China

By free trade wt China, did we supply the rope by which they will eventually hang us with economical

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It all reminds me of Smoot-Hawley.  The protectionist act that is widely considered the trigger to

the great depression. 

https://www.britannica.com/topic/Smoot-Hawley-Tariff-Act

This sounds too familiar as our dear leader needs no advisors but yes men who will confirm his bad judgment:

Despite a petition from more than 1,000 economists urging him to veto the legislation, Hoover signed the bill into law on June 17, 1930.
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A unintended consequence - apply this to our current world:

In 1934 President Franklin D. Roosevelt signed the Reciprocal Trade Agreements Act, reducing tariff levels and promoting trade liberalization and cooperation with foreign governments. Some observers have argued that by deepening the Great Depression the tariff may have contributed to the rise of political extremism, enabling leaders such as Adolf Hitler to improve their political strength and gain power.
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TGHusker said:
It all reminds me of Smoot-Hawley.  The protectionist act that is widely considered the trigger to

the great depression. 

https://www.britannica.com/topic/Smoot-Hawley-Tariff-Act

This sounds too familiar as our dear leader needs no advisors but yes men who will confirm his bad judgment:

A unintended consequence - apply this to our current world:
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This definitely has shades of Smoot-Hawley, but be careful assuming a single or even one major cause for the Great Depression. The tariffs probably had a some effect, but here's a few other causes:

Top 5 Causes of the Great Depression

1. Stock Market Crash of 1929

2. Bank Failures

3. Reduction in Purchasing Across the Board

4. American Economic Policy with Europe

5. Drought Conditions
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http://www.ushistory.org/us/48.asp

Long-term underlying causes sent the nation into a downward spiral of despair. First, American firms earned record profits during the 1920s and reinvested much of these funds into expansion. By 1929, companies had expanded to the bubble point. Workers could no longer continue to fuel further expansion, so a slowdown was inevitable. While corporate profits, skyrocketed, wages increased incrementally, which widened the distribution of wealth.

The richest one percent of Americans owned over a third of all American assets. Such wealth concentrated in the hands of a few limits economic growth. The wealthy tended to save money that might have been put back into the economy if it were spread among the middle and lower classes. Middle class Americans had already stretched their debt capacities by purchasing automobiles and household appliances on installment plans.
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That last quote is VERY scary. The US is even more unequal economically today than it was heading into the Great Depression. The new tariffs could be the straw that broke the camel's back.

 
TGHusker

TGHusker

Active member
We have a Russia thread, a NK thread and I thought it would be good to start a China thread.

China just changed its constitution to allow the current leader to become leader for life.   Think dictatorship.  Can't help but to think of Mao at this point.  The thing about the Chinese culture is that they think in era's not in short term monthly or quarterly or even years.  There's is a  patient society, they have been around for thousands of years while we are still a young nation in comparison. 

I personally believe in free trade and that Trump's short sighted tarriff's will in the end back fire in the long term.  They may have some short term benefit (after the market recovers) but not long term.  Our world has gone based the day of trade being regulated by tariffs.   However, with that said, I've often wonder if we've feed a tiger that may ultimately eat us.  I've often wondered why we choose China to be our big source of cheap goods - why not build up a country that is more democratic in nature if we were to do so. 

Pat Buchanan use to be a person I would read regularly. Not so much anymore due to some of his positions on various topics I won't get into here.  He is too nationalistic (in a prejudice way) for me.  However, occasionally I will read to see what he is up to.  Therefore I offer this article as a discussion point from him. 

His argument is that the neocons starting wt GHWB began to appease the Chinese by turning them into a trading partner with the hopes of re-making them like us.  Refer back to my comment above about the Chinese culture being a patient.   GWB made the same mistake in the ME by thinking Iraq would become a democratic stronghold. 

Buchanan argues that the result is that we have built up the tiger while our manufacturing centers in our cities deteriorate.   At the same time our economy is now built on cheap goods from overseas.

This has all  allowed China to beef up its military and become a threat regionally and globally. 

So my poll question is  Was free trade with China a good thing long term or bad?

http://buchanan.org/blog/fatal-delusions-western-man-128823

Some quotes to comment on.  

“We got China wrong. Now what?” ran the headline over the column in The Washington Post.

“Remember how American engagement with China was going to make that communist backwater more like the democratic, capitalist West?” asked Charles Lane in his opening sentence.

America’s elites believed that economic engagement and the opening of U.S. markets would cause the People’s Republic to coexist benignly with its neighbors and the West.

We deluded ourselves. It did not happen.
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The elites of both parties. Bush Republicans from the 1990s granted China most-favored-nation status and threw open America’s market.

Result: China has run up $4 trillion in trade surpluses with the United States. Her $375 billion trade surplus with us in 2017 far exceeded the entire Chinese defense budget.

We fed the tiger, and created a monster.
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George W. Bush, with the U.S. establishment united behind him, invaded Iraq with the goal of creating a Vermont in the Middle East that would be a beacon of democracy to the Arab and Islamic world.

Ex-Director of the NSA Gen. William Odom correctly called the U.S. invasion the greatest strategic blunder in American history. But Bush, un-chastened, went on to preach a crusade for democracy with the goal of “ending tyranny in our world.”

What is the root of these astounding beliefs — that Stalin would be a partner for peace, that if we built up Mao’s China she would become benign and benevolent, that we could reshape Islamic nations into replicas of Western democracies, that we could eradicate tyranny?

