But if tarrifs are implemented to correct unfair trade agreements, then that isn’t economically unsound policy. How else do you rectify decades of wrong doing. IP theft, china can invest in whatever here, but we have artificial caps there. Significant tarrifs and regulatory issues there, far fewer here. Americans can’t buy property there, China purchases $150B a year in residential property here, pricing out many in the most sought after real estate markets. Forcing technology transfer to a totalitarian borderline authoritarian government and not doing anything would be pathetic.
What other tools do we have that are more palatable than tarrifs? War? Sanctions? Stop trading altogether? How else are you supposed to fix something, if the other side never wants to fix it?
The fact that we have an unfair trade agreement with China now, in no way means that a trade war will necessarily be to our benefit. I imagine it’s going to damage our economy quite a bit, and do the same for China.
You mention that inaction would be “pathetic” which may be the case. And if we want to do something about it, we can, but it doesn’t mean the US or the world will better off for doing so.
Just look at Iraq. For sure, there was a horrible dictator there who committed genocide and other terrible things. So the US acted. Was it a success? Was it the best possible use of those trillions of dollars? Who knows, but I suspect not.
Just because there is a wrong in the world doesn’t mean that we definitely have the means to fix it.
And this won't fix anything. The rest of the world will happily keep doing business with China. The US is just salty. Instead of adapting to new circumstances they cling to US hegemony. Orange man yelling at clouds.
Would you even want to want to buy property in what you describe as an authoritarian, borderline totalitarian country?
The Chinese don't want their property to be subject to whims of party officials, so they invest elsewhere. This is a net positive for Americans (increasing real estate prices mean increasing total wealth), and also a creeping long-term negative for China which they can't easily fix without relinquishing control. Rather than trying to force the issue, USA should continue to take the high road and let the Communist Party slowly boil. It may take a long time, but the Chinese will eventually want their political freedom because they don't have real economic freedom without it.
https://econrsa.org/wkshops/tradepolicy/session2day1-whatsho...
https://nytimes.com/2018/06/20/opinion/trump-trade-tariffs-c...
There is a game theoretical argument for imposing retaliatory tariffs in hopes of instigating the other party to change, eventually reaching an outcome with lower trade barriers than at the start. But there is every indication that Trump fundamentally believes trade is bad (because of a fundamental misunderstanding of trade deficits) and has no intention of negotiating such a deal.
https://www.tcd.ie/Economics/assets/pdf/SER/2017/9trump.pdf
https://twitter.com/realDonaldTrump/status/97134986412578816...
Removing tariffs on manufactured goods between the US and China, for instance, strongly benefits people who can set up factories to take advantage of the cheaper labor and materials. It weakly benefits consumers who get slightly (if at all - corporations might just take the difference as profit depending on the level of competition) cheaper goods, and it disadvantage all of the working class that now has to compete with cheaper Chinese labor.
This can be mitigated by income redistribution, funding for job skills retraining, and so on (although it kinda sucks to find yourself back at the bottom rung of a new field at 40 because you can't find job opportunities anymore) but, historically, these programs haven't received any funding, so it's pretty safe to assume they won't exist until proven otherwise.
Also, you say that Trump misunderstands trade deficits. Can you prove that at all? He's a very successful businessman. I would be more likely to think it's you with the misunderstanding.
>Removal of trade barriers is always good, even if it's unilateral and asymmetric.
then just make it. A strong statement and a pdf link isn't very convincing.
Maybe it becomes clearer by asking, "How does allowing China to own US companies harm the US (economically)?"
Now it's obvious, it's economic warfare, and a foreign power that creates an imbalance of this nature could be reasonably classified as an invasion.
Note, the US government doesn't "buy" companies, private citizens do. Yet, I would have no issues with private foreigners buying companies, I do think having a foreign government buying companies is very bad, especially if their leader is a dictator for life.
How does allowing the US to own Canadian companies harm Canada (economically)?
How does allowing the US to own French companies harm France (economically)?
How does allowing the US to own Nigerian companies harm Nigeria (economically)?
The US management class has grown fearful of foreign owners. Because the foreign owners generally do not place Americans at the top levels because they can't trust them.
You say that as if it is a bad thing, but in europe foreign investment like this can be a source of inequality and makes houses unaffordable for the middle class
I'm curious, why "directly harming others"? The argument here is that you doing as you please (selling critical technology to the Chinese) is indirectly harming others so I'm curious about the distinction you draw between when it's okay to harm others and when it's not.
Singapore, Switzerland, Hong Kong, and Macau all have 0 import tariffs, and rather than mass unemployment they are incredibly rich by international standards.
One issue I have with economists and their theories of tariffs is they are unable to consider the effects of institutional tariffs and subsidies. Meaning companies while the could buy foreign products instead buy locally produced ones. And the banking sector shows strong preferences to who they extend capital to. For instance providing capital to build a factory and refusing to loan money to buy back shares.
So a banking haven, with banks so massive they'd require the big US banks to get over 10x larger to match the relative scale to the Swiss economy.
