Larry Kudlow over at Real Clear Politics notes that an attempt to put a 27.5% tarrif on Chinese imports was blocked in the Senate:
Today around 2pm, news broke that Sens. "Smoot" Schumer (D-NY) and "Hawley" Graham (R-SC) gave up for now on their China bashing tariff of 27.5 percent. This is a very good thing indeed.Placing a huge tariff barrier between American and Chinese trade would have the same effect as imposing a large tax on the consumers, businesses and investors of both countries. It would completely disrupt economic growth worldwide.
Treasury Secretary Henry Paulson deserves credit for getting this delay and preventing a vote in the Senate that surely would have passed with very bad economic symbolism.
As a general rule, I am all for free trade. Free trade is the best means of getting the best priced, best quality goods and services produced and distributed in the most efficient manner possible. Additionally, free trade does have a strong influence on diplomacy - the more economically inter-locked two countries are, the less likely it is that they'll fall in to conflict with each other. That said, I have to say that I disagree with Kudlow's take on this.
China is using dictatorial means to ensure that China's industries can undersell the industries of other nations and thus make the largest free trade area of the world, the United States, by default purchase very large amounts of goods from China. Our leftwing friends like to paint this as some sort of wicked, capitalist plot, but really its just the way business works: in a free market, a business must keep cost as low as possible. To do anything else is economic suicide - and thus when a business in America is looking to get things cheaper, China just becomes the natural stopping point. So, it isn't Evil Capitalist Amerika - but communist and increasingly fascist/nationalist China is playing us false - they are taking advantage of our economy in order to obtain the funds necessary to modernise China's military in preparation for what China's military and political leadership considers the inevitible conflict with the United States.
It has become clear over the past couple decades that China - or, more accurately, China's leadership - wants China to take at least a co-equal place in the world with the United States, and a superior position if they can swing it. For China to assume this co-equal status, they will have to conquer Taiwan and drive American military power firmly out of east Asia - including out of Japan. These things can only happen with war - and China is preparing for such a war.
I cannot imagine any set of diplomatic initiatives which could convince China's leadership that they should accept forever a second-class power status vis a vis the United States. No amount of American economic openess to China will change China's desires - in fact, at this point, the more we trade with them, the larger we are making our eventual problem. Far from maintaining free trade with China, what we should be doing is carefully phasing in tarrifs for Chinese goods while lowering tarrifs on Indian, Bangladeshi, Filipino, Indonesian and Vietnamese goods - we should, to put it bluntly, be assisinting in the economic build-up of those nations most likely to be threated by Chinese domination of east Asia while at the same time causing China no end of trouble in finding the funds for its military build up.
We won't get such a policy at this time - there is simply too much political inertia behind the concept of free trade with China - but this is an issue we, as a people, need to confront and eventually come to political consensus on. Absent a democratic revolution in China, we will eventually be at war with China. It is not a war we'll even come close to losing, but it would be a long, bloody and horrific war. Our task is to figure out the best means of preventing such a war short of surrendering east Asia to China.