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Re: Explain the Trade War with China Please
« Reply #15 on: August 04, 2019, 10:51:08 AM »

Offline hwangjini_1

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well, without knowing and understanding global economic and hegemonic theories, it is hard to explain. i used to spend entire courses teaching on these complex topics. so, no easy solutions explanations are possible. but let's try this folks....

keep in mind that following WWII the US built an series of global structures and processes to support itself and its allies politically (UN, world court), economically (World Bank, IMF, etc.), militarily (NATO, SEATO, CENTO, eventually military bases in over 130 countries), and educationally (fulbrights, student mobility, educating global intellectuals, blah....).

this network of systems benefited the rich nations (called the core countries) more often and more effectively than it did the poorer nations. (often referred to as the periphery) this was the intent and purpose of the system - to safeguard global inequality, which it has done rather well.

it resulted in nearly 70 years of the US being the overwhelming center of global growth and influence and a near total lack of war between major powers (ie. no WWIII). of course, war happened, but usually in the periphery, or, when the core exercised its military powers there. (US in latin america, vietnam, iraq, etc.)

the US has paid more and worked more to keep the system going (as trump often notes on who pays for military etc.) but since the US garners BY FAR the lion's share of the benefits, the benefits to the US far far outweigh the costs to it.

so, what trump is doing by undermining NATO, NAFTA, trade with europe, trade with China, limits on international students to the US, cutting of international education funds, etc. is to corrode and undermine the very complex international systems the US set up after WWII. it is making these systems less desirable to other powerful countries so they will start thinking how to do things WITHOUT the US. that is, the systems that created the current world order are being eroded and other countries will try to replace them with systems of their own, but mostly regionally and not globally. (germany will focus mostly on europe, brazil on LA, china on East Asia, etc.)

as with all change this massive, there will be an increase in political, military, economic, and social chaos and disorder throughout the world. BUT as this increases, the traditional ways of dealing with it (UN, IMF, NATO, etc.) will no longer exist/be diminished and therefore the disorder will be harder to contain.

end result? a more violent and disordered world with more violence, starvation, etc etc etc. and fewer solutions, especially at the global level

WHY? simple enough. trump has no idea how any of this works and he only surrounds himself with people of identical opinions and brain power. (remember tillison's famous "he's a ****ing moron" quip.) trump is a honest to goodness simpleton who does not and cannot grasp that economics are embedded in larger world system. he thinks that in world without these systems, the US will be better since it is stronger than anyone.

he fails to understand that much of US power is directly derived from this US created system.

whew... and China? it is simply one major brick being removed from the system. in the immediate future, the momentum of the systems and habits and remaining systems will carry the world forward. but within a decade, if this continues, the world will be facing fundamental changes, and very unpleasant ones.

TL;DR - trump is directly undermining a 70 year old international economic/political/military/educational system that served US interest more than any other country's interests. more benefits flowed to the US than anyone else in this system. without this system and the support of other rich countries, the US will face an increasing fragmented, disorganized, and chaotic world with increased economic instability and political and military violence.

it will become ever more difficult for the US to control events as its loses the allies it won from having this system.

TP ... I wish you could post more on this topic. Very illuminating. I studied Economics, and understand your theory. Do you believe the policies of this government plays into the hands of China. What is this leads to an alignment between China and Russia?
thanks for the kind words. the basic assumptions that underlie "hegemonic stability theory" (which is really a collection of approaches) do flow from modern economics.

as far as china is concerned, that government wishes to keep the current hegemonic system for the foreseeable future. they gain benefits from it and pay reduced costs, which is an essential element of the theory. why else would other countries join the US system?

next, Chinese leadership has no central tenent or philosophy or depth of collective good will upon which to lead the world. and they know it. they can not create an alternative to this hegemonic system. their number one concern is internal growth and they are willing to let another country run the hegemonic system. fine by them.

in another half century, that may change. but who the heck can precisely predict specific events that far out? after all, in the long run we are all dead.  ;D

next, underlying china's approach to the world is an absolute and fundamental premise, one that they will not alter and must be understood. they were colonized and humiliated by western nations and japan for almost two centuries. THE POINT OF BUILDING NATIONAL WEALTH AND POWER IS TO ENSURE THIS NEVER, EVER HAPPENS AGAIN. this is key. for china's leaders and maybe of their people, national economics are NOT about generation of wealth, especially personal wealth. national economics are about national power.

they will never back down when their national security is in play, economics included. on everything else, they can work with others as legitimate partners and they do have an interest in keeping the hegemonic system working. but it cannot endanger their country.

so, what trump is basically doing is anathema to the chinese leadership on two fronts.

