Bush Campaign Lies

Saturday, May 08, 2004

Bush Campaign Lie #49: Kerry Flip-Flopped on Trade With China 

This is one of the 'new' flip-flops to show up on George Bush's campaign site. In fact, they repeat this charge in at least one other place.

And their argument is basically this. As far back as 1987, up through 2000, Kerry supported trade with China, and specifically, he favored granting permanent 'Most Favored Nation' (MFN) status to China. Then they cite Kerry quotes criticizing Bush's approach to trade with China:

From December 2003:

Kerry said, "We have to be tough on some things. China understands that. It's a way of life out there to get away with what you can until you are called on it. The violations of intellectual property are disgraceful and unacceptable. We need to be tough on currency manipulation."
From April 2004:
Democratic presidential candidate John Kerry said on Monday Americans workers were paying the price for President Bush's weak stance on trade with China and other countries. On the bus tour, Kerry singled out the Bush administration's handling of trade with China and said that country was manipulating its currency.
These statements amount to a reversal if Bush is only according China the privileges it deserves under MFN. However, if it happened to be the case that China were violating the conditions of MFN, then Kerry's desire to get tough on China would be perfectly consistent.

To start with, let's take a look at what 'Most Favored Nation' status really means. As members of the World Trade Organization (WTO), U.S. and Chinese trade policies are nominally overseen by that body, which defines MFN as follows:

Under the WTO agreements, countries cannot normally discriminate between their trading partners. Grant someone a special favour (such as a lower customs duty rate for one of their products) and you have to do the same for all other WTO members.
So what MFN really means is, each country has to treat all other MFN countries equally. But what if someone doesn't play by the rules? For example, what if there were significant concerns about China's lax enforcement of intellectual property rights (IPR)? From page 6 of the U.S. Trade Representative's annual report on China's WTO compliance:

IPR problems are pervasive, covering the widespread production, distribution and end-use of counterfeit and pirated products, brands and technologies. Violations include the rampant piracy of film, music, publishing and software products, infringement of pharmaceutical, chemical, information technology and other patents, and counterfeiting of consumer goods, electrical equipment, automotive parts and industrial products. IPR infringements not only have an economic toll, but also present a direct challenge to China's ability to regulate products that could have health and safety implications for China's population and international consumers.
As another example, what if China engaged in unfair manipulation of its currency? Should other countries, like the United States, just sit idly by?

Well, of course not. And for situations precisely like this one, the WTO has a dispute resolution mechanism in place. And when Kerry says we need to 'get tough' with China, what he means is that we need to pursue remedies for these trade issues via the WTO. The Bush administration has only done this once in 3.5 years, and that case was narrowly focused on the semiconductor industry. In fact, you can read Kerry's foreign trade policies in great depth, and you won't find him advocating that the U.S. retaliate against China in a manner inconsistent with WTO policy regarding China's MNF status.

For the record, the Bush administration thinks that trade with China is overall very positive, and that in particular, China's monetary policy does not amount to currency manipulation. But this isn't about who's right and who's wrong on these issues.

The point is, MNF places certain requirements on the U.S. and China in how they conduct trade with one another. Kerry has good reason to believe that China isn't holding up its end of the bargain, and so he is intent on pursuing corrective action via the WTO. This is not contrary to the spirit of MNF, but rather is entirely consistent with it.

1:27 AM