A crescendo of voices on Capitol Hill is calling for retaliation against China for 'cheating' on its trade commitments and for undervaluing its currency. Senator Byron Dorgan, a Democrat from North Dakota, has even introduced a bill to end normal trading relations with China.
The presumption is China must be 'cheating' - and doing so at the expense of US jobs - because the American bilateral trade deficit with China continues to reach new highs. To 'level the playing field' and correct the trade imbalance, which reached US$233 billion last year, Congress must retaliate with protectionist measures.
False logic underlies this vision of US-China trade. Trade is too often seen as a zero-sum game - one party wins; the other loses - with the prize being a trade surplus. That mercantilist attitude, which David Hume in 1758 called 'a narrow and malignant opinion', accounts for a large amount of the China-bashing in Washington today. By focusing on producers who may have been harmed by trade rather than on consumers who benefit, Congress commits the same fallacy of composition that Hume exposed. Moreover, by failing to recognise the widespread benefits of trade for all nations, protectionists have lost sight of the liberal idea best expressed by Hume that 'where an open communication is preserved among nations, it is impossible but the domestic industry of every one must receive an increase from the improvements of the others'.
If China had not unilaterally liberalised its state-controlled trading regime after 1978, both China and the global economy would surely be much worse off today. Likewise, if the US is overly zealous in restricting Chinese goods imports, the long-term impact will be to lower the growth of US exports to China and a reduction in the wealth of both nations.
What Congress needs to be told is: free trade is mutually beneficial - consumers gain regardless of why imports are cheap; the purpose of trade is not to create jobs but to create wealth; and that the balance of payments must always balance because of double-entry bookkeeping - a current account deficit must be offset by a capital account surplus.
All the protectionist hyperbole diverts attention from the significant progress China has made in its transition from a planned to a market economy, the increase in economic and personal freedom the Chinese have acquired, and the enormous benefits to consumers from the availability of cheap Chinese imports.
The truth is that no one is forced to trade with China. As Minister of Commerce Bo Xilai noted in responding to US protectionist threats: 'If they [American businesses] could not make money doing business with China, they would not have been doing it.'