Commentary

What Should Trump Do About Hong Kong, China?

Daniel Mitchell
By Daniel Mitchell | August 14, 2019 | 4:23 PM EDT

(Photo by Anthony Kwan/Getty Images)

A week ago, I wrote about the turmoil in Hong Kong and pointed out that a crackdown would be bad for China’s already-faltering economy.

I had a chance to again address the issue yesterday.

What made this interview different is that it included a discussion of what Trump should do.

My expertise is economics rather than diplomacy, but I speculated that public warnings and/or threats by Trump might backfire.

The Wall Street Journal opined today on this issue and they want Trump to be aggressive. Here are some excerpts:

“The stakes are rising in Hong Kong, as clashes between pro-democracy protesters and the local government backed by China are escalating. The damage could be global if President Xi Jinping orders a bloody crackdown, and President Trump should be warning the Chinese President not to do it. … The protests began in June when the Legislative Council tried to ram through a bill that would allow Beijing to extradite anyone in Hong Kong to the mainland. Amid overwhelming public opposition, Ms. Lam has declared the legislation 'dead' but refused to withdraw it. Police have responded to the protests with hundreds of arrests and increasing brutality. Hong Kong’s cause should be the free world’s … An invasion of Hong Kong would violate China’s treaty with Britain and poison U.S.-Chinese relations.”

I agree that the Trump Administration should seek to deter intervention, but I think any warnings – at least at this point – should be conveyed behind the scenes.

In my fantasy world, Trump would strike a deal with China, and agree to drop his misguided trade taxes in exchange for China not messing with Hong Kong.

Sadly, my fantasies rarely become reality.

So I’ll close with a practical point. I mentioned in the interview that the people of Hong Kong are much richer than the people of China. Here’s the evidence, based on the Maddison database, as well as the numbers from the International Monetary Fund and World Bank.

My takeaway from these numbers, as I suggest in the title, is that China should send economists to Hong Kong rather than troops. They could learn important lessons about the benefits of free markets and limited government.

Heck, it wouldn’t be a bad idea to send American economists as well. Indeed, since it gets the top score from Economic Freedom of the World, the entire world can learn from Hong Kong’s spectacular success.

Daniel J. Mitchell is a top expert on tax reform and supply-side tax policy and is Chairman of the Center for Freedom and Prosperity. Mitchell is a strong advocate of a flat tax and international tax competition.

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