Buy China, Not Buy China, that is the question

Two different perspectives on the Chinese stimulus plan.

News To U(use) posts: Chinese stimulus is benefiting American business.

On the other hand, Michael Pettis mentions that the Economic Observer (English and Chinese links on right) supports a "Buy China" provision, similar to the "Buy American" provision excoriated in the global, and Chinese, press. He then explains:
First, the “Buy America” provisions were never enforced and, what’s more, they are in many cases against US law. Of course they may also be against the law in some cases in China, but there is a robust legal mechanism in the US that can be used to prevent the US government from enforcing rules that violate US laws or US trade agreements. Importers, American as well as foreign, can sue the US government with every expectation of winning in court, in a way that no one, especially no foreigner, would even attempt doing in China.

Second, US government procurement is a tiny fraction of total US purchases, even taking into consideration the US fiscal stimulus. In China, almost the entire stimulus package is going to expand investment in SOEs and/or government projects, so the share of government procurement in total GDP is much, much higher in China. That makes it a far more trade-constraining measure in China than it could ever be elsewhere.

Finally, and probably most importantly, China is the country that most desperately needs foreign demand to absorb its excess capacity. In a world of contracting demand, China is the country that is most likely to suffer from protection, for the same reason that it is the country that benefits most from absorbing other country’s badly-needed demand. In that case it is not enough to say that China is just doing what everyone else is doing (and never mind that it is much harder for foreigners to invest in China or sell to China than it is for China to do either abroad), since any dispute that resolves itself in greater trade protection hurts China worse than it hurts the other disputant.
In the short-run, the United States stands to gain the most from protectionism, especially since it quickly solves the issue of consumer demand. We can call it "involuntary saving" or "forced savings", since protectionism would cause imports to drop and consumer prices to rise. Americans would consume less and save more, exactly what the country needs.

Long-term, protectionism is a bad policy (that doesn't mean globalization has been carried out successfully). Short-term, the time period most politicians think on, it can make a lot of political sense.

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