Answering China By Prof. Peter Morici

"The rash of dangerous Chinese imports, ranging from defective tires to tainted toothpaste, makes apparent the perils in U.S. and EU policies toward China. Since President Nixon, the United States has sought constructive engagement to encourage economic and political reform. By opening commerce, the United States seeks to expose Chinese citizens to democratic values, instigate systemic change, and eventually add another responsible, prosperous state to the community of western nations.

The United States is betting that opening American markets to China's products, through membership in the World Trade Organization, will lift millions from poverty and create a government that respects human rights. The Communist Party is betting it can manipulate WTO rules to its unique advantage, accomplish export-led growth, and deliver prosperity that allows it to hold on to power indefinitely.

China's economic miracle is giving capitalism a bad name. By offering manufacturers export subsidies through a 40 percent undervalued currency, cheap bank loans, generous tax rebates, lax product-safety and environmental enforcement, and technology extorted from western multinationals seeking Beijing's permission to sell products in China, China is flooding U.S. and EU markets with artificially cheap, and too often dangerous, products.

Aside from wholly corrupting the notion of free trade based on comparative advantage, these policies have created a profits-at-any-cost culture. "

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