first, the US is eroding the hegemonic system, which china wants to preserve. in the minds of chinese leaders, global leadership comes with global responsibilities. they get that and like that. order needs good leadership. a lack of good leadership means a lack of order. a lack of order means the hegemonic system will falter and not help them.

but now, in the eyes of chinese leadership, the US is abandoning the very system it created. that is, they are abandoning their obligations as the global leader of a global system. this is seen as poor leadership that cannot be trusted.

second, china has been, in their mind, singled out for practices that many other countries (japan, south korea, UK, even the US over 150 years ago) practiced. that is, many countries industrialized using the same basic market tactics, stealing of technology, etc. as china now does. yet, now the US punishes China as playing unfairly.

the term used for this is "kicking away the ladder." it means that western industrialized nations used a set of policies and practices that gave them the chance to climb up. and now these same countries kick away the very ladder they used so that others cannot use it.

this is seen as unfair by the Chinese, and they are not alone in thinking this. but they are singular in that they have the voice and will and ability to say "we disagree and will take action."

bullying by trump will directly do the opposite of what trumps says it will. the chinese will not back down. they will compromise, they will negotiate, but they will not be dictated to.

whew...again, overly simple, but this gives you a crude picture of things i hope.
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Re: Explain the Trade War with China Please
« Reply #16 on: August 04, 2019, 11:44:53 AM »

Offline td450

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Trump has had a weird set of ideas about trade for decades. All the things he is saying about China taking advantage of us, he said about Japan 35 years ago. He thinks that because they sell us more than we sell them, they are beating us. He is arrogant enough to think he can force them to do what he wants.

He's wrong. The Chinese leaders have absolute control and want to maintain tight control over the way their internal markets and their society operates, and nothing the U.S. does will ever get them to risk losing power. We might get some minor concessions but we aren't going to get huge new access to their markets, no matter what we demand.

We are the world's reserve currency, meaning people want to hold onto American money. That's good for us, but it means big long term trade deficits. Trump misreads this as weakness.

We are not getting taken advantage of, at least so far. We have slowly moved away from manufacturing dependency, and that is good, because those jobs will be lost to automation soon enough, and we are now prepared. We got products at below market prices for decades. They have not been aggressive towards us.

It was also good for China because a bad job was better than no job. Butt that proposition can't hold forever, and they are a scary player on the world stage if the power of their leaders is threatened. If Trump makes things unstable for them, bad things could happen. If he wins re-election, we should all be worried that he might destabilize China.

Re: Explain the Trade War with China Please
« Reply #17 on: August 04, 2019, 04:55:11 PM »

Offline Ogaju

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well, without knowing and understanding global economic and hegemonic theories, it is hard to explain. i used to spend entire courses teaching on these complex topics. so, no easy solutions explanations are possible. but let's try this folks....

keep in mind that following WWII the US built an series of global structures and processes to support itself and its allies politically (UN, world court), economically (World Bank, IMF, etc.), militarily (NATO, SEATO, CENTO, eventually military bases in over 130 countries), and educationally (fulbrights, student mobility, educating global intellectuals, blah....).

this network of systems benefited the rich nations (called the core countries) more often and more effectively than it did the poorer nations. (often referred to as the periphery) this was the intent and purpose of the system - to safeguard global inequality, which it has done rather well.

it resulted in nearly 70 years of the US being the overwhelming center of global growth and influence and a near total lack of war between major powers (ie. no WWIII). of course, war happened, but usually in the periphery, or, when the core exercised its military powers there. (US in latin america, vietnam, iraq, etc.)

the US has paid more and worked more to keep the system going (as trump often notes on who pays for military etc.) but since the US garners BY FAR the lion's share of the benefits, the benefits to the US far far outweigh the costs to it.

so, what trump is doing by undermining NATO, NAFTA, trade with europe, trade with China, limits on international students to the US, cutting of international education funds, etc. is to corrode and undermine the very complex international systems the US set up after WWII. it is making these systems less desirable to other powerful countries so they will start thinking how to do things WITHOUT the US. that is, the systems that created the current world order are being eroded and other countries will try to replace them with systems of their own, but mostly regionally and not globally. (germany will focus mostly on europe, brazil on LA, china on East Asia, etc.)

as with all change this massive, there will be an increase in political, military, economic, and social chaos and disorder throughout the world. BUT as this increases, the traditional ways of dealing with it (UN, IMF, NATO, etc.) will no longer exist/be diminished and therefore the disorder will be harder to contain.

end result? a more violent and disordered world with more violence, starvation, etc etc etc. and fewer solutions, especially at the global level

WHY? simple enough. trump has no idea how any of this works and he only surrounds himself with people of identical opinions and brain power. (remember tillison's famous "he's a ****ing moron" quip.) trump is a honest to goodness simpleton who does not and cannot grasp that economics are embedded in larger world system. he thinks that in world without these systems, the US will be better since it is stronger than anyone.

he fails to understand that much of US power is directly derived from this US created system.

whew... and China? it is simply one major brick being removed from the system. in the immediate future, the momentum of the systems and habits and remaining systems will carry the world forward. but within a decade, if this continues, the world will be facing fundamental changes, and very unpleasant ones.