Today, we are replicating these historic follies.
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Adhering religiously to free trade dogma, we have run up $12 trillion in trade deficits since Bush I. Our cities have been gutted by the loss of plants and factories. Workers’ wages have stagnated. The economic independence Hamilton sought and Republican presidents from Lincoln to McKinley achieved is history.
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China is experiencing similar economic growth as the Soviet Union did for about 50 years, so like the Soviets in the Cold War, they look at like an economic powerhouse. And right now they are, and they are educating their people and spending massively on infrastructure. But what will happen to them when a vast part of their population goes from poor and uneducated to middle-class and educated? Authoritarian governments don't usually survive an educated population for long. The Soviets didn't, and I don't think the Chinese government will either, but what that society develops into economically and militarily, I have no idea.

 
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So we have this little trade war going with China.  Trump is out of his league here.   He showed all of his cards at one time and China is responding in kind.

I think a trade summit would have been a better approach.  If he is such a great negotiator, he should have sat down wt China and worked this out as equals.

So, he disrupts several industries including farming by taking his approach.  At this article notes, China is no longer the kid brother that can be pushed around.

The bold below, could really cause great damage to our economic model if we were to allow it to happen or push China to make it happen. 

https://www.bloomberg.com/news/articles/2018-04-05/china-s-state-media-warns-of-pain-for-trump-in-trade-battle

The paper said that Sino-U.S. ties were no longer that of David and Goliath, but of two equally matched giants, and that President Donald Trump’s incitement of a trade war was out of step with global sentiment. The daily’s correspondents based in the U.S. filed an article about how businesses and consumers in the U.S. opposed Trump’s tariffs.

The Global Times said China had many more weapons in its arsenal to deploy against the U.S. in the event of a trade war. It could devalue its currency, or promote the yuan as an alternative to the dollar in the global financial system.
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And then we also have this financial nuclear card that they 'literally' hold -   they hold $1.7T of our sovereign debt. 

https://www.reuters.com/article/us-usa-trade-china-treasuries/china-holding-treasuries-keeps-nuclear-option-in-u-s-trade-war-idUSKCN1HB34M

It took China just 11 hours to retaliate against the United States for proposing tariffs on some 1,300 Chinese products, but Chinese officials are holding back on taking aim at their largest American import: government debt.

In a tit-for-tat response to the Trump administration’s plan for 25 percent duties on $50 billion of Chinese imports, China hit back with its own list of similar duties on key American imports including soybeans, planes, cars, beef and chemicals. But officials signaled no interest for now in bringing their vast holdings of U.S. Treasuries to the fight.

China held around $1.17 trillion of Treasuries as of the end of January, making it the largest of America's foreign creditors and the No. 2 overall owner of U.S. government bonds after the Federal Reserve. Any move by China to chop its Treasury portfolio could inflict significant harm on U.S. finances and global investors, driving bond yields higher and making it more costly to finance the federal government.

 
Excellent points RD and good historical perspective.   That is the Trojan horse in their political house - the seeds of democracy can be found in education and a economically secure populace.  

Reagan always said the the cry of liberty is in the heart of every individual and will eventually overthrow the tyranny of despotism (my paraphrase).   

 
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I honestly can't choose between those three. I would probably lean the most towards free trade with China being a bad thing.  But, that varies widely depending on the industry or product we are talking about....and, I think there are very different ways of accomplishing what Trump thinks he's doing with these tariffs.  

I would really need to study the issue more.  But, here are two things that come to mind.

1)  I know for a fact, Chinese made products are being imported into my industry with lead as a raw material.  This is a much cheaper process for them to produce it with and it leave lead in the product to potentially end up with a problem with lead poisoning.  I am banned from using lead in my products for which I fully support.  However, the unknowing public can't see the difference and some buy the cheap Chinese products with lead.  They are allowed to do this because it's illegal to produce the products in the US with lead....but, not illegal to import products with lead.  THIS is an example of something that should be easily changed.  Luckily, the Chinese have not been able to get any firm hold on our market.

2)  It is a well known fact that labor and environmental laws are basically non-existent in many countries and it's a major problem in China.  I support fairly strong labor and environmental laws in the US (even though they could be improved).  But, this puts us at a disadvantage in many industries.  If we are going to put a Tariff on products, I would prefer it to be a tariff on products that are produced in facilities around the world that don't hold up to our labor and environmental laws.

Typically, protectionist policies don't work out like they are sold to the public as.

 
Watch Rotten on Netflix and then tell me we don't need to correct something with China. The problem is, even when we do create tariffs and regulations they find a way around them. 

The episode on honey highlighted how the US implemented anti dumbing laws so that China couldn't drive down the price of honey any longer. There was a tariff on all honey from China. But somehow Malaysia, or some Indian Ocean country, started producing and shipping to the US, like 30 times as muh honey as it was capable of producing. The barrels from China were shipped to another country, relabel to make this new location the country of origin, and shipped to the US for sale at a low price with out a tariff

Another episode on garlic highlights how prison labor is used to cheaply peal garlic (which is illegal in the US).

These are just the food industry. I know in automotive it is cheaper to have a giant multi-ton block of metal milled in China and shipped to the US than it is to have it done in the States. 

I believe there are stock piles of Aluminum in Mexico that are actually from China. They keep them there to avoid tariffs since somehow Mexico can now be considered the country of origin.

Things are whack right now...

 
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I remember reading that the TPP would've been really good for Nebraska. And likely for lots of other red states. It's just that people don't know that much about trade deals (myself included). The thing is, I doubt Trump understands better than I do.

 
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So, what exactly are we supposed to do about China? Anyone who works in industry knows that they regularly steal IP. We know that they routinely violate trade laws and circumvent current tariffs. So why can't we slap tariffs and penalties on them? Are we just supposed to sit back and take it while it kills our own businesses here at home?

 
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