Opinion

China Disconnect: What’s Wrong with a Great Trade War?

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Posted: Apr 22, 2019 10:31 AM
The opinions expressed by columnists are their own and do not represent the views of Townhall.com.
China Disconnect: What’s Wrong with a Great Trade War?

Source: AP Photo/Gregorio Borgia

In his new budget for 2020, President Trump asked for $750 billion for defense. Ah, remember the days when the Cold War ended and—the peace dividend—we could go back to maximizing GDP? 

We need the $750 billion, according to the administration, to counter the threats posed primarily by the Chinese, but also by the Russians—which is puzzling. 

Russia, when it is not colluding with the president to subvert our democracy/ utterly confounding The Washington Post and The New York Times and the rest of the mainstream Trump-resistance media (pick one)has, it would seem, devolved into a second rate power (it was never as strong as we thought it was, certainly not at the end of the Cold War): it is now said to be only a gas station run by alcoholics and mobsters. 

Not so China. The days of making cheap party-favor paper umbrellas have long passed. It has now gained or is about to gain, military parity with the United States. That is a problem. 

 But it’s not the only problem caused by China. Through its “One Belt and One Road” initiative China is hoping to saddle countries with debt and make them beholden to China. (China is already big in Venezuela.) A few weeks ago China’s President Xi Jinping visited Italy on a tour that China hopes will lock other G7 nations into its economic embrace as well. That is just what Russia has done with Germany: made it dependent on Russian natural gas piped in under the Baltic Sea to northern Germany through the 700-mile Nord Stream 2 pipeline.

Germany’s agreement with Russia has been criticized for years, by US administrations as well as European countries. Trump originally blasted the Germans (who have just announced, almost proudly, that they will fall significantly short of NATO’s defense spending goals again) for becoming dependent on Russian gas at the same time they, and the rest of Europe, wanted the US to continue its major support of NATO, which was designed specifically to counter threats from Russia. Recently, however, and strangely, Trump has softened his position on Germany’s linking up to Nord Stream 2. 

China presents a similar danger with its One Belt, One Road policy, but China does the alcoholic Russian gas station mobster attendants one better, much better, with its selling of technology (likely stolen from the US) to various countries. 

The Chinese company Huawei (“hwha-way”) has become a leader in G5, the next wave of information technology. It is busy selling its technology to any country that will buy it. The US concern is that the technology may pose a national security risk: the Chinese may have built back doors into the software that would give them the ability to spy on any country using it, and especially on that country’s military. But some of those countries don’t take that threat seriously: they think the US is just pushing for its own economic advantage.

What to do? Or more precisely, what to do in a democracy, and one that worships GDP?

What would happen if we simply pulled up the trade drawbridge and let the Chinese dump their products into the China Sea? This is what would happen: the multitudinous purveyors of cheap plastic goods from China (and, yes, other stuff as well) would have a cow (bad for the environment).

 In 2018, the US trade deficit in goods with China was $419 billion: imports from China were $540 billion; exports to China were only $120 billion. That means that a trade war hurts the Chinese far more than it hurts the US, and parents and taxpayers (at least those who could take time out from buying more plastic) might ask, Why are we spending gazillions of dollars on military hardware to counter a military threat from the Chinese at the same time we’re trading with them and making them rich enough to buy…military hardware?? 

We didn’t make the Russians rich during the Cold War, partly, of course, because the Cold War generation of Russians, also alcoholic gas station attendants (but without the gas) didn’t make anything we wanted—not even cheap party-favor paper umbrellas. But we also didn’t build factories there and give them access to our technology.         

Which is to say, during the Cold War we took the Russian threat seriously. Now we seem ambivalent about the Chinese.             

There’s probably a Chinese proverb that covers this situation, something like, “The greatest victory is the battle not fought.”          

Or maybe “Country that worships GDP will get deserved punishment.”

Daniel Oliver is Chairman of the Board of the Education and Research Institute and a Director of Pacific Research Institute for Public Policy in San Francisco. In addition to serving as Chairman of the Federal Trade Commission under President Reagan, he was Executive Editor and subsequently Chairman of the Board of William F. Buckley Jr.’s National Review.