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Comment by rrggrr | Hacker News Reader

Ma seems to be saying to the United States: Continue running trade deficits with China, subsidizing China's ill-conceived domestic social and economic policies, or war. If this is what Ma is saying (it essentially is) then war with China is inevitable and better engaged in now, while the US still enjoys a qualitative advantage.

Anyone doubting this interpretation of Ma's comments needs to read Michael Pettis' commentary on Chinese economic policy:

http://foreignpolicy.com/2016/07/22/chinas-currency-manipula...

http://carnegieendowment.org/chinafinancialmarkets/66485

UPDATE: Comments claiming Ma only says, "keep trading"... don't understand how trade works between US-China (read Pettis links above), and are not paying attention to coincidental news from China about new DF-16 ICBM's pointed at the United States. Its almost as if China plans to negotiate trade with a gun pointed at the Trump administration's head.

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Ma seems...

And that's where it stops. Ma made a general observation and that's it. Historically countries who trade less tend to be hostile toward each others, while countries who trade in bigger volumes are friendly.

Also Ma isn't saying or implying "keep the trade deficit". He says "keep trading. period" (a surplus or a deficit, doesn't matter in the context of his argument.) By the way it's weird that people seem to think it's China's problem that the US have a trade deficit with them. The deficit can be solved by the US selling products and services to China. It's the US' problem to find what to sell. And only the US can solve it.

Can a US-based business sell products and services to a Chinese one? At least, can they do it directly and not through some Chinese subsidiary?

Are not American corporations getting a god deal here?

Because it seems to me that they are profiting from the difference in wages. Maybe a case of eat your cake and have it?

> It's the US' problem to find what to sell. And only the US can solve it.

Well there's the problem of China not respecting copyright or any type of intellectual property. And that's not just a problem for the Facebooks of the world, they are stealing our agricultural and industrial knowledge as well. And while it's not officially sanctioned by the CCP, it's unofficially encouraged.

That's the standard book for developing an economy.

The USA did that to Europe, specially to England.

There is no standard for developing an economy, you've just taken two similar instances in history and correlated them.

Or did Japan, Germany, et al. develop their economy through industrial espionage and I just haven't learned about it yet?

It's funny that you mention the Japanese.

I don't know if you were around in the 80's but, if you were and have some memory, this song that we are listening now, should be familiar to you.

And it seems to me that, yes, there is a standard for developing a country's economy: you build and industrial base. For that you need importing technology and knowledge. For that you need foreign currency. So, you sell the job of your people. By the way, what you don't do, if you are clever, is follow the IMF advice.

This implies that the American way of looking at these things is the ONLY right way of looking at things and that Chinese need to accept western companies on western terms.

If they are going to be part of the global economy then they need to accept the terms of the global economy. Yea their practices are mainly harming western countries at this point, but in the future maybe it's India or Singapore that has the lead in these areas. Would you think it's alright for China to do it then?

Like it or not the global capitalist economy has to be built with some form of protection for content and IP producers. I fail to see how China's model is the 'right way of looking at things'. In fact if we all acted like China I'm guessing the global economy would collapse.

"If they are going to be part of the global economy then they need to accept the terms of the global economy."

This is an absolutely marvelous way of looking at things.

For once, it ignores that the "global economy" may profit a lot from revising its own terms (especially regarding copyright/IP).

Or that the "global economy" is more like the interests of the few powerful ones who say what it is.

Sure there are theoretically better ways of doing things. If there are theoretically better ways of distributing food does that mean I get to go rob a grocery store?

You can't flaunt the rules and regulations of world trade because you disagree with them or want to change them. Besides that's not what China wants. China wants to eat its cake and have it too.

Edit: Wow looks like it's ok to lie, cheat, and steal because "the other guy does it and I think the system is unjust on top of that." Really spectacular arguments from the anti-establishment crowd.

And so does USA, EU and others. Isn't that how foreign diplomacy and trade works? Steal, murder, take what you can, behave well only when someone forces you to?

