Hacker News Reader

Comment by rdlecler1 | Hacker News Reader

China has effectively been waging a trade war with the US for the past 20 years. This is a narrative that has not been emphasized enough. America just hasn’t responded—which I find baffling. Investment into China is difficult, you need to have JVs and IP hand overs, local companies have political advantage over foreign companies, entire industries are off limits. China is going to be the world’s largest economy soon. It’s time to take off the kids gloves and live up to their WTO promises. The biggest beneficiaries of this are the large multi nationals, not the American workers. The argument goes that the benefit is to the consumer, but if the latest 65” TV cost 50% more then everyone would spend their $1,500 for a 45” TV instead and be just as happy—maybe happier because they’d have good paying jobs. If you think a trade war is bad, imagine being a vassal state of China where the US has no industries left and their political/economic clout is so strong that we live under their rules. And discussions like this would not happen. The fact that I thought about deleting this post is actually chilling.

View on HN

> If you think a trade war is bad, imagine being a vassal state of China where the US

As a Latin American I laughed hard at this. For the last 60 years many 3rd world countries have been vassal states of the US and European Union, supplicating them to stop farming protectionism that keeps our economies so restricted. You know, "imperialism" is a word with deep meaning and a long history in 3rd world countries.

Probably I will regret later what I say now, but until then: welcome China, thanks for giving the "gringos" a taste of their own medicine.

Who exactly does the protectionism help? Does Brazil's 100% tax on iPads and computers help anyone? There still aren't any Brazilian iPad or computer parts makers, but that doesn't stop the government from forcing citizens to pay double.

If you think America being supplicated by an even larger power is going to be good for the countries historically oppressed by America... you might be surprised. China's "Latin America" is Africa, they have little use for the actual Latin America.

Imagine the US being nuked as "a taste of their own medicine" for previously being the only country to use nukes... how would that work out for developing countries? I would guess not well. Not well at all. Just like a nuclear war impacts more than just the countries fighting, a trade war between two superpowers is going to hurt the developing world far more than it will hurt the US or China.

> they have little use for Latin America

Untrue. China has been making massive investments there to secure natural resources in the past few years.

People should be rightly concerned about the recent backtracking in China's governance, but that is independent of the concerns expressed here. The whole thing reeks of projection. Truth be told, America has benefited the most from the global trade era, with cheap goods and cheap capital practically bestowed like tributes from the entire world. Blame Congress for not redistributing that enormous windfall, not other countries for aspiring to the same standard of living as even the poorest Americans.

Let's forget about Africa/Latin America for a moment. The comparison always ignore 2 differences about the relations:

1.China build roads, buildings not only for living but also whole industrial parks that create jobs in Africa which local population can also benefit later on while the US seldom do the same thing at least with compatible scale. I'm not saying China is unselfishly helping Africans but it's more kind of long term selfish behavior that cultivate local stability and prosperity.

2.China don't set up values promotion preconditions for financial aids to Africa countries while US/Western countries often have a "universal values" promotion agenda combined with financial aids, maybe with good intention.

Western MSM almost always omit these 2 differences when making comparisons trying to sell their own belief that the relations are similar.

Then recognize that it’s not a good position, and what happens when you don’t have leverage to effect change. The US still has leverage, but for how long? The US government has a fiduciary duty to the American people to make sure this doesn’t happen even if it means I can’t afford the top of the line iPhone.

It is no good to see this complex world in binary terms like China vs. US.

As a Latin American you surely noticed how large the China tentacles are. Latin America is full of ongoing Chinese projects where a little local complain trigger a call from the Chinese president.

In Latin America a lot of problems can be explained by internal forces (e.g. corruption). As the Martin Fierro[1] says "Los hermanos sean unidos porque ésa es la ley primera. Tengan unión verdadera en cualquier tiempo que sea, porque si entre ellos se pelean, los devoran los de afuera" [2]

[1] https://en.m.wikipedia.org/wiki/Mart%C3%ADn_Fierro

[2] "Let brothers be united, because that’s the first law. Have a true union in any time that goes, because if they fight each other, they get devoured from outside."

