China: We Need Tougher Action, Not Tougher Tone

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by: Howard Richman

A commentary by Kendra Marr in The Politico (White House takes tougher tone with China) reports Peterson Institute for International Economics Senior Fellow Nicholas R. Lardy saying that the Obama administration's "tougher tone" with China is mainly for public consumption:

For now, however, these moves are just “trying to head off critics in Congress who think the administration is lying down in front of the Chinese,” Lardy said.

The Peterson Institute may have inside knowledge about the Obama Administration's trade rhetoric. Just after President Obama was elected, Senior Fellow Gary Hufbauer correctly told Reuters:

As strong as Obama's rhetoric on China has been, he'll probably moderate his stance as president to head off any bill that opens the door for “an avalanche of countervailing duty cases,” said Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics.

So what does the Peterson Institute recommend? They advise multi-lateral diplomacy at June's G-20 meeting:

“If the administration is going to be serious about putting pressure on China, it has to be multilateral,” said Nicholas R. Lardy, a senior fellow at the Peterson Institute for International Economics, who pointed to the G-20 meeting in June as an important forum where Obama can rally world support against Chinese practices.

Lardy hopes that President Obama gets another commuique passed in June like the ineffective communique the G-20 passed at their September meeting which urged “adequate and balanced global demand.” But China, so far, has been very good at resisting international peer pressure.

The Chinese government's currency manipulations, tarriff barriers and non-tariff barriers are killing Obama's hopes of a strong American economic recovery led by exports. Obama could open Chinese markets if he relied upon action, not words, as my father, son, and I recommended in our American Thinker commentary on Monday:

The solution is to tie Chinese exports to the U.S. to Chinese imports from the United States, as permitted by a special WTO rule for trade deficit countries. In "Trading Away Our Future,” we recommended that the U.S. use auctioned import permits to gradually limit the value of our imports from China (and other mercantilist countries) to the value of their imports from the United States. A less bureaucratic approach would be to impose a tariff on Chinese goods that would be proportionate to the trade deficit.

President Obama is doing nothing to help American exports and the American economy. We need tougher actions, not tougher tone.

Disclosure: I own Chinese yuan through CYB