Sanctions against China?

Once again, Paul Krugman is calling for sanctions against China. He tags as “a joke” the recent pledges by China to raise its currency. It amounts, he says, to making a 2 percent adjustment. In a previous column in May, Krugman quoted a Peterson Institute study saying a “20 percent to 40 percent” adjustment is needed. The huge spread in estimates as to how much or little the Chinese currency is overvalued make designing a sanction policy seem like pure guesswork.

Trade sanctions would raise the price of Chinese imported goods, and give “domestic” producers more room to compete. But without a U.S. industrial policy much more coherent than the primarily military-based one that we DO have, there will be no way to determine how much, if any, of the higher prices will result in U.S. jobs. Many “domestic” manufacturing firms are in fact multinational corporations who will apply savings to their most profitable use, anywhere in the world.

I fail to see how trade sanctions on Chinese manufacturing – Krugman’s, and most of the labor movement’s, recipe for fixing U.S.-China trade imbalances – will do much to help U.S. workers and jobs. Workers will be the ones who feel it FIRST, and MOST at the Wal-Mart checkout counter. The waves of protection granted various industries throughout U.S. history have a sorry historical record in improving the lives of the workers in those industries. Textile, steel, machine tools, auto, agriculture – in most cases the tariffs simply subsidized (socialized) some of the costs of a long-term, irreversible decline. And the bosses got all but the crumbs of these “social programs.” Further, sanctions could risk much increased instability because of the many unintended side-effects that economic warfare elevated to state policy can have.

On the other hand, the rise of labor evidenced in recent Chinese strikes demonstrates the best antidote known to mankind for raising domestic demand in any country, including China – and the ultimate answer to restoring trade imbalances.

In this writer’s view, a powerful labor movement has to be the flip side of China’s vast and important experiment in market socialism – managing a robust, mixed capitalist path of development for an underdeveloped country, within a socialist framework and legal system. If you unleash market forces – especially if the modes of production are primarily in transition from agricultural to industrial (and some post-industrial too) – you must unleash social-democratic forces as well – trade unions especially. Otherwise the rapid development that markets can bring may easily degenerate both economically and politically if the rich can hoard their wealth and workers are denied the fruits of their steadily increasing productivity. No trick or technique or policy has been found that replaces a vibrant and powerful labor movement in getting this done.

Professor Krugman is no advocate of retreat from globalization. Nor am I. Perhaps world war could reverse it. But I see no peaceful future that does not adapt to embracing it. However, for working people, the key part of the embrace of globalization must be an advance in their global empowerment. If there are to be effective sanctions, let them be international, and let them be directed at enforcement of the ILO charter on labor rights. Raising the bargaining rights of the world’s workers is the true path to global and balanced social progress.

Of course, in that context, calls from the U.S. for China to liberate its labor movement will be obliged – in order not to be called a joke – to address the fact that U.S. labor law itself is not in compliance with the ILO charter; and to address further the virtual collapse of U.S. workers’ bargaining power over the past 40 years, including the devastating impact that collapse has had on overall inequality, median income, financialization, and instability.