Because from current perspective I can't seem to find a reason why China would back down and let their own economy be taken over by western companies, when protectionism works well for them and their manufacturing is holding the world world by the proverbial balls. It's the tactic USA employed mercilessly (and still does) to get the best position - forcing everyone else to drop their rules to trade with them. Of course, now when China does it it's suddenly a problem, because Facebook, Google and others can't monopolize their market and transfer money to their offshore accounts? :)

>Steal, murder, take what you can, behave well only when someone forces you to?

And the US is forcing China to. I'm not trying to hold one side up as some kind of moral victor. Yea China's doing the same thing the US would in their position. This isn't some kind of moral equivalency contest.

Your post is the equivalent of Trump excusing Putins behavior because the US has done some pretty bad stuff too.

No one's talking about robbing physical goods or food. Copyright & IP matter to wildly different beasts: ideas.

And there are way more practical better ways of dealing with those than strict locked down control over it. It's not black & white.

Now, we're drifting. My point was: it's normal, acceptable and even desirable to contest and discuss the way cough "everyone" do things, especially when two parties trade. That's how they may all progress.

Going to force, or to war, as too many here seem to suggest (and I just can't believe I read this), solves nothing: it destroys the problem with a long-lived lie (that violence can solve anything) and creates new, larger ones.

Are you even having the same conversation as me? You are so into your anti-IP/DRM mindset its blinding you to the basic principle I'm getting at.

I don't give a shit what you think about the current Copyright or IP laws we have in international trade. In fact I think the current system is stupid.

BUT that doesn't mean China gets to unilaterally ignore them because it's beneficial for them. The same way I can't unilaterally ignore our laws on theft just because I think the system of distributing food is wrong. IF China wants to change the rules then they need to do that through the WTO. They decided to join in order to gain access to the global market. If they can't follow those rules then they need to be stopped or kicked out because it's causing serious issues within the global economy, issues that are leading some people to talk about war.

That's fine... but they joined the WIPO and promised to uphold certain Intellectual property laws internally that are internationally the norm... except it looks like they aren't.

It's almost like Imaginary Property laws don't correspond to how the universe actually works, and perhaps China only "agreed" to them the way one "agrees" to unenforceable terms in a unilateral clickwrap "contract".

China chooses to be a member of the WTO, and with it the rules-based system that underpins international trade across the globe.

gph says:>"... the problem of China not respecting copyright or any type of intellectual property. "

And, after thirty years' trying, mainland Chinese still make very low-quality hand tools and have severely damaged Western suppliers of the same.

"Give me a good screwdriver and a place to stand - I will move the Earth." - Archimedes322

P.S. Why the downvote? Compare the quality of USA-, European- and Chinese-made (except Taiwanese, which are often exquisite) hand tools. The mainland Chinese don't measure up to a 1920's standards of manufacture in the West.

>It's the US' problem to find what to sell. And only the US can solve it.

This is completely wrong.

China has huge barriers in place to dissuade the importation of products that compete with their own. 30% tariffs on certain items, selective application of VAT and currency manipulation all make it near impossible for the US to sell goods in China.

And yet for all those barriers, Chinese consumers still can't get enough of the latest Apple products.

mrb is exactly right. US companies CAN sell in China, if they figure out how to, and some have.

Yes, they CAN sell in China, they're just at a huge disadvantage. Is your argument that because SOME products still sell, the barriers aren't significant, or that US firms aren't adversely affected by them, to the benefit of Chinese ones?

My argument is that when companies can't compete on technology as they may be used to, too frequently, they throw their hands up in the air and conclude that this means they can't compete period. However, we can see that Western companies are successful today competing along different axes.

I would even extend that further by saying that if things dry up in the future and we have to keep innovating to stay ahead as China continues to copy and catch up, good. Let's do that. Everyone will be better off.

Not to mention heavy restrictions on money transfers in and out of the country and a huge amount of red tape. Ian of Dangerous Prototypes set up a business in China a year or so back and wrote about what was involved, and it's astonishing: http://dangerousprototypes.com/blog/2016/02/04/how-to-china-...

>It's the US' problem to find what to sell.

If it's trade or war, it's China's problem too.

