Hong Kong and the Tariff war.

There they are, week after week, the residents of Hong Kong protesting the mainland’s suppression of their liberties, in violation of the agreement China signed in 1997 with England which would guarantee the territory keeping their rights for another 50 years. Week after week the protesters continue to fight, and week after week the police and armed thugs push them back.

Is the rest of the world taking a firm stand against the mainland’s repression of the protesters?

No.

The US could be summoning international support to tell China not to mistreat the protesters but it is not. And it is not because Mr Trump has not valued our alliances.

Our president may think he has achieved a great victory in getting China – through his imposition of tariffs – to drop from being our number one trading partner to becoming our third largest, behind Canada and Mexico, but that is no victory at all. Instead, what the tariffs have done is increase animosities and hurt the global economy.

As Trump has carried on with applying tariffs on China and threatening them on our allies, our stature in the world has diminished.

As Trump has carried on against immigrants, our moral standing has suffered too.

Meanwhile, with each protest, the people in Hong Kong keep sending out a call to the nations of the world to take a stand with them in the fight for freedom. We used to be able to hear those calls but gone is our moral leadership.

Can we ask China not to repress the protesters in Hong Kong when we are bashing them with tariffs? They would laugh at us.

Can we ask the rest of the world to take a stand with us? The likely answer, ‘aren’t you all about making America great again? That doesn’t include us, does it?’

The courageous people of Hong Kong will fight on because that is their precious land. They are fighting for their freedom. They are also fighting for the freedom of all Chinese, even those in the mainland whose voices are harshly suppressed.

One day China will be free, and they will do so fueled by the memories of the sacrifices of their brothers and sisters in Hong Kong.

What Mr Trump doesn’t get, is that China’s drive for becoming a great nation cannot be stopped.

Yes, they have traded unfairly and stolen technology, but they have it in them to learn from it and create their own. Didn’t they already travel to the other side of the moon without our help?

A different approach to the trade problem was available, and still is, one that includes cooperation with our allies who are also affected. But our myopic president dismissed such option. The complexities of the world dwarf him.

Had he not started a tariff war, we, and the rest of the world, could well have been in a better position to stand together in defense of Hong Kong.

And yet, still we hope, that Hong Kong doesn’t turn into another Tiananmen.

Two American Businessmen in China. Circa 1995.

You wonder if there was a time, many years ago, when American businesses first began to access the Chinese market, when they might have said, “Hmm, the Chinese are wanting something in return for granting us access to their markets. They’re offering the cheap labor (plus land and low taxes) but they want more. They probably want to copy our products, then mass produce them themselves, and eventually replace us.”

Bob, who was CEO of a company making widgets in the north of China did, indeed, have such thought. One day he picked up the phone and called Tom, who was CEO of a company making plickets in the South of China.

Tom listened to his friend Bob’s concern and then said, “You’re right. We’re getting pressure from the communist party telling us that we need to transfer the technology to them. Never mind the patents.”

Bob thought about it for a moment, then asked, “What’re you guys going to do about it?”

“Look,” said Tom, “We’re already invested and we’re making good money. We figure that nothing lasts forever, so we give in a little, make as much money as we can while the going is good and then leave.”

“How long do you think that will take?” asked Bob.

“I don’t know. But it could go on for a long time, couldn’t it? The market is huge. And my retirement package is getting fatter and fatter so I’m not complaining.”

Bob’s own bonuses where getting bigger too, and he wondered whether they could get even bigger. At the same time, he thought that America (while pursuing its self interest) was helping China build itself up and that the Chinese would be grateful.  Additionally, over time, the example of American entrepreneurship would inspire the Chinese to develop a strong middle and business class that could undermine the communist party and China would become more like the United States. Bob was bullish on China and saw the possibilities for joint enterprises expanding. In fact, looking ahead and seeking to put his children in an advantageous position, he had already persuaded them to start learning Chinese. He had got them private tutors. His oldest daughter had a Chinese boyfriend also, so she was making the most progress. Still, now and then, it occurred to Bob that back home, on US soil, many Americans were losing their jobs and that the government was not doing enough to train those folks for other employment. It was his social conscience nagging him, but he reasoned that he could do only so much. Bob figured that the widgets his company made, being cheaper than those made back in the US, would be his contribution to the growth of the American nation. That would be it. Not the taxes that his company paid, because it paid zero taxes, the result of hiring an excellent team of accountants, mostly former IRS auditors, who switched sides so they could fatten their own retirement packages.

