Those Stubborn Facts: China’s Losing the Trade Wars Globally, Too

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China, exports, Financial Times, globalization, supply chain, Those Stubborn Facts, Trade, trade wars

China’s share of total world goods exports, 2018: 25 percent

China’s share of total world goods exports, 2019: 22 percent

(Source: “China’s share of global exports falls in supply chains rethink,” by Kathrin Hille, Financial Times, August 17, 2020, https://www.ft.com/content/bfef2854-f8f3-4ce6-a00f-3b11123b01e8)

(What’s Left of) Our Economy: The Woke Street Journal (on Trade)?

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America First, free markets, free trade, Gerard Baker, globalization, Mainstream Media, The Wall Street Journal, Trade, {What's Left of) Our Economy

Since it’s already 11 AM as I begin writing, and the Biden presidential campaign still hasn’t released the full version of a broad manufacturing and economy blueprint scheduled to be issued today (as opposed to this summary), and since it’s still not clear when the document will appear, I’ll focus for now on a development that’s surely more startling, and possibly more important in the long run.

It’s a recent Wall Street Journal column and its viewpoint on trade policy, and it was so mind-blowing that my first reaction was that the author must be dropping acid.

More specifically, the piece was by Gerard Baker, who served as the Journal‘s Editor-in-Chief from 2013 to 2018, and is now an editor at large. That was clearly a demotion, but there’s no indication that the move stemmed from any unhappiness about Baker’s overall policy views. (He was thought by some to be soft on President Trump, but Trump trade policies were never brought up.) 

Yet on Monday, a publication whose editorial positions have from its beginnings practically been defined by all-but-uncritical worship of free markets and their international counterpart, free trade, ran a Baker piece making the following points:

> “The modern woke corporation publicly disdains and derides the values on which the nation—and its profits—were built, even as it pursues global opportunities at the expense of American communities”; and

> Cleaning out the “rot in American capitalism” must include “ensuring that corporations prioritize Americans over their globalist, progressive agendas.”

I know that I recently reported a big Journal position switch – opposing decades of pre-Trump policies that sought to tie America’s economy more closely to China’s. But much of the case made by the editorial board was grounded in national security – which is entirely understandable, but narrower than what Baker seems to be calling for.

After all, his new views didn’t mention national security at all. They were a full-throated demand that Washington’s international economic policies prioritize America First.

Baker isn’t the full editorial board. But neither is his column an example of the kind of tokenism that’s typically shaped Mainstream Media editorial departments’ (including the Journal’s) treatment of trade and related economic policy issues – interrupt a continuing flow of articles singing the praises of conventional trade and globalization policies with the occasional contrarian piece by a fringe figure (like left-wing consumer advocate Ralph Nader or far-right conservative Pat Buchanan), or every once in a while by a leading Democratic party trade critic like Ohio Senator Sherrod Brown.

The effect of these practices clearly was to foster the impression that for the most part only genuine oddballs could question the pro-free trade consensus. But even though Baker left his former position under something of a cloud, he’s not a professional gadfly. He’s a lifelong member of The Club. Just look at these credentials: the Bank of England, Lloyd’s, The Times of London, the Financial Times, the BBC. Even Oxford! So it’s tough to see his latest as anything but another significant (and welcome) straw in the wind.

In fact, it raises a fascinating question: Which part of the Journal will repudiate free trade idolatry fastest and most completely? Its highly and openly (and legitimately) opinionated editorial page? Or its straight news department, which like its counterparts elsewhere in the Mainstream Media, often act just as opinionated – but more subtly so?

Following Up: A U.S.-Less Pacific Trade Zone is Still Bogus After All These Years

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Comprehensive and Progressive Agreement for Trans-Pacific Partnership, CPTPP, Following Up, globalization, Reuters, TPP, Trade, Trans-Pacific Partnership, United Kingdom

Time to pat myself on the back. It’s on a trade issue that may seem obscure, but that’s actually an important example of how completely dishonestly pre-Trump Presidents, and their enablers in the Mainstream Media, tried to sell offshoring-friendly trade agreements and similar policies.

