Is Mitt Romney Pandering with his Hard-Line Stance on China? Or Is He Onto Something?

The most significant policy disagreement in last week’s Republican debate went almost unnoticed. The moderator asked Jon Huntsman, “What does Governor Romney not get about China?” After noting America’s economic weakness and the need to focus on our tasks here at home, Huntsman remarked, “I’d have to say, Mitt, now is not the time … to enter a trade war.”

Behind this exchange lies a remarkable development. A few days before
the debate, Romney’s campaign released “Believe in America,” a
book-length economic plan. In most respects it summarized standard
conservative positions. To be sure, the plan didn’t go as far toward
reducing individual income taxes as ardent supply-siders would like, and
it kept its distance from Paul Ryan’s politically explosive Medicare
proposal. Still, it offered almost no outright surprises … except on
trade. In seven bluntly stated pages, Romney staked out the toughest
position against China that any mainstream national politician has
adopted in a long time. The following quotations provide a sense of its
tone:

Having tried and failed with ‘engagement,’ the Obama
administration now behaves as if the United States has no leverage in
dealing with a country that routinely steals our designs, patents,
brands, know-how, and technology. …

This is not all happenstance. Rather, it is
the result of a deliberate policy by the Chinese government that seeks
to build up its economy by piggybacking on Western technological
success. …

The Chinese government
facilitates this behavior by forcing American companies to share
proprietary technology as a condition of their doing business in China.
China’s unfair trade practices extend to the country’s manipulation of
its currency. …

And it uses a variety of unfair
practices—for instance, inventing regulations and standards that only
Chinese companies can meet, and artificially lowering costs for Chinese
companies—to tilt the playing field in its favor. Instead of responding
forcefully, the Obama administration has acted like a supplicant.

To counter these practices, Romney proposed a new approach, which
begins with “unilateral steps” to get China’s attention. He invoked his
private-sector background: “Anyone with business experience knows that
you can succeed in a negotiation only if you are willing to walk away.
If we want the Chinese to play by the rules, we must be willing to say
“no more” to a relationship that too often benefits them and harms us.”
The initial steps include:

• stopping counterfeit and fraudulently labeled products at the border;
• going to courts and the WTO to challenge practices that violate existing laws and treaties;
• imposing targeted tariffs and economic sanctions; making common cause with our allies to thwart mandatory technology transfers;
• designating China a currency manipulator and imposing countervailing duties; and
• barring U.S. government procurement of Chinese goods and services
  unless the Chinese government ends its discrimination against U.S. goods
  and services.

Romney’s plan concluded with a ringing pronouncement:

The United States does not have to accept forever the
practices that have led to a huge and seemingly perpetual trade deficit
with China. … The time has come to lay out a series of steps that China
must take to become a responsible member of the global economy. And the
time has also come to lay out the consequences that would accompany its
failure to make rapid progress toward that end.

This plan has a significance that goes well beyond the policy
specifics and their immediate political implications. Mitt Romney is
running for president as the champion of the business community. It is
hard to believe that his hard-hitting stance toward China was not
developed in close consultation with his numerous contacts in that
community. If his views reflect theirs, it means that U.S. firms with
substantial interests in China have shifted their position in ways that
could prove momentous for future relations between the world’s two
largest economies.

Twenty years ago, Bill Clinton campaigned against President George H.
W. Bush on the grounds that Bush had placed our diplomatic and
commercial relationship with China ahead of considerations such as human
rights and democracy. Once Clinton took office, systematic and
sustained pressure from the U.S. business community forced the
administration to relent, and the status quo ante was mostly restored.
But if Romney is accurately representing the views of his core
supporters, the business community has now concluded that the status quo
no longer serves its interests and that the playing field has tilted
too much to be accepted.

In a lead editorial, the Wall Street Journal accused Romney of
being willing to risk a “trade war” for crass political reasons, and it
argued that giving Americans the impression that a confrontation with
China will bring lost jobs back to the United States is offering “false
hope.” Maybe so. But Romney seems willing to run for president on the
proposition that there’s leverage we have failed to exploit and that a
tough stance will force China to change course. If he’s elected on that
basis, he’ll have no choice but to test that proposition.

It’s possible, of course, that Romney’s tough China stance is
intended mainly to sway primary electorates in trade-sensitive states
such as South Carolina and that he intends to pursue a steady-as-you-go
strategy if he’s elected president. If so, he’s fooling himself. As the
Clinton case illustrates, campaigns have consequences. In September
1992, Bill Clinton declared that “We will condition favorable trade
terms with repressive regimes—such as China’s Communist regime—on
respect for human rights, political liberalization, and responsible
international conduct.” And that’s what he did—at first. Seventeen
months into his presidency, in May 1994, after much turmoil inside his
administration, he finally announced a course correction: “I am moving …
to delink human rights from the annual extension of most-favored nation
trading status for China.” 

Today, the Chinese and American economies are far more deeply
intertwined than they were two decades ago, and the potential costs of
disrupting the relationship have risen accordingly. If Romney becomes
president, we’ll find out whether the business community has really
changed its mind about China, and how much heat he’ll be willing to
endure if they haven’t. We’ll learn, as well, whether the Chinese
government will respond with compromise or confrontation. And as we do,
the future of the world economy will be at stake.