China Ready For Talks With the US to Resolve Trade Issues

[BlackTortoise + 103]

China is ready to have discussions with the United States and work to resolve trade issues because the world’s two largest economies stand to lose from confrontation, said Vice President Wang Qishan. 

Speaking at the inaugural Bloomberg New Economy Forum, Wang stressed that trade and economic cooperation remain the “anchor and propeller of a steady and healthy relationship” between the US and China, one that will have a direct impact on stability and development around the world. It remains China’s “firm belief” that both countries will “gain from cooperation and lose from confrontation”, said Wang.

Over the past months, the world’s two biggest economies have been embroiled in a trade spat that have seen tariffs being slapped on billions of dollars of goods, stoking fears of how a protracted conflict between the two economic superpowers could derail the global economy. 

[Brian W + 78]

It's hard to negotiate with a country that refuses to accept the inherently fair system of free trade. China bans some of the US companies from even entering the market and also have comparatively high import tariffs compared to the rest of the world. The only thing in this situation the US could do is to raise their own tariffs so they have something to hold over their head. 

[Sofia + 35]

Free trade isn't inherently fair. It favors those with capital. It's pretty obvious why countries don't want foreign entities dominating major essential industries within their borders. Every single country has a minimum of protective tariffs and domestic subsidies if they can manage it. China just takes it a step or two further, while they still can.

[Stormysaga + 62]

Maybe it's time for China to take a few steps back. They're no longer an emerging economy. They're the second largest economy in the entire world.

The problem with the trade war is not that Trump picked a fight with China; that part was reasonable. The problem with the trade war is that he simultaneously picked a fight with completely unrelated countries like Canada and the EU, especially since his reason to do so was that China was acting in bad faith. If he stuck  just with China, the trade war would've been seen as a legitimately good move by most people.

[NatGasDude + 94]

2 hours ago, Stormysaga said:

Maybe it's time for China to take a few steps back. They're no longer an emerging economy. They're the second largest economy in the entire world.

The problem with the trade war is not that Trump picked a fight with China; that part was reasonable. The problem with the trade war is that he simultaneously picked a fight with completely unrelated countries like Canada and the EU, especially since his reason to do so was that China was acting in bad faith. If he stuck  just with China, the trade war would've been seen as a legitimately good move by most people.

I agree that perhaps a wiser approach would have been a united front against China to protect intellectual property rights of European, American, and Canadian companies.

China is very sneaky and capable of transferring shipments around Asia to non tariff free nations, and then exporting to the US anyway, so the potential economic impact can be mitigated and side stepped by the Chinese, at least partially.

[Dan Warnick + 6,100]

18 hours ago, NatGasDude said:

I agree that perhaps a wiser approach would have been a united front against China to protect intellectual property rights of European, American, and Canadian companies.

That assumes that the countries you mention would have fought China alongside the U.S. if the U.S. had chosen to only stand up to China.  I don't think that would have happened anymore than those countries stood with the U.S. when fighting the nuclear capabilities of Tehran.  I think the evidence is pretty strong that those countries were quite happy with their imbalanced trade with the U.S. and were/are intent on licking China's, er, feet.

[Dan Warnick + 6,100]

15 hours ago, mthebold said:

In every case I've looked at, Trump's tariffs attacked another country's tariffs, VAT taxes, unbalanced regulations, or other unfair practices.  To me, that's legitimate.  Do you know of any counter examples? 

Spot on!  Interesting that this very important issue is almost always left out of the argument in favor of painting Trump and the U.S. as the bad guys.  They also leave out technology theft of every variety, most of it blatant; some of it covert and some of it extremely covert.

[Jan van Eck + 7,558]

21 hours ago, Sofia said:

Free trade isn't inherently fair. It favors those with capital. 

Not really.  It favors those with cheap labor, especially immobile cheap labor.  Capital is inherently free to move, to go where it can obtain returns.  Capital flows quite freely across borders.  Cheap labor cannot.  Cheap labor is not "free trade," in that there can be no mutual advantage, what economists call "comparative advantage."  Instead, the possession of lots of cheap labor results in that country having an absolute advantage.  So the other country, with expensive labor, gets their factories shuttered, and has industrial unemployment, and big social costs and drug addiction problems.  Look at France;  look at the "rust belt" in the USA, States such as Ohio and Michigan. 

