Transcripts

"Commentary"-China...Friend or Foe

SUSIE GHARIB: Tonight's commentator says there's a simple answer to competing with overseas economies. He's James Pethokoukis, business editor at "U.S. News and World Report."

JAMES PETHOKOUKIS, BUSINESS EDITOR, U.S. NEWS & WORLD REPORT: Is China an ally or an adversary? It's a provocative question given the simmering trade tensions between Beijing and Washington. So I listened closely when it got asked at a recent Democratic presidential forum. Now, pretty much all of the candidates fudged their answers just a bit. Instead of picking ally or adversary, most of the White House wannabes chose a different word: competitor. And then all the contenders started complaining that China competes unfairly with America.

For instance, Hillary, Obama and the rest blamed our $250 billion annual trade deficit with China on how Beijing keeps its currency weak versus the dollar. Little was said about how America can make its own economy more innovative and productive to better compete with China, as well as with India, Japan and the EU. That was a missed opportunity. So here's one idea that both Democrats and Republicans just might agree on: cut corporate taxes. Only Japan has a higher corporate tax rate than America. And get this: while the average advanced economy has a 29 percent rate, ours is a whopping 40 percent. Even big-government France has a lower rate.

Now many countries have been cutting taxes the past few years with spectacular results. Ireland, for one, has cut corporate taxes by two- thirds and seen its economy boom. Of course, it's tough to get much of anything done in Washington these days. But Democrat John Kerry proposed a rate cut back during the 2004 election and President Bush raised the possibility again a couple of weeks ago. So this is one proposal that might not be dead on arrival. Compete or retreat, it's America's choice. I'm James Pethokoukis.