The agreement in question was the Trans-Pacific Partnership (TPP), pushed hard by former Presidents George W. Bush and Barack Obama, but resisted in Congress through the end of 2016 and nixed by Donald Trump two days after his first White House term began.

Any number of arguments were advanced by globalization cheerleaders in government, business, academe, and journalism alike. Some were economic (e.g., the deal would “compel” the 11 other signatory countries throughout the Pacific Basin region to abide by high standards for respecting worker rights and environment protections that would level the proverbial playing field for U.S.-based companies and workers). Some were strategic (mainly, the TPP would be a great instrument for containing the rise of Chinese power and influence in the economically crucial East Asia-Pacific area). They’ve been parroted conveniently here. 

All were utter baloney. For example, as noted on RealityChek, the labor rights and environment provisions of the deal – and other parts aimed at limiting government subsidization of industries – were completely unenforceable. As for the China containment claims, they ignored the TPP rules that permitted the importation into the new free trade zone of products with lots of Made in China parts, components, and materials – meaning that Beijing would have enjoyed many key benefits of the agreement while incurring exactly none of its obligations.

But arguably the most laughable (but widely swallowed) pro-TPP talking point involved the contention that the agreement would open to U.S. exports markets representing an impressive 40 percent of the entire world’s economic output.

I put the torch to that bit of fakery in this 2015 op-ed, which pointed out that at the time, fully 62 percent of the new trade zone consisted of the U.S. economy, and that without America, the rest of the members combined added up to just slightly over 15 percent of global product.

More fun facts: Another 20 percent of the economies of the proposed free trade area was comprised by Mexico and Canada – which were already linked to the United States via the North American Free Trade Agreement (which has since been updated and improved). So the only way anyone could legitimately call the TPP a potential export bonanza for the United States was if they counted America trading with itself.

And just today, a news report came out showing that I’m still right about the minimal possibilities offered by the TPP to the United States’ domestic economy (that is, companies that make their products state-side and employ Americans). According to Reuters, the United Kingdom (UK) is planning to join the “Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).” That’s an effort by the other TPP countries to create a version of the former agreement without the United States.

The UK’s top trade official is making some familiar-sounding arguments: “Today we’re announcing our intent to pursue accession to CPTPP, one of the world’s largest free trading areas.” And to some extent, I can’t blame her. After all, the country’s trade opportunities will be significantly diminished by the Brexit decision to leave the European Union. So the UK clearly needs all the partial substitutes it can get.

But as Reuters’ coverage makes clear, the prize is even more underwhelming than when I quantified it five years ago, as the U.S.-less trade area right now represents only 13.5 percent of the global economy.

And by the way, as with the pre-Trump United States, London is bound to be disappointed with its new CPTPP partners in another important way: Most of them rely heavily on growing by racking up trade surpluses. That is, agreement or not, they’re unlikely to display any greater appetite for British products and services as they were for any U.S. counterparts or for any foreign products and services – they can’t create them themselves.

Since the 18^th century, “Rule Britannia” has been one of the most popular British patriotic songs. Joining the CPTPP could well prompt a composer to create a modern version titled “Rue Britannia.”

Im-Politic: How The New York Times Op-Ed Page Really Blew It on Tom Cotton

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fact-checking, free speech, freedom of speech, globalization, Im-Politic, journalism, Mainstream Media, MSM, op-ed page, opinion journalism, Paul M. Krugman, protests, Tom Cotton, Trade

Although pretty much everyone who’s thought about it agrees that The New York Times op-ed page has thoroughly bungled its handling of an article it recently published by Republican Senator Tom Cotton of Arkansas, disagreement is rife over what the blunder was.

Because I’ve written several times for The Times‘ Op-Ed page and others, I’ve got two thoughts that I believe can usefully add to the mix. But first, it’s important to note that even The Times as a company can’t seem to agree on what went wrong.

