Giving China a Break
Posted on March 26, 2009
Giving China A Break
I was talking to a good friend of mine, a smart policy and communications guy, about the state of the world, and he pointed out to me an interesting fact. The Chinese are taking their considerable resources and buying up assets all over the globe at bargain basement prices. While we are creaking under two wars and mountains of debt, the Chinese are taking our dollars and using them to make more money in the future. My friend lamented that we are now living in the China century.
This morning, I read in the New York Times about a Pentagon report about China’s military strategies. According to the Times, “China is seeking technology and weapons to disrupt the traditional advantages of American forces, and secrecy surrounding its military creates the potential for miscalculation on both sides.” Nothing will help the Chinese get to military parity with the United States more than having a lot more money than we do. Money can buy a lot of military hardware.
Meanwhile, in the House of Representatives, Democrats are trying to pass a budget that will include provisions for a cap and trade energy program. Democrats like to talk about how this will help the environment, how it will stop global warming, how it will prevent climate change, how it will create green jobs. What they don’t like to talk about is how this program will sharply increase the cost of manufacturing, and how many of those costs will be shifted to consumers.
And what they also don’t like to talk about is how this cap and trade policy will have absolutely no impact on the Chinese. They don’t have to follow American laws (and frequently ignore international law). Putting additional costs on American manufacturers will put them at an additional competitive disadvantage to their Chinese competitors. It will also give more incentives to American companies to move their operations to China, cutting both costs and jobs.
Democrats may respond by slapping high tariffs on Chinese products. But will they do the same to American products manufactured in China. And are high tariffs really the answer? Can we really afford a trade war with the country that owns most of our national debt? Will China allow that to happen?
China doesn’t have to deal with the high labor costs or the high costs of regulation that afflict American companies. That is not necessarily good for the Chinese, as they are choking on their own smog, and labor unrest is much more common there than here. But in the short term, saddling American firms with a cap and trade policy that excludes the Chinese (and the Indians) makes no sense.
The U.S. government has to start thinking strategically about how we compete with China. We have to make it easier to invest here in the U.S., especially for manufacturers. We have to think carefully about the regulatory structure of this country, to make certain it both protects jobs and consumers. We have to come to an understanding that piling more debt on the next generation is a strategic decision that will make our country much weaker in the future.
This doesn’t have to be China’s century. China has tons of big problems (chiefly a corrupt and thuggish Communist bureaucracy that hates political freedom and free-expression), and is not, by its historic nature, an expansionistic power. But it also may not be another American century, and it certainly won’t be if we continue down the path of more debt, higher taxes, and punishing and anti-competitive regulations as envisioned by the Obama Administration.