You present it as if the poor country that allows foreign companies to exploit its cheap labor is somehow the one taking advantage of the rich countries. Just ask yourself: is that a likely way for the world to work? Do you think the rich countries just let themselves get walked over in that way by much weaker, poorer countries?
Point-by-point:
> We've had decades of letting China walk all over us.
It's hard to square your view with the fact that American companies have made massive sums of money by exploiting cheap Chinese labor, or with the fact that when you walk around any Chinese city, you see American brands everywhere (Apple, Starbucks, KfC, GM, Tesla, all the fashion brands whose names I don't know).
> They tariff our goods, we buy theirs up.
China has massively reduced tariffs since the early 1990s. Average Chinese tariffs are now around 3.4%, which is similar to tariff rates the US imposed in the mid-1990s.[1]
> They steal our IP, we respect theirs.
Your view of IP enforcement in China is behind the times. Back when China was a largely peasant society shut off from the outside world, it had virtually no IP law. That has changed quite dramatically in the last decades. China is the world's most active venue for IP litigation now. Specialist IP courts have been set up in major cities over the past several years, and the statistics show that foreign companies are quite successful in enforcing their IP.[2]
American companies also take in billions of dollars in revenue by licensing patents to Chinese companies.
> They manipulate their currency, we let ours float.
Many countries intervene in the foreign exchange markets. China does so too, and limits capital flows in and out of the country. I'm not enough of an expert to know whether or not this is a wise economic policy, but I suspect they have good reasons (e.g., financial stability) for doing so.
However, there's no doubt that the RMB floats to a far greater extent than it used to. You can see this pretty easily if you look at a CNY/USD chart showing the past 20 years. The RMB moved very smoothly until about 2012, and since then has fluctuated much more like a normal currency. Of course, like most central banks, the PBOC will pull the breaks when it feels that it's important.
> You present it as if the poor country that allows foreign companies to exploit its cheap labor is somehow the one taking advantage of the rich countries. Just ask yourself: is that a likely way for the world to work? Do you think the rich countries just let themselves get walked over in that way by much weaker, poorer countries?
Your questions don't make a lot of sense, because the situation is much complicated than than a model with two monolithic actors ("poor country" and "rich country") can handle. For instance: "rich country" has powerful actors that work to benefit their own private interests against the national common good.
At a national level, industrial capabilities are more valuable than currency and finished product, but for many private actors, the opposite is often true. National time horizons are longer (or should be longer, as in multiple lifetimes), but private time horizons are usually much shorter (fractions of a lifetime).
> It's hard to square your view with the fact that American companies have made massive sums of money by exploiting cheap Chinese labor, or with the fact that when you walk around any Chinese city, you see American brands everywhere (Apple, Starbucks, KfC, GM, Tesla, all the fashion brands whose names I don't know).
What the US has had with China is private interests trading industrial capabilities for short term increased profit. The US government hasn't kept those private interests in check (because they're powerful), and China has been happy to take advantage of the situation.
You're talking about the United States vs. China, not China vs. individual American companies.
Over the past several decades, China has undergone massive internal structural changes, many of them at the behest of the United States. China has made massive changes to its economic and legal systems in order to allow foreign companies wide-ranging access to Chinese markets. Those changes allowed unprecedented profits for American companies.
But the way you're painting it, allowing American companies to exploit cheap Chinese labor, allowing them wide-ranging access to the Chinese market, where they sell enormous amounts of goods and dominate many market sectors, and constructing an IP enforcement system out of nothing constitute China taking advantage of American companies.
> You're talking about the United States vs. China, not China vs. individual American companies.
Actually, I was talking about something more like individual American companies & China vs. the United States.
> But the way you're painting it, allowing American companies to exploit cheap Chinese labor, allowing them wide-ranging access to the Chinese market, where they sell enormous amounts of goods and dominate many market sectors, and constructing an IP enforcement system out of nothing constitute China taking advantage of American companies.
What's so hard to understand? The idea is that American companies making profit selling Chinese-made goods to Chinese and Americans may not actually a very good deal for the United States. It's like a son selling his family's farm for the price of 10 years of produce and the paper title "king of the village," so he could focus on improving his underwater basket-weaving skills. Maybe that was a good deal for the son, but that doesn't mean it was a good deal for the family.
But the key point was to say the answer to this question, which you asked and seem to think is false, could conceivably be true:
>>> Do you think the rich countries just let themselves get walked over in that way by much weaker, poorer countries?
That question is a lot like this one: do you think king with a castle with impenetrable walls and overflowing storehouses will just let his enemy inside?
The answer is no, if the king is the only agent in the castle.
The answer is yes, if the guard manning the gate is an independent agent, and the enemy bribes him.
