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Seattle Post-Intelligencer, 01/31/05

America's relationship with China is awfully complicated.

Last week, The Boeing Co. celebrated the sale of 60 new 7E7 Dreamliners to six Chinese airlines, a deal worth about $7.3 billion. This is good news for Washington state.

Meanwhile, almost at the same time, three members of Congress asked for a Cold War-style probe of Lenovo's acquisition of IBM's personal computer division. Lenovo is China's largest computer maker, and the deal is worth $1.75 billion.

"First, this transaction may transfer advanced U.S. technology and corporate assets to the Chinese government. Second, this transaction may transfer licensable or export-controlled technology to the Chinese government.

Finally, this transaction may result in certain U.S. government contracts with or involving (personal computers) being fulfilled or participated in by the Chinese government," says a letter to the Treasury Department from Republicans Henry Hyde and Don Manzullo of Illinois and Duncan Hunter of California.

This raises an interesting question: In a global economy do these antiquated export controls make sense?

A recent report on semiconductor trade says there needs to be a balance between national security and global trade but points out that much of the technology at issue can be purchased readily from U.S. competitors in Japan, Europe and Korea.

Indeed, it's the question of competition - not national security - that might be the driving issue here. Manzullo was quoted by The Financial Times, saying, "The Chinese government runs a non-market economy which does not play by the rules of fair trade." He suggested that the Chinese company might "take over" the world PC market.

We doubt that to be so. There are many competitive, innovative PC manufacturers based in the United States.

But China will be a player in the manufacturing sector, too. And that's not bad - especially because that will mean more middle-class Chinese, and more of them will travel, increasing the demand for such things as new airplanes. And so on and so on with other goods.

That's how free trade is supposed to work; it's really not that complicated.

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