Gordon Campbell on a trade war with China
As things currently stand, the White House has NOT included New Zealand on its list of allies whose steel and aluminium exports to the US will be exempted from US President Donald Trump’s recent hike in tariffs.
Given that the tariffs in question have been imposed under section 232 of the 1962 US Trade Expansion Act (whereby the national security of the US is supposedly at stake) this American failure to treat New Zealand as an ally is historically significant. After all, our troops have fought and died alongside the US in every major global conflict – the two world wars, Korea, Vietnam, Afghanistan etc - for the past hundred years or more.
We have also been (to the point of self harm) a country wedded to free trade and open borders. For its pains, New Zealand has still ended up on the enemies list at the Trump White House.
This morning though, those steel and aluminium tariffs have been eclipsed by the $50-60 billion package ( the amounts vary) of trade sanctions that the US says that it plans to levy against China – for its allegedly unfair trade practices, theft of intellectual property and impact on American jobs. There are fears of a tit for tat response by China, against US products. In 2016, China was the third biggest market for US exports.
Boeing airplanes, US high-tech componentry and US farm exports (eg soybeans, sorghum and pork) would probably be first in the firing line of any Chinese response, for both political and economic reasons. Sorghum production for instance, is concentrated in states that voted heavily for Trump in 2016. Yet for now, the headlines about an imminent trade war with China may be overly dramatic :
Under the terms of the memorandum, Trump will target the Chinese imports only after a consultation period, a measure that will give industry lobbyists and legislators a chance to water down a proposed target list which runs to 1,300 products. China will also have space to respond to Trump’s actions, reducing the risk of immediate dramatic retaliation from Beijing, and Trump struck an emollient tone as he started speaking. “I view them as a friend,” he said. “We have spoken to China and we are in the middle of negotiations….”
Even if we are merely in the “phony war” phase of a
trade war, the rhetoric is still unsettling. The
“intellectual property theft” accusation against China
would also be open to retaliation, as the Strait
Times pointed out in its summary of the US goods that
China might choose to target:
The
purpose of the investigation [into Chinese trade practices]
by the US Trade Representative's Office was to shield the
intellectual property of American companies, a key concern
in Silicon Valley. But US tech companies are also vulnerable
to retaliation, especially companies such as Apple and Intel
that have manufacturing operations in
China.
Where did this come from ?
The recent White House policy on trade has been
fashioned by Trump, his key economic adviser Peter Navarro,
and the US Trade Representative Robert Lighthizer. Globally,
there would be few observers who would disagree with this
triumvirate that China’s track record on currency
manipulation, worker safety standards, environmental
protection and respect for intellectual property has been
reprehensible. But the White House response has been shaped
by Peter Navarro’s worldview – which appears to regard
trade as being solely a zero sum game, whereby the likes of
China and Mexico are the winners, and the US is always the
hapless loser. As Adam Davidson pointed out two years ago in
his profile of Navarro, this is not how the world
works:
The phrase “zero-sum game” is a powerful
one in economics; it refers to a situation in which one
party to a transaction can only gain if the other party
loses. This is in contrast to most other market
transactions, in which both parties can be made better off
by exchanging with each other. For Navarro, the U.S. is a
loser—a passive victim, whose prosperity is in the hands
of the leadership of China and Mexico. His solution, much
like Trump’s, is for the U.S. to threaten to impose a
massive tariff on all Chinese imports. But I have never
heard any public-policy expert make claims like Navarro’s:
that trade is the central problem in the world, that trade
brings mostly pain to America, and that dramatically
lessening trade will bring a renaissance to our economy.
For one thing, China has quite a few
other options. The US can only win a trade war with China if
it has allies who act in concert with the US. As yet, Trump
has shown little interest in building such a coalition. In
all likelihood then, unilateral US action would ultimately
be self-defeating, and especially given the role of China as
the world’s premier growth market. As Davidson added,
even back in 2016:
China already trades more with the
European Union than it does with the U.S., and would shift
its trading strategy even more decisively away from us. It
is hard to find a major American exporter who doesn’t see
China as its most promising area of growth. A trade war
would shatter General Motors, all of Hollywood, the music industry, Boeing, and the entire state of Washington, which
exports more goods to China than any
other.
