More on the HRC/Obama China Tariff...

... which I first blogged about here. Matthew Yglesias reads Brad DeLong and wonders:

Now where I tend to lose the plot is this. If mainstream economists like Brad think it's a bad idea to use threats of tariffs to push China into changing its exchange-rate policies, how come the economics mainstream seems to have so few complaints about the fact that it's completely normal for US trade negotiators to use exactly this sort of leverage to try to get other countries to change the intellectual properties policies or to privatize their water systems or what have you? Why is the threat to shoot ourselves in the foot okay when made on behalf of pharmaceutical companies and movie studios, but not when made on behalf of import-competing manufacturers? Often when I see this argument made, I feel like the point is -- aha! hypocrites! you should support our China bill after all! -- but I really do think Brad's right, this is a bad bill. But by the same token, the people who complain about this sort of thing ought to complain about the other sort of thing as well.

There are a couple answers to this:

1. Most in the "economics mainstream" -- i.e. the orthodox theories and those who espouse them -- do oppose using these tactics in bilateral or multilateral trade negotiations. It's "normal" for US trade negotiators to use these tactics, but not because economists approve of it. It's common for US trade negotiators to use these tactics because their job isn't to enact good economic policies; it is to extract concessions from other countries so that trade agreements will be more politically feasible. But usually, we would never put tariffs on another country unless they are violation of WTO rules.

2. The US trade negotiators have different rule sets when negotiating with, say, Chile than they do when negotiating with China. We can easily do without having Chile as a trading partner, and we have the upper-hand in any negotiations with them because they need access to our markets much more than we need access to theirs. So we can browbeat them into doing just about whatever we want them to do by threatening tariffs or other punitive punishments. With China it's not so easy. We do rely on China much more than other countries. Not only do they provide a lot of our consumption, but they also hold a lot of our debt. Because of that, and past military tensions, we view them as a threat to our hegemony (or, at least, some people do). So, threats of tariffs are made, despite the fact that it would hurt us more than China (but they still will hurt China). And, unlike Chile, China isn't going to do whatever we want whenever we want it, so we've got to act like we've got a big stick. We don't have the same sort of leverage against China that we have with Chile.

Also, we do threaten tariffs and other punitive punishments against China for violating intellectual property laws (e.g. pirated software and movies). And part of the reason why Doha has failed so far is because of the US's insistence on the inclusion of intellectual property reform in the developing world. Most economists disagree with that line of logic, although the patent system and intellectual property laws are a wholly separate beast from import-competing manufacturing. After all, in the former cases, Chinese producers aren't producing a product at lower cost than American producers can; they're just free-riding on American innovation without paying anything at all for it. In some cases, they are stealing our products outright. It's a difficult and complex issue, and not easily comparable to standard international trade logic.