'Getting Tough on China' is an expensive and terrible idea.
Adam Rifkin stashed this in China!
Jordan writes about an example of "getting tough on China": tire tariffs.
After the tire tariff went into effect, China handed down its own tariff on American chicken, a move many interpreted as retaliation. That alone may have cost the United Stated $1 billion in agricultural exports. The Institute also suggests that extra $1.1 billion we spent on tires likely put a crimp on other household spending, possibly costing us thousands of retail jobs.
So this is what "getting tough on China" got us. Consumers spent $1.1 billion extra to put tires on their cars in 2011. Most of the money went to factories in other low-wage countries. And we sold a lot less chicken. Great deal, no?
No. Not a great deal.
But, you know, they sounded tough on TV to impress those Ohio voters.
Actually, neither one of them sounded tough. Which is a good thing.
I tend to think there are only 2 ways we should ever "retaliate" or "get tough" on another country that's unfairly favoring or subsidizing one of their industries:
(1) Impose a small incremental tariff on *all* goods from that country, not just those in the narrow category (like tires). After all, a tariff can't really restore 'fairness', and when it's narrow it's likely to just be a windfall/permanent-privilege for the domestic producers, and perhaps even tolerable by the foreign producers. A broad tariff is more likely to rally *other* industries in the foreign country for the reforms we'd like.
(2) Increase green card and other immigration allotments from that country, ideally as part of a skills-sensitive 'points' system like Canada/Australia/etc use. In other words: screw our exports, and we'll steal away even more of your most-talented population. Brain drain as trade lever.
Each of these, instead of keeping a dispute in a narrow industry -- where both foreign and domestic producers may be happy with less competition and more legal privilege -- broaden the costs and benefits to mobilize other constituencies (in both countries) for freer trade.
Is free trade everywhere a bad idea? No one in Congress seems to support the idea.