It is our view (Gus’ and his old toothless mates who keep mentioning “in my day…” in the local retirement village) that the West became somewhat lazy on manufacturing and invention. The West has relied mostly on economic fiddles to survive and/or maintain the bourgeois life-style which is going down the drain in many places — as the new generations are often claimed to be “poorer than the baby boomers".

This life-style change has also been helped by major industries of Well-Being, good food and dieting (because of the bad food), health (with hospitals/insurance for profits), pseudo-spirituality replacing the old beliefs in gods, and an inequitable welfare system between subsidies to industries and mining, while most poor people barely subsist. And the smartphones that make many kids lazy (this is a big statement and is relative to the numbers of smart kids versus dumbed down kids).

Another blow to our economy has been production automation. In the West, We need less workers as we need MORE consumers. In China, most of the consumers are workers, despite a massive automation of processes. As mentioned before by Gus: 

CHINA USED TO BE A COUNTRY OF FARMERS THAT HAS NOW BECOME A COUNTRY OF TECHNICIANS AND ENGINEERS. THE US STILL HAVE THE MENTALITY OF WARRIORS inherited from the crusades — ON BOTH MILITARY AND ECONOMIC FRONTS.

At this level, China wants to help and the US want to dominate. ANY ECONOMIC PLANS need to consider these divergent philosophies. And this is where the argy-bargy starts…

America thinks economy is a game of Gridiron while others think it is a game of soccer or whatever else.

SUPPORT FOR A RULES-BASED MULTILATERAL TRADING SYSTEM WAS A LONG-STANDING OBJECTIVE OF US FOREIGN POLICY DATING BACK TO THE FORMATION OF THE GENERAL AGREEMENT ON TARIFFS AND TRADE IN THE LATE 1940S, EVEN THOUGH US SUPPORT FOR A STANDING INSTITUTION TO GIVE EFFECT TO THAT ORDER WAS OFTEN EQUIVOCAL.

So we need to agree to what is called a rules-based trading system. At the basic level we have to know where the rules apply to a tonne of carrots versus a tonne of apples… And this become impossible to rule, because at the same time, there are currency manipulations that distort the values, whether they have been agreed upon or not.

And there are many differences in producing a tonne of carrots: 

Bio (organic) versus GMO (genetically modified). Types of soil... Different payments to workers... Profits and numbers of resellers/wholesellers... Seasonal variations/bad weather... Cost of fertilisers... Distribution/distance travelled... Agreements made to buy carrots instead of beans… Taxes… overproduction (supply and demand)… Method of payment in goods or cash… and so on...

So we need to visit and preempt a conference in may this year:

La Follette Forum: American Power, Prosperity, and Democracy...

May 4 @ 9:00 am – 6:00 pm

GusNote: From Jules Letambour, I have been advised that "la follette" is a mad young woman...

In this conference, many experts with expertise on expertly knowing the crookery of the market will come from the US perspective of trading fish and chips in exchange of computer chips. 

But now, young Mister Putin wants "his" gas and oil to be paid in Rubles… What will annoy us next? The price of petrol going through the roof because of Lies by NATO? Or that injecting $3.5 trillion in the US economy is entirely falsifying the rules — and making rich guys nervous unless they can place their mittens on the majority of the cash, instead of fixing a few potholes?

—————————————

Just picking on one of the experts:

By Dr Stephen Kirchner

Director, International Economy, United States Studies Centre

EXECUTIVE SUMMARY

• China’s accession to the World Trade Organization (WTO) in 2001 was an important element of its growing integration into the world economy, as well as its domestic economic reform program dating back to 1978.

• In terms of access to US markets, accession only served to make permanent access China enjoyed since the 1980s.

• “China shock” literature highlights the number of US manufacturing jobs lost to import competition from China in previous decades.

• However, a broader assessment of the economic impact of the “China shock” suggests it has been a net positive for the US economy.

• US policymakers are increasingly critical of the role of the World Trade Organization and its failure to discipline China’s trade and industrial policies, but Australian policymakers see G7-led WTO reform as a key element to push back against China’s coercive economic diplomacy.

• President Trump’s trade war and sanctions against China led Chinese elites to equally question the extent of economic interdependence with the United States. President Xi Jinping revived the Maoist concept of “self-reliance,” explicitly citing the rise of foreign unilateralism and trade protectionism as a motivation.