At various times, various staffers in various of its departments (including ownership) have claimed that Cotton’s main argument (that President Trump should call in the U.S. military to restore order in cities where it’s broken down and/or where state and local authorities can’t or won’t respond inadequately)

>should never have run because it fell outside the bounds of responsible opinion;

>that it might constitute responsible opinion but that its publication at a time of major national tumult – and especially race-tinged tumult – was inappropriate, and even heightened dangers to Times and other reporters covering the George Floyd protests, and to African-American reporters in particular;

>that however controversial, the argument wasn’t out of bounds, but that the article wasn’t satisfactorily fact-checked;

>that it was indeed fact-checked as per usual; and

>that Cotton’s and other allegedly out of bounds views should be presented in the paper, but in hard news articles (where adequate context, scrutiny, and counter-arguments could be provided), rather than on the op-ed page (where regardless of whether it was fact-checked or not, publication per se created an aura of approval or legitimacy or prestige that was unwarranted. Here’s a good summary from The Times’ main national competitor, the Washington Post.

Moreover, if you’re not already confused enough, how about these two positions stated by the newspaper’s ownership – the first by publisher A.G. Sulzberger (presented in the above linked Post piece):

>“I believe in the principle of openness to a range of opinions, even those we may disagree with, and this piece was published in that spirit” and

and the second by his spokesperson:

“We’ve examined the piece and the process leading up to its publication. This review made clear that a rushed editorial process led to the publication of an Op-Ed that did not meet our standards. As a result, we’re planning to examine both short term and long term changes, to include expanding our fact checking operation and reducing the number of Op-Eds we publish.”

At least these statements weren’t made on the same day.

And to top it all off, the article hasn’t been retracted or yanked from The Times‘ website.

Now for my two observations. The first involves the fact-checking issue.

As mentioned above, I’ve written frequently for The Times and other op-ed pages. And I can tell you from personal experience that fact-checking for outside contributors is spotty at best. I’ve been asked to provide cites for the specific data that my articles typically contain. But I have no reason to believe that anyone on the paper has looked through these numbers in detail – or at all.

That’s especially revealing because the trade and globalization subjects on which I’ve most often written are so obviously alien territories to the paper’s opinion staffers. But I’ve never knowingly presented a number or fact that I know is either inaccurate or misleading – or in which I haven’t had complete confidence.

More disturbing, one undoubted reason that my articles have been even superficially fact-checked is that they run counter both to the newspaper’s official stance generally favoring pre-Trump U.S. trade.policies, and to the unofficial but clear approval of such policies by The Times‘ straight news economics correspondents.

It’s unimaginable to me that anything like such requirements – including contextualizing – have been imposed on articles that conform with these official and unofficial Times‘ views. And I’m certain this is the case because flagrant errors have been so easy to spot.

One example: It’s become seemingly mandatory that articles favoring pre-Trump policies contend that 95 percent of the world’s population lives outside U.S. borders, and that therefore any deviation from so-called pro-free trade policies that ignores or slights the need to reach these potential consumers would be a catastrophic mistake. Never, ever pointed out: The vast majority of this 95 percent earns far too little to be significant customers for American-made products, or to become significant customers in the policy-relevant future. (I debunked the claim here.)

And as I’ve repeatedly shown on RealityChek – notably in the case of Nobel Prize winning economist Paul M. Krugman – serious fact-checking seems at least as rare when it comes to The Times‘ regular columnists.

So let’s please drop fact-checking as an excuse for challenging the legitimacy of running Cotton’s piece.

My second observation involves the broader debate set off by this fiasco (which resulted in the chief of the opinion pages resigning and the head of the op-ed page getting moved into another job). As with The Times internal deliberations, it’s been all over the place, too, but one central and explicit charge has been that even The Times‘ official waffling on the Cotton piece’s suitability amounts to troubling retreats from the ideals of journalistic objectivity and of free expression (which of course needs to comply with well established Constitutional limits, like prohibitions on speech and other forms of expression that are defamatory, or that posed dangers to children, or that ,’by their very utterance inflict injury or tend to incite an immediate breach of the peace.”).

To which my response is: Grow up. After all, The Times is a private company, and is under no obligation to publish all or even most ideological or philosophical comers on its opinion pages or anywhere else. It’s not a “public square.” Get a permit (if needed), and preach from a soap box on a street corner if you want one of those. 

True,the paper – which literally invented the op-ed page – avowedly conceived of the feature, in 1970, as an effort to:

“afford greater opportunity for exploration of issues and presentation of new insights and new ideas by writers and thinkers who have no institutional connection with The Times and whose views will very frequently be completely divergent from our own.”

