China Will Be In A World Of Pain — But Fair Global Trade Can Help
“A country that touts freedom of speech and a free market is actually abusing state power to go after a certain company [TikTok]. This is supremely ironic.”
Said with conviction a few days ago by China’s Foreign Ministry spokesperson Wang Wenbin.
A concern that many have with US policy in general, is an inability to see the world from the viewpoint of the other side.
China is proud of many things: its progress for example on the human development index (HDI) has increased from 0.499 in 1990 to 0.788 in 2022; it is the only country in the world that has made such a large leap.
Yes, it has a long way to go. But what’s the best way to urge it forward? Can it somehow move into the Western ranks…and at the same time become “Western”?
Could it, for example, become a democracy and reverse it policies on the Uighurs and Taiwan? If China was an attractive place to be, would force be needed?
America has the answer.
In the wake of World War II, despite the bloodiest war in history, Washington chose to learn the lessons of the punitive post–World War I agreements. Instead of humiliating defeated wartime enemies Germany and Japan, whose countries lay in ruin, the United States led a massive multibillion-dollar economic recovery program and helped convert totalitarian societies into prosperous democracies. Washington spearheaded the founding of the United Nations and the implementation of the Geneva Conventions to prevent the horrors of World War II from ever happening again and to ensure that all countries are held to the same standards on human rights. In the 1960s, President John F. Kennedy launched the Peace Corps to support education, public health, and entrepreneurship around the world, building human connections and advancing local development projects. In this century, Bush launched the President’s Emergency Plan for AIDS Relief, known as PEPFAR, which has saved over 25 million lives, primarily in sub-Saharan Africa, and the President’s Malaria Initiative, which has prevented more than 1.5 billion cases of malaria.
Working with a long-term view toward peaceful progress is a sustainable goal and a laudable example for America.
The converse — policy for greed and short-term power — is a disaster.
As Bernie Sanders wrote in his visionary paper “A Revolution In American Foreign Policy Making”, spending trillions of dollars on endless wars and defense contracts is not going to address the existential threat of climate change or the likelihood of future pandemics. It is not going to feed hungry children, reduce hatred, educate the illiterate, or cure diseases. It is not going to help create a shared global community and diminish the likelihood of war. Instead of starting a trade war with China, Washington could create mutually beneficial trade agreements that benefit workers in both countries.
If policy is left up to the corporations, we will have further decades of disastrous over-leaning to China. To save wage costs, “globalization” agreements have sacrificed 40,000 factories in the US and the jobs of around two million US workers. Working-class Americans experienced wage stagnation — even while corporations made billions and investors were richly rewarded.
U.S. policy on China is an illustration of failed foreign policy groupthink, which frames the U.S.-Chinese relationship as a zero-sum struggle. The only winners are the Chinese state and the Western asset-owners.
The traditional description of “globalization” painted a picture of a world of interdependent trade, cultures and population, brought about by free trade in commodities, services and finance.
That got blown up by Donald Trump, who vowed to take care of Americans first. He renegotiated the Canada-U.S.-Mexico accord, for example. After much heaving and shoving and blowing of trumpets, he left it exactly as it had been. Man was shrewd.
Instead, Trump’s attempt to use tariffs to keep out foreign trade ended up forcing American companies to accept lower profit margins and cut wages for U.S. workers. China’s trade surpluses hit all-time highs.
China’s big advantage in its trade with the US is its cost of labor, which remains low compared to those in the US and many other countries. The minimum wage is set by regional governments; the highest minimum wage is $350 USD/month.
But not really.
In one of the most violent outbreaks of worker unrest in China recently, and the Foxconn assembly plant for Apple, Chinese workers suffered from a double exploitation by their government and international companies. The Chinese government’s ‘zero-tolerance’ COVID policy deprived workers of income by forcing them to stay at home, while mismanagement by Foxconn led to exploitation. The workers are still concerned that there not being enough COVID protections in the factories.
China does not provide official statistics on workers’ protests.
Foxconn has announced that it is expanding operations in Vietnam and India.
How effective are obligations under guidelines established by the international Organization for Economic Co-operation and Development (OECD)?
Estimates are that by 2050, the Chinese population will have shrunk to half it’s current size, courtesy of government planning. The Chinese one-party also state dictated that its workers would earn very low wages for tech assembly (not innovation).
By 2030 the average Chinese will be nearly as twice as old as the average American, but will have achieved nowhere near the level of education to add as much value to the economy. The result will be a labor shortage of epic levels. The Chinese economic model can only be maintained by running on ever-thinner margins. Eventually, manufacturing margins turn negative.
The Chinese are in for some grim and painful times.
This is not a matter for rejoicing. We can take our knowledge and help them out of their bind.
One way is to establish clear principles for trade. Chrystia Freeland, Canada’s Deputy Prime Minister and Minister of Finance, comes closest to having a framework. It is corrective, rather than coercive, and is based on what she called “Friendshoring”.
It proposes an alliance where countries with similar values can work peacefully towards prosperity for all their citizens. Sort of like the EU in that member states have to be democracies and peaceful, with rights for labor unions.
Countries in this club would enjoy the trading advantages of being inside a buoyant bubble of rapid growth.
Other countries would be encouraged to take steps — specifically spelled out — that encourage them to join…democracy, for example.
No, Putin doesn’t count.
China needs to play along with the Freeland Doctrine. Whether it realizes it consciously or not, China will have to adopt the values that will get it into the Freeland Club:
- Democracy
- Freedom of Expression
- Freedom of Thought
I have no doubt that China will do that. While the Party bosses may dither, the country will inevitably drift to the Freeland camp. The Chinese are actually conservative decision-makers; the bosses do not risk their lives over military adventures, for example.
And they can be brilliant businesspeople. In the early days, when Europeans were first entering China, the Chinese noted that they were not very original but could rapidly imitate Chinese innovation.
The world has not changed that much. I’ve stood in the car factories in China and am not surprised at all that BYD overtook Tesla. Musk was a fool for laughing at them. He did not know his history.
BTW, the Freeland Doctrine must lead the international community in eliminating the tax havens that enable billionaires and large corporations to hide trillions in wealth and avoid paying their fair share of taxes. That includes punishing countries that serve as tax shelters. We can also use our significant economic leverage to cut off access to free world financial system. An estimated $21 trillion to $32 trillion in financial assets are sitting offshore in tax havens today, according to the Tax Justice Network. This wealth does nothing to benefit societies. It’s not taxed and it’s not even spent — it simply ensures that the rich get richer.
Fair international labor standards would raise wages for millions of American workers and billions of people around the world. Making the rich pay their taxes and cracking down on offshore capital would unlock substantial financial resources that could be put to work addressing global needs and helping restore people’s faith that democracies can deliver.
We can’t keep on being competitors with China — we need to be partners. If we dealt with China from a position where our wage rates are not assailed by lower-wage differentials, then both countries would have expanded markets and — most importantly — expanded bases of brainpower. It is the number of free-thinking brains in an economy that make prosperity happen.
I can still remember the stars overhead when I stood in Snack Street in Beijing, surrounded by bustling pleasant people. I was eating a deep-fried scorpion at the time. Don’t bother. Anway, it felt like the world could be a pleasant place.
I hope you get a chance to try it out!
Written by Barry Gander
A Canadian from Connecticut: 2 strikes against me! I'm a top writer, looking for the Meaning under the headlines. Follow me on Mastodon @Barry