in a long time. The following quotations provide a sense of its tone:
Having tried and failed with 'engagement,' the Obama administration now behaves as if the United States has no leverage in dealing with a country that routinely steals our designs, patents, brands, know-how, and technology. ...
This is not all happenstance. Rather, it is the result of a deliberate policy by the Chinese government that seeks to build up its economy by piggybacking on Western technological success. ...
The Chinese government facilitates this behavior by forcing American companies to share proprietary technology as a condition of their doing business in China. China's unfair trade practices extend to the country's manipulation of its currency. ...
And it uses a variety of unfair practices--for instance, inventing regulations and standards that only Chinese companies can meet, and artificially lowering costs for Chinese companies--to tilt the playing field in its favor. Instead of responding forcefully, the Obama administration has acted like a supplicant.
To counter these practices, Romney proposed a new approach, which begins with "unilateral steps" to get China's attention. He invoked his private-sector background: "Anyone with business experience knows that you can succeed in a negotiation only if you are willing to walk away. If we want the Chinese to play by the rules, we must be willing to say "no more" to a relationship that too often benefits them and harms us." The initial steps include:
stopping counterfeit and fraudulently labeled products at the border;
going to courts and the WTO to challenge practices that violate existing laws and treaties;
imposing targeted tariffs and economic sanctions; making common cause with our allies to thwart mandatory technology transfers;
designating China a currency manipulator and imposing countervailing duties;
and barring U.S. government procurement of Chinese goods and services unless the Chinese government ends its discrimination against U.S. goods and services.
Romney's plan concluded with a ringing pronouncement:
The United States does not have to accept forever the practices that have led to a huge and seemingly perpetual trade deficit with China. ... The time has come to lay out a series of steps that China must take to become a responsible member of the global economy. And the time has also come to lay out the consequences that would accompany its failure to make rapid progress toward that end.
This plan has a significance that goes well beyond the policy specifics and their immediate political implications. Mitt Romney is running for president as the champion of the business community. It is hard to believe that his hard-hitting stance toward China was not developed in close consultation with his numerous contacts in that community. If his views reflect theirs, it means that U.S. firms with substantial interests in China have shifted their position in ways that could prove momentous for future relations between the world's two largest economies.
Twenty years ago, Bill Clinton campaigned against President George H. W. Bush on the grounds that Bush had placed our diplomatic and commercial relationship with China ahead of considerations such as human rights and democracy. Once Clinton took office, systematic and sustained pressure from the U.S. business community forced the administration to relent, and the status quo ante was mostly restored. But if Romney is accurately representing the views of his core supporters, the business community has now concluded that the status quo no longer serves its interests and that the playing field has tilted too much to be accepted.
In a lead editorial, the Wall Street Journal accused Romney of being willing to risk a "trade war" for crass political reasons, and it argued that giving Americans the impression that a confrontation with China will bring lost jobs back to the United States is offering "false hope." Maybe so. But Romney seems willing to run for president on the proposition that there's leverage we have failed to exploit and that a tough stance will force China to change course. If he's elected on that basis, he'll have no choice but to test that proposition.
It's possible, of course, that Romney's tough China stance is intended mainly to sway primary electorates in trade-sensitive states such as South Carolina and that he intends to pursue a steady-as-you-go strategy if he's elected president. If so, he's fooling himself. As the Clinton case illustrates, campaigns have consequences. In September 1992, Bill Clinton declared that "We will condition favorable trade terms with repressive regimes--such as China's Communist regime--on respect for human rights, political liberalization, and responsible international conduct." And that's what he did--at first. Seventeen months into his presidency, in May 1994, after much turmoil inside his administration, he finally announced a course correction: "I am moving ... to delink human rights from the annual extension of most-favored nation trading status for China."
Today, the Chinese and American economies are far more deeply intertwined than they were two decades ago, and the potential costs of disrupting the relationship have risen accordingly. If Romney becomes president, we'll find out whether the business community has really changed its mind about China, and how much heat he'll be willing to endure if they haven't. We'll learn, as well, whether the Chinese government will respond with compromise or confrontation. And as we do, the future of the world economy will be at stake.