Times editors added:

“In furtherance of our belief that the diverse voices of our society must be given the greatest possible opportunity to be heard, we are at the same time approximately doubling the weekday space devoted to letters from our readers.”

I personally believe that this commitment to maximum (legal) diversity has been admirable. But that’s far from claiming that the paper has any legal or moral obligation to seek such variety. So my only quarrel with The Times on these free speech issues is an insistence on transparency – and honesty. If Times management wants officially to turn the op-ed page into a megaphone for whatever set of viewpoints it likes, or against whatever group of opinions it dislikes, just do it, and announce the decision to your readers.

At the same time, if the paper wants to keep sitting on the fence, or groping in the dark, or simply doesn’t even yet know what it’s groping towards, that should be announced, too. Such a confession of broad fallibility has its ethical virtues, too. In fact, for the nation’s too-often high handed Mainstream Media, and its pretensions of omniscience and unimpeachable civic and intellectual integrity, nothing could be more refreshing – not to mention newsworthy.

Glad I Didn’t Say That: No CCP Virus Learning Curve for Globalization Zealots

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China, Daniel Griswold, free trade, George Mason University, Glad I Didn't Say That!, global supply chains, globalization, health security, healthcare goods, Mercatus Center, Paul Hannon, Stu Woo, supply chains, The Wall Street Journal, Trade

“US supply chains for medical goods are already diversified and are not overly reliant on China.”

Daniel Griswold, Mercatus Center, George Mason University, April 3, 2020

Number of countries that have imposed export curbs on healthcare-related goods, 2020: 85

Number of individual healthcare-related goods export controls imposed, 2020: 186

– The Wall Street Journal, May 25, 2020

(Sources: “The Coronavirus Should Not Prompt Us to Rethink Globalization,” The Bridge, Mercatus Center, George Mason University, April 3, 2020, https://www.mercatus.org/bridge/commentary/coronavirus-should-not-prompt-us-rethink-globalization and “Steep Drop in Trade Flows Shows Pitfalls of Cross-Border Supply Chains,” by Paul Hannon and Stu Woo, The Wall Street Journal, May 25, 2020, https://www.wsj.com/articles/steep-drop-in-trade-flows-shows-pitfalls-of-cross-border-supply-chains-11590416983)

Making News: A New Trade and Globalization Podcast Interview, and on National Radio Tonight

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America Trends Podcast, China, decoupling, globalization, Gordon G. Chang, Jobs, Larry Rifkin, Making News, manufacturing, supply chains, The John Batchelor Show, Trade

I’m pleased to announce that a podcast interview focusing on my views on trade, globalization, and the U.S. economy went on-line yesterday.  The interview, conducted by veteran talk radio show host Larry Rifkin for his America Trends Podcast, was conducted in late January, so the CCP Virus was just becoming a headline issue.  But I think you’ll agree that the analysis of major problems with U.S. trade policy, why they’ve emerged, and how to handle the China challenge, have held up well.  Here’s the link.

In addition, today, I recorded an interview for John Batchelor’s nationally syndicated radio show for broadcast tonight.  The segment deals with the Trump administration’s announced renewed determination to bring U.S.-owned manufacturing and its supply chains out of China, and also features co-host Gordon G. Chang.

Normally, John’s shows are broadcast live, but virus conditions have prevented easy access to his New York City studio.  I don’t know exacty when my segment will air, but you can listen to the entire show on-line starting at 9 PM EST at this link.  As usual, moreover, I’ll post a link to the podcast as soon as one’s available.

And keep checking in with RealityChek for news of upcoming media appearances and other developments.

Following Up: Podcast Now On-Line of National Radio Interview on the CCP Virus & Global & China Trade

Tags

CCP Virus, China, coronavirus, COVID 19, Following Up, global supply chains, globalization, Gordon G. Chang, supply chains, The John Batchelor Show, Trade, Wuhan virus

You’re in luck! I didn’t get advance word on the exact broadcast time of my interview last night on John Batchelor’s nationally syndicated radio show. But the podcast is now on-line!

