China-US Trade

The blogosphere is already clogged with Syria, and with the question how genuine are President Trump's sentiments about the appalling deaths of 'beautiful babies'. I do not doubt the sincerity of the US Populist: it is through the assertion of such basic American backwoods sentiments that his bizarre candidacy brought him to the White House.

Now the President is sleeping - or, perhaps, tweeting - in Florida, while his distinguished guest prepares for the second day of their get-to-know-you encounter. Both leaders have had intense briefings which have prepared them to start their discussion free from the propagandist piffle that has massively been used in the USA to present China as a ruthless and exploitative economic enemy of the USA. They begin from a mutual recognition of the essential economic facts, which are set out also in my text, NO CONFIDENCE: The Brexit Vote and Economics. 

China is the biggest creditor of the USA. Many billions of the dollars that China took from US firms in exchange for the goods that rising Chinese exporter firms supplied as imports to the USA were spent on buying debt certificates issued by the US Treasury and by other US agencies. So, far from denuding the US of goods, or buying the ownership of US brands on a heroic scale, the Chinese made possible the deficit spending of the Clinton, Bush and Obama regimes as factories and mines faced bankruptcy within the rapidly changing US economy. Welfare could continue to be paid. Some modest infrastructure schemes could be carried out. The US military continued to be funded.

Mr Trump rightly deplores the present state of the US rustbelt, but the simplistic equation that has been made between Chinese imports to the USA and the decline of US heavy industry [in particular] is unsustainable. As many US and international commentators point out, more US jobs have been lost to robotisation and automation of plant within the US that to direct Chinese imports: and where there are conspicuous cases of dumping of products at less than cost price - as has happened with Chinese steel - the US has not hesitated to apply crippling tariffs to the imports. The Chinese have been massive importers of goods to the USA since 1990. By exporting to the US the Chinese have acquired the money with which to buy access to raw materials in Africa and Latin America, and to import machinery necessary to their industrialisation process, as well as helping US governments to maintain their spending on US citizens. Now they are well advanced in the second and third stages of economic development, by which the living standards, thus the real wages, of Chinese skilled men and women are rising rapidly. As a result of that increase in wages in China, Chinese goods are no longer dirt-cheap by comparison with US production. President Trump's wish to see a more level playing field between US and Chinese production is well on the way to accomplishment.

Meanwhile, the USA retains its predominance in intellectual capital; what my book calls ik. Chinese brands have not yet hit the world's markets as Japanese brands did in the nineteen sixties and Korean brands did in the nineteen eighties. China has resisted the mass selling of all western brands in China so that circulating capital can be kept in China to fund the development of Chinese productive powers and the slow emergence of dominant Chinese brands in the home market.

The parameters of the discussion between the two presidents today are very far different from popular press concepts; and there is no reason why the talks should end in bitterness or rivalry.