TL;DR - trump is directly undermining a 70 year old international economic/political/military/educational system that served US interest more than any other country's interests. more benefits flowed to the US than anyone else in this system. without this system and the support of other rich countries, the US will face an increasing fragmented, disorganized, and chaotic world with increased economic instability and political and military violence.

it will become ever more difficult for the US to control events as its loses the allies it won from having this system.

TP ... I wish you could post more on this topic. Very illuminating. I studied Economics, and understand your theory. Do you believe the policies of this government plays into the hands of China. What is this leads to an alignment between China and Russia?
thanks for the kind words. the basic assumptions that underlie "hegemonic stability theory" (which is really a collection of approaches) do flow from modern economics.

as far as china is concerned, that government wishes to keep the current hegemonic system for the foreseeable future. they gain benefits from it and pay reduced costs, which is an essential element of the theory. why else would other countries join the US system?

next, Chinese leadership has no central tenent or philosophy or depth of collective good will upon which to lead the world. and they know it. they can not create an alternative to this hegemonic system. their number one concern is internal growth and they are willing to let another country run the hegemonic system. fine by them.

in another half century, that may change. but who the heck can precisely predict specific events that far out? after all, in the long run we are all dead.  ;D

next, underlying china's approach to the world is an absolute and fundamental premise, one that they will not alter and must be understood. they were colonized and humiliated by western nations and japan for almost two centuries. THE POINT OF BUILDING NATIONAL WEALTH AND POWER IS TO ENSURE THIS NEVER, EVER HAPPENS AGAIN. this is key. for china's leaders and maybe of their people, national economics are NOT about generation of wealth, especially personal wealth. national economics are about national power.

they will never back down when their national security is in play, economics included. on everything else, they can work with others as legitimate partners and they do have an interest in keeping the hegemonic system working. but it cannot endanger their country.

so, what trump is basically doing is anathema to the chinese leadership on two fronts.

first, the US is eroding the hegemonic system, which china wants to preserve. in the minds of chinese leaders, global leadership comes with global responsibilities. they get that and like that. order needs good leadership. a lack of good leadership means a lack of order. a lack of order means the hegemonic system will falter and not help them.

but now, in the eyes of chinese leadership, the US is abandoning the very system it created. that is, they are abandoning their obligations as the global leader of a global system. this is seen as poor leadership that cannot be trusted.

second, china has been, in their mind, singled out for practices that many other countries (japan, south korea, UK, even the US over 150 years ago) practiced. that is, many countries industrialized using the same basic market tactics, stealing of technology, etc. as china now does. yet, now the US punishes China as playing unfairly.

the term used for this is "kicking away the ladder." it means that western industrialized nations used a set of policies and practices that gave them the chance to climb up. and now these same countries kick away the very ladder they used so that others cannot use it.

this is seen as unfair by the Chinese, and they are not alone in thinking this. but they are singular in that they have the voice and will and ability to say "we disagree and will take action."

bullying by trump will directly do the opposite of what trumps says it will. the chinese will not back down. they will compromise, they will negotiate, but they will not be dictated to.

whew...again, overly simple, but this gives you a crude picture of things i hope.

I am loving this, another TP coming your way. Not to bother you but can you please recommend some books that deal with this on an in depth and historical basis.

Re: Explain the Trade War with China Please
« Reply #18 on: August 04, 2019, 07:20:08 PM »

Online Neurotic Guy

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Thank you all for contributing and helping me (and others) to a better understanding.  I am going to summarize what I think I learned -- mostly to test out whether, in fact, I do have a rudimentary understanding (please clear up what I get wrong). 

1.  The current global economy is founded on a complex set of agreements that ultimately have benefitted the United States economy overall since WW2 and which are relied upon for some measure of economic and military stability in the world today.

2. The US currently has a large trade deficit with China, meaning that imported goods from China are significantly greater than exported goods to China.  In large part the trade deficit with China emanates from China's cheap labor force resulting in products that are produced at much lower cost than in America.  Therefore, American companies have been better off purchasing from China or manufacturing in China, rather than producing products in America.

3. The trade deficit means less manufacturing in America, fewer jobs in America, and less money infused into America's economy.