“Look,” continued Tom, “The Chinese know what it’s like to be ruled by Western nations and Japan. They know what they have to do.”

“What’s that?”

“Strive for self reliance.”

“But do you think that, eventually, they’ll challenge us?”

“Hard to say, isn’t it? It’s easy to see that they’re smart people. Ambitious, too.”

“True,” said Bob.

“Of course, there’s always the chance that, if we neglect our own, one day they’ll leap ahead and we’ll all be speaking Chinese,” said Tom.

Bob chuckled. Still he worried. Shouldn’t American businesses be raising the issue of patent infringement more vigorously? He hadn’t talked to Tom in a while but he had always enjoyed his candor.

“We’re neglecting them now, aren’t we?” said Bob.

“You’re talking about the loss of American jobs from our companies leaving in search of cheap labor?”

“Yes.”

“Bob, good buddy, please don’t lose sleep over that. Economic competition has always been ruthless. That’s the name of the game. If it were you or I in a factory town in the Midwest and the main employer gave notice that they’d be pulling out, neither you nor I would stay put, would we?”

“You’re right,” replied Bob, feeling a bit relieved.

“We would right away get to thinking of where we would have to move next to make a living. That is, unless you came up with a business idea of your own to make it worthwhile staying behind.”
“Pretty much,” said Bob.

 “It’s the American spirit, my friend. Innovation. Change. Now, I grant, I’m all for giving a helping hand to those who’re temporarily rattled and confused. But that’s up to government which is way we pay our taxes. I have my hands full otherwise.”

“Did you guys pay any taxes this last year?”

“Actually, we didn’t. Not this year, but we have in the past. Did you?”

“Not this year,” said Bob.

“Which is why we pay lobbyists in D.C.  Everybody does it. Why not us?”

“Right.”

“There is a common good, of course, and Americans should help other Americans. I’m all for that too. But you have to show some initiative. That’s how I see it.”

Bob reflected on that for a moment. He had a cousin who had got depressed when she lost her job with a firm in Seattle that sent their jobs to China, and he knew that she had been an ambitious person. “Tom, sometimes people get depressed. Maybe that’s what happened to a lot of Americans when the companies they’d worked for many years pulled up and left.”

“Depression or no depression, you got to get over it.”

“It may not be that easy. People have kids, parents…”

“No check coming in, you got to go. But does American business think of the common good?”

“Do we?”

Tom hesitated for a moment. “We do,” said he now with wavering conviction. He, himself, had some distant relatives who had lived in a former steel town in Pennsylvania but he had lost touch. They were hard working, too, as he recalled. Maybe they were still there. Stuck.

“If, all of a sudden – continued Tom – the big money was in Africa, we’d go to Africa, wouldn’t we, Bob?”

“Yes.”

“We bombed the heck out of Vietnam but I guarantee you that one day we’ll be doing business.

And we will because capitalism is not racist. Incidentally, I once heard Noam Chomsky tell me that, personally. I went to a talk he gave and afterwards had a chance to get close to the man. I asked him something about capitalism and he told me that. ‘Capitalism is not racist.’ So there you are, we capitalists go where the money is. That’s it.”

“I’m sure that wasn’t an endorsement of capitalism but I like the thought,” said Bob.

“But I do think about the common good,” returned Tom, “the idea of nationhood, and what we could do to make the US a better place to live.”

“Sure, I do, too.”

“There has to be a good leader, though, someone who reminds us of the need to share, to help our fellow Americans become stronger.”

“I think a woman president would be a good choice,” said Bob, who had three daughters.
“Eventually, sure. Hadn’t thought of that. I don’t know why, since they’re over half our population. Maybe in the next century. But businesspeople wouldn’t make good leaders, I know that.”

“Why?”

“Our concerns are too narrow, and leading a nation needs something else. That much I know.”

Bob wanted to get back to his worry about the pressure the Chinese were putting on American businesses to share protected information.

“Regarding technology transfers…”

“Forced technology transfers,” said Tom.

“Right, shouldn’t we be raising the issue? If we did we might get collective action to stop it. I mean, we could negotiate something, rather than just give it away. I don’t like that. We’ve worked hard for our patents…”

“I doubt it.”

“…That way the Chinese would feel we’re a more integral part of their growth, and we would be teaching them something about fair play.”

