A boom in exports that has pushed China’s trade surplus past $1tn for the first time reveals the extent to which its economy is still overwhelmingly reliant on foreign markets – and the difficulty figures like Donald Trump will have in trying to rebalance global trade.
So the people who import things are bad because they rely upon foreign production and are being beaten by China! And, China is in a bad place because it is reliant upon foreign markets for its exports!
Trade is bad, see!
But anyone who buys anything is reliant on someone else to do the production. And anyone who produces anything at all is dependent upon markets for their revenue. That there’s a national border in there somewhere only brings the idiocies of politics into this.
But there are people out there who think that trade itself is bad and they’re not all Victorian aristocrats. There’s a very dignificant green and lefty line that thinks we should all be self-supporting peasants on a bit of common land.
Except for the elite, of course.
But this idea that international trade is bad is that same idea write a little smaller. Swapping stucff with the slant-eyed crafties is bad, d’ye see? This just leading to the ultimate question of how rotten do you like your winter turnips?
The real imbalance is caused by the wilful deindustrialization of Europe.
Capitalists will produce where it is cheapest. When somewhere else is cheaper then they’ll move on.
In any case China has a massive debt crisis looming. As the Chinese also own a lot of US debt the two are locked in a deathly embrace. They need each other.
“dignificant” – is that Sir Simon Jenkins?
International trade is good.
International trade which involves the destruction of (much of) the rest of your economy and particularly your nation’s ability to defend itself or its interests against the country to which you have offshored all your manufacturing, less so.
It is true that widgets made in small towns in the rust belt and the north of England are more expensive than the same (or similar) widgets made in China.
But what are the costs to a town like Blackburn of the closure of all of their factories?
Getting widgets for £1 instead of £2 is obviously good; but how many blokes who might have supported families making £2 widgets are now getting the other £1 in benefits, anyway?
Not sure. Not sure about a lot of this, to be honest. I just know it’s not as simple as cheaper widgets good.
We don’t seem to be all that conspicuously richer as a country, with our £111 billion annual payments just to service the interest on our debt, much of which is used to pay the above benefits, since we decided not to make our own shirts any more.
Yes yes yes, comparative advantage, blah blah, but did Ricardo imagine a competition between two nations, one of which employs industrialised slave labour and actually does fuck up its environment?
It’s not that they’re better at widgets than we are, and that’s the end of it, so shut up and buy your widgets.
There are solutions which would narrow the gap – less envirobollocks here, fewer roadblocks to starting businesses and hiring and firing, lower taxes etc etc.
But Clinton should never have given China Most Favoured Nation status, the silly cunt.
The problem is that instead of taking advantage of getting widget A for £1 rather than £2 (by using the resultant spare capacity and money saved to develop widget A-plus), we’ve used that saved pound to pay benefits.
As I understand it, Ricardo was against the Poor Laws and against benefits in general for that very reason, and that is the problem with Tim’s analysis as things now stand in our country. Once the benefits genie has been unleashed, it’s impossible to put back in a democracy, and the benefits of free trade and comparative advantage are lost.
(As always, happy to be corrected on this by someone who has actually read Ricardo; it’s why I come to this blog.)
Essentially my point (or part of it).
But what are the costs to a town like Blackburn of the closure of all of their factories?
I lived just outside Blackburn from 1953-70, leaving for uni. In my teens I encountered my first black face in the form of West African waiters in the officers’ mess of my dad’s ship. Today the population of the town is 35% Pakistani, as is the mayor and the ‘MP for Gaza’ (in my day it was Barbara Castle).
Setting up trade so you have to pay £2 for a widget to save a job in Blackburn means you have firmly seized the tiger’s tail and are committed to keeping that job for life, even if the price falls to 50p or 10p. Meanwhile you are suppressing the innovation needed to provide alternative jobs.
And if we feel that the bill for benefits is too high, the solution is not creating or preseving loss-making jobs.
Lucky we stopped doing low-end manufacturing and switched to services, luxury and specialist manufacturing. We didn’t need Willy Hutton directing everyone towards getting our own Mittelstand, we just left it to the market and stopped making cheap knickers and started making luxury brogues and parking meters instead.