Well said, it is time for us to know what it is liked to get fucked a bit. Should help us be better neighbors. I am excited we are getting to this point, and also afraid, a non-uni-lateral world might be one that ends in violence.

I would look past the juvenile jubilee and bigotry in celebrating comeuppance to the "gringos", but that's all your comment is.

It does nothing but mirror the radical mindset you choose to focus on within America. One might suggest if you were serious about positive change, or even just having a discussion in this thread, you would provide some insight and knowledge toward solutions.

As a Latin American, it's disheartening to read.

When I first learned about neoliberalism it was from The Shock Doctrine by Naomi Klein. Much of the focus in the book was on American corporations and bankers forcing Latin American companies to "open up" and the economic and political chaos that resulted.

Really you have to hand it to China. They figured out how to play the game to win. And now it's their western counterparties that are suffering economic and political chaos.

Greed. America hasn't responded because of greed.

Twenty years ago, as a young student, I took a class in China on doing business there. On the plane over, I got talking to an American who had been doing business there for a good 10+ years. His advice was as true today as it was then: we are allowed to do business there so long as it benefits the Chinese, especially in terms of the transfer of intellectual property and industrial knowledge. A few years after that meeting, my father-in-law’s company went into a co-venture, and like hundreds ( or more ?) of other American firms, eventually saw their venture taken over by the Chinese partner. How many US firms, from bicycles to electronics, have seen perfect clones of their products flood the market as their products were produced by day, and by night, the same assembly line produced knock-offs under a Chinese brand?

But it doesn’t matter. So long as there are a billion potential consumers, American companies will be consumed with their greed, and believe that they can succeed. As The Economist recently wrote, we have completely misunderstood and underestimated China. They have no interest in US companies being successful there.

Tariffs are not the answer; they make us look like a fading empire stuck in the past. Learning to compete and not just rest on our laurels of being the victors of World War Two is the only way for the US to move forward in the world.

> China has effectively been waging a trade war with the US for the past 20 years. ... America just hasn’t responded—which I find baffling.

"Hasn't responded"? It was America's idea in the first place!

It started 24 years ago with the Clinton administration granting China "most favored nation" status.[0] A controversial move at the time, and one that broke a one of Clinton's campaign promises.

Lest anyone think I'm being partisan about this, it's worth noting that the previous administration (George H.W. Bush) had also been supportive of the idea of opening up trade with China, so it was not limited to any one political party. The idea of opening trade with China had been brewing for a long time, and accelerated once the end of the Cold War occurred. 1994 was when it finally came to pass, thus setting up the events we've seen play out between China and the US for the next two and a half decades. Who knows where it will go from here?

It's particularly sad to go back and read statements from past US presidents expressing optimism that there would be "long-term sustainable progress on human rights" in China as a result of expanding trade, especially given what's happening today with China's "social credit" system.[1]

[0] http://tech.mit.edu/V114/N27/china.27w.html

[1] https://www.reuters.com/article/us-china-credit/china-to-bar...

>It started 24 years ago with the Clinton administration granting China "most favored nation" status.

This is wholly inaccurate. China has had MFN status continuously since 1980.[0] Clinton renewed China's MFN waiver in 1994, as did every president each year until trade relations were permanently normalized under Bush in 2002 after China acceded to the WTO.[1]

"Most favored nation" itself is a bit of a misnomer — now known as "(permanent) normal trade relations," it's a status granted to every trading partner. Only two countries (Cuba & North Korea) are denied NTR, with an additional six (Belarus, Turkmenistan, Azerbaijan, Kazakhstan, Tajikistan, Uzbekistan) granted temporary NTR under periodically renewed waivers.[2] Those denials and waivers are based on the Jackson–Vanik amendment to the Trade Act of 1974, punishing countries for violating human rights under communism, not as a trade negotiation tactic.[3]

MFN/PNTR is a core tenet of the world trade agreements (and liberal international order generally) that the United States has been pushing for decades. The very first article of the 1947 General Agreement on Tariffs and Trade (GATT) established unconditional MFN treatment among members.[4] It remains the guiding principle of the modern WTO.