4. As a result of the imbalance in trade (the deficit), Trump believes that applying tariffs on certain imported goods from China will stimulate/motivate American businesses to manufacture goods in the US (the tariffs increase US companies' costs) and thus create more jobs to America while providing more stimulus to the American economy.  Additionally, Trump's theory would suggest that he believes the "punishment" of the tariffs will motivate China to agree to a trade deal with America that will be favorable to America.

5. If Trump's tariffs do provide the necessary pressure on China, his hope would be to get them to agree to a long-term trade agreement in which China would (in some way??) absorb more cost for their exported products, ultimately decreasing the value of American companies manufacturing in China or purchasing goods from China - because with a "good" agreement there would be an evening out of the cost to produce those goods in America (competitive with China).

Questions:

  • There is something having to do with the overall global economic structure (referred to in this thread as the "hegemonic system") that appears to be in the process of being eroded by Trump's policies. This is probably invisible to most Americans (certainly is unknown to me):   Is the erosion of the "Hegemonic System" by Trump something that is generally agreed upon by mainstream conservative and liberal economists (i.e., is there consensus that this is what he is doing?)? Is this seen by economists as destabilizing to the global economy for which there will be predictably bad outcomes?   If so, how does this information get communicated effectively to the general population?

  • If/when there is a so-called "trade deal" with China, in order for the deal to be a true victory for Trump, would China need to agree essentially to raise the cost/price of exported goods (from China)? In Trump's thinking (I guess), China would agree to this because he has put so much pressure on them via the tariffs, so China would see an economic benefit to agreeing to a more balanced trade situation with America.

  • Re: Intellectual Property: While I have only a cursory understanding of the issue with regard to intellectual property, might IP also be addressed as part of a "successful" deal with China?  Is it correct that Trump is theoretically looking for some commitment from China to end the practice of "stealing" IP, or to pay a price for using American IP? Is getting or not getting a "deal" on IP part of what will determine the success or failure of the trade war?

  • From most mainstream economists' perspectives, what would signify a poor or irrelevant trade deal with China?   How would most economists determine/measure that Trump essentially failed to get what he wanted from China?

  • Lastly, how will most people like me who haven't a clue determine whether Trump got the better of China or not?  We know he'll claim huge victory no matter what, and I suspect there won't be any immediately felt pain in America regardless of the "deal" (or will there?).   I assume those who love him will think he's a hero regardless of the agreement and those who hate him won't.  Assuming that Trump will over-sell the quality of the deal, how would democrats credibly counter?

Sorry if there is a lack of clarity or redundancy in the comments or questions.   Thanks.

Re: Explain the Trade War with China Please
« Reply #19 on: August 04, 2019, 07:33:47 PM »

Offline Alec14

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Hwangjini has a lot of great things to say. There are a few points I'd quibble with, and I'll share my perspective as someone who has lived in Shanghai for 14 years and has always had an interest in history, foreign relations, and economics.

I would argue that while China is upset the US is upsetting the hegemonic system created post WW2, it isn't actually because they want the system to persevere indefinitely. They (the CCP) very much want to see a re-ordering of the global hierarchy with China at the top - it is pretty ingrained in the Chinese psyche that China has traditionally been the center of world civilization (and they have a case for much of it, at least from the fall of Rome to the Industrial era). The problem is that Xi jumped the gun too soon. For decades, China followed the old Chinese maxim 'tao guang yang hui', which means 'hide your brightness, bide your time'. They diligently improved their economic, military, infrastructure, technology by any means necessary (exploitation of the lao bai xing; environmental degradation; a concerted, state directed attempt to steal technology from more developed countries). Their goal was to re-assert China as the dominant world power and enjoy the privileges the US does now (reserve currency, unrivaled influence, cultural dominance). I do think it's partly motivated by the 'century of shame' where Japan and a few of the Western powers humbled China and a desire to keep anything like that from ahppening again, but I also think it's related to a deep-rooted cultural doctrination that China is the 'middle kingdom' - the word for China in Chinese 'Zhong Guo' literally means 'the central country in the world'.

Anyway, let's circle back to what happened a decade ago. China has been slowly amassing power since Deng Xiaoping had reformed the economy in the early 80s. China was admitted into the WTO in 2001, and that's when their growth truly became supercharged. In 2008, the world financial crisis happened, and a few years after that a strong man president Xi was elevated to power. Now, Xi observed the shambles the Washington consensus had made of the world and he concluded that it was China's time to emerge from the grass and provide a challenger to the US model. China became much more aggressive, and started trying to develop an alternate world order using Chinese money and influence (China's expansion into Africa, the Belt and Road Initiative, the development of a blue water navy, etc). This of course alarmed the US strategic planners. Also, it turned out the US model wasn't as weak as it appeared. But Xi has stayed the course, refusing to back down. There's a real threat of the Thucydides Trap playing out again, where a rising power tries to overtake an established hegemon through conflict. My personal opinion is that China is a lot weaker than they project, with much of the amazing growth since 2008 built on an unprecedented debt binge that is unsustainable (yes, even more than in the States), and that at some point in the near future there will be an economic reckoning that will substantially change internal Chinese and world politics. That's an interesting discussion for another time.

