Outsourcing isn't free trade with China. It's a free ride for China.

Here’s how proud the Obama administration is of its own China policy: Its latest major policy pronouncement – declaring that Beijing is not, as widely charged, deliberately undervaluing its currency to rig trade flows – was made the Friday afternoon before Memorial Day weekend, once Congress and most of the media were safely starting their vacations.

If only sheepishness portended rethinking. Although the current mold for the United States’ approach to the People’s Republic was set long before President Obama’s inauguration, Beijing’s behavior along the length and breadth of the Sino-American agenda has unquestionably worsened on the president’s watch.

Crackdowns on Chinese dissidents have intensified. Chinese saber-rattling throughout East Asia continues, along with a sweeping military modernization program. Even the US companies that have massively outsourced production, jobs, and technology to China are grousing that Beijing is becoming a less cooperative, less scrupulous business partner.

The rapid rise and sheer size of China’s economy, moreover, make such bad behavior the world’s problem. The most pressing challenge: Its continuing obsessions with exporting and amassing huge financial surpluses are again expanding the global imbalances that have already made the 21^st century world economy so fragile and prone to disaster. We need to move beyond the old free-trade/fair-trade debate and explain to Main Street Americans why China’s unbridled economic rise threatens their future more than its cheap consumer goods help their pocketbooks

One promising possibility: the idea that the status quo that multinational businesses have created and defend as free trading is really free-riding. The key to making this point stick is explaining how the companies’ actual operations and strategies in China differ from the story they’ve peddled.

If, as these companies insist, their main aim is opening China’s immense and burgeoning market to US exports, then current policies are easy to depict as win-win propositions. Pushing production offshore can be portrayed as complementing the companies’ American operations, not replacing them. On an economywide basis, even the sting of import-induced American job loss can be soothed by the promise of export bonanzas and those rock-bottom consumer prices.

But a radically different picture is painted by China’s own continuing export orientation, its constantly surging trade surpluses with the US, and the multinationals’ own mounting global trade deficits. These facts strongly indicate that the multinationals are focused mainly on supplying the US market from China, not the other way around. And in this light, the benefits of trade expansion look much less mutual from America’s perspective.

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