The answer to the question is very different once the model is expanded to include more agents with different motivations. The two-agent model implicit in your question is too simple for this topic.
> Actually, I was talking about something more like individual American companies & China vs. the United States.
> [...]
> The idea is that American companies making profit selling Chinese-made goods to Chinese and Americans may not actually a very good deal for the United States.
What it sounds like you're upset about is actually the growth of international trade and deindustrialization in the US. You're putting it in crude and xenophobic terms: China taking advantage of the US.
American workers who have lost their jobs or who saw their wages decrease certainly were taken advantage of. It wasn't by the Chinese, or the Japanese, who were the bogeyman in the 1980s. It was by an impersonal and ubiquitous economic system. It's much easier to direct your hatred towards a specific, tangible enemy, however, which is why the xenophobic answer is so popular. Just point the finger at the foreign workers earning their pennies an hour, rather than understanding the broader economic forces at work.
> What it sounds like you're upset about is actually the growth of international trade and deindustrialization in the US. You're putting it in crude and xenophobic terms: China taking advantage of the US.
Actually, what it sounds like is that I was correcting you on on oversimple model you were using to make the point to another poster that everything is peachy. Throwing around terms like "upset" and "xenophobic" is not a good way to have a productive conversation.
> It was by an impersonal and ubiquitous economic system.
"Impersonal an ubiquitous economic systems" have no agency, btw. The system didn't do anything.
Just point the finger at the foreign workers earning their pennies an hour
Yet another actor that's missing from your model is CCP policy makers.
>(Apple, Starbucks, KfC, GM, Tesla, all the fashion brands whose names I don't know).
Apart from Apple and Tesla, all the others are Co Partnership before they could enter. Tesla wasn't even allowed in for a long time, Apple also have their restrictions especially with sourcing parts.
>China has massively reduced tariffs since the early 1990s.
I wonder how that was calculated. Try importing anything into China and see if it is anywhere near a single digit. There is a reason why huge amount of products are still smuggle through grey channel into China via a few places.
>Many countries intervene in the foreign exchange markets.
Try doing business inside China with US / Foreign government support. I doubt you can move much money out of china without getting lots of trouble.
> all the others are Co Partnership before they could enter
Foreign companies got to exploit cheap Chinese labor and got access to a large consumer market, but they had to work with a local partner. American firms still benefited hugely from access to Chinese labor and consumers.
By the way, these local partnership restrictions are now gone from most economic sectors in China. They're a reasonable tool for a developing country that doesn't want the relationship with foreign capital to be purely exploitative.
It's hard to get the impression that China is the one exploiting the US when you walk around a Chinese city and see the extraordinary amount of business US firms are doing in China. Chinese companies don't have anything approaching that level of presence in the US.
> I wonder how that was calculated. Try importing anything into China and see if it is anywhere near a single digit.
By total value imported, I think. China taxes 3.4% of the total value of imported into the country.
> I doubt you can move much money out of china without getting lots of trouble.
There are capital flow restrictions. Are those unreasonable or unwise?
Point-by-point:
> We've had decades of letting China walk all over us.
It's hard to square your view with the fact that American companies have made massive sums of money by exploiting cheap Chinese labor, or with the fact that when you walk around any Chinese city, you see American brands everywhere (Apple, Starbucks, KfC, GM, Tesla, all the fashion brands whose names I don't know).
> They tariff our goods, we buy theirs up.
China has massively reduced tariffs since the early 1990s. Average Chinese tariffs are now around 3.4%, which is similar to tariff rates the US imposed in the mid-1990s.[1]
> They steal our IP, we respect theirs.
Your view of IP enforcement in China is behind the times. Back when China was a largely peasant society shut off from the outside world, it had virtually no IP law. That has changed quite dramatically in the last decades. China is the world's most active venue for IP litigation now. Specialist IP courts have been set up in major cities over the past several years, and the statistics show that foreign companies are quite successful in enforcing their IP.[2]
American companies also take in billions of dollars in revenue by licensing patents to Chinese companies.
> They manipulate their currency, we let ours float.
Many countries intervene in the foreign exchange markets. China does so too, and limits capital flows in and out of the country. I'm not enough of an expert to know whether or not this is a wise economic policy, but I suspect they have good reasons (e.g., financial stability) for doing so.
However, there's no doubt that the RMB floats to a far greater extent than it used to. You can see this pretty easily if you look at a CNY/USD chart showing the past 20 years. The RMB moved very smoothly until about 2012, and since then has fluctuated much more like a normal currency. Of course, like most central banks, the PBOC will pull the breaks when it feels that it's important.
1. https://data.worldbank.org/indicator/TM.TAX.MRCH.WM.AR.ZS?lo...
2. https://www.ipwatchdog.com/2018/05/07/rapid-changes-chinese-...