By Peter Morici – – Wednesday, August 29, 2018
Any decent lawyer will tell you that divorcing two well-adjusted,
successful people will harm both parties emotionally and financially.
Children, close friends and even employers will endure difficult, even
Sometimes two people grow so incompatible — or one spouse is so
obnoxious, unfaithful (physically, emotionally or otherwise) or abusive and
beyond repentance — that a divorce is worth the anguish and cost.
Given time, resilient people and their offspring recover — and so it goes
with nations, too.
In 1972, Richard Nixon’s visit to China initiated a courtship — a
process of opening U.S. markets to commerce and economic reforms in the
Middle Kingdom — that culminated with nuptials. In 2001, China was
admitted to the WTO and that granted it most of the same rights and
privileges in the United States that our European trading partners enjoy.
China has proven to be habitually unfaithful, a bully and unrepentant. It
has kept tariffs high, imposed byzantine administrative barriers to U.S.
products, targeted American industries like solar panels for extinction,
turned intellectual property theft into a national sport and now is seeking
to dominate world markets in advanced technology and artificial
intelligence by strong arming American companies.
Lest we forget, Beijing is using the dollars it skims from its trade
surplus with America to purchase influence throughout Asia and elsewhere
with its One Belt-One Road initiative. It is building a formidable Navy to
bully neighbors in the South China Sea and enabled North Korea’s nuclear
program. And it requires U.S. companies to help it deploy sophisticated
technologies that limit Chinese citizens’ access to Western Internet
sites and enables Beijing’s repression of the Uighur Muslims in Xinjiang
province and other human rights abuses.
China is hardly a poster child for the idea that trade begets kindly
neighbors and democratic values.
President Trump has thrown up tariffs on aluminum, steel and solar panels,
and on another $50 billion and slowed Chinese investment in U.S. technology
companies to get Beijing to change its ways. And he is contemplating even
His advisers tell us China’s economy is on the ropes. Chinese stocks are
skidding, and its prosperity sits on a mountain of debt.
Belying this, China posted 6.7 percent growth in the second quarter, and it
is no Greece. Beijing can print its own money to prop up state-owned and
private enterprises and provincial governments. Its
foreign-currency-denominated debt is only 14 percent of GDP, which is
modest as compared to other emerging powerhouses like South Korea.
More fundamentally, China can’t reform, because culturally it can’t
function without state direction of investment. It is organized much like
prewar Germany and Japan (and until recently, post-war Japan) where
privately-owned companies were organized into industry associations that
looked to single-party governments for priorities in allocating investment.
Asking China to reform would be akin to asking pre-World War II Germany to
give up militarism and become a benevolent state.
Accepting Beijing’s mercantilisms, as we did until Mr. Trump, is akin to
Chamberlain’s appeasement — it only emboldened the tyrant.
President Xi played Mr.Trump with the talks that came out of the
Mar-a-Largo Summit — Beijing didn’t budge because it does not know how
to change. And Mr. Xi likely believes Mr. Trump, not being terribly
popular, will be succeeded by a president similar to George W. Bush or
Barack Obama — they complained but ultimately knuckled under.
It’s time to divorce China. Announce we will no longer be governed by
World Trade Organization (WTO) rules, impose a balanced trade regime —
either through across-the-board tariffs or quotas — and let the rest of
the world adjust as it may.
Impose very strict controls on exports of technology, bilateral investment
and the education of Chinese nationals in our business schools and STEM
Initially, it will be costly.
Supply chains in many industries will be disrupted and require rearranging.
Prices will go up on toasters and televisions at Walmart until production
moves elsewhere in Asia or returns here. Apple and its high-tech brethren
will have to stop outsourcing jobs and learn to act to serve American
U.S. companies will be denied access to China’s rich market but will have
the American market much more to themselves.
The nice thing about beating your head against the wall and getting no
results is that it feels so good when you stop.
• Peter Morici is an economist and business professor at the University
of Maryland, and a national columnist.