Economics

لماذا لن تخضع الصين لترمب

Apr 17, 2018 Jeffrey Frankel

بكين ــ في الشهر الفائت، أقر الرئيس الأميركي دونالد ترمب فرض تعريفات جمركية على الصلب والألومنيوم، وهي رسوم موجهة بشكل مباشر إلى الصين. وفي الثاني من إبريل/نيسان، ردت الصين بفرض تعريفات على 128 منتجا أميركيا. فأعلن ترمب عن رسوم جمركية بنسبة 25% على 1300 منتج صيني آخر، تمثل نحو 50 مليار دولار من الصادرات. وردا على ذلك، هددت الصين بفرض تعريفات بنسبة 25% على 106 من صادرات الولايات المتحدة (بما في ذلك فول الصويا، والسيارات، والطائرات)، على أن تُصبِح سارية بمجرد سريان التعريفات الأميركية.

أجل، إذا أصبحت هذه التدابير سارية المفعول، فإنها سترقى إلى حرب تجارية ــ حرب من غير المحتمل أن تفوز بها الولايات المتحدة.

في حين يزعم أهل الاقتصاد في عموم الأمر أن الجميع يخسرون في أي حرب تجارية، يدافع بعض المراقبين عن تصرفات ترمب بوصفها وسيلة تكتيكية تفاوضية بارعة لإرغام الصين على تعديل سياساتها التجارية، مثل شرط مشاركة الشركات الأجنبية في ملكيتها الفكرية في مقابل تمكينها من دخول السوق الصينية. لكن ترمب لا يفهم أساسيات مثل هذا التفاوض: فهو يتصور أن الدولة التي لديها عجز تجاري تتمتع بموقف تفاوضي أقوى بالضرورة. ولكن في واقع الأمر، تكون دولة الفائض التجاري في موقف أقوى غالبا، بفضل مطالباتها المالية المتراكمة ضد "الخصم".

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The Real Reason for Trump’s Steel and Aluminum Tariffs
AFP/Getty Images

Economics 46

The Real Reason for Trump’s Steel and Aluminum Tariffs

Martin Feldstein
The Trump administration's proposed tariffs on steel and aluminum imports will target China, but not the way most observers believe. For the US, the most important bilateral trade issue has nothing to do with the Chinese authorities' failure to reduce excess steel capacity, as promised, and stop subsidizing exports.
thinks the US administration is targeting China, but not the way most observers believe.
China Adjusts
Paul Lachine

Economics 4

China Adjusts

Jeffrey Frankel
Making America’s Deficits Great Again
Saul Loeb/Getty Images

Economics 8

Making America’s Deficits Great Again

Jeffrey Frankel
The new tax legislation pushed through by Donald Trump and congressional Republicans is virtually certain to raise the budget deficit and, in turn, the current-account deficit. Whatever the resemblance to the Reagan-era tax cuts of 1981-1983, it's not morning in America.
shows that, no matter how one measures it, the Republicans' tax cut will worsen the US trade balance.

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0 Comments on this paragraph, 34 Comments on this article

Robert Wolff May 18, 2018

Frankel fails to address the debts of China and the US and their consequences. While total US debt is 3X the US GDP Chinese total debt is also 3X the Chinese GDP.
The reason for current Chinese debt is heavy investment in their industrial infrastructure as the means to their plan for rapid future expansion; whereas the reason for current US debt is using increased debt to subsidize capitalist profits in the US (through consumer loans, welfare and cheap capital for US corporation) as US industrial output and trade deficits continue to skyrocket.

