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The free trade with China, win-win, narrative is breaking down. The China as protectionist narrative is on the ascendancy.
The Office of the U.S. Trade Representative and the European Union have filed a WTO suit against China for export tariffs on raw materials. And China's protestations of the U.S. "Buy American" provision merely highlighted their lack of credibility as they strengthened their pre-existing "Buy Chinese" policy.
Today, the NY Times has a major article today "As China Stirs Economy, Some See Protectionism," which is a broad indictment of China's practices.
Risking the ire of the United States and other trading partners, the Chinese government has quietly started adopting policies aimed at encouraging exports while curbing imports, even though China, as one of the world’s largest exporters, has aggressively criticized protectionism in other countries.
Yes, I know. China has not merely "started" adopting policies. They had them all along. Also, government intervention to maximize exports is technically "mercantilism." While "protectionism" is taking action to prevent foreign import competition, which they also do. But the point is the narrative is now closer to reality.
The government has sharply expanded three programs to help exporters, giving them larger tax rebates, more generous loans from state-owned banks to finance trade, and more government-paid travel to promote themselves at trade shows around the world.
At the same time, Beijing has banned all local, provincial and national government agencies from buying imported goods except in cases where no local substitute exists.
The rule, issued as part of the country’s economic stimulus plan and enforcing a seldom honored Chinese law from 2003 favoring domestic suppliers, exploits China’s failure so far to sign a global agreement barring protectionism in government procurement.
A good three paragraphs outlining a portion of China's non-free-trade practices. Different from the "China price" line which implies natural trade advantages.
“China is not only continuing but accelerating many of the protectionist approaches they’ve taken in the past to promote economic development,” said Michael R. Wessel, who was appointed by Nancy Pelosi, the speaker of the House, to the United States-China Economic and Security Review Commission.
Wessell is an expert, and knows a lot about China by virtue of the US-China Commission, which holds multiple hearings on this topic. But the Commission has gotten very little ink in the past few years.
So, on one hand, it is not helpful to describe the U.S.-China relationship as free trade related. They are a non-market economy. Free markets and free trade have virtually nothing to do with the export-import dynamics.
On the other hand, China does need to promote more domestic consumption. That is good for us, because they need not rely on our consumption so much. We, in the U.S., need to do the opposite. We need to promote more domestic production and lessen reliance on consumption. Out 70% of GDP which is represented by consumption is too much... too out of balance... exceeding that of other developed countries who are 7 to 12 points less.
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