Chinese Dependence Permeates the US Economy
20 for 2020 is a newsletter sent to 20 people in preparation for the U.S. Presidential election of 2020. The recipients include Business, Government and Society members including three Presidential candidates. The newsletter goes beyond the headlines and provides factual information on key issues including healthcare, the economy, society and how we can come together as a nation and as a people. Aug. 2019
This is the third issue of 20 for 2020 and the subject is China as our major Trading Partner.
As its history, global trade has at its roots the trading of resources and products that were unique to a given region and typically superior in quality or unavailable by nature in the land of its trading partner. Think Chinese Porcelain and rare spices and even oil. As economies have grown and changed, trade has changed. In the 1980s Japan could produce televisions and electronics in a higher quality and lower cost method and infiltrated the US market with demand based pricing. Current trade with China has its roots in government subsidized dumping (selling goods at below cost), infringing on intellectual property and exploiting people for lower labor costs.
Although this may seem evolutionary or inevitable or how economies progress, it is important to realize that China is not a young America.
China is a second world country and a bit of an odd ball at that. Although its GNP may make it the second largest economic market at 13.6 trillion dollars in 2018 compared to the U.S. ‘s 20.5 trillion dollars and it may have world class infrastructure and unique manufacturing abilities, its GNP per capital is approx.. $8,000 vs the approx.. $54,000 of the U.S. and in this regard China is similar to Mexico and Argentina.
Furthermore, and most importantly, China is a Communist Country. It is not a free society.
While the privileged Chinese that come to the U.S. for education or work may give the impression that they are just like us, educated, deciding what they want to do with their lives on their own, and even attending our churches, the role and influence of the Chinese government in the lives of its people is much more pervasive than is the role of the U.S. government in the life of its citizens. Our government doesn’t create a public profile on each of its citizens that determines if they can travel, go to school, work certain places, etc. and our church attendance does not adversely impact such a profile.
According to the Office of the U.S. State Trade Representative , China was the United States' largest supplier of goods imports in 2018. U.S. goods imports from China totaled $539.5 billion in 2018, up 6.7% ($34.0 billion) from 2017, and up 59.7% from 2008. The United States is dependent on China for everything from cheap clothes to plastic bags and exports aircraft and agricultural products to China. China cannot feed itself. Due to its topography, farming is difficult and ox and plow farming is not uncommon on rural farms and Universities are even working to improve this primitive means of farming.
Last year the Chinese economy grew between 6-7% which was a 28 year low, the slowest growth since 1990, in contrast the U.S. economy grew between 2-3% which is the upper range of where it has straddled for the past decade.
International trade experts have forewarned that it is easy to become like your trading partners and regretfully, that may be happening to the United States as we lose our core values of freedom, liberty , justice and brotherhood and focus on the stock market, jobs reports, and other short term aspects of the economy and even making the next big deal. As a nation and as a people, we were founded on more than that and yet we are resorting to that in many ways. Lest we forget, up until recently China had a 1 child only policy.
While China may have sprinkles of stars resembling capitalists, they are in reality government sponsored or condoned, part of a planned economy and planned export strategy verses a free enterprise independent organization operating of its own free will. Chinese companies support the goals of the Chinese government and rely on subsidies in doing so.
A recent opinion page testimony in the Wall Street Journal titled "My Customers Don't Pay Tarrifs" the owner of a consumer electronics firm clearly stated that he was able to get price concessions from his Chinese suppliers of electronic components to cover the increase in cost of the tariffs for the following reasons “1) pressure in the raw materials supply chain, no one wants to get caught with a lot of inventory, 2) so many similar companies in China that one or more will concede on price for their own survival, and 3) meeting shipping quotas is more important to Chinese companies than meeting profitability goals as the Chinese government pays subsidies to prop up their margins. This manufacturer claimed that American purchasing departments are well aware of the Chinese subsidy system. One has to wonder are Congress, the Federal Reserve, the Justice Department, the FTC or the Trump Administration?
Cambria, A local MN manufacturer of stone counter tops was recently in the news citing that the Trump administration had intervened on competitive dumping from Chinese manufacturers and that they were grateful. They are not alone in encountering dumping. Dumping from the Chinese is the norm, not the exception and should not be handled one deal at a time, but rather trade laws against dumping need to be enforced. A comprehensive strategy is needed.
The United States and in particular the tech industry has not been a good ambassador of true American values in its dealings with Eastern nations including China. It has been exploitive of low wage labor and has moved its facilities from nation to nation to exploit lower labor costs and capture more favorable economic incentives. In China, it is not unusual for young Chinese women from the rural areas to come to a factory for a year to stay and earn a dowry for marriage. These women are worked seven days a week and stay in factory dorms and work long hours for little pay. It is also not unusual for parents from rural areas to leave their children behind and go to a different geographic area to work in factories and stay in factory dorms.
How would we feel if a nation did this to our people? In the name of economic progress? Work force ready education verses education for the sake of having an educated populace is perhaps a step in that direction.
Let’s keep in mind that these below cost goods we consume from China every day have played a role in keeping inflation at bay, interest rates way too low and propping up the stock market and we even have a new class of companies that use predatory practices for growth and may not be profitable or have the intent of being profitable in the foreseeable future, like Uber and Amazon.
I encourage tariffs as a stop gap policy while dumping is investigated and the U.S. government takes steps to ban predatory behaviors that are inherently destructive, including dumpling and the stealing of intellectual property. We need to encourage the rebuilding of our forsaken manufacturing capabilities and industries. We also need to think about how people are treated in the goods we produce and consume.
China is not like us. The question is are we becoming like China? I think we need to wake up, cling to our heritage, and say some prayers. We are one nation under God with liberty and justice for all, and brotherhood as a core value, not simply one economy.