I am struggling mightily to maintain my allegiance to Adam Smith and Milton Friedman and the rest of my homies, and to resist the allure of good old-fashioned mercantilism (be it voluntary or retaliatory) when it comes to dealing with Asia. Pieces such as the following just make my blood boil:
Granted, Nortel was enabled in its downfall by the incompetence of its senior management (especially, its feckless CEO, Mike Zafirovski), but still, the sheer scope and energy of the whole hacking enterprise are shocking. As for the IPad matter, it appears to involve local Chinese firms whose main job is to scout foreign products and companies that are about to enter the Chinese market, and who are paid by local manufacturers and other companies to tip them off so that they can register the foreign companies’ trademarks first, which then gives them leverage to exact tribute from the hapless foreign firm as a condition of its entering that market – an activity that is called trademark “squatting” and is effectively invited by the Chinese government’s adoption of “first to file,” as the foundation of its trade mark laws. (This problem is far less severe, though extant, in countries, such as the US, that award trademarks on a “first to use” foundation.) These are just two examples, but there are many, many other mercantilistic policies, such as currency manipulation, tariffs, state subsidization of major companies and industries, etc., that indicate that any lingering hopes that we could all make nice and enjoy the benefits of the “comparative advantage” envisioned by Smith, Hayek, Friedman, and other free-market icons, are out the window, because we are already engaged in a trade war.
The free-traders’ goal has always been to avoid trade wars and their deleterious effects, and Smoot- Hawley and the Great Depression have been held up as examples of what not to do, but it appears we are well beyond all of that: we are in a trade war, and we are losing, and there appears to be no reasonable alternative to fighting back. It would be one thing to sit back and enjoy the one positive result that comes out of the Asian version of neomercantilism: the fact that it enables US consumers, and US businesses who buy Asian supplies or parts or who outsource labor to Asia, to buy goods and services on the cheap. It is quite another to watch as the overall effect of these Asian policies upon US companies and industries that once were worldwide leaders in developing and producing and exporting their products and services, but are now being driven into insignificance by those policies. It is painful to watch the US’s primary contemporary product, technology (and the intellectual-property rights therein), being transferred oversees, with or without compensation. At the present pace of deterioration of the most-productive elements of the US economy, many (or most) of our most-productive individuals and companies will have exited the country or gone out of business before the comparative advantage of cheaper pricing of overseas supplies and labor can be of much use to them – and the US may then be reduced to the status of a mere consumer of (mostly imported) products and services.