Farah Stockman of the New York Times recently had a piece about former Biden administration official Jennifer Harris. If I understand their views correctly, Stockman and Harris are part of a group of people who are skeptical of past "neoliberal" policies, whereas I -- as I mention here from time to time -- am in the group that is skeptical that "neoliberal" is a useful term in the U.S. politics and policy debate (at least until people who use it can get on the same page about what exactly they mean by it). But beyond those general disagreements, I want to focus here on U.S.-China economic relations. Stockman says the following about how Harris's views changed during a previous government stint with the Bush administration in the 2000s:
... After she joined a student delegation to a NATO summit in Prague in 2002, a faculty adviser on that trip offered her a job in Washington working at the National Intelligence Council. In those early years, she believed what everyone else in Washington believed about the economy — that governments ought not meddle with it.
Her outlook changed in 2007, after she joined the policy planning staff at the State Department. It was her job to track China’s use of subsidies, industrial espionage and currency manipulation to fuel its rise as a manufacturing powerhouse. Ms. Harris argued that tariffs on China were a necessary defense. Nobody agreed. “I was kind of just banging my head against this wall,” she told me. “The wall was a foreign policy establishment that saw markets as sacrosanct.”
In reaction, let me first note that in this period of U.S. policymaking (like at all other times!), I think it's an exaggeration to say the U.S. foreign policy establishment, or any other part of the establishment, saw markets as "sacrosanct"; and along the same lines, I don't think it's the case that everyone in Washington believed that governments "ought not to meddle with" the economy. Of course, I'm sure you can find a few people in government who believed that, but in practice those people generally got outvoted. U.S. economic policy at that time involved a wide range of government intervention in the economy (in trade policy, that meant ordinary tariffs, trade remedy tariffs, farm subsidies, Buy America provisions, etc.). Were people in Washington more in favor of markets in the 2000s than, say, during the 1960s and 1970s? Probably. But I can assure you that the free market folks (like me!) were pretty frustrated with all the government intervention in the economy during this period. (To illustrate this, you can see what my former Cato colleague Dan Ikenson was complaining about at the time here.)
At the same time, while that characterization of U.S. economic policy may be an exaggeration, I can imagine that Harris got pushback from free market advocates within the Bush administration on issues such as the possibility of imposing tariffs on Chinese imports under Section 421. There were six petitions filed under Section 421 during the Bush administration, four of which resulted in affirmative determinations of market disruption, but the Bush administration rejected the use of tariffs in each of these. In terms of the pure economic considerations, these tariffs would have helped specific companies but harmed the overall economy, and that probably led many of the economics folks in the Bush administration to argue against them (AD/CVDs were widely used though, so it's not as though all Chinese imports were coming in duty-free). In addition, the foreign policy establishment had their own non-economic objectives during this period of the War on Terror, and challenging China on trade would have interfered with their goals. In this regard, the U.S. needed China's non-objection on various foreign policy initiatives, so I can imagine it was the view of this group that it was best to avoid trade confrontation with China.
Turning now -- finally! -- to the main point of this post, an important consideration that I think gets overlooked in the context of how to address concerns with China's trade practices is what would actually be effective. There seems to be an assumption from the critics of neoliberalism that taking measures such as the Section 421 tariffs would have been the tough approach to China's trade practices, but I'm not sure that's right. Which measures are actually toughest may depend on the objectives. If your objective is to change China's trade practices, I don't think Section 421 tariffs are likely to get you there. (Indeed, tariffs were imposed on Chinese tires under this provision during the Obama administration, and I don't think anyone would suggest this changed China's trade practices). Instead, WTO complaints would likely have been -- and in many instances actually were -- more effective for inducing policy change.
All of that leads to me some questions for the people, on both the left and the right, who seem to be believe that the U.S. was not tough enough on China's trade practices during this period:
- What is your specific goal with respect to Chinese trade practices? Do you want China to become more market-oriented? Or are you not interested in that one way or the other, and would rather just keep China out of the U.S. market and/or have the U.S. adopt industrial policies of its own?
- If you do want China to become more market-oriented, do you think unilateral actions such as Section 421 tariffs or Section 301 tariffs will help achieve that? And if you think they will, why do you think this, given past experience?