But anyway. Fundamentally, the trade war is an attempt by the US to slow / limit China's rise. And there is merit to this strategy. First, China has abused the world economic system for decades. Many of the provisions they were supposed to implement when they joined the WTO they ignored. The Chinese economy is still largely closed off from the rest of the world, despite China enjoying largely unfettered access to everyone else's markets. This allows local champions (many of whom are allowed unlimited credit from the central banks, which are government controlled) to grow huge in China and then go out into the world to grab other companies and market share, with no need to show profit. This kind of industrial policy should not be allowed if we want market capitalism to endure. China has been like a parasite for decades, not abiding by the rules of the global economic system and growing strong because no one had the guts to stand up to them. I haven't even touched on the issues like forced technology transfers or currency manipulation or the human rights issues. I despise Trump, but on this one matter I agree with what the US is doing. I see this as a sort of existential struggle for the soul of humanity - are we going to be a future dominated by freedom and innovation and the individual, or is the dominant model in the future based on authoritarianism and corporate statism. Now, I think American profit driven, short term share price capitalism is seriously diseased and needs to be reformed, but at its best it provides a better model to humanity than what the CCP offers.         

Re: Explain the Trade War with China Please
« Reply #20 on: August 04, 2019, 08:29:37 PM »

Offline Ogaju

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I despise Trump, but on this one matter I agree with what the US is doing. I see this as a sort of existential struggle for the soul of humanity - are we going to be a future dominated by freedom and innovation and the individual, or is the dominant model in the future based on authoritarianism and corporate statism. Now, I think American profit driven, short term share price capitalism is seriously diseased and needs to be reformed, but at its best it provides a better model to humanity than what the CCP offers.       

You may agree with what the US is doing but this is has not been explained by the administration and without an adequate explanation how can we attribute this overall policy or strategy to the administration? The way this policy is touted it sounds like just a trade war to assuage the republican base that believes that China is taking away all the manufacturing jobs.

Re: Explain the Trade War with China Please
« Reply #21 on: August 04, 2019, 09:30:56 PM »

Offline Alec14

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I despise Trump, but on this one matter I agree with what the US is doing. I see this as a sort of existential struggle for the soul of humanity - are we going to be a future dominated by freedom and innovation and the individual, or is the dominant model in the future based on authoritarianism and corporate statism. Now, I think American profit driven, short term share price capitalism is seriously diseased and needs to be reformed, but at its best it provides a better model to humanity than what the CCP offers.       

You may agree with what the US is doing but this is has not been explained by the administration and without an adequate explanation how can we attribute this overall policy or strategy to the administration? The way this policy is touted it sounds like just a trade war to assuage the republican base that believes that China is taking away all the manufacturing jobs.

Personally, I believe that the manufacturing job argument is a ruse - yes, American manufacturing has been decimated, but that's as much a product of automation and the fact that the American economy is no longer competitive in low-wage manufacturing as it is China. Jobs will not go back to America - they will go to Vietnam and Cambodia and India and eventually Africa. Trump may not realize this, as he is really is an idiot. However, the people he listens to in foreign policy I think do believe that China is the major threat to the American world order and all this posturing and policies (Huawei, the tariffs, etc) are simply attempts to arrest China's rise. There will not be a trade deal, even if China capitulates (and the major issues - subsidies, tech acquisition by means fair and foul, human rights, etc - are things the CCP cannot budge on, as they are intrinsic to their entire system). This is about holding China down, and pushing them away from a central role in the economic order. It isn't really about some minor trading disagreements. But that's an easier sell to the base.   

Re: Explain the Trade War with China Please
« Reply #22 on: August 04, 2019, 09:34:01 PM »

Offline hwangjini_1

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Hwangjini has a lot of great things to say. There are a few points I'd quibble with, and I'll share my perspective as someone who has lived in Shanghai for 14 years and has always had an interest in history, foreign relations, and economics.