Mr. Trump instinctively recognizes this, not in an intellectual way, but in a gut way, and recognizes that it is unfair to the US and its work force, and then uses this in attempting to convince manufacturers to move production back to the USA.  Whether or not you like Mr. Trump is beside the point. In this, his analysis and action is accurate. 

[Rasmus Jorgensen + 1,169]

18 minutes ago, Jan van Eck said:

Not really.  It favors those with cheap labor, especially immobile cheap labor.  Capital is inherently free to move, to go where it can obtain returns.  Capital flows quite freely across borders.  Cheap labor cannot.  Cheap labor is not "free trade," in that there can be no mutual advantage, what economists call "comparative advantage."  Instead, the possession of lots of cheap labor results in that country having an absolute advantage.  So the other country, with expensive labor, gets their factories shuttered, and has industrial unemployment, and big social costs and drug addiction problems.  Look at France;  look at the "rust belt" in the USA, States such as Ohio and Michigan. 

For industriel industry I would say generally true. But there are examples of countries / companies with high labour costs moving higher in the value chain. 

Additionally, there are high end service and tech industries. I do recognize, however, that these don't provide same mass employment as industry.

[John Houbion + 31]

I suspect Congress allowed the exportation of crude oil in order to reduce our trade deficit.  As bad as it is, only tariffs will repatriate jobs to our shores and reduce dependency on government handouts. These exports furthermore keep oil prices much higher than they would otherwise be.  I don't see China imposing tariffs on our oil like China does on our soybean, I wonder why!

On the other hand, Congress gave a 40 % corporate tax cut to all the companies that profit from manufacturing and importing goods from abroad.  It doesn't do the country any good and will only exacerbate the trade deficit by encouraging bad behavior.

Thanks.

[John Houbion + 31]

Spot on!  Interesting that this very important issue is almost always left out of the argument in favor of painting Trump and the U.S. as the bad guys.  They also leave out technology theft of every variety, most of it blatant; some of it covert and some of it extremely covert.

The VAT is the most insidious tariff on US exports, currency manipulation is the next one.

With an annual global trade deficit of $1 trillion, the dollar should go down and eventually dissipate the deficit as it did in the past.  It is no longer happening!

Thanks.

[Rasmus Jorgensen + 1,169]

2 hours ago, mthebold said:

The other problem with this is that service and tech industries go where the manufacturing is - along with R&D, education, and everything else.  

Manufacturing is the gateway from poor, rural, uneducated life to the middle class.  Manufacturing supports smaller communities that can't host a Google or Amazon.  It lifts people with agricultural skills into the basics of engineering, management, and business.  It allows blue-collar workers to send their children to college.  When you gut manufacturing, those who have already climbed the economic ladder might remain at the top, but those at the bottom are utterly screwed.  But even those at the top eventually suffer as foreign countries - with their manufacturing base and upward mobility - take the lead in innovation.  

I understand. 

All I am saying is that there are examples of the opposite. A very good one is hightech offshore shipbuilding in Norway. They build the labour intensive hulls in Eastern Europe and them tow the to Norway for outfitting. In Norway the norwegians does all the finishing and Norwegian suppliers supply lots of the hardware. This is has been going on for many years and the eastern europeans yard have gotten better and better, but the Norwegians keep innovating and moving higher up the value chain...I know you will say this is a niche market and cannot provide mass employment, which is partly true, but only partly.

Of  course trade has to be fair and balanced but economics is not zero sum game. Comparative advanteges does exist. 

And ps - I do understand the pligth of community that gets competely gutted when plant shuts down. 

[Enthalpic + 1,496]

29 minutes ago, mthebold said:

 if a country's culture is such that there's a continuous supply of cheap, exploitable labor, I would protect my country's work force against such an absolute advantage.

...

But if a country abides by sufficiently similar trade laws, regulations, and cultural norms for there to be a level playing field, then of course the best people should win.  

