Why Bannon Had to Go: The Importance of China

On leaving the White House, Steve Bannon promised to wage war on the enemies of the President of the United States. Of course, he means  that he is ready to fight anyone who challenges his idea of the 'mission' of the United States: which may now come to include Donald Trump, if Trump can retain the presidency.

The idea of waging a trade war against China, even at the price of ignoring the buildup of North Korea's nuclear arsenal and Kim's development of rockets capable of reaching the continental USA, is far too crude to be practicable.

The rustbelt that provided a huge cohort of dedicated followers of the Trump line was not created by the Chinese. Factory sites became derelict, and lives were 'ruined', in consequence of thousands of decisions that were taken by US Corporations; with the encouragement and support of the Econocracy. Many of those decisions were based on the fact that components for advanced manufacturing could more cheaply be bought from emergent countries - including China - than by building and equipping new factories in the US and training the appropriate workforce. This enabled major corporations to concentrate their investment on the 'top end' of manufacturing, and on research and development for innovative products.

Simultaneously, American retailers found new cheaper sources of consumer products, which could thus be sold [largely under the retailers' 'own-brands'] at prices that could maintain some shreds of a consumerist lifestyle even for the ex-industrial workers and their children who survived on government benefits in the rustbelt. Hence imports from emergent countries, not just China, enabled their mass-producers of such products to expand their capacity and reduce their costs. Hence they improved their competitiveness with surviving US manufacturers of similar goods; many of whom were ruined. This all suited the model of 'free markets' that forms the basis of recent econocratic theory. The fact that it left individuals who were sunk in mortgaged houses without the means [economic or intellectual] unable to move on from where they were, rather than to seek new economic opportunities for themselves, is beneath the radar of the Econocracy. Equally invisible to most Econocrats is the fact that as the proportion of the population who are sunk in misery expands, so the communities in which they live progressively lack the will and the means to renew or replace collapsing infrastructure. Until an urban area falls so far into dereliction that it becomes a source of potential danger to the rest of the country - as happened with Detroit a few years ago - national government ignores the problem, while the bankrupt local government is incapable of tackling it. Even after a major assault on poverty and its causes, large areas of greater Detroit remain deeply depressed; and eyesores have not been removed.

While the rustbelt was consolidating, the lead by which the USA is ahead of the rest of the world in advanced technologies has become greater than ever. America remains the predominant and military power in the world, and even despite Chinese efforts to develop and promote competitors like Alibaba their corporations remain far behind the US in developing intellectual property. And here is the pressure point. Bannon's reason for wanting a trade war with China rests precisely on the point that China is determined to catch up with the USA in all areas, and that China will use fair means or foul: just as the US did in the nineteenth century when piracy of European intellectual property was fostered by state and federal governments, principally by deferring the development of laws to protect alien intellectual property until there was an equal danger of American inventors loosing out in global competition.

Bannon has picked on an aspect of trade policy that is used heavily by China now, and was used in Europe and America over a couple of centuries. This is the requirement that the technology used in imported devices and products should be understood, so that the items can be allowed into the country on health and safety grounds. It involves requiring the intending importer [or the company hoping to open a subsidiary plant in China] to disclose the technical matters that - whether reasonably or not - the Chinese regulators say is necessary for the product to be sold as safe and healthy in China. Once those technological data are disclosed to Chinese authorities, there is a danger that they will be leaked to Chinese competitors for their commercial benefit; as has happened in Europe and North America in the past.

To treat this as an act of war is absurd: it is a matter for patient negotiation, case by case; always remembering that in such issues it is best to speak gently, and carry a big stick. America needs better to coordinate the ambitions of US companies to develop trade with China with the need to protect American intellectual property. Steve Bannon will have done his country a huge service by highlighting the issue; but his use of bellicose rhetoric meant that his role in government had to be brought to an end.