Click here for a great discussion (including co-host Gordon G. Chang) of how U.S.-China trade relations could look once the CCP Virus has come and gone, and how the pandemic could change the entire world economy.

And keep checking in with RealityChek for news of upcoming media appearances and other developments.

Our So-Called Foreign Policy: Why Kissinger is Wrong About the CCP Virus and Geopolitics

Tags

America First, Carl von Clausewitz, CCP Virus, coronavirus, COVID 19, export bans, globalism, globalization, health security, Henry Kissinger, international organizations, liberal global order, Our So-Called Foreign Policy, realism, The Wall Street Journal, travel ban, Wuhan virus

As I’ve written previously on RealityChek, I’m a big Henry Kissinger fan. Not that I haven’t strongly, and even vehemently disagreed with the former Secretary of State and White House national security adviser on numerous issues. But I’ve considered his experience making foreign policy and studying its history to be orders of magnitude more impressive than anyone else on the national and worldwide diplomatic scenes for decades, and so believe that everything he writes deserves to be taken seriously.

And that’s why I found his recent Wall Street Journal article on the implications of the CCP Virus outbreak for U.S. foreign policy and global geopolitics so disappointing. For it differs little from the standard globalist drivel that’s been regurgitated lately about how the pandemic once again shows the need for more international cooperation and stronger international institutions because it’s one of those threats that “doesn’t respect borders.”

To be sure, Kissinger has always been quite the globalist himself in many ways, differing mainly with this foreign policy approach by insisting that American leaders can never forget the realities or power and other globally divisive forces responsible for how conflict has dominated world history. But the Journal essay is completely devoid of Kissinger’s characteristic efforts to integrate the kind of foreign policy “realism” with which, on the one hand, he’s been (simplistically) associated, and what genuine realists (and America Firsters like me) regard as the kumbaya-saturated means and ends of globalism on the other.

The author’s goal of transitioning to a global “post-coronavirus order” is quintessential Kissinger – who has long believed much more than other globalists that creating and preserving a substantial degree of international stability is essential to what all supporters of this school of thought have recognized as the imperative of preventing war between the great powers – especially in a nuclear age. (For a fuller explanation of the differences among these various foreign policy approaches, see this 2018 article of mine.)

But Kissinger’s essay is devoid of his characteristic attempts to integrate even his highly qualified brand of realism (let alone a more – in my opinion – hardheaded America First strategy) with the globalist insistence that major conflict is best prevented by addressing its supposedly underlying economic and social causes.

As a result, Kissinger emphasizes that “No country, not even the U.S., can in a purely national effort overcome the virus.” And that the current crisis “must ultimately be coupled with a global collaborative vision and program.” And that the “principles of the liberal world order” must be “safeguarded.” And that, in particular, nations must resist the temptation to revive the ambition of retreating behind walls because nowadays, prosperity depends on global trade and movement of people.

The problem, as I’ve pointed out in the article linked above, is that even a strategy focused on such global cooperation and other goals needs to understand that, because there remain great differences among countries on how best to achieve them, and in some important instances on the goals themselves, only power (in both military and economic forms) ultimately can guarantee any country that its preferred approaches and ambitions will prevail. And that even goes for working within international institutions. To paraphrase the great 19^th century Prussian strategist Carl von Clausewitz, working with international organizations is nothing but the continuation of power politics with other means.

Nor is there any acknowledgement in Kissinger’s piece of the United States’ unique capacity for self-sufficiency in both producing heathcare-related goods and developing vaccines and cures for diseases, or for the unmistakable need greatly to strengthen this capacity given the literally dozens of export bans imposed on drugs and drug ingredients and medical devices and protective equipment by countries that do normally sell them overseas. And as for Kissinger’s reference to the importance of global travel, yes…but look at all the countries that have imposed restrictions on travel from China alone.

Kissinger ends his article by citing U.S. policy after World War II as an example of the kind of enlightened course Washington should pursue because of its clear success in “growing prosperity and [enhancing] human dignity.” But as that postwar era dawned, the United States was so globally predominant in terms of material power that it could afford to finance for decades most of the effort needed to achieve these goals without undercutting its own position. And of course more than half that postwar world wound up organizing itself in opposition. In other words, it seems that Kissinger has forgotten one of the main lessons learned by all truly great historians – that the past rarely repeats itself exactly, or even very close.