The denial of MFN/PNTR status to China was an anomaly, not the norm — a bet that allowing China into the global community would accomplish more for human rights and well-being than isolating China and preventing the economic rise that's propelled half a billion people out of extreme poverty in three decades.

[0] http://www.cnn.com/ALLPOLITICS/1998/06/03/china.trade/

[1] https://georgewbush-whitehouse.archives.gov/news/releases/20...

[2] http://www.au.af.mil/au/awc/awcgate/crs/96-463.pdf (n.b. Slightly outdated - Vietnam and Ukraine got PNTR in 2006 along with Russia and Moldova in 2012 in the sanctions law known as the Magnitsky Act.)

[3] https://en.wikipedia.org/wiki/Jackson–Vanik_amendment

[4] https://www.wto.org/english/docs_e/legal_e/gatt47_01_e.htm#a...

It is a fact that the growing economic pie in the last 30 odd years has not only increased the wellbeing of people but allowed for a climate of political loosening around the world but particularly in China. This is not a myth. On average, everyone benefited. Conversely it is the threat of a return to the traditional zero-sum rapacity of the capital-rich against the capital-poor since 2008 that has led to the retreat we see in political and economic freedom almost everywhere. You're sadly drawing the wrong lessons from this. Growing the pie isn't your problem. But having the growth go to a small number of people and to wars does not work. Would you still be complaining if the money gained from trade with China were spent on modernizing America instead of wars and stuffing the offshore accounts of a few?

> It started 24 years ago with the Clinton administration granting China "most favored nation" status.[0] A controversial move at the time, and one that broke a one of Clinton's campaign promises.

I think there is more information than in the article on most favoured nation status that might give useful context. The article discusses a relatively narrow set of tariffs on certain items produced in China, largely tied to human rights violations in China; MFN predates this by quite some time.

Most favoured nation (MFN) and its counterpart national treatment (NT) are cornerstones of the General Agreement on Tariffs and Trade (GATT)[0], which was a product of the World War 2 era treaties designed in large part to prevent the sort of interstate acrimony that could lead to World War 3.

The GATT mandates that signatories — including the USA — adhere to MFN and NT, which respectively oblige states to not apply tariffs to one country and not another, and to not favour domestic industry over foreign by way of subsidy or tariff or other market-distorting unfairness by the state. When a state violates MFN or NT, any harmed state has standing to apply a sort of reciprocal treatment, namely they have the colour of right to apply market distorting tariffs and subsidies of their own.

A recent example is the USA application of a tariff on imported steel from Europe, which entitles the European Union to apply a reciprocal tariffs on imports from the USA, such as bourbon.

The GATT evolved into the World Trade Organization (WTO), which routinely determines the merits and quantum of damages associated with often complex accusations of violations of MFN and NT.

The origin China-USA MFN and NT goes back in principle at least to the GATT, which in turn is based on the failures of the inter-war period that lead to WW2.

Which is all to say, it's not accurate to state that the Clinton administration granted MFN status to China (broadly speaking, anyway), and I'm not certain that in the broader context of the complex history of trade relations that any start of the trade disputes we see today can be so precisely pinpointed.

[0] https://en.wikipedia.org/wiki/General_Agreement_on_Tariffs_a...

MFN only obligates countries to not discriminate. It does not obligate them to set tariffs at a particular level (presumably to protect domestic industries). The particular tariff levels are negotiated separately, most recently at the Uruguay round. Since then tariff reduction effort at the WTO is basically stalled.

It's already hard to imagine a Hollywood studio making a movie that puts China in a bad light.

The same is true of all large markets. US movies generally don't put India/EU/Japan in a bad light because the goal is to maximize profits.

