Archive for the ‘Economy’ Category

Below is an email interview with Derek Scissors, of the Heritage Foundation, regarding his analysis of Eliza Patterson’s policy prescription on trade with China.

First, you mentioned her analysis was particularly vague. Do you think Patterson’s policy outlined in her analysis deserves serious attention, or is it too vague to seriously consider as US policy?

It does not deserve serious attention.

1. Do you think China would initiate the alteration of its policies (*outlined below in italics) in a favorable manner on the condition that the US will reciprocate to their demands? Will China trust that the US will indeed reciprocate? And can we trust that China will actually fully follow through on these requests? 

From the Chinese perspective, the US just asks for more and more, for example on the exchange rate. We asked for 30%, we’ve gotten 25%, now we want another 30%. From the American perspective, China frequently sidesteps WTO commitments. Any exchange of major concessions would thus have to be carefully staged.

*”exchange rate, intellectual property protection, the “indigenous innovation policies”, which promote Chinese innovators over those from the US particularly in the area of government procurement, subsidization of green industries, export controls on rare earth minerals, bid rigging on government procurement contracts, barriers to foreign investment in telecommunications and  financial services, and frequent harassment of China-based US companies” 

2. What sort of demands will China make to the United States if we asked them to alter the policies outlined above*? And what would the impact if we implemented all of China ‘s likely demands? Would it be worth getting these concessions from China ?

The status quo has the American market largely open and the Chinese market largely closed. We therefore cannot make concessions sufficient to justify opening the Chinese market. On the economic side, we would have to make a credible threat. Alternately, we could make geopolitical concessions.

3. What would be the international perception of the US if we entered into this broad-sweeping, open-ended quid pro quo? Does this have any kind of precedent of being successful or unsuccessful, particularly with China ?

The global community was generally unhappy at the initial suggestion of a US-China G-2. Most countries do not want serious US-China confrontation but perhaps most countries also do not want too much US-China cooperation, since that could have the flavor of an imposed world order.

There have been historical arrangements made of this type. However, the big economic arrangement the US made with China was WTO accession and the majority opinion in the US probably is regretful.

4. If this open-ended quid pro quo was initiated by the US , what would its impact be on Sino-US relations? Would it likely help or harm our alliances in the region and what would their perception of the agreement be?

This is far too hypothetical to answer. Details of the trade are indispensable.

5. Do you think the quid pro quo policy changes (**listed below) are feasible, and is it in the interest of the US to attempt to achieve these changes through this quid pro quo? 

Same.

**”The lists should then be presented to Beijing making it clear that the US is willing to adopt a roadmap for US  policy changes as demanded by  Chinese authorities but that its configuration will be determined by policy changes           in   China . No policy changes will be made in the US in advance of concrete actions by China on the listed priority   items. If China wants the US to designate it as a “market economy” it must act like one, letting its currency         appreciate and limiting government policies favoring domestic over foreign industries. If China wants the US  to          ease export controls on high-technology products it must offer verifiable assurances regarding their ultimate civilian use. If China wants a bilateral investment treaty with the US  ensuring increased access for Chinese investors in the             US it must liberalize its own investment regime and provide adequate investor protections. It must also    improve governance within its companies and institute regulatory changes to ensure a clear separation between         government regulators and the firms they oversee. And if China wants a halt in US criticism of its human rights        record it must change that record.”

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  • The Law, Frederic Bastiat

    Life, faculties, production — in other words, individuality, liberty, property — this is man. And in spite of the cunning of artful political leaders, these three gifts from God precede all human legislation, and are superior to it. Life, liberty, and property do not exist because men have made laws. On the contrary, it was the fact that life, liberty, and property existed beforehand that caused men to make laws in the first place.