“Bob… I don’t think we would be able to get our people to agree, let alone the communist party. We’re all making money here. What do you want to do, piss off the Chinese and go back to Wisconsin?”

“Tom, they need us and we need them.”

“Sure, but if it’s not us then it would be the Europeans, the Russians, anyone with ideas.”

“I think we should take a stand, for our own good,” pressed Bob, “Better now than later.”

“It’ll take care of itself… down the line. Don’t worry so much.”

“I’d feel better if we were doing more for the people who’ve lost their jobs back home and standing up for patent protection would be a step in that direction.”

“Bob… I think you have too much money that you’re worrying about other people. I don’t.”

But Bob did worry. “If we pass the buck now, then later on it will be worse. We’ll end up electing a president who will want to start a trade war.”

“Bob… relax. You’re thinking too much. We don’t do trade wars, we compete and beat everybody at the game. We’ve never been afraid of competition. As far as China is concerned, they will rise because they must… and as they do they’ll change, and we’ll marry them and they’ll marry us, and we’ll live happily ever after. Did I tell you I divorced Joan and married Biyu?”

“No, I didn’t know. Congratulations.”

“Thanks. She’s from Chongqing, beautiful city. Met her there on a business trip. She’s a translator. Went to school in Texas. Has a little drawl too.”

Bob laughed.

“That’s how we transform, my friend, the capitalist way, we coalesce.”

But Bob still worried, worried that doing nothing was passing the buck and that years later it would be worse.

The Trade War. Envy and Competition.

A centerpiece in the increasingly toxic trade war is the fact that China pushed for forced technology transfers from American and other foreign companies seeking to do business in their country.

Did this practice begin recently? No. It’s been going on for years and years.

So why, then, did it take so long for the US government to bring it up and demand that it be stopped?

Profits.

American and foreign investors agreed to Chinese demands because profits made it worthwhile. In the meantime, the Chinese learned from the technology, improved on it and now have risen to become our rivals.

If that has made us upset then it’s time we got over it.

The Chinese did what they did and we let them do it.

One American administration after another talked about stopping the forced technology transfers but ended up doing nothing.

Why?

Profits.

Maybe we thought the Chinese could never get it together or that we would keep coming up with even better technologies and ideas and forever hold an edge over them.

The growth of China forces us to take a good look at ourselves.

Are we being outcompeted?

Have they copied us too well?

If so, then let’s pull up our sleeves and get to work, not just start a trade war.

We’re envious of China. Envious of their drive and their success and we’re not dealing with it appropriately. Instead, we’re choosing to bellyache and let our president be the bellyacher in chief.

The Chinese have succeeded, no question about it, but they are also paying a heavy price for it. They are a regimented society.

We are not and should take comfort in that.

But not too much.

And I say that because there are now forces here in America that would not mind sacrificing basic freedoms so as to increase growth and ape the Chinese.

Look at the steady rise of mega companies and their continuing effort to dominate markets, making it hard to let in new companies so they can vie for a piece of the pie.

Look at the rise of autocrats, who have got into office because we put them there.

What are we thinking?

Companies that moved into China and agreed to the technology transfers demanded by their hosts did so because they were advocates of growth at any price. Never mind what or whom they left behind. Cheaper labor won the day. And they’re still there. Feeding at the trough. Still doing business. Still making money. So what’s the flap about?

If American companies handed over trade secrets and are now outcompeted and not able to come up with better ideas, then get out. Face it. You lost. No bellyaching, please.

The Chinese are coming into their own and are in contention for the title of world’s leading superpower. They’re not there yet but they’re pushing. That’s a reality. We have no choice but to compete.

This trade war we’re in is unnecessary and a dangerous distraction. It is yet another bid for world attention by our self-aggrandizing president. But it is not just any other bid. It carries with it the high risk of driving us into a world recession.

Growth at any price won’t do. The voices that cry for more competition and for greater opportunity here at home must be heard. And so must the voices that say that we have to stop abusing others, and so too the voices that call for curbing carbon emissions. We need the balance because it brings us dignity.

Safeguarding our freedoms is as important as economic growth. In that sense we’re ahead of the Chinese. So let us value what we have. It’s not all about GDP as we have come to know it but just as importantly, about that other kind of GDP, the Growth Dignity Product. We’re still a long way from getting it right but we’re getting there.

We should not let a narrow minded president think that starting a trade war with China and the world is the way for the nation to pull itself up.

Try investing in Americans. Try raising expectations. Try demanding that we rise to the task.