At RealClearPolicy the organization No Labels present five facts about the U. S.-China trade war. Here they are:
- According to CNBC, one in five U.S. companies claims that Chinese companies have stolen their intellectual property within the past year.
- The South China Morning Post reports that profits of state firms are hitting record highs as the number of entities under government control have decreased.
- A major point of contention in U.S-China trade talks is the practice of “technology transfer,†in which the Chinese government forces U.S. companies to turn over their tech secrets to Chinese partners as a condition of gaining access to the country’s enormous market.
- Right now there is a heated race to pioneer 5G, or fifth-generation mobile networks, and China has the leading edge.
- According to the Economic Policy Institute, 3.4 million U.S. jobs were lost between 2001 and 2017 because of the U.S. trade deficit with China.
Read the whole thing.
In my view in order to maintain a healthy economy and a healthy society we need people working in primary production and factory workers as well as menials, professionals, artists, and rentiers. A society based solely on those latter four groups will not be a healthy one but that’s the direction in which we are heading.
I believe in free trade but one way free trade will destroy our country. We have put off the reckoning for far too long and the longer it has been delayed the more difficult it will be to reverse. If you have a better plan for that than tariffs, please propose it.
A human failing for common people, as well as high minded politicians, is to put off uncomfortable, risky decisions for as long as possible. Such decisions cover a broad spectrum…like everything!
China’s aggressive behavior, violating agreements made with the WTO, has been vilified by all previous administrations in lip-service type words. The same words of concern have been voiced about immigration, illegal border crossings etc. but few ever attempt an active solution. And, when they do, the opposing party either wails about it or sit on their hands.
As I said, I’m sympathetic to the notion that tariffs are a poor policy. If you oppose tariffs, propose something else. What we have been doing is not working for too many Americans.
“the Chinese government forces U.S. companies to turn over their tech secrets to Chinese partners as a condition of gaining access to the country’s enormous market.”
This still bugs me. Why are we supposed to essentially bail out these companies. They go there to manufacture stuff and we lose jobs. They go knowing they are going to have to give up their tech secrets. They do this so that a few people in the investor class can make tons of money. The real answer seems to be we should not go there to manufacture.
Steve
It is banned under the agreements that China entered into when joining the WTO. Additionally, even notionally private companies in China actually have government ties. I don’t think that the federal government should be bailing out companies that entered into voluntary agreements but it should be holding the Chinese government to its agreements and helping U. S. companies when they are , in effect, negotiating with the Chinese government.
Keep in mind that back in 1979 when my then-employer wanted me to go to China to head up part of their operations there I warned them of this risk so none of it is new. I was frustrated that no one there seemed to know the first thing about China. When I told them the currency wasn’t convertible it came to them as a bolt from blue.
we should not go there to manufacture.
Steve
Exactly the goal of tariffs.
I still don’t buy this. Those companies did not go there and get surprised. They went knowing that they would have to give up secrets, even if it was against the WTO. They still went. Now we are going to pay taxes, ie tariffs, so that those companies that made big profits in China can stop giving up their secrets. Once again, privatized gains and socialized losses.
Steve
I agree that they should have known what was likely to happen. I disagree that companies should be completely on their own when they do business with China. I think that the responsibility for ensuring that states live up to their international obligations belongs to other states not to private organizations.
“Technology transfers for market access” could be seen as a state subsidy by the Chinese government to Chinese firms (free R&D) — just an indirect method.
If one is blaming American companies for taking that bargain, it is easier to say no if US companies have a protected home market (the US) like the Chinese.
For example. The US net imports 6 of 17 million new cars purchased every year. China net imports 0 of the 28 million news cars.
In a rough way, you could say US market for domestic car manufacturing is 1/3 smaller than its natural state. Shrinking the most natural market for American companies is a good way to make them look to other countries, and accept bad deals in the process.
Where is the cry for protectionism?
I think it’s actually somewhat worse than that, CuriousOnlooker. No small auto engines are manufactured in the United States. Nearly the only real U. S.-made personal vehicles are light trucks and SUVs.
Dave, yes. I understated the facts on purpose, to show the strength in the argument. For example, US rules on content requirements to be “domestic” is more generous than other countries.
The only logical positions I can see is “free trade, but every country follows the same rules” or “managed trade, benefits for both sides” or “no trade, countries set rules as they see fit”.
Advocating for free trade, but other countries get to set rules as they see fit is umm… something.
Yep. That’s basically the way I see it. I prefer Door #1 then Door #2. We’ve been using Door #4: largely free trade here; managed trade everywhere else. That’s not working for too many Americans.
When the lion roars the jungle goes silent. Aside from the economic implications of Trump’s trade policy he is forcefully reminding the world that America is The Colossus. Probably more effective than aircraft carriers in deterring potential troublemakers.
“I disagree that companies should be completely on their own when they do business with China.”
But we are doing this with tariffs, which means that all Americans are paying to try to fix this, while the companies that went to China to manufacture made lots of money by going there. I think that those companies should bear more of the cost.
Steve
This goes back to the post.
If you have a better suggestion then tariffs; suggest it.
Complaining about doing something without proposing an alternative is logically proposing to do nothing.
Sure, and you can still use tariffs. Rather than have general tariffs which means we all have to pay because a few people benefitted, lets go after those companies that gave away secrets. Lets put tariffs of 50% or 100% or higher on their goods. This would either put them out of business or force them to move, hopefully back to the US. Lets not do general tariffs.
Lets pass a law making it illegal for US companies to give out company secrets to other foreign countries, anticipating that companies move to another country and do the same thing again. Let’s actually work with other trading partners to put pressure on China so that they cant just go somewhere else. Stop selling China US treasuries.
Steve
As I understand it, consumer prices have yet to rise due to tariffs, with Chinese banks being instructed to underwrite the costs. It could be that China will pay the tariffs to remain competitive.
There are 3 categories of companies that export from China to the US. US based, Chinese based, or a 3rd country (like Japan or Germany). The proposal is to only tax US based – so what about Chinese based, who are the intended beneficiaries of the R&transfers and other subsidies from the Chinese government (that are contrary to WTO commitments)?
Its an interesting proposal to penalize US companies and leave Chinese ones alone.
So that leaves 3rd countries; which brings up 2 facts, they are a small component of the China to US export trade, second most foreign companies do not own their Chinese production. An example is Toyota, its production in China is in a joint venture – they get 50% of the profits from their Chinese made cars. I don’t think it is proper to treat those as Japanese.
Speaking of 3rd countries, the term “working with trading partners†is an ironic term. They can always take their own action (similar to US) at anytime. China’s been in the WTO for 20 years….
In the end all I see is a proposal that is a general tariff with a small exception for 3rd country wholly owned subsidiaries, or tariffs that leaves the beneficiary of Chinese government subsidies alone.
Or is the proposal to ban all goods made by Chinese company. I doubt that was the proposal – but its a trade nuclear weapon. Probably hurt American consumers more then tariffs.
I will give my proposal to alleviate costs to consumers. The proceeds from the tariffs fund a per-head tax rebate. 30 billion / 300 million = $100 check for everyone.