“Lucky we stopped doing low-end manufacturing and switched to services, luxury and specialist manufacturing.”
Yes because everyone needs a Burberry handbag when the chips are down……forget food, energy and basic manufactures, no one ever needs them in a crisis.
What @interested said. It is now belatedly obvious to me that Chinese policy is to deindustrial the West to establish military and political superiority.
As I said I was slow to grasp this but at least I was quicker than Tim. Tim’s niche is that he is a free trade advocate and I guess it is difficult to persuade a man of something when his job depends on him not understanding it.
Why does China care about being militarily superior? So they can take over lots of land and grow vegetables and rice? Why would they do that rather than just making lots of industrial goods and getting richer?
Where’s the evidence for Chinese belligerency in the past 50 years? They got involved in Vietnam and a bit of involvement in Somalia (like almost everyone else). They’ve been involved in fewer wars than we have.
And I don’t think China thinks much about deindustrialising the west. We did that. We raised the price of energy created lots of bureaucracy around manufacturing. China didn’t do that, plus their labour rates were lower.
Yes – all the evidence points to China wanting to be militarily inferior. It has no designs on Japan, or Taiwan – that’s just nonsense put about by… someone. They maintain a vast army for no real reason, and they keep developing next gen fighter jets and other weapons because they’re bored.
FTAOD I don’t think they’ll be invading the US any time soon – that they have no need to do. But there could easily be resource wars in Africa and South America, the latter probably especially being why the US has taken to spouting about the Monroe Doctrine again.
Of course China thinks about deindustrialising the west… it creates its customers for tat, for starters.
“Yes – all the evidence points to China wanting to be militarily inferior. It has no designs on Japan, or Taiwan – that’s just nonsense put about by… someone. They maintain a vast army for no real reason, and they keep developing next gen fighter jets and other weapons because they’re bored.”
The US has a vast army and are developing next gen fighter jets, too.
“FTAOD I don’t think they’ll be invading the US any time soon – that they have no need to do. But there could easily be resource wars in Africa and South America, the latter probably especially being why the US has taken to spouting about the Monroe Doctrine again.”
What resources? How much? Where?
I’m open to the possibility that China might do this, but it doesn’t sound anything but completely bonkers for China to go off invading somewhere to get the minerals, rare metals or whatever instead of just buying them and selling people BYD cars and iPhones.
…it doesn’t sound anything but completely bonkers for China to go off invading somewhere to get the minerals, rare metals or whatever instead of just buying them and selling people BYD cars and iPhones.
But that is not how the Chinese, and in particular the CCP, mind works. Logic is an alien concept.
I’m not sure what point you’re making here. Yes, I know. I didn’t say the US wasn’t interested in military superiority. Very clearly it is. Does that have any bearing on your apparent belief that China is not?
It’s no secret that Africa has vast and to date fairly untapped mineral (and other) resources, nor that China is making big plays there.
So I would say those resources, lots of them, there. See also Venezuela.
I didn’t say China was going to invade anywhere – I said it wouldn’t be invading the US. Taiwan is a distinct possibility, but only time will tell.
You mentioned China’s lack of belligerence over the past 50 years, and I don’t disagree. For much of that time it was vastly poor, and its martial resources were focused inwards, to control its population.
But we are not living 50 years ago, we’re living now, and things have changed and will continue to change.
The ball game is probably Africa, with the caveat that I think Venezuela’s oil is another real prize, and is actually quite possibly why Trump is blowing up drug boats; is it impossible that he needs a casus belli, albeit one which I believe happens to be justified, to remove Maduro before Maduro can make good on his requests to China for military and other support? I dunno.
China doesn’t need to invade anywhere in Africa, or to invade Venezuela, if it can put in place security agreements with corrupt governments to exploit the mineral wealth, which it has, and possibly to extend military support in the event of threats to those regimes, which it may well do – though who knows?
This is all speculation: none of us knows. We can only read the runes and rely on our understanding of human nature, resource usage, population, military matters and so on.
