For what may be the first time I am in complete agreement with Fareed Zakaria’s column in the Washington Post on the challenge posed by China’s mercantilist trade policy to the United States’s economy and people:
Many of the Trump administration’s economic documents have been laughably sketchy and amateurish. But the Office of the U.S. Trade Representative’s report to Congress on China’s compliance with global trading rules is an exception worth reading. In measured prose and great detail, it lays out the many ways that China has failed to enact promised economic reforms and backtracked on others, and uses formal and informal means to block foreign firms from competing in China’s market. It points out correctly that in recent years, the Chinese government has increased its intervention in the economy, particularly taking aim at foreign companies. All of this directly contradicts Beijing’s commitments when it joined the World Trade Organization in 2001.
Whether one accepts the trade representative’s conclusion that “the United States erred in supporting China’s entry into the WTO,†it is clear that the expectation that China would continue to liberalize its markets after its entry has proved to be mistaken.
China’s policies are worse than that. They are a threat to any rules-based system of international governance. They manifestly will not conform to the rules voluntarily and they are too big and powerful to be compelled to.
We can’t change China’s behavior but we can change our own and imposing a broad regime of tariffs on goods made in China is the beginning of that process. If you oppose such tariffs, I think you have an obligation to explain how the United States can maintain a robust and egalitarian economy and society solely on the basis of retail, banking, and health care because that’s the direction in which we are headed. I don’t believe we can; I think we need a much more diverse economy than that.
“We can’t change China’s behavior but we can change our own and imposing a broad regime of tariffs on goods made in China is the beginning of that process.”
Which process will be messy, but is necessary. Concerns about China not buying or purging treasuries are overwrought. However, one issue, originally pointed out by Dave here several years ago, and which I had become aware of through a magnet deal, is that of China’s dominance in rare earths. Dumb US environmental laws created this problem, and now it could be a major weapon. Rare earths are truly strategic materials.
The reason that they’re dumb is not because they’re environmental laws or because they’re U. S. laws but their NIMBY quality. Does anybody seriously believe that rare earths are being mined and processed in a more environmentally sound way in China than they would have been here?
We can produce rare earths here and eat our environmental cake, too, but it will take a basic transformation in how we think of the various roles and relationships.
Again, outright agreement with the President on Chinese trade policy by someone who is usually a critic of the President. So far the harshest disagreement is on means; not on the need or the general course.
The Chinese have an interesting choice here; negotiate now and get a deal before the midterms, or believe their own propoganda that the US is soft; and that the midterms will rebuke President Trump and he will be forced to quit. A real gamble for the Chinese if it brings an even more protectionist Congress and they enshrine restrictions into law.
An ironic thing about China and the US trade spat is how it resembles the 2016 election. Trump bombastic behavior and willingess to pick fights with allies and neighbors like the EU, Canada, South Korea, Mexico should mean Trump ought to lose. But his opponent is China, the country whose behavior is even worse – picking fights and being even more of a bully. The Chinese commerce spokesman encouraged the EU to join forces against US protectionism – this from the same China that tried to bully the Germans into sharing industrial technology by secretly buying stakes in Deutsche Bank and Daimler!
Now that they’re running a trade deficit with China like most of the rest of the world and in the light of the other Chinese actions you’ve mentioned, the Germans are probably not as favorably disposed to the Chinese as they were when they maintained a trade surplus with China which has been the case for most of the last 40 years. The Chinese didn’t build all of their own factories; the Germans built a lot of them for them.
Also, expect mounting complaints about the “Made in China 2025” plan. It’s an express violation of China’s WTO commitments.
I have to wonder if this ends up with China getting unofficially ejected out of the WTO.
“An ironic thing about China and the US trade spat is how it resembles the 2016 election. Trump bombastic behavior and willingess to pick fights with allies and neighbors like the EU, Canada, South Korea, Mexico should mean Trump ought to lose. ”
Not seeing the analogy. The GOP has a long history of admiring “tough” talkers. They loved Rumsfeld, who was pretty much hated by the military. He went especially competent either as SoD, but he talked tough. His opponents were all conventional candidates. No one else was really willing to get down in the mud with him, at least partially I think because they all assumed he would drop out and they didn’t want to alienate his voters.
When it comes to China this strikes me more as two opponents who are willing to bully their towards what they want. To lie, cheat or steal to achieve an end. I think you can make the case that in the medium to short run China needs us more than we do them. In the short run I am not so sure. Trump may have the will to ride things out, but not sure his billionaire buddies and voters will tolerate even a short downturn if things go south.
Steve
The analogy is that Trumps trade actions are unpopular but China’s trade policy are also unpopular. Like how Trump was historically unpopular as a Presidential candidate but Clinton was approximately as unpopular. In 2016, Trump ended up winning an election he would have lost to any other Democratic candidate. Now, the Chinese have no sympathy from other major countries despite Trump doing unprecedented actions.
Its easiest to see the difference when you look at the steel tariffs of 2002. Then, Japan, South Korea, China and EU teamed up and got tariffs scraped within a year. There’s a high chance this time Japan, South Korea, and the EU are going sit this fight out; as they have been on the receiving end of aggressive Chinese policy (trade or otherwise).
I already pointed out Senator Warren’s comment, and now this article. I think the better case to be made that this get tough policy has a lot of legs in it; that the default assumptions by a wide variety of policy makers has changed.
“… how the United States can maintain a robust and egalitarian economy …”
Maybe it can’t. I thought the general observation of most people is that economy is a bit anemic and that the top one percent are doing much better than the rest of us. It’s not much of a stretch to think of England a bit over a century back, when aristocrats and nobility made up 1 % of the population, 5% of the people were “middle class” and all the rest were … Her Majesty’s subjects.
We could be like that. Most people growing up in such circumstances would feel content, especially if parts of their life got better somewhat over time (“Ooh wow gee, 12-core processsors!”), and if there were always people further down the totem pole to dump on (“Greasers!” “Ragheads!” “Trannies!”),
It could be very stable. I don’t think we’d be running the world, but I don’t think we’re going to be doing that forever anyhow.