Consider the last Pearl Harbor (2001) at the time it was the sixth-best debut of all time in Japan. That was very much intentional and had a big impact on the film.

It's different, because an organization or individual making a negative movie about China might get all their future movies blacklisted from the country.

Hollywood did once put Japanese into a bad light in 80s~90s.

At least in RoboCop 3, the antagonists was Japanese.

https://en.wikipedia.org/wiki/RoboCop_3

Poor Russia

So we're stuck with Russians, Nazis, and fictional -Stan countries. We've already reached that point in the video game industry.

So has the US though through farm subsidies, defense contracts, blocked Qualcomm takeover by Broadcom, blocked purchase of Airbus jets in favor of Boeing jets, etc...

Its all a dirty game.

> Investment into China is difficult

it's also not trade.

And it does nothing to reduce trade deficit. If anything it increases the trade deficit.

Let me give an example: If Tesla builds a factory in Shanghai, even if it does not import these cars back into the US, it can substitute the current export of US-made cars into Asia and thereby reduce US exports and increase US trade deficits.

Why should we care what the trade deficit is?

I don't know, maybe because it has the word "deficit" in it. Maybe we should rename it "dollar winnings" or "greenback surpluses". I am pretty sure the trade deficit is driven by the desire of people outside of US to own dollars and dollar denominated assets. As long as US has the strongest military and is seen as the haven for the rich people around the world to park their earnings the trade deficit will always be there, unless capital control is imposed.

The trade deficit implies that somebody wants to give us actual goods in return for pieces of cotton.

Because private sector deficits lead to recessions: https://en.wikipedia.org/wiki/Sectoral_balances

> And it does nothing to reduce trade deficit.

Sure, it does: net inbound capital flow is necessarily equivalent to trade deficit, so increasing net investment from US to China necessarily reduces the US-China trade deficit (or, increases the China-US one if you do enough of it.)

This is also why trade policy may not be the most effective mechanism to addressing as trade deficit (if you even need to address it, which is a different debate.) Instead, just address the pattern of domestic investment: the more domestic investment opportunity is taken by domestic investors, the lower the capital inflow and the lower the trade deficit.

The keyword here is "net". What you are asking for is free capital flow, mostly in the form of financial market capital. That is not what is discussed here about JV, technology transfer and whatnot. FDI inflow into China can be easily sterilized.

And there is no guarantee with free capital flow you will get net inflow into China. If anything there was an even larger outflow before China tightened up the control. And even if you managed a net inflow into China, there is no guarantee it will reduce the bilateral trade imbalance with US per se, so long as the demand for US assets is not reduced.

Of course if you meant that US could impose capital control to make trade deficit go away, I would agree.

>> Investment into China is difficult

> it's also not trade.

That's not true in the slightest [0]. Trade can be imagined as transactions on a two sided ledger. Investment can be seen as a trade of capital for a claim on future returns from the investment.

[0] https://www.mercatus.org/publications/american-balance-of-tr...

That would remove the US trade deficit as China buying US bonds is an investment.

So, you can use it as a personal definition, but it's not the current definition used in economics.

> That would remove the US trade deficit as China buying US bonds is an investment.

Did you read the source provided? It addresses that very issue.

> So, you can use it as a personal definition, but it's not the current definition used in economics.

Can you substantiate that with some evidence, please?

Yes, I don't think you understood what the link was saying:

"The United States runs a deficit in trade and a surplus in investment and lending, meaning that foreign investors step in to make up for the shortfall in domestic savings."

Trade clearly excludes investment and lending in that sentience.

PS: It's meaningful to talk about the exchange of goods as independent from investment and that's what trade is referring to. Otherwise everything is going to zero out which is a less useful definition.

You're mischaracterizing the source through selective quotation of a summary of a 29 page article on the subject. For some context around your quotation:

"""Foreigners who sell America goods will either spend the dollars they earn on US exports or assets or exchange the dollars with someone else who wants to buy US exports or assets. Thus, America’s international accounts are always balanced.