> Historically countries who trade less tend to be hostile toward each others, while countries who trade in bigger volumes are friendly

I can think of one big counterexample off the top of my head: trade between France and Germany in the years leading up to 1914. Strong economic ties didn't prevent Europe from going completely off the rails. Which historical trading partners did you have in mind?

This is an awfully US-centered way of interpreting the comment, which completely misses the real play. The comment was made while visiting Australia, and this article is in Australian media. Furthermore, China isn't looking to get into outright war with the US, for all the reasons listed in sibling comments.

What Ma (/China) is really doing is capitalizing on the fear in US allies that the US will now hold back military support. This is a negotiation happening with Australia, to gain trade terms favorable to China. China is reminding Australia that they are within China's sphere of influence, and that it is Australia who must work to stay on good terms with China.

For context, I'm a USian and think Trump is duplicitous and incompetent, but sympathize with why he was elected. The problem with the TPP was the same problem with our entire political landscape - it mostly consisted of prudent trade terms, but packaged with a bunch of corporate-pushed corruption. It's designed to be against our own interest to defect (game theoretically), but people are getting quite fed up with the scam.

>Ma seems to be saying to the United States: Continue running trade deficits with China, subsidizing China's ill-conceived domestic social and economic policies, or war

Subsidizing? The US (and others) spends X in China, and Chinese workers and factories sweat their ass off and give back products that the US companies then sell for 2X to 100X.

That's the exact opposite of subsidizing. It's the US that can't produce anymore, or can't produce cheaply enough and with enough tolerances, that found a solution to its issues.

And if you count for the trade deficit, it's China that holds US debt and thus "subsidies" the US.

No. This is NOT how it works. China exports its domestic demand to the US, the US absorbs Chinese overcapacity. This initially began as China importing inefficient US industrial production in the 70s-90s, in exchange for US expectation of access to an enormous Chinese market. That trade never really occurred as the short terms incentives weren't present, resulting in Chinese inefficiencies and massive imbalances for both sides.

Read this:

http://carnegieendowment.org/chinafinancialmarkets/66485

>the US absorbs Chinese overcapacity

How charitable of them.

Well, whatever makes one sleep at night with their national superiority intact.

As a third party that's neither Chinese nor American, that's what I see.

This is exactly the policy the US seeks to now reverse (absorbing over-capacity) and which planned reversal China meets with threats of war. It wasn't charity as you well understand. The US exported its inefficient industries initially for the unfulfilled expectation of access to much greater markets for its efficient industries.

I'd much rather lose a petty economic rivalry to China than win a war against them.

This is the likely outcome.

Do you think that the next generations, surviving in a post-apocalyptic irradiated world, will care about the reasons that took us to war? Is there anything that is worth the death of hundreds of millions of people? Because that's what you're advocating by saying we should go to war, throwing this word lightly like if there would be a future after war between major powers in the nuclear age.

Post-apocalyptic irradiated countries, maybe. World? Not completely. I am skeptical of China's capability of successfully nuking US, aside from perhaps the west coast.

Your usage of the word subsidize is strange. I might as easily say that I subsidize my local grocery store. Except that a much more natural way to say the same thing is that I buy food there.

We have a trade deficit with China because they make so many affordable products that Americans want to buy.

Of course much of that wealth ends up in the hands of the Chinese government, just as the US taxes corporations here. I would probably describe our government's use of most of those funds as "ill-conceived." We certainly wage more wars than China.

Why so belligerent?

You're not in the grocery business. Your grocery store doesn't manipulate its prices giving it an unfair advantage against your store. Spirited disagreement != belligerence.

Now that you bring it up I realize that I am also running a massive trade deficit with my local grocery store. This does not seem fair, I should impose a 30% tariff on all food imported from the grocery, that will show them for subsidizing their supply chain and manipulating the prices of food

In fact, I think the grocery store has been manipulating their prices down, giving them an unfair advantage. Obviously you should insist that they stop selling such cheap food.

Man, we'll be rich in no time if we keep this up.

He's not making a threat of any kind, he's making an empirical observation that countries that trade with each other tend to go to war less.

>He's not making a threat of any kind, he's making an empirical observation that countries that trade with each other tend to go to war less.