One of the reasons China keeps a vast army is to prevent them otherwise being unemployed and causing trouble.
And you don’t think there’s some neo-con equivalents in China saying “We have this huge army, let’s use it”?
I’m not privy to the workings of the Chinese mind, I can only look at what they do (that which is open to view), and try to read the runes.
You might be right, but I’d have thought simply marching the excess out into the fields and machine-gunning them would be much cheaper, and actually less dangerous to the regime, and probably more in character, too, than giving them the machine guns.
I don’t know, but I suspect they have a massive army at least in part because massive armies are useful for army-type stuff.
“Why does China care about being militarily superior?”
Wrong question. Better: ‘Why do Mr Xi and his Politburo care about being militarily superior?”
“But this idea that international trade is bad is that same idea write a little smaller. Swapping stucff with the slant-eyed crafties is bad, d’ye see? This just leading to the ultimate question of how rotten do you like your winter turnips?”
You are so f*cking naive its unbelievable.
The argument in favor of free trade ought to be one of personal freedom. As a free people we should to be able to buy what we damned well please – and sell to whom we please with few restrictions. Once it gets into the realm of “what about the poor guy making widgest in West Boondocks – shouldn’t we protect his jobs even if those widgets cost a lot more”, we’re ignoring the jobs lost to those businesses that incorporate widgets into their products which they must now sell for more, and will probably therefore sell less. In addition, you’ve encouraged the owner of the widget business to start lobbying and possibly bribing to obtain such favorable status. Also, the owner of the buyer of widgets to start trying to influence government to allow them to buy from wherever.
We’ve moved into Hayek territory. No one is smart enough to sit above and decide that this trade should be curtailed because it would be beneificial to do so, much as the politicans are convinced that they have such smarts. Especially if they are rewarded by the protectees. The old saying is that any system that robs Peter to pay Paul can count on the support of Paul.
Remind me again why we’ve just paid Mauritius to take the Chagos off our hands?
Comparative Advantage is great. Then nationalist politics pops up. Ruling classes have other interests and objectives than simply making their populations as wealthy, happy and fulfilled as they possibly can. As we see, daily.
Free trade zealots like our host are the right’s equivalent of socialists. Propounding an ideology that would work in the perfect world they have imagined in their heads, but that doesn’t in the real world we live in. At least free trade has the advantage over socialism is that it does work, in moderation. Socialism, not so much (but even that does work a bit, see Soviet Russia in the first half of its history. Peasant farmers to cosmonauts in less than 4 decades) . The failure of the free traders is to learn when to stop, which like all ideologues they can’t.
“but even that does work a bit, see Soviet Russia in the first half of its history. Peasant farmers to cosmonauts in less than 4 decades”
Getting a few blokes into space is not a measure of a great country. If it was, people would have been rushing to move there, rather than trying to get out.
“The failure of the free traders is to learn when to stop, which like all ideologues they can’t.”
There’s nothing “ideological” about this. More competition is a good thing. You might have to consider situations where the competition is unavailable (e.g. war) but that’s a rare circumstance.
Wiki Peter Navarro:
On the Marginal Revolution blog I once enquired whether the argument for Free Trade stands up in a world of welfare states.
Mr Cowen said it did. My memory, however, is that his answer was more an assertion than an argument. (I hope I’m not being unfair to him.)
So I still wonder whether the argument for Free Trade stands up.
It takes all sorts. For me, free trade stands up as a subset of individual freedom of action, which is necessary if one is to discover what suits one in life, the key to it in my experience.
Which is not to say that any of this is possible when the productive part of society is carrying such a heavy and growing load of fucking parasites.
Let’s put it better. Individual freedom of self-determination.
Purely guessing here, but I suspect a welfare state is only possible with free(ish) trade. Only the internationally competitive will generate enough tax revenues to support it.
The trouble we have in Britain at the moment is the unholy trinity of an unbelievably generous welfare state, no time limits on said generosity and the government crushing any enterprise that might employ people between the rocks of taxation and regulation. Oh and a minimum wage dreamed up by a bunch of people who never leave central London going, “yeah, that’ll work.”