Thus, the US needs to decrease its trade deficits to stop the ballooning debt, but China needs to maintain its trade surpluses to pay off debts from capital investment intended to bring a future windfall. The US and Chinese strategies and aims are at odds, and China cannot afford to accommodate US wishes that would make their own plan for the future fail.
- Robert Wolff May 18, 2018
  
  (Correction: ". . . as US industrial output falls and trade deficits continue to skyrocket.")
  A new reply to this comment has been posted.
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Bei De Zhu May 2, 2018

Big American importers have for decades mandated that Chinese exporters give up their IP (trade secrets, patents, TMs, copyrights, you name it) as a condition of selling into the American market. If there is to be a reconciliation of the IP lost to appropriation without due compensation, the deficit is a net of trillions of dollars of harm in suppressing the development of IP in China.
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Bei De Zhu May 2, 2018

The widespread practice suppresses and kills off nascent IP portfolios before they can be developed in China. Think of why a T-shirt with a Mickey Mouse graphic sells for 500 RMB in China, and one with a design by the same Chinese supplier sells for $5 retail in America. The damage is real and huge.

Steven Mnuchin should act the fair minded American, and on this trip offer to invalidate, by agreement between nations, all contract terms seeking to rip off China firms of their IP without compensation. What is good must be universal, right?
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Bei De Zhu May 2, 2018

"requirement that foreign companies share their intellectual property (IP) to gain access to the Chinese market"??

Western behemoths have for the last 40 years continued to ripoff Chinese companies of their IP on a massive scale. The practice is insidious and widespread, and prevents the nation from upgrading its IP portfolio. Millions of contracts of adhesion caused many trillions of dollars of IP losses by Chinese companies. If there is to be fairness, how is that to be accounted for?

Just look at the typical T&C (Terms and Conditions) that the major American importers demanded of their vendors, and you will find similar provisions everywhere:

"CONFIDENTIAL INFORMATION; NONDISCLOSURE

Supplier shall not at any time, during or after the Term of this Agreement, disclose to others, take or use for its own purposes or the purpose of others, any of Company’s confidential information, knowledge, designs, data, know-how, trade secrets, or any other information considered “confidential” or “proprietary” by Company. Supplier understands, agrees and recognizes that this obligation applies, but is not limited to, technical information, designs, marketing and financial information, and any business information that Company treats as confidential. Any confidential information, knowledge, designs, data, know-how, trade secrets, or any other information considered “confidential” or “proprietary” by Supplier which the Supplier shall have disclosed or may hereafter disclose to the Company and which in any way relates to the goods or services covered by this order, agreement or contract, shall, unless otherwise specifically agreed to in writing by the Company be deemed to be confidential or proprietary information and further shall be acquired by the Company free from any restrictions (other than a claim for patent infringement) as part of the consideration for this order, agreement or contract. No cause of action will arise on Supplier’s behalf for Company’s use of any confidential information disclosed to Company, and no damages whatsoever shall accrue to Supplier for Company’s use thereof. Supplier shall keep confidential any and all technical processes and information, economic and financial information, designs, data, marketing information, and any other business information that Company treats as confidential furnished to Supplier in connection with this order, agreement or contract and Supplier shall not divulge, export or use directly or indirectly, such information for the benefit of any other party without obtaining Company’s written permission. Supplier shall return all items belonging to Company and all copies of documents containing such confidential information in Supplier’s possession or under Supplier’s control upon request by the Company or termination of this Agreement."

[Note how that "what's yours ends up mine" language is craftily hidden in the middle of the passage. Typical American style drafting.]

You think that is bad? Try this zinger:

"INTELLECTUAL PROPERTY

Absent a separate express agreement between Supplier and Company and after one year from date of importation of Merchandise into the United States which in any way relates to the goods or services covered by an Order, , Supplier will irrevocably grant to Company a full paid up, royalty free license to make, use, sell and offer for sale any such Merchandise free of any claim of infringement or misappropriation of any intellectual property of Supplier. The aforementioned paid up license will remain in effect until the expiration of any intellectual property relating in any way to the Merchandise."
__________________
Can you imagine clauses like that imposed on Microsoft, or Intel, etc., by any Chinese entity without causing a fire and brimstone response?? Yet this sort of chicanery is imposed by major American companies in contracts of adhesion on hundreds of thousands of Chinese exporters year in and year out. The typical Chinese company simply is not in a position to bargain. As a result, China had been ROBBED of trillions of dollars of valuable IP over the decades.

