Tag: US China relations

The White House is Empty.

After a short truce declared at the end of June, Trump decided to further raise tariffs in his ill-conceived plan to beat China regardless of the softening of the world economy. Last week the Federal Reserve Bank cut the interest rate in an effort to limit the damage the tariffs have been inflicting on our own economy. Then this last weekend we were struck by two back to back mass shootings, first in El Paso, Texas and then in Dayton, Ohio.

A deep malaise has seized the nation and yet, at this critical moment, we are, in effect, leaderless. There is no one in charge at the White House, no one with vision or moral courage.

The trade war with China was a bad idea from the start. There are plenty of other ways to address our differences but not at the expense of imperiling our economies. Furthermore, we will not beat China in a trade war, and we will not because they will endure more suffering than us.

But listen to one of the president’s advisers talk on the radio and one sees a common denominator: the effort to demonize. The adviser, Peter Navarro, spoke the other day as if the one objective driving China’s existence was to subjugate Americans, to get us down on our knees and beg for mercy. There was rage in the man’s voice as he spoke of Chinese soldiers devoted to hacking our systems, and of China’s massive shipments of the drug fentanyl to poison our hearts and minds. China, the devil incarnate. As if we were known for being helpless.

Not willing to back off, over the weekend China fought back against Trump’s raise in tariffs by devaluing their currency which will make their exports cheaper.

The financial markets, in turn, sensing the deep malaise, the uncertainty, the lack of perspective in the White House, the void of leadership, have responded with a sharp drop in the Dow.  

We will not win a trade war with China but a short sighted president with profound personal flaws keeps beating that drum in a vain attempt to deflect personal scrutiny. And as he does so he continues to undermine what had been an economy with steady growth.

This is the same man who rose to his position by way of inciting hate, demonizing immigrants and Muslims, and who has thus empowered those blinded by their hate.

Our president, himself filled with hate and unable or unwilling to defuse it, has by his example, given license to others who have weaker defenses against their unexamined impulses.

And so, no matter how many proclamations and tweets and executive orders come from the White House, if one takes a moment to sift through it all, it is clear that the Oval Office has been empty. There is no one there. Sure, someone goes in and out, sits at the desk and walks around, meets with foreign leaders and makes lots of noises, but there’s no one there with the brain needed to lead us. And because of it we are drifting dangerously, without a moral and intellectual compass to lead us into the future.

Don’t Humiliate China

China does not yet have the economic power that America has. And it is likely that if the trade war escalates, China will, indeed, be hurt by it, more so than we will. Of course, so will the world economy.

I doubt that China will back off if Trump follows through with his threat of imposing more tariffs, even though it appears that they are dependent on American technology companies as suppliers of component parts.

But why abuse our position of strength?

Why try to bring China to its knees?

I think it is a mistake.

There are, presently, in China, sectors that are deeply wedded to the notion of a more democratic society. They battle daily the state’s oppressive surveillance system and still they are growing.

It will take more time for these resistance sectors to eventually make their presence felt in the existing power structure, but one day they will. Any effort on our part to “beat” China economically, is likely to increase political repression and weaken their struggle.

Pushing China around economically will not last long, anyway. Eventually they will find their stride for they are resilient and strong. And when they do, then what?

Jack Ma, the head of Alibaba – the gigantic online commerce platform – is a communist party member. A multibillionaire enlisted by the Communist Party. Does that not tell us something about what is going on in China? Is that not the height of contradictions? Is that not a glaring example of a country in transition?

Mr Ma represents the Chinese state’s reliance on men and women who’ve been able to channel their creative energies and generate all manner of opportunities for the rest of the nation.

The Chinese model has transformed a nearly feudal society into a world powerhouse. But lagging well behind is the push for human rights. As dissenters have said, they not only want rice, they want rights too. And their drive will continue to grow.

Just this weekend a large mass of protesters in Hong Kong showed their opposition to a law to extradite residents to the mainland.

Mr Trump needs to look at his choices with a sense of history.

An escalation of tariffs may win him some points in the short term and satisfy some of his supporters, but in the end will amount to little more than a pyrrhic victory. So we may win the battle today but not the war tomorrow.

Oscar Valdes    oscarvaldes.net

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.