Our So-Called Foreign Policy: Meanwhile, Back at the Tech Wars….

Tags

5G, China, Financial Times, Forbes, free trade, globalization, Huawei, Mainstream Media, national security, offshoring, offshoring lobby, Our So-Called Foreign Policy, semiconductors, tech, telecommunications, telecoms, Trade, Trump

Free trade extremists who haven’t been shocked into reality by America’s dangerous levels of dependence on health care goods imports from Chinese and other foreign suppliers (i.e., many of them) just got another whack by a two-by-four from Beijing.

Hot on the heels of a Chinese threat to embargo exports to the United States of pharmaceuticals and drug ingredients needed to fight the CCP Virus has come a new Chinese warning – that American efforts to restrict U.S. and other foreign supplies of semiconductors, other crucial electronic components, and software needed by its telecommunications giant Huawei could trigger “counter-measures” that would damage the U.S. tech sector and the American and broader global economies.

The bad news here is that, just as with the Chinese economy overall with many medicines and their ingredients, government-controlled Huawei has seized world leadership in much of the hardware needed to build next-generation 5G communications systems – which of course have already begun to be installed worldwide. Since state-of-the-art communications is crucial both to economic prosperity and national security, Huawei’s success has triggered alarm bells even among many American leaders who were long happy to support the reckless U.S. trade and related tech policies that enabled China to steal and extort much of the knowhow that build Beijing’s tech sector – and looked the other way as American firms voluntarily transferred much of the rest.  (See here for an especially revealing partial account of this tech policy disaster.)

But there’s good news, too. First, U.S.-headquartered companies still hold what a Financial Times article shows are “strategic chokepoints on Huawei’s phones, from the Android operating system to RF front-end chips and the chip architectures by Arm Holdings….” (To be sure, however, this Huawei dependence is shrinking.)

Second, as reported here in Forbes, Huawei’s overall sales performance outside its home market has been so weak that it’s now “completely dependent on China for its growth.” And thanks to the worldwide recession triggered by the pandemic that of course began in China, and because of continuing national security-driven reluctance by foreign governments to give Huawei free rein in their own markets, the entity’s overseas troubles are likely to intensify. (Note: Because of pervasive Chinese state control, RealityChek refuses to call outfits like Huawei “companies” or “businesses,” as such terms suggest great common ground with enterprises in largely free-market economies.)

At the same time, let’s not whistle in the dark here.  The trade and broader globalization policies responsible for these economic and national security vulnerabilities were pushed so hard so successfully for so long by pre-Trump Presidents and Congresses, that digging out of the present hole will require even more outside-the-box thinking than even the current administration has contemplated. And its task isn’t being made any easier by the efforts of the corporate Offshoring Lobby, its political and think tank hired guns, and the Mainstream Media journalists who still slavishly follow their cues, to yank the country back to globalization business-as-usual.      

Glad I Didn’t Say That! What Could Have Gone Wrong with Offshoring?

Tags

Clinton administration, coronarivus #CCP Virus, COVID 19, Glad I Didn't Say That!, globalization, health security, Larry Summers, manufacturing, Obama administration, offshoring, supply chain, Trade, Wuhan virus

“Why can’t the greatest economy in the history of the world produce swabs, face masks and ventilators in adequate supply?”

–Former Clinton administration Treasury Secretary and Obama administration top White House economic adviser Larry Summers, March 21, 2020

“There are those today who would resist the process of international integration; that is a prescription for a more contentious and less prosperous world. We should not oppose offshoring or outsourcing.”

–Former Clinton administration Treasury Secretary and Obama administration top White House economic adviser Larry Summers, June, 2011

(Sources: Summers Twitter feed, https://twitter.com/LHSummers/status/1241329121768230912 and “At World BPO/ITO Forum 2011, iRise CEO Stresses Need for Transformational Thinking Among CIOs,” Business Wire, August 25, 2011, https://www.businesswire.com/news/home/20110825006115/en/World-BPOITO-Forum-2011-iRise-CEO-Stresses. Specia acknowledgements: John Greener and Mike Cernovich)