On Thursday, U.S. Trade Representative Susan Schwab announced that China had agreed to drop twelve sets of industrial subsidies that encourage exports and discourage imports. The subsidies cover about 60 percent of Chinese manufactured exports. “This outcome shows that President Bush’s policy of serious dialogue and resolute enforcement is delivering real results,” Schwab said in a statement. “This outcome represents a victory for U.S. manufacturers and their workers.”
Is this agreement with China really a “victory” for “dialogue”? It was a victory all right, a victory for Beijing. These subsidies are clearly a violation of WTO rules. They should have been eliminated on December 11, 2001, the day China joined the global trading body. The U.S. did not file a WTO complaint about them until February of this year. What were we doing for more than a half decade? Worse, the Schwab agreement does not compensate American companies and workers for the injury suffered since 2001 because of the patently illegal incentives. This agreement permits China to escape punishment for more than five years of crime.
The concession is also smart politics for Beijing. The Chinese were going to lose on these subsidies at the WTO, and they undoubtedly figured they might get some good publicity, especially ahead of the third round of the Strategic Economic Dialogue, which is scheduled to begin in Beijing on the 12th of this month. The SED, initiated last year, has been a dismal failure for friendly dialogue. It has resulted in the loss of crucial time and a diversion of our energy. Yet we keep trying: Paulson will be taking with him to the Chinese capital an “entourage of high-level talkers” including Schwab, three cabinet secretaries, the head of the EPA, and a score of other officials.
Americans believe that, if we are friendly to Chinese leaders, they will be friendly back. Decades of dealings with them, however, have shown that they are ruthlessly pragmatic. They are not impressed by gestures of friendliness. They respect strength. If we want fair trade with the Chinese, we will have to file WTO cases and treat them like they treat us. They need America more than America needs them.
Let’s stop talking. After all, there’s nothing more to discuss. China needs to comply with its WTO promises now. End of discussion.