• Far from calling out and disciplining China’s behaviour, President Trump’s trade policies, maintained by the Biden administration, have encouraged China to double-down on its state-led development model and strategic industry and trade policy, while potential multilateral solutions and processes have been neglected and under-utilised.

• The growth in discriminatory trade measures among G20 economies since the global financial crisis in 2008 demonstrates that the problems in the multilateral trading system are not specific to China.

• A key to restoring domestic political support for US leadership of the multilateral trading system is to reframe that leadership in terms of strategic competition with China around the rules and norms of the global economy.

• Effective US leadership of the multilateral trading system would not only promote US foreign policy objectives such as prosecuting its strategic competition with China but would also discipline US domestic economic policy in ways that better serve its economic interests. It also provides a rules-based framework to manage trade frictions arising from climate mitigation under the Paris Agreement and growth in the digital economy.

CONCLUSION

China’s accession to the World Trade Organization in 2001 was an important element of its growing integration into the world economy, as well as its domestic economic reform program dating back to 1978. In terms of access to US markets, accession only served to make permanent access China had enjoyed since the 1980s. While estimates vary as to the importance of the implicit trade barrier represented by uncertainty around whether the US Congress would renew China’s MFN status each year, it is likely that the elimination of this uncertainty in 2001 was economically significant.

The granting of PNTR was part of a broader effort to open up the Chinese economy and engage China economically and politically as a member of the rules-based liberal order. While this effort was broadly successful, and the United States was a net beneficiary economically, there is now a bipartisan view in the United States that economic engagement came at a cost both to the economy and in terms of geopolitical rivalry. The World Trade Organization is increasingly viewed by US policymakers as ineffective, both in promoting trade liberalisation, but also in disciplining China’s trade and industrial policies.

Australian policymakers, by contrast, remain supportive of the multilateral trading system. Prime Minister Scott Morrison has called for a G7-led effort to reform the WTO as a key element of a collective pushback against China’s use of economic statecraft in particular. Australian policymakers face a major challenge in bringing their US counterparts closer to the Australian position.

The “China shock” literature has highlighted the number of US manufacturing jobs lost to import competition from China in previous decades and its broader economic, social and political effects. However, an overall assessment of the economic impact of the “China shock” suggests the expansion of trade has been a net positive for the US economy. The “China shock” was a continuation of long-run trends in the US economy due to the globalisation of manufacturing. Had the United States resisted China’s integration into the global economy, greater import-competition would have almost certainly arisen from other sources, leading to similar outcomes.

President Trump’s trade war and sanctions against China led Chinese elites to equally question the extent of economic interdependence with the United States. President Trump’s ‘America First’ policies and President Biden’s ‘foreign policy for the middle class’ are mirrored in China by Xi’s advocacy of a concept of national security that embraces economic self-sufficiency, aspires to global technological leadership, engages in economic statecraft and seeks to diversify away from economic engagement with the United States. Xi Jinping has revived the Maoist concept of ‘self-reliance,’ explicitly citing the rise of foreign unilateralism and trade protectionism as the motivation. Far from calling out and disciplining China’s behaviour, President Trump’s trade policies, maintained by the Biden administration, have encouraged China to double-down on its state-led development model and strategic industry and trade policy, while potential multilateral solutions and processes have been neglected and under-utilised.

The multilateral trading system has been undermined by creeping protectionism since the financial crisis of 2008 coinciding with a global productivity slowdown that is strongly suggestive of a causal link between the two. Instead of being a champion of globalisation, the United States has increasingly disengaged from the world economy over the last 20 years, beginning with the failure of the WTO ministerial meeting in Seattle in 1999 and culminating most dramatically in its failure to join the centrepiece of the Obama administration’s economic diplomacy, the Trans-Pacific Partnership in 2017. This retreat added impetus to a rolling deglobalisation shock and the associated loss of economic dynamism, more so than the “China shock,” bred populist political impulses in the United States. Globalisation wrought its biggest changes in the 1980s and 1990s, well before the outbreak of populism in 2016.

A key to restoring domestic political support for US leadership of the multilateral trading system is to reframe that leadership in terms of strategic competition with China around the rules and norms of the global economy. Effective US leadership of the multilateral trading system would not only promote US foreign policy objectives such as prosecuting its strategic competition with China but would also discipline US domestic economic policy in ways that would better serve its economic interests while also providing a rules-based framework for managing trade frictions arising from climate mitigation under the Paris Agreement and growth in the digital economy.

