Yet another &!$% thread about trade with China

Great Debates
41

There are actually several places in the US where we could be mining rare earth metals (which aren’t actually all that rare), but economically there is no big incentive to do so (or there hasn’t been until fairly recently). From what I gather, not only aren’t there a lot of economic incentives for us to do so, but it’s also a highly dirty and potentially environmentally unfriendly process to extract many of them…which adds to the cost here in the US, but which the Chinese don’t seem to be particularly worried about.

It’s par for the course in these debates on China…people think that China is the be all and end all, even though they are still a very poor country, and even though a lot of their progress has been at the expense of their environment and the suffering of their people. It’s funny that folks who cheer on the Chinese never seem to grasp what it’s cost (and will continue to cost) the Chinese to get to where they are today…or why we wouldn’t be willing to make those sacrifices or pay those costs, or why those costs wouldn’t be worth it to us, collectively, to pay.

-XT

42

I probably should have noted the term “rare” as it relates to rare earths has nothing to do with actual scarcity - the name comes from their seeming scarcity when first discovered in the late 18th century, only because we lacked the technology to easily identify and differentiate elements in the lanthanide series of the periodic table.

43

China is in the process of elevating its people. They are encouraging university educations and emphasizing technical and engineering. They are building a middle class. They are getting into universal health care and clean energy.
We are doing the opposite.

44

Although this is a good point, it’s missing the bigger picture. The people of China aren’t free to chose the schools they attend and maybe not be free to chose the programs they study. Getting into university has more to do with looks than intelligence (so I’m told). The ugly child of a farmer cannot get into the same university as the attractive child of a businessman.

But for China, at this stage of its development, that’s okay. It can set up areas of economic freedom, while still having areas of communism. There are a lot of things it can get away with because it is still such a fledgling economy.

If the US wanted to practice a controlled economy and selective education it too could have 12.5% growth. If it wanted to decide to fixate on one industry and be the best at just one industry it could do great.

But how many of us want to live in a country with just one industry?

ETA: And of course China is “building a middle class,” because they didn’t have one 30 years ago. Adding just one more person making $12k a year is a huge improvement in China, where median income is still less than $3k per year.

45

From abyssal dirt poverty to just really really poor. You are right…they are making great strides in bringing their population us. But it’s going to be a while before they get their average citizens standard of living up to what we consider the poverty level in the US (or in Europe). I wouldn’t hold my breath, if I were you.

Good for them! Hopefully that won’t mean that they have a ton of people trained in technical and engineering fields without the jobs or opportunity to use those skills…I say ‘hopefully’, meaning from the Chinese perspective. If they do, it would probably be a good thing for the US and Europe, since we could all always use good engineers.

Again, good for them! We and the Europeans have had one for quite a long time now (and it didn’t need to be ‘built’…it just sort of happened that way, by and large), but it’s great that the Chinese are building one. How’s that working out for them so far? Do you have any statistics showing this growing middle class in China? How much of their population comprises this building middle class? How much of the countries wealth does this represent? How quickly are they building it? What’s the mean income of this middle class, and how does it differ from their rural poor or their extremely wealthy?

Ah…universal health care. Excellent…the mark of a civilized nation, to be sure. What’s the standard care provided to the average Chinese by this universal health care? How universal is it?

As for clean energy…well, the Chinese are getting into ALL kinds of energy. They have to, since they have a huge and increasing need for the stuff. Besides getting into clean energy, they are, of course, building a lot of dirty energy too. They have recently built a large hydro system that displaced millions of people and has had quite an, um, impact on both their environment and many cultural archeological sites (besides displacing the already mentioned millions of people from places they and their ancestors have lived for hundreds or even thousands of years).