What is good must be universal. If IP is to be protected, everyone’s IP should be protected.
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Paul Friesen Apr 27, 2018

I have very little sympathy for the U.S. as it claims China is "stealing" its technology by requiring technology transfers in return for market access. The world system heavily favours current rich countries, and especially the U.S. They have the power to write the rules, and have used it to maintain the advantages they already have.

Finally, in China, they have met a country both able and willing to stand up to them. I, too, do not expect China to back down. They just don't need the U.S. any more. They can produce many things themselves now, and they have all the rest of the world to trade with to get the things they can't produce. They have their own population as a market.

The U.S. is just going to have to get used to the idea that they are not going to be able to push the rest of us around just as they like for much longer. China, at least, has not so far shown as much of a tendency to do that. Hopefully, it will not develop such a tendency as it replaces the U.S. as the world's dominant power.
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Alex Aslanidis Apr 24, 2018

Is this some sort of joke?

If China sells US treasuries, the Federal Reserve will buy them. China can't limit it's purchases of $ assets without limiting it's exports to the US. Who's gonna replace the US as an export destination then? China can't route it's exports through other countries either if the US reduces it's current-account deficit with all countries, as it should. Finally, why does the writer criticize Trump's fiscal expansion? Does he advocate the US addressing it's trade problems through fiscal tightening? That would bring similar results, just through recession. Is that what he wants?

No matter which way you see it, free-trade advocates are very confused people. In the end, why don't they favor balanced trade? My guess is that their interests lie with the financial sector, i.e. the sector that is going to be reigned once trade imbalances correct themselves.
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asad lateef Apr 24, 2018

White elephant is becoming too old to sustain any further tweet of trump.
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Miranda Xafa Apr 22, 2018

"Republican"? What about the Obama $800 billion "fiscal stimulus package" enacted in 2009?
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j. von Hettlingen Apr 21, 2018

Jeffrey Frankel says the tariffs that China and the US have proposed against one another would eventually lead to a trade war should they be implemented – a war that the US would unlikely win. Nevertheless Trump has support for ramping up the rhetoric from those who resent China’s trade policies, “such as the requirement that foreign companies share their intellectual property (IP) to gain access to the Chinese market.”
Although the US is hopeful that it could come to an agreement with China on trade issues, the author criticises Trump’s lack of negotiation basics, assuming erroneously that the US, “a country with a trade deficit necessarily has the stronger negotiating position,” without knowing that China, “the surplus country is in the stronger position, because it has accumulated financial claims” all the years against its “opponent.”
Indeed, China’s foreign exchange reserves amount to some $3.1 trillion, while holding over $1 trillion in US debt. Beijing could dump its US Treasury securities at a loss. Or it stops buying US bonds, now that US debt is “expanding and interest rates on the rise.” This could “drive down US bond prices and accelerate the increase in US interest rates.” As a result of Trump’s drum of war in recent weeks, financial markets have been jittery lately.
Unsurprisingly China said it was “absolutely not afraid” of a trade war with the US, even though it did not want one. Trump’s pursuit of economic nationalism and protectionist policies will cause the world’s economy to contract. Analysts believe if a full blown trade war is not averted, China could make things difficult for US companies doing business in China, while others say China is more likely seek to avoid escalate tensions. Beijing is aware of a severe impact on the global economy, posing a threat to its recovery.
Due to historical grievances – the “unequal treaties” China had to sign with Britain following its 1842 defeat in the Opium War – Beijing sees this chapter of history as its inglorious past. This “century of humiliation” serves as a guideline for Beijing’s assertive foreign policy since its economic rise in the 1980s. The author explains why China is sensitive towards “trade bullying.” He suggests the US should help China overcome this “legacy of humiliation,” and urges Trump to stop “flip-flopping.”
The author highlights a litany of measures that enable China to win Trump’s trade war. But he urges Trump not to focus too much on America’s trade deficit, as it has little to do with China’s trade surplus, but more to do with Republicans’ disastrous fiscal policy. While Trump’s “complaints” about China’s dishonest means of acquiring intellectual property are “valid grievances,” he certainly is inept at tackling the problem.
In order to stop China’s alleged IP theft, it “requires technical expertise and negotiating skill, not blunt threats based on inadequate knowledge.” The author says Trump’s disdain for “rules-based institutions” like the World Trade Ordanisation could prove his undoing. Trump has in the past alienated America’s allies, who are now badly needed, because many of them “have similar grievances with China.” Only through cooperation with others can a united front be formed and pressure be applied on China.
The author says “the shortcomings of existing trade institutions do not justify resorting to aggressive and ineffective unilateralism. That did not work in the 1980s, when Ronald Reagan’s so-called Voluntary Export Restraints on Japanese goods ended up benefiting Japanese firms, rather than the US, which was better off after they were removed. Nor did it work in 2002, when George W. Bush imposed steel tariffs that cost many more jobs than they protected.”
As Trump loves to be flattered, China might offer him “some face-saving gesture,” but hardly any “substantive concessions.” All these “gleeful photo ops, self-congratulatary tweets, or triumphant Fox News reports” will not “improve America’s external balance, output, employment, or real wages.” But he does not care, because his die-hard supporters would still believe in his ability to deliver.
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Joseph Zorzin Apr 19, 2018

