If there’s a trade war between the U.S. and China, don’t blame Donald Trump : China started it long before he became president.
Even free traders and internationalists agree China’s predatory trade practices—which include forcing U.S. business to transfer valuable technology to Chinese firms and restricting access to Chinese markets—are undermining both its partners and the trading system.
Mr. Trump’s China crackdown is risky, but it’s on firmer legal, political and economic ground than many of his other trade complaints, for several reasons.
1. These products are different: The classic case for free trade predicts that each country specializes where it has a comparative advantage, lowering costs and raising incomes for everyone. If China subsidizes exports of steel to the U.S., in theory the U.S. still benefits because consumers and steel-using industries will have lower costs, and while some steel jobs will disappear, more productive jobs elsewhere will take their place.
But starting in the 1980s, economists recognized that comparative advantage couldn’t explain success in many industries such as commercial jetliners, microprocessors and software. These industries are difficult for competitors to enter because of steep costs for research and development, previously established technical standards, increasing returns to scale (costs drop the more you sell), and network effects (the more customers use the product, the more valuable it becomes).
In such industries, a handful of firms may reap the lion’s share of the wages and profits (what economists call rents), at the expense of others. China’s efforts are aimed at achieving such dominance in many of these industries by 2025.
“China is undermining or taking away some of our rents, so we are relatively worse off and they are better off,” says Dartmouth College economist Douglas Irwin, author of “Clashing over Commerce: A History of U.S. Trade Policy.” Unlike Mr. Trump’s tariffs on steel and aluminum, “a lot of economists would hold their fire in terms of attacking Trump for his China actions. I don’t think anyone can really defend the way China has moved in the past few years, violating intellectual property and forced technology transfer.”
2. The WTO isn’t enough: When China joined the World Trade Organization in 2001, many advocates thought it would play by the global rules against advantaging its own firms and hurting others. Instead, China does so anyway in ways not easily remedied by the WTO.
Rob Atkinson, president of the Information Technology and Innovation Foundation, notes that a WTO case typically requires evidence from an aggrieved company. But many foreign companies are reluctant to complain about their treatment in China for fear of retaliation, such as being investigated for antitrust, consumer abuse, fraud or espionage, or losing sales to state-controlled companies. With no balance of powers or independent courts, “there is no rule of law to constrain Chinese officials from implementing arbitrary and capricious mercantilist policies,” Mr. Atkinson and two co-authors wrote in an extensive critique of China a year ago.
It is also difficult to hold China accountable for its WTO obligations because its system is so opaque. Mr. Atkinson says many discriminatory measures aren’t published, or published only in Chinese. When the central government, under external pressure, rescinds some discriminatory measures, they reappear at the provincial and local level, he says.
3. The U.S. isn’t alone: Mr. Trump’s steel and aluminum tariffs were widely panned for hitting both China and law-abiding allies like Canada and western Europe alike.
By contrast, his ire at China is widely shared. French President Emmanuel Macron has called for a unified European Union policy against Chinese corporate takeovers.
“Everyone who trades with China faces this problem,” Peter Navarro, Mr. Trump’s trade adviser, told reporters Thursday. “Part of the process that we’ve undergone … is to have a significant outreach to our like-minded allies and trading partners.”
But as always the Lie a Day Media will blame Trump so will the democrats and the usial bunch from Hollywood just like the way they blame the NRA for a ll shootings and bunch of Tide Pod eating useful idiots lead by the bigggist blabbermouth around David Hogg
Lots of people want to complain about unfair trade practices but are afraid to confront them. Sure, it is risky but the inequity of so many imbalances has to be challenged for the sake of US trade and jobs.
I guess Trump ain’t a guy that just throws his hands up and says, “This is hard, so I’ll just ignore it.”
The Chinese play very dirty. One of the issues raised in the Trump administration’s recent National Security Strategy is forced technology transfer. That is, if Intel wants to get access to the Chinese market—the biggest chip market in the world—China requires Intel to divulge everything it knows. We now cant put our newest military planes in the air without chips from China.
If the Chinese are spending tens of billions of dollars to build chip fabrication plants and we come up with a better way of doing it, suddenly they’ll have a hundred billion dollars’ worth of worthless chip manufacturing plants on their hands.
They’re producing four times as many science, technology, engineering, and mathematics (STEM) bachelor’s degrees and twice as many STEM Ph.D.s as the United States. Granted, some of them are of low quality—but many are excellent.