I would argue that while China is upset the US is upsetting the hegemonic system created post WW2, it isn't actually because they want the system to persevere indefinitely. They (the CCP) very much want to see a re-ordering of the global hierarchy with China at the top - it is pretty ingrained in the Chinese psyche that China has traditionally been the center of world civilization (and they have a case for much of it, at least from the fall of Rome to the Industrial era). The problem is that Xi jumped the gun too soon. For decades, China followed the old Chinese maxim 'tao guang yang hui', which means 'hide your brightness, bide your time'. They diligently improved their economic, military, infrastructure, technology by any means necessary (exploitation of the lao bai xing; environmental degradation; a concerted, state directed attempt to steal technology from more developed countries). Their goal was to re-assert China as the dominant world power and enjoy the privileges the US does now (reserve currency, unrivaled influence, cultural dominance). I do think it's partly motivated by the 'century of shame' where Japan and a few of the Western powers humbled China and a desire to keep anything like that from ahppening again, but I also think it's related to a deep-rooted cultural doctrination that China is the 'middle kingdom' - the word for China in Chinese 'Zhong Guo' literally means 'the central country in the world'.

Anyway, let's circle back to what happened a decade ago. China has been slowly amassing power since Deng Xiaoping had reformed the economy in the early 80s. China was admitted into the WTO in 2001, and that's when their growth truly became supercharged. In 2008, the world financial crisis happened, and a few years after that a strong man president Xi was elevated to power. Now, Xi observed the shambles the Washington consensus had made of the world and he concluded that it was China's time to emerge from the grass and provide a challenger to the US model. China became much more aggressive, and started trying to develop an alternate world order using Chinese money and influence (China's expansion into Africa, the Belt and Road Initiative, the development of a blue water navy, etc). This of course alarmed the US strategic planners. Also, it turned out the US model wasn't as weak as it appeared. But Xi has stayed the course, refusing to back down. There's a real threat of the Thucydides Trap playing out again, where a rising power tries to overtake an established hegemon through conflict. My personal opinion is that China is a lot weaker than they project, with much of the amazing growth since 2008 built on an unprecedented debt binge that is unsustainable (yes, even more than in the States), and that at some point in the near future there will be an economic reckoning that will substantially change internal Chinese and world politics. That's an interesting discussion for another time.

But anyway. Fundamentally, the trade war is an attempt by the US to slow / limit China's rise. And there is merit to this strategy. First, China has abused the world economic system for decades. Many of the provisions they were supposed to implement when they joined the WTO they ignored. The Chinese economy is still largely closed off from the rest of the world, despite China enjoying largely unfettered access to everyone else's markets. This allows local champions (many of whom are allowed unlimited credit from the central banks, which are government controlled) to grow huge in China and then go out into the world to grab other companies and market share, with no need to show profit. This kind of industrial policy should not be allowed if we want market capitalism to endure. China has been like a parasite for decades, not abiding by the rules of the global economic system and growing strong because no one had the guts to stand up to them. I haven't even touched on the issues like forced technology transfers or currency manipulation or the human rights issues. I despise Trump, but on this one matter I agree with what the US is doing. I see this as a sort of existential struggle for the soul of humanity - are we going to be a future dominated by freedom and innovation and the individual, or is the dominant model in the future based on authoritarianism and corporate statism. Now, I think American profit driven, short term share price capitalism is seriously diseased and needs to be reformed, but at its best it provides a better model to humanity than what the CCP offers.       
i do not disagree and what you say and what i say fit together. china does not wish the US to exist in perpetuity. but they also do not wish it to go away immediately.

when and how the shift in chinese vision happens is not something i can speculate on with any confidence.

next, as for abusing the world economic system by china, yes, but then again it abused them for centuries.

also, japan, SK, taiwan, singapore, and other countries used similar tactics and actions as china and did so with largely US blessings....japan in particular in the 1950s and 1960s. the thinking was that the US did so as a policy to keep their political systems in place, systems predicated upon opposing communism.

that seems a bit anachronistic now. this is more a  non-ideological rivalry now.
I believe Gandhi is the only person who knew about real democracy — not democracy as the right to go and buy what you want, but democracy as the responsibility to be accountable to everyone around you. Democracy begins with freedom from hunger, freedom from unemployment, freedom from fear, and freedom from hatred.
- Vandana Shiva

Re: Explain the Trade War with China Please
« Reply #23 on: August 04, 2019, 09:50:33 PM »

Offline Alec14

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Questions:

  • There is something having to do with the overall global economic structure (referred to in this thread as the "hegemonic system") that appears to be in the process of being eroded by Trump's policies. This is probably invisible to most Americans (certainly is unknown to me):   Is the erosion of the "Hegemonic System" by Trump something that is generally agreed upon by mainstream conservative and liberal economists (i.e., is there consensus that this is what he is doing?)? Is this seen by economists as destabilizing to the global economy for which there will be predictably bad outcomes?   If so, how does this information get communicated effectively to the general population?


