LyrArc Article Gist
In this thoughtful essay Bob Davis of the WSJ asks whether the decision of the Clinton administration to admit China into the World Trade Organization was a bad one for the U.S. Mr. Clinton in 2000 tried to persuade Congress citing words of president Woodrow Wilson that of a dream "of a world full of free markets, free elections, and free peoples working together." Every year China would have its most favored nation status renewed with help from supporters in Congress. After WTO entry this was not necessary. Chinese leaders saw the entry into WTO as a way to knock down trade barriers, to act a wrecking ball for the planned economy, to give the economy a big boost.
In 1994 China was a relatively backward economy with 60% of the population living on less than $1.90 a day. Hard to imagine today.
Not everyone was convinced that it was good for the U.S. This included a trade attorney who had tackled a huge trade deficit with Japan in the Reagan period- Robert Lighthizer. Lighthizer was Deputy Trade Representative negotiating with the Japanese. His prediction was that no job in America would be safe once China entered the WTO, that China would become a dominant trading nation.
Robert Cassidy, 73, trade negotiator for president Clinton looks back on that time and says that he regrets what has happened, that all his work night and a day only benefited business and hurt workers. David Autor, MIT economist and his colleagues, in a later study documented loss of 2.4 million jobs to Chinese competition between 1999 and 2011, in many manufacturing towns dotting the landscape of America, particularly in the midwestern states. And the expectation that the higher economic growth would lead to less political control did not turn out to be true.
In the process multinationals rushed to China after WTO entry and China became the world's manufacturing floor. By 2013 China's per capita income reached $7000, after years of fast GDP growth approaching 10% a year. About 400 million Chinese were lifted out of poverty from living on less than $1.90 per day from 1999 to 2011, according to the World Bank.
A big problem was that the U.S. did not plan for the change from WTO entry. No resources were allocated for the plan to let American workers adjust through worker retraining and special trade handicapped income support, to allow for a slow planned shift. Instead the pace of growth was faster than that which the U.S. faced with the Japanese export offensive in the eighties. China experienced double digit growth after 2000. The irony is that the Republican administrations that followed Clinton followed a policy of free trade to the advantage of China's state run economy when working class Americans voted mostly for the Democratic Party. Little was done and little said in the media from Democrats and Republicans in Congress and the establishment during this time even after Mr. David Autor documented the effects of trade in the U.S. Till Mr. Trump recognizing the alienation in communities hit by job losses from trade upended American politics, shifted this part of the electorate to the Republican base.
Mr. Lighthizer's view is that complaints about China should be left out of WTO because it is naive to tackle it that way. With a $375 billion China trade deficit for 2017 the challenge has to be met in a different way, and the U.S. has to rely on regaining its economic strength within a fair trading framework. Having negotiated with the Japanese Mr. Lighthizer sees the approach adopted then as the one right for today. During the long negotiations Lighthizer is said to have received many negotiating positions of the Japanese signifying no change in long sessions. He once simply made a paper plane and sent it right back, in one of these sessions. He meant that the U.S. was serious about reversing the imbalance in trade.
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