The Potential China Disaster
David Goldman, a scholar and writer for Asia Times, provides fascinating insights into growing American problems with China, which are unknown and misunderstood by Americans. He wrote that China:
- Is an empire based on coercion of unwilling people
- Is inherently unstable due to many un-cohesive cultures with numerous incompatible languages
- Exists under autocratic rule and is not a state with common popular interests
- Is a merciless meritocracy, under communism, as opposed to democracies that “accept stupidity”
Among China’s 1.38 billion citizens, STEM education is revered – 6-7% pursue it in the U.S. but 30-40% pursue it in China. Since 1987 China’s population consumes 17 times more goods and services than were formerly available. With the coalescence of population from rural to urban environments, exports of new/high (manufactured goods) technology has risen from 5% of GDP in 1999 to 25% today. U.S. output dropped from 20% to 7% of the total pie in the same time. Now overlay the fact that China, across the board, does not respect or adhere to concepts of ownership of ideas. Intellectual-property rights do not exist with China’s corrupt society and government regulation.
It is obvious with these conditions that a trade war, or something such as a battle over tariffs, could provide a net loss for U.S. participation. The mechanism for failure is that such a trade war will “cause global financial markets to unravel,” according to an American Enterprise Institute study. This may be what China really wants because it can withstand losses that the U.S. will not tolerate. Just look at existing American trade deficits with sample world nations (from 2017):
- France – $15.3 billion
- Canada – $17.6 billion
- South Korea – $22.9 billion
- Italy – $31.6 billion
- Ireland – $38.1 billion
- Germany – $64.3 billion
- Japan – $68.8 billion
- Mexico – $71.1 billion
- China – $342.8 billion
Also, consider that under Section 301 of the Trade Act of 1974 the U.S. currently has 149 anti-dumping and countervailing duty rulings pending that have had little or no effect on trade relations with China. So, the recent (March 8, 2018) tariffs on steel and aluminum pursuant to Section 232 of the Trade Expansion Act of 1962 have no beneficial impacts on U.S. materials-using sectors.
What China wants is control of new technology improvements, and they acquire that through intellectual-property theft and coercion of industries wanting to conduct business with China. The country has done this since entry into the World Trade Organization in 2001 and has succeeded in destabilizing world trading systems ever since. This is not a matter of opinion or bias but is a policy initiative (CM2025) documented by China’s State Council.
The top economic advisor to China’s President Xi met with U.S. officials over two months ago during a peace-keeping mission to announce China’s intention to reduce its trade surplus with America. This was immediately accompanied by both nations issuing tariff hikes and punitive items worth $50 billion on various imported goods. Any trade war with or by the U.S. will only bring disaster to the world economy, Chinese Commerce Minister Zhong Shan has said. You have a lot to learn if you think that a trade war where China intends to relinquish its rising industrial power will happen.
There are numerous threats and actual issues being discussed, such as:
- How to resolve the Chinese position that requires U.S. companies to transfer their patent rights to China before doing business there
- The Congressional bill that broadens powers to stop foreign purchase of U.S. firms prompted by concerns over China’s growing efforts to buy American high-tech companies
- Specific curbs on Chinese investments in the U.S. manufacturing economy
- Intent to restrict Chinese students from enrollment in U.S. higher education
- China’s “threat” to slow the buying of American government debt instruments
I love the last one. Congress, are you listening? President Trump, do you understand that punitive actions could produce global economic crisis?