No one including their forever president can buy their way into the Peking university. No one is sitting next to anyone stupid sucking on a silver spoon or riding a diversity grant.
We are producing Hoggs and seemingly proud of it.
@Deplorable Me: China is putting stiff tariffs on pork.
Before the federal DOE we were #2 for education, thanks to federal meddling we have slid to a dismal 7th spending much more for less.
May 14, 2019 — Trump pushes for new bailouts for farmers hurt by his trade war
According to the most recent estimates, the annual cost of the trade war with China to the average American family will be around $490. Additional tariffs could push that figure as high as $800. These costs will result from higher consumer prices.
Additionally, U.S. taxpayers will be paying off farmers hard hit by Chinese retaliatory tariffs so Trump can avoid losing their votes in 2020. This will be on top of $12 billion in targeted farm subsidies previously allocated to avoid political backlash in the 2018 midterms. This is hidden in our rapidly rising annual deficit, which is once again over the trillion dollar mark.
The average middle-class American family actually realized tax cuts of around $900; a large part of that gain will be lost to the trade war. (You may recall that middle-class families were originally told by Team Trump that their tax savings would be $4,000 per year; the Heritage Foundation later claimed their average savings would be $2,900 per year.)
@Greg: A farmer must do market analysis in advance a whole years work in advance its a business. If they planned for soy(based on futures) its in the ground, he cant simply plow that under and start over with corn or hay. China backing out of agreements means a market change for prices. What is in the ground may not be worth the cost to plant it. By taking some of the tariffs and keeping the farmers heads above water that equals American food security, well above your head and beyond your comprehension. He isnt taking over the farming industry, like Venezuela did.
You could help the effort by buying American made products.
Trumps goal is zero tarriffs free trade, fair trade.
They need American consumers more than we need their shoddy products.
I’m not so sure their products actually are shoddy. You get what you pay for. Chinese factories also make very high quality goods. I remember when Made in Japan implied cheaply-made junk. The next thing we knew, all of the best stuff was coming from Japan.
A Chinese-made and launched rover is currently exploring the dark side of the Moon.
@Greg: Its garbage even the cloth they make the shirts and pants with is thin and of poor weave. I cant get cloth that crappy at the fabric store.
Where did Japan get the technology? They purchased American stuff even tractors and used automation which is cheaper and more consistent in quality. American companys sat on their asses and allowed themselves to be beaten. GMs ignition switch problem s a good example for a part that was less than 1 dollar they refused to fix it. Its why the Lemon laws were enacted.
China’s unfair trade practices, currency manipulation and intellectual property theft has gone on for years. If previous administrations had not just shuffled it off to the next guy, it wouldn’t be such an ordeal to correct. And Genius Joe, with extensive personal and family investments in China comes out and says China is nothing to worry about; move along, nothing to see here. Just like Ukraine.
We’ll see how interested in REAL collusion Democrats actually are. My guess is… more investigations of Trump.
It wasn’t American workers who exported so many American jobs and so much American manufacturing. That was done by American corporations , seeking to maximize their profits. They were just rewarded with huge permanent tax cuts. When the profits they’d been evading taxes on by keeping them overseas returned home, they used them more to buy back their own shares than to expand domestically. The shareholders that benefited from that were rewarded with capital gain tax cuts.
It this somehow all China’s fault?
Tariffs can be one tool to help remedy the situation, if they’re used judiciously. I don’t believe a rapidly escalating trade war fits that description.
@Greg: Nah, that was out of control union wages, high taxes, punitive regulations and idiotic energy policies that did it.
Right. American workers should be forced to compete with foreign workers earning under $500 per month, who have no benefits beyond company housing with windows high enough to throw themselves from when they’ve finally had more than they can take. And we can throw any costly environmental protections out the window after them, because Who cares?
@Greg: Yet, the FACT is, that is who they are competing with. When they can’t, then the businesses either fold or move overseas.
What Trump has done is remove as many of the barriers to businesses succeeding here as is possible. At the same time, he is trying to get foreign trade partners to play on a level field so our workers have the best chance of survival.
It’s not just about some mandated wage or penalty for making a profit; it is ECONOMIC sense, something liberals do NOT seem to understand.
If you cared AT ALL about any American workers you would support Trump.