In what ways? We aren’t moving towards universal health care, that’s for sure. Who’s health care is better, though, for the largest percentage of their people? I’m going to go out on a limb here and say that the US would win this by a nose. :stuck_out_tongue: Clean energy? Contrary to your ridiculous beliefs, the US IS building clean energy systems…and we already have a large deployed base of the stuff. Our current energy needs are, by and large, already met…whereas the Chinese are still trying to ramp up production to meet demand. I know you can’t comprehend this concept or grasp why it’s important, since it’s been explained to you before and you just continue to bull ahead with the same silly arguments. We aren’t doing the opposite in encouraging our young people to be technicians or engineers either (you see, the OPPOSITE of that would be to discourage them…which ‘we’ aren’t doing). What else? Oh, building a middle class. You are right…we don’t do that. We sort of are doing the opposite…we don’t try and regiment or build our society, but instead sort of let it happen. Since we’ve had a middle class for longer than the current Chinese government has existed, I’d say it’s working out fairly well for us so far. We’ll see how it works out for the Chinese in the long run. Maybe, if they try really hard, they will be able to get their median income up to what’s considered the poverty level in the US or Europe sometime in the next decade or so, ehe? THAT will be something really substantial.

-XT

46

Excellent posts, Dr. Love.

47

Agreed, though I think that Hellestal’s post should be a sticky for threads like this. It was very comprehensive.

-XT

48

Hellestal’s posts make my brain hurt, though. :slight_smile:

49

Forget about schools-- people in China are not free to choose where they freakin’ live.

50

I’ve been away for a bit…sorry.

It IS different though…if something is automated, the job is being done by the machine. If the job is shifted overseas…the job is being done by a human. The job still exists. It is obviously a useful job because it still exists.

So, a career that gets usurped by a machine is probably a good thing. A job that still requires a human is not the same as the printing press.

While I understand shifting ‘low-level’ jobs overseas…why stop at low level? Manufacturing on an assemby line…fine. What about low level engineering? Ok…why not high level engineering? Ok…why not managment? Why not the CEO and owners themselves? Sure, not today but how about in 50 years?

51

You are hitting the logical part of my brain again…and I tend to agree with what you say. However, it still seems…like playing with fire.

You don’t want tariffs…but do these companies pay any taxes? They don’t contribute to social security. Do their corporations pay U.S. taxes? I legitimately don’t know. If they do…do they pay their fair share?

Why not something like a VAT tax…instead of corporation/income taxes. We won’t charge you more than we do our local companies but if you sell stuff here you pay VAT. This VAT could be placed so that home grown companies no longer need to contribute to social security/medicare/pay any taxes etc. To be clear, products made by U.S. companies have to pay the same VAT. Just levels the playing field somewhat. Those with access to slave/cheap labor will still have an advantage but still a bit more even playing field?

Would that work better?

52

We do, white collar and professional jobs can be done overseas more cheaply too. Medical surgery, legal advice, scientific R&D, engineering, etc. can all be done in places like China, India, Thailand, Brazil, etc. for far less than it costs here. Anything that can be done more cheaply either by outsourcing (or for that matter by turning domestic jobs into temp/contract work or hiring domestic H1-B visas) will be. I don’t see why it is going to be limited to low level work.

I would doubt that high level management jobs would be outsourced since they are the ones who decide who is outsourced vs. not and I wouldn’t see them doing that.

53

I think that’s just playing a semantic game. It’s the “task” that is still performed. In the past that task required skill and training. Few people could perform it so those people were sought after and highly paid.

Now that task has been reduced and simplified. As a society we have decided that we don’t value it as much and aren’t willing to pay a premium. The object that results, be it sneakers or an iPod, isn’t worth enough.

I think printing is one of the best example. It used to be a handful of monks that had the skill and training, so they reproduced scholarly works by hand, making them rare and valuable. Now upwards of 96% of society knows how to read and write. So if that task is simply to reproduce a manuscript we’ve got lots of people that can do it, and it’s a task we think nothing of.

But how long do you think it would take for someone to hand write a 200 page novel? If we paid that person minimum wage how much would the book cost? And if we then priced the book who could afford it? Take it a step further and have people making paper by hand.