This is an interesting question. I believe that in many other areas Trump has greatly undermined the American hegemony (pulling out of trade deals like NAFTA, cuddling up to authoritarians like Putin) however, in this particular instance the influencers behind Trump (not Trump, he's an idiot) are trying to arrest China's rise and therefore preserve America's position as the dominant power in the world. Now, if they use this position to bully others, like Trump does, the question could be asked if we deserve to maintain this role. But if we act like we (generally) did for the first 60 or so years after WW2, and see the global economy as collaborative, then that's another story.


  • If/when there is a so-called "trade deal" with China, in order for the deal to be a true victory for Trump, would China need to agree essentially to raise the cost/price of exported goods (from China)? In Trump's thinking (I guess), China would agree to this because he has put so much pressure on them via the tariffs, so China would see an economic benefit to agreeing to a more balanced trade situation with America.


I personally don't believe any deal will be good enough for Trump's influencers (the strategic thinkers who are guiding him here and see China as an existential threat). China can only bend so far because many of the key issues are intrinsic to their economy and government. Trump (and his enablers) see everything as zero-sum. There are no win-win outcomes, only I win - you lose. The CCP actually sees the world the same way, which is why this is a situation of an unstoppable force meeting an immovable object. 


  • Re: Intellectual Property: While I have only a cursory understanding of the issue with regard to intellectual property, might IP also be addressed as part of a "successful" deal with China?  Is it correct that Trump is theoretically looking for some commitment from China to end the practice of "stealing" IP, or to pay a price for using American IP? Is getting or not getting a "deal" on IP part of what will determine the success or failure of the trade war?


That's a key issue. It's also something China has agreed to many times before, and they just keep on doing it. They see catching up with the west as being central to the survival of the CCP regime, and so long as they are behind they will continue to try to steal what they need, whether that's genetically modified seeds or jet engine technology. Mainland Chinese culture has been warped by decades of corrupt authoritarian rule, and the general consensus is 'if you're not cheating, you're not trying hard enough'. Any commitment to stop tech stealing wouldn't be worth the paper it's printed on.

  • From most mainstream economists' perspectives, what would signify a poor or irrelevant trade deal with China?   How would most economists determine/measure that Trump essentially failed to get what he wanted from China?


For most economist's perspectives, any sort of agreement that reduces tariffs and restores trade is good. Going back to the way things were would be preferable, as economic orthodoxy touts the purported benefits of free trade. Corporations get richer, which is how most economists seem to measure economic success. Of course, most of them ignore China's undermining of the system, which honestly must be addressed. You cannot have the world's largest trading country refusing to abide by the rules that govern everybody else.

  • Lastly, how will most people like me who haven't a clue determine whether Trump got the better of China or not?  We know he'll claim huge victory no matter what, and I suspect there won't be any immediately felt pain in America regardless of the "deal" (or will there?).   I assume those who love him will think he's a hero regardless of the agreement and those who hate him won't.  Assuming that Trump will over-sell the quality of the deal, how would democrats credibly counter?


If China enters a period of economic crisis, Trump and his influencers win. It's closer than you might think, though the trade war is only a tiny sliver of what's pushing them closer to a period of economic retrenchment.


Re: Explain the Trade War with China Please
« Reply #24 on: August 04, 2019, 09:58:57 PM »

Offline Alec14

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that seems a bit anachronistic now. this is more a  non-ideological rivalry now.

Another good comment, you know your stuff. I will quibble with this last point, though. Personally, I do see this as an ideological struggle. America and China are offering two competing visions about how to structure societies and the world. Freedom or security? Individualism or collectivism? Benevolent authoritarianism or democracy? I think many 3rd world countries are watching how this all plays out, and if China emerges as a stable economic giant many will reject the Western model. Also, the CCP's legitimacy rests on the strength of its economy. It needs to demonstrate that it can deliver to its population what the Western world and Korea / Japan has already achieved - a way out of the middle income trap and a path to being a high-income country. So in that sense it is an ideological struggle - can the state-driven corporatism with state control over nearly every aspect of the economy deliver when matched up against the western model? The irony is they've achieved so much so fast by gaming the western model, refusing to play by the established rules so that they can accrue more economic power and influence. What happens when they are the ones determining the rules? That's the future I think the American strategic thinkers are worried about, and why this 'trade war' is far more than simply about tariffs.     

Re: Explain the Trade War with China Please
« Reply #25 on: August 05, 2019, 10:15:26 AM »

Offline Ogaju

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One facet that is really easy to understand is labor costs.

China is able to undercut all competition by enslaving their workforce. If you think that the cupcakes here think that they don’t make a living wage, try living in mainland China. They are bullying the rest of the world with the ability to make products at a fraction of the cost.