Canadians are well compensated... no cheap exploited labour here. 

 

You said it... "the best people should win" don't be sore.

[Rasmus Jorgensen + 1,169]

10 hours ago, mthebold said:

On that note, I would only consider tariffs & "protectionism" reasonable to counter tariffs, protectionism, and "absolute advantage"

That just the point the point though - I don't think that absolute advantages exists. I agree they can appear to, though. In the case of Norwegian offshore shipbuilding : They have been able to compete against China for years despite Norwegian wages being way higher than American wages. Why? Because when faced with competetion companies (and the Norwegian government) took up the challenge. They moved higher up the value chain. The government helped fund re-education; they funded basic research that lead to innovation and creation of new industries. What they did not do was to enact protectionist policies.

I know this is a very simplistic example used as an answer to a complex problem. I understand that when entire industries face death it can deal a massive blow that no community can recover from.... But overall you need to look forward. Not backward. When point 1 finger at others you point at your self. 

10 hours ago, mthebold said:

you don't protect your work force, you destroy that gateway to the middle class, which destroys your future innovation.

Here is our real difference : You say the workforce needs protecting. I say they need to be nudged, pushed or demanded to advance.... 

 

[Rasmus Jorgensen + 1,169]

11 hours ago, mthebold said:

But if a country abides by sufficiently similar trade laws, regulations, and cultural norms for there to be a level playing field, then of course the best people should win. 

The west generally has a culture that supports innovation.... Does that give other countries the rigth to hit us with tariffs? 

Or are we the only victims?

[Norm Young + 2]

2 hours ago, Rasmus Jorgensen said:

That just the point the point though - I don't think that absolute advantages exists. I agree they can appear to, though. In the case of Norwegian offshore shipbuilding : They have been able to compete against China for years despite Norwegian wages being way higher than American wages. Why? Because when faced with competetion companies (and the Norwegian government) took up the challenge. They moved higher up the value chain. The government helped fund re-education; they funded basic research that lead to innovation and creation of new industries. What they did not do was to enact protectionist policies.

I know this is a very simplistic example used as an answer to a complex problem. I understand that when entire industries face death it can deal a massive blow that no community can recover from.... But overall you need to look forward. Not backward. When point 1 finger at others you point at your self. 

Here is our real difference : You say the workforce needs protecting. I say they need to be nudged, pushed or demanded to advance.... 

 

I think the markets are predicting for the world the damages that are resulting from even talking about tarriffs.   Look at the price of oil or copper, for instance.  Demand is falling in China.  The problem with tarriffs is that  from the perspective of markets there is no us, only we.    Problems in China and emerging markets will not stay there.  They are not staying there.  Ask any investor.

[NatGasDude + 94]

2 hours ago, Rasmus Jorgensen said:

Here is our real difference : You say the workforce needs protecting. I say they need to be nudged, pushed or demanded to advance.... 

 

So what happens when we run out of developing countries to manufacture goods for us? The auto industry has already shown that despite so many innovations in automation and robotics, we still need people on the factory floors. Some of the best innovations haven't been in fully automated processes, rather, the mechanized body suits being used by GM, Toyota, Honda and Ford that allow workers to lift objects without injury and avoid sustained shoulder stress from hoisting drills in an upward direction.

You make a great point about Norway-they set an example for stepping up their quality and manufacturing to create value and take market share. This is the way to go for manufacturing in the developed world. I also believe that there is a catch to all of this-products should evolve towards being more durable and longer lasting (like many old automobiles and appliances from the 50's-70's), even though this will come at the expense of sales volumes. The consumer may have to look at buying a car as a 10 year investment in a very high quality machine with more aluminum/steel than plastic parts in the engine compartment.