A tiny, highly regulated gambling haven, that can't be replicated to the US scale at all.
And then two tiny islands in Hong Kong and Singapore, with a combined 13 million people.
That's a really terrible comparison sheet for arguing low tariffs are a big benefit to the US economy.
Now show me the same for: Germany, France, UK, Japan, Australia, Canada, China, India, Italy, Brazil, Russia, Spain, South Korea. The world's largest economies, and countries that actually have serious population sizes.
They have 0 imports because they hardly produce anything.
Most of the top 20 wealthiest countries have tariffs.
https://en.wikipedia.org/wiki/List_of_OECD_countries_by_GDP_...
Also, I don't know why we keep deferring to economists as if they know anything since they are wrong about everything ( even the nobel prize winners ) and economics isn't an empirically testable science. Economics is a religion more than a science. It's ridiculous we treat it as a science.
Remember that we are supposed to have been in a world ending global recession for the past two years according to one of the most "eminent" economists.
https://www.nytimes.com/interactive/projects/cp/opinion/elec...
There's a strong sentiment in certain circles that the best way to deal with emerging powers is by incorporating them into global neoliberal institutions. The theory is that including these countries sets up the correct incentives for liberalization, and that liberal markets beget a middle clas s which eventually demands democratic voice. And democracies are western-friendly.
So the roadmap for China was supposed to be a gradual liberalization, first economically and then politically. This strategy is a long game and "requires patience".
I'm not particularly convinced by this argument (it's too... cold war-y), but I'm doing my best to portray it accurately. And if you accept its basic premise, then there's a strong geopolitical long-game case for "putting up with" asymmetric trade barriers.
That was supposed to be the plan, but the Chinese government didn't blink in 1989, when the demand for democracy happened. And they suffered no consequence for it. In retrospect that is when we should have realized that the script wasn't going to work.
Why shouldn't it? Neither the stock market, nor capitalism cares who buys shares of a company. If China isn't interested in investments from the US, wouldn't that just make their own markets less efficient?
If your goal is efficient markets, then it shouldn't matter where your investment dollars are coming from.
I don't understand where this ridiculous notion of 'fairness' in capital markets is coming from. Money is money, if you want to ascribe morality to it, then this is not the economic system to do so in.
Consider this question: Should, say Nigeria allow US-based companies or persons to buy Nigerian companies/mineral rights/agricultural land?
If so, why? Under a reciprocal agreement, it's not like Nigerian companies are able to buy US companies/mineral rights/agricultural land. Even if they were allowed to in theory, they wouldn't have the money.
Does this mean that Nigeria should close itself to outside investment? Would Nigeria be better off if it did so? Is it only hurting itself by being closed to American investment?
They're asking why, if China doesn't allow US ownership of Chinese companies, should the US allow Chinese ownership of American companies, not some abstract question of fairness. Currently there are severe controls on US activity in the Chinese market, ownership restrictions among them.
>China doesn’t let US companies buy Chinese companies
Is that really true? I found this stat - https://imgur.com/a/z5eAykw Seems like there is a lot of inbound activity.
>Leaving aside notions of fairness, what is the theoretical basis for arguing that the US should nonetheless allow Chinese ownership of US companies?
The US has sold bonds to China. It doesn't mind taking money from China to finance itself. I'd say the same foreign policy should extend to foreign investment, no? Oh and it has the power to stop legal purchases of US businesses from China (e.g. Micron) when it wants to. The US government can and has exerted a lot of power to keep certain kinds of tech in the US.
And as a point of comparison .. Not sure if there are any Chinese companies here :-
http://fortune.com/fortune500/list/
But there seem to be a lot of US companies here http://www.fortunechina.com/fortune500/c/2017-07/20/content_...
China has really perfected the practice of massively unfair trade practices and perform them with the masterful foresight of a chess grand master. They've managed some pretty brazenly one-sided practices all without falling afoul of the WTO.
The problem I have with Trump's agenda is that he's playing this whole thing like a rank amateur going up against Magnus Carlsen, and he's going to get smacked down hard. Trump has managed to piss off all of our closest trade partners, and has seemingly taken bribes from the Chinese to relax the embargo on ZTE. The US economy is on the verge of a major collapse from Trump's rather arrogant and unfocused use of tariffs against every major trade partner. Trump's efforts are going to fail, and in a massively spectacular way that will cause massive damage to the US economy, and will leave China in a very favorable position.
A better strategy would have been a coordinated effort with our closest trade partners and allies to place pressure on China via technology and financial embargoes, as well as getting the WTO to identify and penalize China's massive indirect corporate subsidies. A global coordinated effor of cutting China off from the global markets until they open they massively reform their trading practices and open up their local markets to foreign companies is probably the only viable way to equalize trade with China.
>On behalf of @realDonaldTrump, the stories on investment restrictions in Bloomberg & WSJ are false, fake news. The leaker either doesn’t exist or know the subject very well. Statement will be out not specific to China, but to all countries that are trying to steal our technology.
https://twitter.com/stevenmnuchin1/status/101125820718296678...