We’re all better off because of the printing press, information accelerated after it was developed. The task of printing is still being performed but we’ve diminished it down to ctrl-p.

With offshoring, we’ve taken manufactured items that we want but can’t afford and made them profitable. Everyone* now has a modem, router, computer in their house, and because of that availability everyone has access to massive amounts of information.

My opinion is that if the jobs weren’t sent to China they either would have been automated or would have been eliminated. The US market wouldn’t support a $1500 ipod, it likes them to cost $300, so Apple figured out a way to make them for $300, thus allowing society to benefit from them.

What results is that the US has shifted from manufacturing towards service, in that first Americans design iPods, then they sell iPods. The result is that both of those people are making more than the handful of guys in China.

I personally don’t see a distinction. Mostly because I see it as temporary. Eventually China won’t be able to provide cheap labour for a myriad of reasons: relative increase in their dollar, labour revolution, natural economic improvements, even and sharp increase in the cost of fuel. Offshoring to China simply accelerated the automation process. All those jobs we think we lost were due to be replaced. And currently there are American companies working on ways to automate the work done by the Chinese.

Couple of reasons. Those tasks require decision making, which is the reason why we haven’t automated them yet. We have machines that can print pages, but we don’t have machines that come up with stories (Fast Five and Katy Perry’s latest song excluded).

That is an entirely different problem. Now what you’re talking about are companies that decide to set up and operate in China. I hate to be the one to tell you this but the US isn’t going to be the center of economic activity for ever. Eventually other countries are going to have companies that produce things that Americans want. Those companies will have CEOs, engineers, and maybe even some manufacturing. If China produces an environment that companies want to operate in, that’s where the jobs will go.

54

That might work. But what you want to avoid is making it more expensive to sell products in the US. Take away the profit motive and companies will simply decide it’s not worth the trouble.

Anecdote: I grew up on the East Coast of Canada where it was common for people to drive to Maine to shop. A friend that just came back shows me this great moisturizer she loves. While at the shop she made the offhand comment, “Why don’t you guys sell this in Canada” Not expecting an answer.

But the shop owner was there and very plainly said, “We’ve wanted to for years. But Canadian law requires the bottle be printed in both English and French. Frankly it’s too much trouble for the small increase in sales.”

55

If Chinese tariffs protect their industries, we will move there. If we protected our industries here, we would create the climate you believe in.
China provides a huge work force that works very cheaply. They are cranking out college graduates . They have the technical expertise. What they lacked, we gave them in order to facilitate our operations there.
Free Trade sounds like a good idea, until you find out you are the only one doing it. Then you are a sucker.

56

No, that is bullshit and you know it. You’ve been shown that is false several times now yet you keep repeating what is an obvious lie.

Again I’ll post the example of ship building in Canada, and how tariffs were supposed to protect the industry but failed:

As has been so often repeated, China is still a dirt poor country with a fledgling economy and little in the way of domestic production. They have tariffs and protectionist policies to protect local production FROM US companies to keep them from moving in. Bejing wants domestic consumption but it doesn’t exist yet, any more than Canada can demand a domestic iPod industry.

If it helps, think of it like Trade Unions, you know, the way they balance the playing field, giving labour a way to compete against management. China can’t yet compete against the US on a level playing field, their local industries would be destroyed. The same way American companies moved in and bought up Canadian companies. Without protections in place China would cease to exist.

No, if you believe bullshit rhetoric that supports your bias your a sucker.

Bootlegging dvd’s is hardly the same thing has having a movie industry. You can steal all the technology you want, but if you haven’t got the capabilities to come up with anything new you’ll continue to lag.

That is where China is at right now. They’ve got a billion monkeys pecking away at type-writers hoping to reproduce what it takes one American to conceive.

Keep in mind that this won’t last for ever. Eventually companies in China will be able to compete with American companies, just like Germany and Japan back in the 50s. You don’t get to be an empire for ever.

