I'll Trade You
Rumor has it that the President, upon meeting with representatives of Midwestern farm states (including Iowa Governor Kim Reynolds), abruptly changed his position on trade with Asian countries and told his new economic advisor, Larry Kudlow, to get to work immediately on getting the United States into the Trans-Pacific Partnership.
Spectactular news, if true.
And if he's totally committed.
As we discussed just this past weekend with Clark Packard of the R Street Institute, the United States has legitimate reasons for distress over some aspects of our trade with China. Foremost among those concerns is the need for protection of a wide range of intellectual property rights -- from copyright and patents to trademarks and trade dress. (If you missed the live broadcast, listen to the podcast edition.) Copycat goods, knock-offs, and strong-arm tactics forcing outside companies to "share" their R&D with Chinese "partners" are all harmful to the conduct of authentic free trade.
But these are not problems that are easily solved with sweeping tariffs and trade wars. They are problems best resolved through engagement within the bounds of a rules-based order. Rules are promulgated through institutions -- institutions like the WTO and whatever governing institution emerges to coordinate the TPP.
The brewing trade war between the US and China doesn't just have the potential to wreck important parts of the US manufacturing economy, like the intermediate- and finished-goods sectors that add so much value to raw materials. A trade war (especially if it's targeted to create maximum political pain, as the Chinese appear willing to do at Iowa's expense) could be downright devastating regionally.
If the President really heard the Midwestern voices speaking to him today, and if he's really going to stick to the course that will best serve our regional (and national) interests, he has to stick to a plan to get us deeper into every reasonable multilateral trade agreement we can find. The more parties bound together by the same set of rules, the more seriously those rules can be taken. We're not the only country that suffers from China's theft of intellectual property. We shouldn't try to combat the problem with a go-it-alone strategy of ham-handed taxes on trade that only serve to punish American producers and consumers as much as they hurt anyone on the other side of the Pacific Ocean.