Monday, July 04, 2005

"Free" Trade

A recent post, Larry "Smith" Kudlow, would be more accurate if China were practicing free trade. He, along with others, portrays the threats against China (from congress) as threats against free trade. Common sense, and practical policy, speaks to the contrary. China is not practicing free trade. It does not respect patent laws, it has an unfair currency peg, it "forces" people to give their money to gigantic public works projects, by making them put money in banks which then loan out all the money (an unsound economic practice anyway), and they're driving their people into poverty & their country into an environmental disaster for short term gains. Now, perhaps if they had a democratically elected government, where society had voted in leaders to go down this path, we might not have a problem. But they obviously do not, and, China is a threat in the short term. For all these reasons, it is the practical policy that our government should go ahead and pass measures, in a rational manner, that will coerce/persuade China into playing by the rules. We're not talking about regime change. China is a sovereign nation and that we respect. Yet when their practices affect us and our economy, we have to take steps to insure that they respect patent laws, unpeg their currency, and treat their workers & environment as humanely as we treat ours. Otherwise, the field is tilted against us, and the average Chinese worker, to the point where the only winners are a bunch elite Chinese.
The ideal piece of legislation, perhaps previously mentioned, would be a Fair Trade act. It would require that any company/country importing goods into the US must abide by US regulations. This includes a minimum wage (relative equivalent to the country), safety regulations, and environmental regulations. The company would obtain a license, after an inspection of their facilities, and would be subject to occasional surprise inspections, the punishment of failure being a complete revocation of the license (which would be understandably hard to obtain).
The reasoning behind this is why should we have these great things here, only to export them abroad? This is rather like maintaining freedom by exporting the tyranny. It also just makes sense, because how can we possibly hope to win economically (or even stay equal) against other countries, in the longterm, if the playing field is tilted in the first place? It also eliminates many of the advantages of going overseas. This legislation would be enacted four or five years after being passed because companies would have to radically alter their practices (and we don't want global trade to grind to a halt). Thus stands the practical policy: the fair trade act.


The Big A said...

I agree that we need to act upon the imbalance in our trade with china or any country that has a huge advantage over us. However, if you force every country that exports products to the U.S. to follow the U.S.'s rules and regulations, then the U.S. would dictate the rules and regulations for each of those countries, digging into their independence to make their own rules for their country. So if there is a solution to what china does, it needs to be less broad and better.

William said...

This is a valid concern, for there needs to be flexibility to allow for innovation in the export businesses, thus only a core set of regulations, including the most basic of humane working standards, would be included. This would probably be minimum wage, some safety regulations, and regulations keeping children out of the workplace.