China is not a normal trading nation. All "China watchers" should read "The Hundred-Year Marathon" subtitled "China's Secret Strategy to Replace America as the Global Superpower" by Michael Pillsbury. There is an hour long interview of the author on the Asia Society web site.
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Henry Rech Apr 19, 2018

It is clear that what China wants is western technology/intellectual property - it is even willing to steal it and exploit it without recompense to the owners of that technology. That's Trump's ultimate bargaining chip.
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prashanth kamath Apr 18, 2018

"Why China Won’t Yield to Trump"

It is China, is it? Where an unelected emperor makes policies, it becomes China's policies. On the other hand, Trump, who is the elected president of US does not mean the US.

Well, I wonder where your thoughts are coming from?
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Kien Choong Apr 18, 2018

Thank you for the interesting article, explaining why China is unlikely to back down even if (as a number of commentators have asserted) China will end up worse off in a trade war.

Perhaps another reason why China would not back down is that it simply is unclear what the US's goals are, and how exactly China can help with those goals? If the goal is to eliminate the US's bilateral trade deficit with China, how should China go about achieving this? Even if it could be achieved (doubtless at considerable cost), how would it help the US?

America's problems have to do with inequality and a failure to ensure a fair distribution of the gains from global trade. These issues can easily be addressed by the US government, but only if there is a political will to do this. Despite the rhetoric about loss of manufacturing jobs due to global trade (which I understand was plainly foreseeable), US politicians continue to do little to help its unemployed, prioritising instead tax cuts.

It seems US politicians give greater priority to US corporate interests than to the wellbeing of American workers and consumers. The recurring complaints about IP theft and unfair technology transfer is instructive. These issues concern the interest of US corporations. But the job of China's government is to foster the wellbeing of workers and consumers, not to make life easy for corporations. Corporations that want to invest in China ought to be encouraged/incentivised to transfer technology to China. In fact, the IMF has a recent paper pointing to the importance of technology transfer to development. It puzzles me why so many commentators fail to see that technology transfer is a good thing, not just for China, but for the world.

America squandered the "peace dividend" (following the end of the Cold War) and the "global trade dividend". It could have used the gains from peace and global trade to make US society a more just society. Instead, US have spent these gains on war and on cutting taxes, making the wealthy in the US ever more wealthier!

If corporate interests remains the priority of US politicians, why should China do anything to help the US? Far better that China continues to focus on alleviating poverty in China and the emerging world.
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Michael Public Apr 17, 2018

It is increasingly clear to me that it is increasingly unclear what happens when someone imposes import duties. It depends on too many factors. What is clear, however, is that it disrupts everyone from business as usual.
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لماذا لن تخضع الصين لترمب

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