That's more wishful thinking though. Many touted the same thing in early 20th century: that the increased trade between European powers, economic interdependence, etc. will mean the end of war.

Then WWI and WWII came along.

Trade is itself a kind of soft war (for resources, for markets, etc) and can easily be extended to full war when those are not ample enough.

Yet there is evidence that larger trade agreements that bind economies together and create some sort of codependence have a function in reducing the likelihood of going to war.

Ma is maybe guilty of conflating individual agreements between nation states and these kind of larger partnerships like Nafta, EU, Euratom etc (or not being sufficiently nuanced for effect).

Of course, these large supranational agreements (rather than trading agreements per se) seem to be what Trump is opposing.

Seems like we've somehow forgotten that before Trump came to power to denounce those agreements, every leftie and liberal, that is, all non corporatists, were also against NAFTA, TPPA, etc (and rightly so).

In the US, maybe. The Eu enjoys broad support on the 'metropolitan' centre-left across Europe - only being opposed really by the extreme left and the centre to far right.

Also, maybe the US should be careful what it wishes for. The UN, for instance, was set up post WWII to project US / Wilsonian values around the world. While trade deals / supranational agreements are inconvenient sometimes, the US may end up missing them when they're gone and the US has to deal with a truly multipolar world again.

>In the US, maybe. The Eu enjoys broad support on the 'metropolitan' centre-left across Europe - only being opposed really by the extreme left and the centre to far right.

Same in the US I think. I wasn't talking about democrats (the US "centre-left", but about the actual left.

>Also, maybe the US should be careful what it wishes for. The UN, for instance, was set up post WWII to project US / Wilsonian values around the world. While trade deals / supranational agreements are inconvenient sometimes, the US may end up missing them when they're gone and the US has to deal with a truly multipolar world again

Let it come, I say!

Incorrect. His comments are coincidental with Chinese military announcements that smell like a campaign to manufacture a crisis that gives Chinese negotiators an upper hand in trade talks and US legislation to come.

"Manufacture a crisis" wait which side are we talking about here?

When, in the past 50 years, has the United States threatened war as part of a trade negotiation?

I've felt for a while that more happened behind the scenes in this election than we know, and that part of what occurred is a collapse in the de-facto unwritten alliance between the USA and China that has existed for some time now. Clinton was working to preserve that alliance, and failed.

That's dangerous. I do agree that the USA has subsidized China too much to its own detriment, but the alternative could be significantly worse for both countries. A collapse of trade would crash both economies, and given the fragility of the Chinese economy a crash there could be a humanitarian and political disaster. It could also lead to the ascent of crazy hard liners.

Honestly I don't see either -- continuing to subsidize China or collapsing trade -- to be a good outcome. It seems we've painted ourselves into a corner.

How is the US subsidizing China's policies? US consumers buy lots of Chinese products because they offer cheap prices. Is a trading deficit really that hard to understand?

Read this: http://www.businessinsider.com/michael-pettis-spain-surplus-...

Then tell me if you still think you understand how trade works.

Trade deficits aren't subsidies. All it means is that there's a greater volume of home-currency-denominated investment in the "deficit" country than there are home-currency-denominated exports. So, in the case of the US, there's a net positive capital inflow - dollar-denominated investment. Dollar payments balance, as they must: https://3.bp.blogspot.com/-ahpWrFO8WFM/TZkyZmhwGLI/AAAAAAAAP...

Trade deficits are a meaningless thing to worry about. They're not actual deficits of any kind, and they don't even accurately measure trade, since they generally don't include services or the chains of value-adding.

> Trade deficits are a meaningless thing to worry about.

Manifestly wrong. Large trade deficits are unsustainable for three reasons. They cause private and public debt bubbles in the defect nation. They cause unemployment and underemployment in the defect nation. And, they can cause systemic inefficiencies in the surplus nations that lead to economic and social problems at home, and deflation abroad.

Private and public debt bubbles? There's no actual debt or deficit being incurred - it's just using money to pay for goods. We might as well worry that we have a trade deficit with the corner store, or our employer might worry that they have a trade deficit with us. "Trade deficits" are orthogonal to actual debt.