While it is true that tariffs will cause Chinese companies to raise prices to maintain their profits , if enough of the world says enough, or if the prices get so high that it’s not worth buying their stuff anymore, countries will begin to re-enter markets that were previously locked out.

The reason everyone is panicking is because businesses LOVE exploiting Chinese workforce. There are entire business models that buy crap from China and rebrand it as a private label, not to mention how much dependency our largest companies have on them.

While this has serious repercussions in the short term, it is also unsustainable to cede all manufacturing to China.

A Trump victory here looks like America getting some extra tariffs (compensation for labor cost difference) without counter tariffs.

The other part is IP theft. China steals ideas from American companies and there isn’t a great way to prosecute.

Currency manipulation is pretty complicated. The tldr is that China is able to pick what their currency is worth and uses that to gain leverage on trade partners.
Dude I’m not defending China but stealing IP is such a broad accusation that it’s hard to be measured ...
Also did trump or anyone give specific examples of China stealing whatever ideas from USA ? I understand they are copycats historically but stealing is a serious accusation if it potentially can be sanctioned.... and on the topic of stealing ... the USA has helped  made the world education system such that in effect America is stealing the brains from all other countries including China ...
This is one of the frustrations with trump administration... they made it so much more difficult for smart people to study and stay or want to stay in USA and deliver their ideas to businesses

You can start here:

https://law.stanford.edu/2018/04/10/intellectual-property-china-china-stealing-american-ip/

Re: currency manipulation, the Chinese renminbi is a state-controller currency. The Chinese communist government controls it and sets it. For example, if Trump increases tariffs on Chinese goods, china could (and has) drop its currency to minimize the impact of tariffs. Currency control gives counties an unfair advantage and goes against principles of the IMF, World Bank, Etc - as I understand it.

You called it ..China devalues currency...DOW falls 500 pts at open. Next move USA.

Re: Explain the Trade War with China Please
« Reply #26 on: August 05, 2019, 12:32:39 PM »

Offline Vermont Green

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These are broad and complicated topics but as is all too typical for Trump, there is a fundamental lie or fraud at the core of what he is doing.  He said at a rally that US consumers are not paying the tariffs, that china is.  This is a lie.  Consumers pay less for goods when cheaper Chinese goods are part of the supply chain and pay more when Chinese goods cost more.  It may not happen right away but eventually, the cost will "trickle up" to the consumer.  Trump is flat out lying about this but his base believes him.

That does not mean that tariffs shouldn't be used to influence countries to trade more fairly, it just means that once again, Trump is being dishonest about something.  How popular would the tariffs be if he said everything you buy is going to cost more but you need to ride this out for the good of the country.

Now when you start getting into currency manipulation, it is all over my head.  A strong dollar is good for the US in some ways, bad in others.  The big thing for the US though is that we can essentially "print money".  Our currency is the basis for all world commerce (or the vast majority).  Some the the economics folks here will have to explain this but if we lose this power, we are in big trouble.   We would have to start treating debt like debt.

Re: Explain the Trade War with China Please
« Reply #27 on: August 05, 2019, 07:37:26 PM »

Online Neurotic Guy

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I don't understand currency manipulation and am not asking for an explanation.  I do want to understand what China's latest move to weaken its currency (do I have that right?) means with regard to the "trade war".   

Specifically, what does China's move indicate with regard to the trade war itself (I assume this escalates the fight??) and as an indicator of China's willingness to sustain the battle in the short or long term?  Does China's move suggest they are in it for the long haul?  Or is this a desperation move that indicates it might be a last gasp effort before agreeing to make a deal with the US?

Re: Explain the Trade War with China Please
« Reply #28 on: August 05, 2019, 08:26:51 PM »

Offline Ogaju

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I don't understand currency manipulation and am not asking for an explanation.  I do want to understand what China's latest move to weaken its currency (do I have that right?) means with regard to the "trade war".   

Specifically, what does China's move indicate with regard to the trade war itself (I assume this escalates the fight??) and as an indicator of China's willingness to sustain the battle in the short or long term?  Does China's move suggest they are in it for the long haul?  Or is this a desperation move that indicates it might be a last gasp effort before agreeing to make a deal with the US?

China is in it for the long haul. You better believe it. Devaluation of their currency means that Chinese products just became even cheaper. US will have to increase Tariffs to get the desired effect. Weaker Chinese currency opens the Chinese market to more business and exports for China. It closes Chinese markets to more imports. It is a strong move.

Re: Explain the Trade War with China Please
« Reply #29 on: August 05, 2019, 08:40:13 PM »

Offline Ogaju

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Things just heated up by US tagging China a currency manipulator  Brace up people. Battle of the Titans.

 

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