* The United States runs a deficit in trade and a surplus in investment and lending, meaning that foreign investors step in to make up for the shortfall in domestic savings. As long as domestic savings lag behind investment, foreign investors will make up the difference.

* Deficits with a single country are meaningless. Just as individuals have “trade deficits” with their grocery store, so do nations run deficits and surpluses unevenly with one another, and it is impossible to eliminate these deficits without addressing the gap between domestic savings and investment.

CONCLUSION

America’s commercial trade with the rest of the world is a part of a complex, interrelated system. If the US government intervenes by turning the spigot to change the flow of dollars through one set of pipes, it will of necessity change the flow through other pipes. It is a contradiction to decry the outflow of dollars to buy imports while at the same time seeking to increase sales of US exports or investment in the US economy."""

Again even within that quote it's: "on US exports or assets or exchange"

You are ignoring the or, if it said 'on US exports such as assets' then you would be correct in your interpretation.

Exports are a subcategory of total trade, which again is a useful distinction otherwise they would say trade not Exports. This was intended to confuse without being wrong, but exports and trade are meaningfully different and used in context correctly, but you are interpreting them as the same thing when they are not.

PS: Another way of stating this is trade must be balanced. I exchange one apple for one orange then by the existence of the trade the implication is the orange and the apple have equivalent value with each side valuing the others item more than their own. That's still true if you replace apple with Yen or whatnot which is again why trade deficits are only meaningful when you only look at goods.

Everything is connected so everyone must work together. In the spirit of all huamns being equal the final vision for humanity is countries economic output ranked the same as their population. (and no countries at all perhaps.)

The US is often the provoker of things due to a mix of over confidence and desire for the status quo. Given population differences this has historically only been due to technological and capital knowledge.

Connective technology both spread information/education and also lowers capital requirements meaning the US no longer has an advantage. In face it has many disadvantages culturally including a large sect of tradition it's and people who think trying hard is good enough.

The fallback argument is always around human rights or some other moral grandstanding but the history of the US proves otherwise. No country has perfectly clean hands but it feels like the US doesn't acknowledge this.

I don't the equality of all humans is something that many humans strive for. I don't think it is natural.

I think trade war is just about tariffs on imported goods.

China protecting their country from free roaming of foreign capital can't be considered act of trade war. That's the only way to get ahead of current leaders in any market. If you don't do that, the current leaders will just come and buy whatever you built that's better than what they have and you are left with just coin and nothing on them.

>China has effectively been waging a trade war with the US for the past 20 years. This is a narrative that has not been emphasized enough. America just hasn’t responded—which I find baffling.

It has been a one-sided conflict because the risk of provoking the other is too great. It's like MAD but in the economic realm instead of the military. China has a gotten slight advantage on us by playing chicken and we're afraid that by responding we may escalate too far.

Ridiculous statement. America has been advocating for free trade, we don't see your American companies complaining when they've benefitted from cheap labor in China to mass produce the likes of shoes( eg: Nike) or Apple with iPhones. America is simply imposing tariffs because China has opted to introduce the PetroYuan for oil trades which effectively poses a threat to the USD. America wasn't expecting China to respond but it did. You don't bully your debtholder and expect to get compliments in return.

You’re not addressing the issue. The cheap labor you speak was jobs to millions of Chinese which in the beginning was a very very poor country. Because China was so successful selling goods to America they found themselves with huge surpluses of capital. They couldn’t bring it home because it would drive up inflation and make their exports expensive, so instead they bought American bonds which made it easier for America’s to buy Chinese goods. This wasn’t good will on their part. All the while, China limited market access to foreign companies. Where they were invited in, it was only to boot them out later once they either took the technology or decided that they wanted a local player dominating the market.

All you said sounds to me that China is just smart about their economy. And US is just happily consuming cheap goods bought with money milked from the world using financial and IP sectors.

Reply on news.ycombinator.com