How much does hosting the Dalai Lama hurt your country’s trade with China?

How much does hosting the Dalai Lama hurt your country’s trade with China?

A fair amount, apparently. Just not for very long. Andreas Fuchs and Nils-Hendrik Klann of Germany University of Geottingen looked at 159 countries’ trade patterns with China between 1991 and 2008 to see what effect a high-level meeting with the Dalai Lama had on bilateral trade. Here’s what they found:

Empirical evidence confirms the existence of a trade-deteriorating effect of Dalai Lama
receptions for the Hu Jintao era (2002-2008). However, we find at best weak evidence to support the existence of such an effect in earlier years. While our results suggest that systematic trade reductions are only caused by meetings with heads of state or government, no additional impact is found for meetings between the Dalai Lama and lower-ranking officials. As a consequence of a political leader’s reception of the Dalai Lama in the current or previous period, exports to China are found to decrease by 8.1 percent or 16.9 percent, depending on the estimation technique used. Furthermore, we find that this effect will have disappeared two years after a meeting took place. Analyzing disaggregated export data, ‘Machinery and transport equipment’ is found to be the only product group with a consistent negative effect of Dalai Lama meetings on exports across samples and estimation techniques.

"Meet with him and we will temporarily reduce our machinery and transport equipment imports!" doesn’t sound like the scariest of threats.

The pattern seems similar to what happens with defense ties. China halted its military exchanges with the United States in January in response to U.S. arms sales to Taiwan, but there are strong signs now that these ties will soon resume.

One way to read this is that President Barack Obama was right last year to postpone his meeting with the Dalai Lama until after a summit with Chinese leader Hu Jintao. If you know diplomatic relations are going to take a temporary hit, why not postpone it until a more convenient time. On the other hand, the fact that the punishments China inflicts on its trading partners don’t seem to last that long lends credence to Vaclav Havel’s argument that "When someone soils his pants prematurely, then [the Chinese] do not respect you more for it."

Hat tip: Marginal Revolution