For the offshore/outsourcing case, and anti protectionism consider this-once China and other Southeast Asian countries develop a robust middle class, and labor costs sky rocket, where will things be manufactured? I think that the future involves de-globalization of labor, but increased globalization of product exchange. Companies will start migrating factories back to their nation of origin because of increasing costs overseas that will negate the incentive to offshore/outsource, and yes, a more educated technician/engineer workforce will be required to supervise and work the floors of modern factories for higher pay of course. (in-house vocational/technician training and licensing rather than 3rd party college/university degrees, targeting un-utilized portions of the workforce that have potential but are not college-bound types)

Because of the nature of global manufacturing, the X factor is going to be INNOVATION, which is why the countries that spend so much capital on developing the most advanced tech need to protect their intellectual property. Inventions and tech developments cost billions and are the result, as you mentioned, of investing in education and training and creating an environment conducive to innovation. Companies that build factories in Asia and willingly sign away IP are exchanging priceless technologies for a quick buck which will soon be short lived because of the rate of development of the workforce in Asia into a higher educated middle class that may no longer want to work factory floors anymore (just like the US).

2 hours ago, Rasmus Jorgensen said:

The west generally has a culture that supports innovation.... Does that give other countries the rigth to hit us with tariffs? 

Or are we the only victims?

I don't understand this statement. Are you trying to say that the West deserves to get tariffed because of their capacity to innovate? Merit is earned not stolen, a society has the right to profit from their cultivation of human resources via individualistic and independent philosophy and approach to education. These are the fruits of western culture, and it took centuries to develop this widespread tradition that produced Newton, Einstein, Shannon, Turing, Von Braun, etc. Asia is not a victim because they have chosen to promote centuries of subservience rather than individualism and innovation(and continue to stifle free thought), that was their choice, and that culture has its own benefits despite these downsides.

Tariffs also victimize the very countries imposing them. Victims all around. We all have to deal with it until the world can agree on what is mutually fair and balanced exchange of goods and knowledge. It is an example of countries exercising their sovereignty.

 

 

[Dan Warnick + 6,100]

3 minutes ago, mthebold said:

I can see how a business owner would prefer your system.  If society collectively pays labor costs, it reduces the burden on businesses.  That's a sweet deal.  Throwing immigrants into the mix makes it even better: you get lower wages, and you don't have to pick up the social costs.  

And they are less likely to organize against an abusive management.

[Rodent + 1,424]

2 minutes ago, mthebold said:

Minor detail: US refineries are designed to handle the heavy, sour crude that was available at the time.  They can't efficiently handle the light, sweet crude produced by fracking.  Thus, the US benefits from importing heavy sour and exporting light sweet.  Legalizing exports made this possible. 

YupYup. If only we could refine our own crude oil. And Venezuela's heavy crude oil is ... well... in short supply these days. Miraculously, though, we're still getting about the same amount from Venezuela. Not sure how long that supply will last.  Then there's Canada's heavy oil, which is having a hard time making it out of country thanks to some overzealous anti-pipeline activists and a few stubborn politicians. 

We get a fair amount from THE KINGDOM (it just seems like that should be in all caps, doesn't it?) too, but not sure what kind of oil. Interesting to note the trend in the amount of oil from KSA to US (in thousand barrels per day):

Jan 744

Feb 667

March 760

April 904

May 872

June 847

July 876

August 1,039

 

I recall KSA's plan to stop shipping the US so much oil not too terribly long ago.

 

[Rasmus Jorgensen + 1,169]

On 11/9/2018 at 7:22 PM, mthebold said:

The only time problems occur is when incompatible cultures & economies are forced to interact.  It seems to me that corporations find profit in all the off shoring & immigration, but it's bad for the people.  

Global free trade has made the world and largely everybody in it richer and safer. That is a fact. 

[Rasmus Jorgensen + 1,169]

On 11/9/2018 at 7:22 PM, mthebold said:

I can see how a business owner would prefer your system.  If society collectively pays labor costs, it reduces the burden on businesses.  That's a sweet deal.  Throwing immigrants into the mix makes it even better: you get lower wages, and you don't have to pick up the social costs.  

Not true. Simply not true. 

Society collectively pays social cost for everybody. Meaning a lot more are covered. Feel free to check the facts. 

Re wages look at wages and degree of unionizing in Scandinavia - way higher!

