Roots of the U.S.-China Trade Dispute

Roots of the U.S.-China Trade Conflict

https://portside.org/2019-09-05/roots-us-china-trade-conflict

Author: David Kotz

Date of source: September 1, 2019

Democratic Left (Democratic Socialists of America)

The most anti-worker president in recent memory slaps big tariffs on products made in China — in the name of protecting the jobs of American workers. Corporate lobbyists criticize the tariffs — but say we must get tough on China’s trade policies. Some Democratic senators warn Trump not to back down in trade negotiations with China.

What can socialists make of all this? To answer this question, let’s examine the background of the trade conflict and the reasons why it broke out recently.

China Rises

Beginning in 1978, the ruling Communist Party in China made a radical turn, called the “reform and opening.” Central planning was gradually replaced by a market economy. The previously closed economy was opened to trade with the capitalist countries. Privately owned companies came to predominate. However, a core of large state-owned enterprises remains, and the government actively regulates the economy. China’s economic system today bears some resemblance to the heavily state-regulated capitalist economies of Western Europe in the post-Second World War decades, although paired with a different political and social system ruled by the Communist Party.

When China started down this road, the U.S. government was enthusiastic and supportive. U.S. big business saw big profit opportunities in a growing China market. The reform and opening led to remarkably rapid economic growth, at about 10% per year for decades. U.S. business lobbied for China’s admission to the World Trade Organization in 2001. Many U.S. companies set up shop in China, which has abundant low-wage (yet relatively healthy and well-educated) labor coming from a huge rural sector. China also has a business-friendly government, docile official trade unions, and a government that makes huge infrastructure investments in transportation and power that underpin the profitability of operating in the China market. 

As “Made in China” labels proliferated in U.S. stores, many U.S. workers lost their jobs. Cheap imports from China, along with those from other low-wage countries, have played a role in driving down the real wages of U.S. workers since 1980. That did not concern the U.S. corporations that were boosting profits by moving production to China, nor did it bother the many sectors of U.S. business that purchased cheap inputs from China. 

About Face

Read the entire piece here. 

https://www.dsausa.org/democratic-left/roots-of-the-u-s-china-trade-conflict/

Ahem—Not All of US Were Wrong About China (or About Wall Street, Either). 

In various ways, the Who Lost China debate is back with us again, with any number of commentators now realizing that China’s rise in global power and influence and its model of authoritarian rule (a kind of capitalist Leninism) pose a genuine threat to democratic values and to the well being of millions of workers in Western economies, particularly workers in the manufacturing sector.

A representative such commentary is that of the Brooking Institution’s William Galston, who in his Wall Street Journal column this Wednesday laments how America slept while China was eating its lunch. A number of nations, including some now in Europe, he notes, are welcoming greater Chinese investment in and ownership of key infrastructure, while the U.S., under Donald Trump, seems somnolently uninterested in any comparable investment, or even involvement. The American model, with its various virtues and warts, is in retreat. “However you look at it,” Galston writes, “the past 20 years have been a geopolitical catastrophe for the U.S.”

For this decline, Galston blames the diversion of our attention to Afghanistan and Iraq in the post 9/11 period, while the far more serious threat to American power and democratic values was gathering in China. (To his credit, Galston was one of the relatively few centrist Democrats who opposed—powerfully and articulately—our going to war in Iraq.) But he also says that we made two additional unforced errors. “Leaders of both parties dramatically underestimated the impact on the U.S. economy of China’s accession to the World Trade Organization in 2001,” he writes. “Over the next decade, a surge of Chinese imports wiped out millions of manufacturing jobs.” The second mistake was the accompanying belief that as China entered the global economy, welcomed foreign investment and became more capitalistic, “it would become a less autocratic society that posed no systemic threat to liberal democracy.”

We all made that mistake? Who’s “we,” Bill?

Only some “leaders of both parties” supported granting China “Permanent Normal Trade Relations” status in 2001, which paved the way for its entry into the WTO. The measure barely passed in the House, with the overwhelming majority of Democrats voting No. The labor movement foresaw the evisceration of American manufacturing quite clearly, and formed the core of liberal opposition to PNTR. For this, labor and liberals were condemned in the mainstream media for their backward-looking “protectionism.” 

As well, even as the PNTR debate raged, a number of China scholars and other liberals predicted that China’s new capitalist turn didn’t augur the nation’s transformation to liberal democracy. In 2001, Jim Mann authored a piece for the Prospect—the first of several he was to write for us over the years—explaining why a more capitalist China wasn’t likely to become a more democratic China.