There’s No Such Thing As Free Trade With China As Long As It Cheats

By Nathanael Blake

Friday, December 27, 2019

Contrary to the old adage, cheaters frequently prosper. From the New England Patriots to our Chinese trading partners, a lot of unscrupulous folks have done quite well for themselves by cheating. This invites the question of what sort of fools would keep dealing with known, unreformed cheaters?

This is among the questions raised by Kevin Williamson’s oblique seeming response to my criticism of one of his recent columns. I am unsure whether to feel slighted that this National Review writer did not deign to dignify me with a direct response or, given his abusive abilities when irate, to count it a small mercy.

Regardless, Williamson has implicitly acknowledged the problem with his snark about those who worried about the “sneaky Chinese” stealing American jobs. As he puts it, “the biggest beef U.S. firms have with China [is] the theft of intellectual property, particularly in the form of counterfeit goods.” He argues that the best response to this is to enforce, and perhaps strengthen, the laws we have against counterfeiting and importing counterfeit goods.

This is a reasonable point, and I support the stepped-up enforcement measures he recommends. If the goal is to protect ourselves while maximizing trade with China, these are good recommendations. However, in making the argument, Williamson concedes that there are significant costs to doing business with cheaters and scofflaws, and that regimes matter when trading. These points ought to be examined, for they complicate the narrative of free trade as an inevitable boon to all parties.

The Costs of Trading with a Dishonest Regime

One of Williamson’s mantras is that trade is between individuals, not countries. This is (mostly) true when we are discussing, say, Missouri residents buying single-malt Scotch, or Scottish barbecue aficionados (surely there must be some) buying Missouri barbecue rubs and sauces. It is not really true when we are talking about dealing with a totalitarian (nominally communist but really fascist) country like mainland China.

Trade with such a regime is never free because the government is always in control of business, which has no rights it can assert against the government. The Chinese government is uninterested in the fair and free exchange of goods and services, instead viewing trade as a form of leverage and a way to procure technology.

The Chinese government has an ideological imperative — communists disdain private property — as well as geopolitical and financial incentives to turn a blind eye toward and even to encourage fraud and theft when targeted at Americans. Of course, we have plenty of homegrown rip-off merchants and scam artists, but American law enforcement works to squelch them.

Dealing with honest businesses under an honest government (by the standards of governments) is not the same as dealing with a regime like China’s. The latter imposes extra costs, as doing nothing means intellectual property is stolen and counterfeits flood the market. Taking action, whether hiring more port inspectors or Amazon increasing its efforts against counterfeiters, costs money, and these costs are not necessarily borne by those who have been profiting from dealing with unscrupulous foreign business and regimes.

Such costs have not been honestly accounted for by those advocating for free trade with the regime in Beijing. There are also other social and cultural costs of which we are only just becoming aware. Doing business with China has made our movies subject to the censorship of the Chinese Communist Party. It has made NBA stars who boldly speak about domestic politics into cowards when asked about China’s current genocidal campaign against a Muslim-minority population. There are many more examples of China using its economic power to squelch the free speech rights of its critics.

Going into business with murderous, quasi-communist bastards gives them leverage, and they use it. Our trade relations with China have not liberalized that country; they have given the thugs who rule it more tools of repression at home and the means to buy favor and bully critics abroad. After adding up the expensive externalities and the social cost, cheap stuff from China does not look as affordable as it does on the store shelf or the online cart.

Trade with China Has Created Real Problems

Perhaps trade with China and other totalitarian regimes is still worth it. Maybe the money is just too good to pass up, even accounting for the costs of dealing with a crooked government that encourages crooked businesses. It should nonetheless be clear that the carefree arguments used to justify free trade with other free and friendly nations are not obviously applicable to trade with a tyrannical geopolitical rival.

Our trade relations with China have not gone according to plan, and it is past time for a reckoning. President Trump’s trade war against China has been a haphazard campaign, but he was at least able to recognize that there was a problem with the autopilot trajectory of our previous trade policies. He has not provided a clear alternative trade policy, but his presidency has created opportunities for Republican politicians who will effectively rethink the issue.

Even if our trade relations with China are for the greater good, they have created real problems, including many caused by the malfeasance of that regime. These difficulties must be addressed, first of all by those who insist we continue our close economic relationships with China. Those who support free trade, even with regimes like China’s, should be offering solutions to the problems created by making deals with such tyrants, rather than sneering at those who have suffered by them.