Friday, April 20, 2018

There are no winners in a trade war

This op-ed piece appeared in the April 19, 2018 issue of San Francisco Chronicle.
As the United States and China approach the brink of a trade war, it would be wise to cast aside the inflammatory rhetoric to weigh the cost and benefit of such a war to the American people.
President Trump accuses China of unfair trade practice leading to a huge trade surplus. It’s not that simple. As many have pointed out, the trade imbalance is distorted by attributing the value of all the components as coming from China — including those China purchased and included in the final product. For example, China’s content in an Apple iPhone is around 5 percent of the total value but is “credited” as the total value.
China’s export of household items and consumer goods represent good deals that the American public would be foolish to turn down. 
To impose a general tariff on goods from China would either force the Chinese seller to raise the prices or take the products elsewhere. In either case, the cost to the average American household would go up.
On the other hand, the Chinese consumer has choices and does not have to buy American. 
Take wine. It has taken 15 years to develop a customer following in China for California red wine. If that export were to be penalized by China’s reciprocating tariff, the market California worked hard to create would benefit winemakers in Australia, Chile and South Africa, all eagerly waiting to fill the void. 
Also, technology has been developing so rapidly that China now has intellectual property worth stealing and that will only increase with time. Raising tariffs will do nothing to influence the flow of intellectual property transfer — legal or not.
Accusing China of taking jobs from the United States rings hollow. The challenge is just the opposite: Jobs are going begging for lack of qualified candidates. China hasn’t been taking away low-paying jobs — America’s defective educational system is not preparing students for the future.
Aa trade war is would create an uneven playing field against America's own interest. President Trump is supposed to be too shrew a businessman for a move that makes no sense.
George Koo is a member of the Committee of 100.

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