[Rasmus Jorgensen + 1,169]

On 11/9/2018 at 7:13 PM, NatGasDude said:

So what happens when we run out of developing countries to manufacture goods for us? The auto industry has already shown that despite so many innovations in automation and robotics, we still need people on the factory floors. Some of the best innovations haven't been in fully automated processes, rather, the mechanized body suits being used by GM, Toyota, Honda and Ford that allow workers to lift objects without injury and avoid sustained shoulder stress from hoisting drills in an upward direction.

You make a great point about Norway-they set an example for stepping up their quality and manufacturing to create value and take market share. This is the way to go for manufacturing in the developed world. I also believe that there is a catch to all of this-products should evolve towards being more durable and longer lasting (like many old automobiles and appliances from the 50's-70's), even though this will come at the expense of sales volumes. The consumer may have to look at buying a car as a 10 year investment in a very high quality machine with more aluminum/steel than plastic parts in the engine compartment.

For the offshore/outsourcing case, and anti protectionism consider this-once China and other Southeast Asian countries develop a robust middle class, and labor costs sky rocket, where will things be manufactured? I think that the future involves de-globalization of labor, but increased globalization of product exchange. Companies will start migrating factories back to their nation of origin because of increasing costs overseas that will negate the incentive to offshore/outsource, and yes, a more educated technician/engineer workforce will be required to supervise and work the floors of modern factories for higher pay of course. (in-house vocational/technician training and licensing rather than 3rd party college/university degrees, targeting un-utilized portions of the workforce that have potential but are not college-bound types)

Because of the nature of global manufacturing, the X factor is going to be INNOVATION, which is why the countries that spend so much capital on developing the most advanced tech need to protect their intellectual property. Inventions and tech developments cost billions and are the result, as you mentioned, of investing in education and training and creating an environment conducive to innovation. Companies that build factories in Asia and willingly sign away IP are exchanging priceless technologies for a quick buck which will soon be short lived because of the rate of development of the workforce in Asia into a higher educated middle class that may no longer want to work factory floors anymore (just like the US).

Agree 100 %. Economics is not a zero sum game. At least not longterm. 

[Rasmus Jorgensen + 1,169]

On 11/9/2018 at 7:13 PM, NatGasDude said:

I don't understand this statement. Are you trying to say that the West deserves to get tariffed because of their capacity to innovate? Merit is earned not stolen, a society has the right to profit from their cultivation of human resources via individualistic and independent philosophy and approach to education. These are the fruits of western culture, and it took centuries to develop this widespread tradition that produced Newton, Einstein, Shannon, Turing, Von Braun, etc. Asia is not a victim because they have chosen to promote centuries of subservience rather than individualism and innovation(and continue to stifle free thought), that was their choice, and that culture has its own benefits despite these downsides.

Tariffs also victimize the very countries imposing them. Victims all around. We all have to deal with it until the world can agree on what is mutually fair and balanced exchange of goods and knowledge. It is an example of countries exercising their sovereignty.

 

 

I was trying to be witty. Our cultures produced innovation. This has given us a competetive advantage. We lose that when we start enacting tarifs, beause it reduces the need to innovate. . 

Edited November 12, 2018 by Rasmus Jorgensen

[Rasmus Jorgensen + 1,169]

On 11/9/2018 at 7:26 PM, Dan Warnick said:

On 11/9/2018 at 7:22 PM, mthebold said:

I can see how a business owner would prefer your system.  If society collectively pays labor costs, it reduces the burden on businesses.  That's a sweet deal.  Throwing immigrants into the mix makes it even better: you get lower wages, and you don't have to pick up the social costs.  

And they are less likely to organize against an abusive management.

As stated in another conversation 

1) total social costs go up when there are more people. Simple math. 

2) Unions and labor rights are much stronger in Scandinavia than in the USA. 

Funnily, above is actually a structural problem that Scandinavia needs to fix. I am not stating above because I am leftist. On the contrary if there is one thing I am not it is a leftist. 

Edited November 12, 2018 by Rasmus Jorgensen

[Rasmus Jorgensen + 1,169]

@mthebold 

Thanks for a good discussion. Let's end it here before it gets too politcal.