The Chinese Dilemma

By

Leonard Zwelling

https://www.wsj.com/articles/tariffs-should-target-chinese-lawlessness-not-the-trade-deficit-11545955628

The problem that faces the United States in its on-going trade war with China is not simply the issue of a trade deficit. Yes, the U.S. imports more from China than China imports from us. But that’s not really the problem as Martin Feldstein, former chairman of the Council of Economic Advisors, points out in his succinct piece in The Wall Street Journal on December 28. It’s the lawlessness of Chinese computer-based espionage of American trade secrets and extortion of American companies to hand over their intellectual property if they want to do business in China. This must stop. It is the reason that President Trump has imposed the tariffs on $200 billion of Chinese goods and he’s probably right to do so, even if a bit heavy handed and way too public about it.

China’s population is about 1.4 billion, four times that of the United States. How is the government going to care for and feed all of those people? They are often crowded into urban environs of packed proximity making living a challenge for any citizen who is not part of the Communist government apparatus or a rich industrialist. Life in China is a battle. Air pollution in Beijing alone is a daily problem. The government of China, autocratic as it is, still has the problem of governing that many people. It’s not easy. I guess we shouldn’t be surprised that they have to cheat to stay afloat.

During our recent trip to Southeast Asia, we were very struck with the great differences among the peoples of the region. Vietnamese were very different from Cambodians, probably ten years ahead in Saigon than the society of Siem Reap. Thailand was even more westernized although their traffic jams are not to be emulated by the other countries of the region. There was however one common theme among the people we met in Southeast Asia. They all resented the Chinese who had, at one point or another controlled the countries of the area.

We were also taken by the huge numbers of Chinese tourists in the many areas of Southeast Asia we visited. Clearly some of the people of China have the wherewithal to travel for leisure and do. They are everywhere by the hundreds having a major impact on the commerce and tourism upon which Vietnam, Cambodia and Thailand depend. China cannot be ignored, but its government’s arrogance cannot be tolerated either.

Mr. Trump has a point with his tariffs. Somehow, the Chinese must be brought into the family of trading nations that plays by the rules and does not resort to crime to compete with the West. That’s the real goal of the tariffs and not one that is likely to be fulfilled as Mr. Feldstein points out. It may turn out that the U.S. and China cannot settle the trade dispute by March. The Chinese may press on with their initiative to dominate world trade called Made In China 2025. We shall see.

The markets will not settle down until the dilemma posed by China is solved. The Chinese cannot continue to commit espionage and blackmail to gain the upper hand in trade. The U.S. cannot tolerate that behavior and the tariffs may be just a start. Let’s hope a solution can be found because wars have been fought for less than this.

If China wants to join the world, as it seems to want, it cannot impose its will on others. It will have to deal with other countries as partners not adversaries. This may require a great cultural shift. We shall see if its government can make the shift and still keep its tight hold on the people and on social media.

Leonard Zwelling