This week it became public that at the Dutch company ASML trade secrets were stolen by former employees of Chinese descent. Many people were schocked, because ASML is the flagship of the Dutch knowledge economy. That this is such a sensitive issue is also because recently growing concerns have arisen about how China is developing into a world power.

The announcement of the theft at ASML took place one day after I had extensively discussed President Trump’s trade policy towards China with my economics students. In my class “Philosophy of economics and economic ethics” students have to twice write a paper at the end of the course about a current economic policy theme, in order to learn to apply the theory discussed. The question they had to answer this time was whether Trump’s increase in import tariffs for Chinese products is justified from the point of view of happiness ethics (utilism), the ethics of law and theories of justice.

More than two thirds of the students arrived at a negative judgement about Trumps policy. They were mainly guided by the ethics of happiness. The most important argument in this regard is that the tariff increase leads to a general decrease in utility. Both for China and for Europe.

Admittedly, there are American companies that benefit from the import levy because they can now compete better with Chinese companies and increase their market share in the US. But on the other hand, American consumers and other American companies have to pay higher prices. And furthermore American companies that export to China are affected by the countermeasures that China took. On balance, Trump’s policy therefore offers few benefits in the context of “America First”. This is in line with what the father of the economy, Adam Smith, argued when he argued for free trade without protective import tariffs.

However, as so often, there are more aspects at play in this case. That makes it so interesting and at the same time complex. I could also see that in the analysis of other students, who judged that a potentially important long-term advantage is that China is being forced by America to deal with foreign companies more fairly. Trump’s trade policy is in fact a response to China’s many violations of the rules of fair competition in the past. China has grown big by putting in place many trade barriers in its own country, obliging foreign companies to share their knowledge (which violates the right to private property) and, at times, even stealing knowledge. That a country increases in power because of its economic growth and size, should not in itself be a cause for concern. But it does become a major problem if it refuses to respect essential rights of people and companies. Rapid action is then necessary, as China would otherwise become so powerful that it could no longer be corrected.

This long-term effect should be taken into account within the ethics of happiness. Then it is not only about the positive economic effect of fairer trade practices in the longer term, but also about the happiness effects associated with respect for the freedom rights of companies and individuals. Perhaps they are much more important than the happiness effects of more or less prosperity.

This also becomes clear when we apply duty ethics or theories of justice. The violation of rights by China requires compensation for damage from the past and a new violation thereof to be prevented. Trumps policy is defensible in this respect. But – unlike Trump’s actions – this requires a cautious policy that, on the one hand, curbs the improper increase in power of China, while on the other hand the trade relationship with China, which also has many positive aspects, is not unnecessarily burdened.

The challenge for the Dutch government as well is clearly to put a stop to China’s unfair trade practices, without destroying the possibility of a flourishing trade relationship.

This is a translation of a column in Dutch that was published in newspaper Reformatorisch Dagblad.

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