And they don't cause unemployment, they just change the composition of employment. Now, if a country resolutely insists on hampering its own economy with cartels and bizarre regulation, then yes, "trade deficits" can reveal some of those weaknesses more prominently, but they were already there.

Trade deficits are just a mercantilist phantom, conjured up by counting physical goods crossing a border, carefully not counting services and capital investment, and then claiming that wealth is being "drained". It's like measuring evaporation from a lake (exports), ignoring any and all precipitation (payment for exports), and then claiming that the lake is running dry, without actually measuring the water level (per capita income).

"Trade deficits" pretty much always comes down to "foreigners sell us things at a low price, therefore we need to fight them/restrict investment in our economy/make things more expensive for our own consumers". It's never been an actual problem.

Here is a proper explanation if you're genuinely curious and not seeking to advance a position out of convenience or bias.

http://carnegieendowment.org/chinafinancialmarkets/60358

I've read it, and it seems to be the same kind of mercantilist thinking that I'm criticizing. It's more of this "take an accounting identity, ignore the effects of one-half of it, bemoan the 'imbalance' of the other half."

I mean, you could solve the US 'trade imbalance' by making it extremely hard for foreigners to invest capital in the US. But of course this would have knock-on effects that make it harder for companies and workers in the US to access investment capital. Or you could shut out foreign goods - and ignore the costs of more expensive domestic goods for US consumers. None of this actually benefits people.

I see nothing in this article to distinguish it from the historically-always-wrong mercantilism that just kept drawing boundaries around areas and then yelled and shouted whenever more of one particular class of good went in than came out.

I give you credit for reading it. Disagree with you utterly, but impressed by your conviction as wrong as it is :-)

Exchanging promises (debt/trade deficit) for real goods is hardly a subsidy.

You are missing a step. How does "Keep trading" mean that war is inevitable?

It almost certainly means that devaluation of the dollar is inevitable (the ultimate fate of any currency that runs an account deficit for long enough), but to say "war is inevitable, therefore declare war today" is ridiculous.

This chart (1/2 through article): https://www.ft.com/content/acd3f2fc-084a-11e6-876d-b823056b2... suggests a disorderly adjustment for China if its economy is not rebalanced soon. With this adjustment will come much social unrest and with that always comes scapegoats and calls for war. So, its no the United States that concerns me.

>> then war with China is inevitable and better engaged in now, while the US still enjoys a qualitative advantage

Are you saying that, or are you saying the Mr. Ma is saying that? Because if you are saying that then I'm pretty sure you haven't been following the news since August 6th ... of 1945. What the hell kind of war with China do you think is going to happen, one fought with bubble-gum? War with China means the doomsday clock goes to midnight and we all develop a nice healthy green glow.

If the British Empire is fated to pass from life into history, we must hope it will not be by the slow process of dispersion and decay, but in some supreme exertion for freedom, for right and for truth.

Churchill

Correct me if I am wrong, but I believe the use of that quote in this context is then advocating nuclear holocaust. If that is what you are trying to say, the next question is then: Are you insane?

You are wrong.

Would you care to explain why?

http://johnhawks.net/weblog/reviews/behavior/game_theoretic/...

Playing chicken with an opponent who time after time demonstrates highly rational, self-dealing behavior is the opposite of insane.

What's with the war propaganda level rhetoric? How do you even compare world powers jostling for trade advantage with moral dichotomies of "right/truth" and "evil?" Any cursory examination of the practices of American businesses in international trade should immediately dispel any delusion that the US has clean hands in the matter. You're implying here (not very subtly either) that mutually assured nuclear destruction and loss of life in the billions is somehow a reasonable response to an asymmetry in economic advantage between world powers?

I'm not certain that rrggrr is human. The replies are nutty non-sequiturs and very aggressive at that. Down-vote and move on.

Please don't break the HN guidelines in your own right, even if you're right and the other person is wrong.

Please don't take HN threads into off-topic flamewars.

I'm not an economist, but from what I've read, running a trade deficit isn't necessarily a bad thing. The US ran trade deficits through the 80's and 90's while the economy was booming.

And there is never a good time for war between two nuclear powers.

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