57

A slightly less hostile way to look at this is to consider the summer olympics. From 2000 to 2008 China increased their medal count by 72%, but the US only increased by 13%. What can we conclude from this?

If use the same rhetoric applied in this discussion we’d have a doom and gloom forecasts for how sports in the US are about to end, and that soon China will win everything.

But the reality is that China went from 58 -> 100, while the US went from 97 -> 110, and if you go back to 1988 China only won 28 medals, while the US has always been at the top.

Compare and contrast the two countries: anyone that was paying attention in 2008 would know about the Chinese program called Project 119. They’d know about the government involvement in sports development, taking kids from their parents at an early age and training them to be athletes.

And even with the host country advantage, China still couldn’t win more medals than the US.

The environment within the US produces millions of great athletes, without having to have a government run program and central planning. But what you’ll see is that US athletes are drawn to and perform well in certain sports, while other smaller countries are able to excel at other sports. Should the US do more to promote a domestic ping pong and badminton program?

58

This paragraph is exactly right, IMHO.

The problem with the “Made in” labels is the same as the problem with traditional trade statistics: it only shows the country of final assembly. It doesn’t take into account where the constituent parts come from. There’s been a detailed study of this for the iPod(pdf).

Others have commented on manufacturing productivity and the comparison to the agricultural sector, so I’m just going to give a couple links. As a proportion of total employment, manufacturing employment has been decreasing for a long time. In fact, it peaked in 1944, with about 38% of jobs in the manufacturing sector (pdf, pg. 6). There’s a timely blog post by trade lawyer Scott Lincicome on US and world manufacturing. In particular, take a look at this plot of manufacturing productivity, and the manufacturing output of China, the US and several other developed countries.

A word about the last graph. It’s extremely likely that China will become the largest manufacturer in the world, simply by virtue of it’s large population. This is nothing to worry about. In fact, the large population of the United States has more economic output than other developed nations. I occasionally hear worries that China, on account of its immense population, is an “economic threat” to the US. If this is true, then explain why the US, with it’s large population, is not an economic threat to, say, Canada.

The Federal Reserve site has a lot of detailed information on it. Here is the information about definitions. In particular

There used to be detailed information on a number of manufacturing and industrial sectors, which could be downloaded in Excel format. I’m not finding it right now, but if you look around the website you may find something.

There’s no evidence that this is true. 12.5% is an extremely fast rate of growth, doubling output in only 6 years. If it were possible for developed economies to have sustained growth at this rate, why don’t we see it happening?

Intuitively, I think of it like this: it’s possible for developing economies to grow quickly because a large part of “developing” consists of copying what others have done. For example, developing countries can reform their institutions to be more similar to those of developed countries, or educate their (currently uneducated) populations, or adopt technologies and methods from industries in developed countries. Once they become on par with the first world countries, further growth requires them to find new solutions to problems, so their growth slows down. Since goods and ideas are (relatively) free to cross borders in the first world, the first world grows richer together.

59

Real wages after adjusting for inflation haven’t increased for 30 years for most people in the US. In the same time period expenses like tertiary education, health care, energy, etc. have gone up. Some other expenses have gone down like food, clothing and transportation though.

Trade can increase wealth and efficiency but many of the gains have concentrated at the top recently (or in developing nations not only between rich/poor but also between urban/rural), or whatever gains people are seeing (cheaper/better cars, cheaper clothes, cheaper food) are offset by stagnant wages and higher health costs. This is a global problem and nations in Asia, latin america and the west are having to find ways to deal with it. If you can’t fix the uneven distribution of the benefits of higher productivity and efficiency you destroy public support of trade.

60

The Chinese are not all pecking at type writers, they are using their trade agreements with western nations to take technology from western companies and use it to start up their own companies, then subsidize those companies to give them advantages in the global marketplace. And there is some corporate pushback because of it because they realize that the short term gains come with long term losses due to it.