------------------

So what to make of all this?

First, despite what it claims, Economics isn’t a science, despite using all the tools of mathematics and statistics available.

Like nature, we are lazy and, unless we’re a fanatical artist, we choose the easy option. In economics, unlike sciences, when we repeat an experiment, we’re going to get a different result. The CONDITIONS OF OUR DESIRES HAVE CHANGED. 

A) Crummy politics are going to be playing the game, while they should be in the sin bin.

B) the tricks of advertising are going to manipulate our wants and needs.

C) the industry of news — journalism — is going to push barrows of shit from one government over another, while limiting/or manipulating the data.

SO HERE WE GO FOR ANOTHER HIGH JUMP:

Box 1: Offsetting US economic gains from the “China shock”

Price and competition effects

• Amiti et al found that China’s WTO entry reduced the price index for the median US manufacturing industry by eight per cent between 2000 and 2006, over which period Chinese imports to the United States grew 290 per cent by value. Importantly, the largest contribution to the reduction in the effective price came from the lowering of Chinese tariffs on its inputs from which the United States then benefited via cheaper Chinese imports.19

• Similarly, Jaravel and Sager, using a similar empirical strategy to the “China shock” literature, found that increased Chinese import penetration generated benefits to US consumers through lower prices equal to US$101,250 per lost manufacturing job, or a cumulative 1.97 per cent fall in the aggregate US Consumer Price Index between 2000 and 2007.20 The “China shock” is thus shown to have pro-competitive effects that increased consumer welfare.

• Bai and Stumpner found that Chinese imports led to a 0.19 percentage point annual reduction in the price index for US consumer tradeables from 2004 to 2015.21

Aggregate welfare effects

• Using a general equilibrium model, Caliendo et al found increased trade with China accounted for a reduction of about 0.55 million US manufacturing jobs (smaller than ADH), only about 16 per cent of the observed decline in manufacturing employment from 2000 to 2007, but aggregate US welfare still gained by 0.2 per cent.22

• Galle et al found the “China shock” increased average welfare, but some groups experienced losses as high as five times the average gain and these losses were also geographically concentrated.23

Other employment and real wage effects

• Feenstra and Sasahara found that the expansion in US merchandise exports relative to imports from China over 1995–2011 created net demand for about 1.7 million jobs.

• Feenstra et al found job gains due to US export expansion largely offset job losses due to Chinese import competition, resulting in a net gain of 379,000 jobs over 1991–2011.

• Xu et al also found the effect on employment of the “China shock” is overstated by failing to account for the effects of the housing cycle, which reduces the independent employment effect of the “China shock” by 20-30 per cent.

• Wang et al found that China trade boosted employment and real wages downstream from manufacturing and these gains more than offset upstream losses from direct import competition.

SUPPORT FOR A RULES-BASED MULTILATERAL TRADING SYSTEM WAS A LONG-STANDING OBJECTIVE OF US FOREIGN POLICY DATING BACK TO THE FORMATION OF THE GENERAL AGREEMENT ON TARIFFS AND TRADE IN THE LATE 1940S, EVEN THOUGH US SUPPORT FOR A STANDING INSTITUTION TO GIVE EFFECT TO THAT ORDER WAS OFTEN EQUIVOCAL.

TO THE EXTENT THAT THERE ARE GAPS IN EXISTING WORLD TRADE ORGANIZATION RULES AND PROCESSES, THESE GAPS ARE NOT SPECIFIC TO CHINA, EVEN IF CHINA IS THE MAIN EXPLOITER OF THESE GAPS.

US LEADERSHIP IS BOTH CAUSE AND SOLUTION TO MANY OF THE ISSUES CONFRONTING THE WTO. BUT TO WIN SUPPORT IN WASHINGTON, THAT LEADERSHIP NEEDS TO BE REFRAMED IN TERMS OF ITS CONTRIBUTION TO WINNING A GLOBAL RULE-MAKING COMPETITION WITH CHINA.

Meanwhile, the BRI is a work in progress, which is challenging all of these view points. We shall investigate the BRI in a next instalment.

GL

Not an economist bootlace...

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