I’ve been off my game for a little while. This post isn’t taking the form I had originally intended because Noah Smith has said most of what I wanted to say:
The only possible solution way for China’s rivals to match it in size is to gang up. And in this case, what “gang up” means is to form a free trade zone amongst each other, with zero trade barriers between them.
If the U.S. had zero trade barriers with Europe, Japan, Korea, India, and the countries of Southeast Asia, those countries wouldn’t become exactly like one huge “domestic” market. There would still be language barriers, geographic distance, exchange rate fluctuations, and national regulatory differences that end up accidentally restricting trade. But it would go a long way toward allowing American manufacturers — and European, Japanese, Korean, Indian, and Southeast Asian manufacturers — to attain the sort of economies of scale and supply-chain networks that China enjoys within its borders.
Basically, to balance China, you’d need to start thinking of “Non-China” as a single vast economic entity.
He goes on to emphasize the importance of imposing tariffs on intermediate goods as well as primary ones. Just to give one example Sun Pharma has 30% of the U. S. pharmaceutical market and 2/3s of Sun’s active pharmacological ingredients are imported from China.
As to the claim that we are starting a trade war, here’s your trade war for you:
Between 2000 (when China gained permanent most favored nation trading status and 2009 (China was admitted to the WTO at the end of 2001) China has dumped cheap subsidized manufactured goods on the U. S. market and we have suffered more then 5 million casualties—relatively highly paid manufacturing jobs lost here.
We are making the Chinese Communist Party rich through our trade policies and the CCP is polluting the air and the oceans. Its government-sponsored hackers are endangering every U. S. company or government agency. It is surveilling our military cites with observation balloons and drones.
While controlled by the CCP China is not a good global citizen and we should take the steps we must to end our support for that. Given their subsidies, import quotas, and eagerness to raise tariffs that may goes as far as embargo. We really have little choice.
I am under no illusions. Such actions will make us poorer than might otherwise be the case. That is better than the alternatives.
Dave Schuler: here’s your trade war for you
You probably shouldn’t want to look at agricultural employment over time. It looks pretty dire. On the other hand, manufacturing output has increased substantially in the United States, even as manufacturing employment has fallen—just like agriculture did previously.
America has one of the world’s highest median incomes, has low unemployment, millions of very busy guest workers, even though manufacturing represents a smaller share of GDP. It’s almost as if making MAGA hats is no longer the key to economic prosperity.
I think you need to name your goal here. If the goal is to bring back high paying jobs to the areas that lost them, mostly the Rust Belt, it’s not likely to happen. One of the reasons manufacturing paid well in those areas was that they were unionized. Companies moved jobs South even before China was a factor to cut costs by avoiding unions. Those high paying jobs that required only a high school education are not coming back to those areas.
If your goal is to bring back high paying jobs, you arent going to get real far. First, the premium for manufacturing jobs is only about 10%. Next, the only way we compete is to highly automate and we need to do it more effectively than the rest of the world, especially China. Automation and robots are already the norm in China for many if not most areas of manufacturing. Even if lots of manufacturing comes back the total number of manufacturing jobs is going to keep decreasing anyway.
If your goal is just to bring back manufacturing as the goal that may be doable but I have a hard time seeing tariffs, especially as being practiced, as the way to do it. Suppose we isolate China and essentially form a free trade zone with the rest of the world. Why would the rest of the world trust us at this point? It also ignores that there are lots of areas of manufacturing we are highly unlikely to have come back, yet we are setting tariffs broadly on all inputs.
If we want to have a focused approach on China then do it. If we need some manufacturing for security purposes then identify what those are and target approaches that build those areas. And while we are fantasizing is it too much to ask that we at least look like we know what we are doing and not have it apparent that our entire economy is held hostage by one person?
Steve
I have a number of goals in mind, none of them among those you’ve mentioned.
The first is that we need to have supply chains for the things our military uses that don’t go through China. We don’t at present as I have documented in the past. That is an absolute necessity and will be much harder than many seem to think.
The second is that we need a broader base for the economy. An economy that is mainly healthcare and finance won’t work. That means we need more primary production.
Blithely saying that we need more higher education is fatuous. Something between half and a third of the population can make effective use of higher education. What are the rest of the people supposed to do? I think they should be engaged in primary production.
“Blithely saying that we need more higher education is fatuous.”
Where did I say that? We moved around a bit but I did live for quite a while in a true company town. Many of the guys just expected to go straight to work for the company out fo high school. That was the norm. You learned what you needed to learn once employed. If we have factories come back and succeed I think they are likely going to require automation of a high enough level that workers are going to need some post-high school education. May or may not require a degree. I will leave that up to the individual employers but it looks like they will need at least some targeted learning.
https://www.wsj.com/articles/american-factories-demand-white-collar-education-for-blue-collar-work-11575907185
Steve
Sort of an aside but Brian Potter has listed a summation of what he has written over the last few years. One of the key jobs that is talked about to bring back to the US is shipbuilding. He did a couple of piece on this and has noted that since the 19th century shipbuilding in the US has been more costly and less efficient than elsewhere. We had a brief moment to shine in WW2 when we were making Libery ships but after the war we regressed while the people who developed that method took it to Japan and turned their shipyards into winners.
https://www.construction-physics.com/p/50-things-ive-learned-writing-construction?utm_source=post-email-title&publication_id=104058&post_id=161535268&utm_campaign=email-post-title&isFreemail=true&r=3o9&triedRedirect=true&utm_medium=email
Steve
That the path forward for most Americans was via higher education has been the policy of both political parties since the Clinton Administration. If one does not explicitly reject that view (as I do), one implicitly accepts it.