In essence, the Trump trade
strategy is one that appears to be based on nostalgia,
whereby tomorrow’s trade wars are being expected to create
a better yesterday:
Navarro and Trump also assume a manufacturing universe that no
longer exists. American manufacturers have shifted away from
making lower-cost commodity goods and focus, instead, on
more expensive, complex products, like medical devices,
automobiles, and airplanes. All of those goods require a
steady input of smaller, commodity components like screws
and circuit boards that are made in China and other
countries. Some companies might react by beginning to
manufacture those lower-cost commodity products
domestically, but it seems unlikely that many manufacturers
would do so. A huge tariff on China wouldn’t suddenly
force Vietnam or Mexico or, for that matter, Germany or
Japan to reduce their global competitiveness. Indeed, they
would see it as an opportunity. Multinational corporations
considering leaving China would face an easy choice: they
could re-invest in the U.S., in the midst of a unilaterally
created trade war, or they could invest in any other country
on earth and have access to the U.S. and global
markets.
Finally, is China the real
villain here? More so in the past, surely, than at it is at
present. No doubt in the 1990s and early 2000s, cheap
imports from China (combined with its prior readiness to
artificially depress its currency in order to secure trade
advantages) did destroy US manufacturing jobs, and did
depress wages. Yet as wages and production costs have risen
in China that impact has lessened. All along, there have
been key domestic drivers at work within the US job market,
too. Davidson, again:
Workers have been displaced by technology and discouraged from getting more education because of the rising cost of public universities. Democratically aligned economists point to weaker unions, a low minimum wage, a lack of infrastructure spending, and a series of congressional and Supreme Court actions that shift bargaining power away from workers and toward corporations. Many traditional Republicans believe that regulations and taxes prevent investment that could lead to more jobs. There is enormous disagreement about the proper response to global trade. However, pretty much every economics scholar would observe that the United States is hardly powerless against China and that the fundamental solutions to adjusting to a global economy are domestic ones. We have, within the United States, all the power we need to improve our education system, to help workers transfer to more promising industries, to invest in infrastructure, and to improve worker bargaining power.
Exactly. Trump has no
appetite for those kind of domestic solutions. He seeks
foreign villains, and China has played that role usefully
for the West since the days of Fu Manchu. As for China, the
trouble with centralizing power – as China’s strongman
Xi Jinping has recently done – is that you can’t blame
anyone else (at home) if things turn out badly. China –
like Putin – will blame the outsiders. Still, Xi has good
reason to want to avoid a trade war, given that the Chinese
economy is still dependent on exporting, and far from
completing its transition to domestic consumption.
New Zealand, for its part, has every reason to be concerned by the confrontational rhetoric though, given our own dependence – from the GFC onwards –on China’s appetite for our exports.
The future is young (duh) It is
also female.
These Pew polling figures on
political allegiance among millennials are astounding, and highly
encouraging.
Among millennials, which Pew
identifies as people born between 1981 and 1996, men lean
toward Democrats by 8 percentage points — far and away a
bigger tilt toward Democrats than older cohorts of men. But
millennial women favor Democrats by a staggeringly large
70-23 margin.
The graphs that chart the comparisons between the political allegiances of among the different generations (millennials, Gen X, boomers, silent generation) say it all.
In the Silent Generation,
women are 8 points more favorable to Democrats. Among
boomers, it’s 10 points. Among Gen-Xers, it’s 11 points,
and among millennials, it’s 21 points. That’s driven by
what seems to be an explosive change in millennial women’s
political sentiments over just the past two or three years
even while most other groups’ views have stayed relatively
stable.
In New Zealand, the same trend
among women voters,
and the young, was evident before the last election.
Chinese
Walls
Talking about Trump,
walls, and the Chinese, brings this classic 1980s cut to
mind