Category Archives: foreign policy

It’s Really Pretty Straightforward

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The House Select Committee on China has laid out the breadth and complexity of the People’s Republic of China’s cornering of the rare earth production, refining, and manufacturing markets. The report allegedly

provides a roadmap on how the US can stop—or at least slow—the effort by its biggest global economic competitor to prevent the US from breaking into the market.

A road map? It’s really quite straightforward, if politically difficult.

The US has vast supplies of rare earths within our own borders. Canada, who would be better for us (and themselves) as a trading partner than as a State, has similarly vast supplies. We’ve just concluded a trade deal with Australia to export rare earth to us from its vast supplies. African nations have similarly vast supplies, although doing deals there would have more value in denying those earths to the PRC than in getting exports to us, vast as that value would be.

What’s needed, and this is the straightforward but politically difficult part—though the difficulty lies in timid politicians not those determined to do what’s best for our nation—is getting regulations, environmentistas, and climatistas out of the way of each of the mining, processing, and manufacturing phases of getting to the products of rare earths: primarily, but not exclusively, magnets and chips.

The report recommends a variety of market-manipulating measures, and those might be near-term effective, but the problems with government market interventions center on two things: the “government” part, and government interventions are open-ended; they don’t die. The best way for our government to manipulate our economy, our market, is to get out and stay out of the way.

And there’s be nothing at all that the PRC could do to stop us from doing any of that.

US Chip Export Restrictions

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They’re beginning to bite in the People’s Republic of China, according to “people familiar.”

Shortages of advanced semiconductors are so acute that the government has begun intervening in how the output of China’s largest contract chip maker, Semiconductor Manufacturing International, is distributed, according to people familiar with the matter. Chinese authorities are trying to give priority to the needs of tech conglomerate and national champion Huawei Technologies, which uses SMIC technology to make artificial-intelligence chips, the people said.

Say the report is accurate, the mythical nature of the source notwithstanding. What is the PRC doing about it besides allocating domestic production from the center?

Up against restrictions, some semiconductor companies such as Shanghai-based MetaX are designing chips on older, more available technology, bundling two or more smaller chips together to compensate for more limited computing power. Bundling strategies at Chinese companies have resulted in electricity-guzzling data centers, prompting multiple local governments to start subsidizing their power bills, people familiar with the matter said.

And they smuggle American chips that have been banned from export to the PRC. The PRC also will solve its data center energy problem.

The correct answer to this, though, is not to remove the export restrictions. The correct answer is to do our own workarounds of this type, learn the details of the PRC’s workarounds, and learn how the PRC solves its own data center energy shortage problems at the same time we work out solutions to our own data center energy shortage problems. Doing that would better prepare us for future such shortages, and it would enable us to better target restrictions on American goods, not just chips, headed for the PRC, whether directly or via third (and fourth) party nations.

Some Thoughts on Tariffs

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The Wall Street Journal‘s editors have twisted their panties on tariffs, again, this time showing their lack of understanding of tariff rebates to us low- and middle-income American citizens (in addition to their lack of understanding of tariffs as foreign policy tools. That President Donald Trump (R) has muddled that use is not an excuse for the editors’ failure).

Begin with a couple of things the editors have elided.

President Donald Trump (R) early on said tariffs would let him reduce income taxes—something the editors completed ignored in their present missive. Trump wants to give a $2,000 tariff rebate to us American citizens. While this isn’t a direct reduction of our income taxes, it certainly offsets that much of each of our income tax bills. As a first step in reducing income taxes, it’s not bad.

Then there’s this:

In arguing [before the Supreme Court] that tariffs aren’t really taxes and are mainly a tool of foreign policy, Mr Sauer said “these tariffs, these policies, it is clear that these policies are most effective if nobody ever pays the tariff. If it never raises a dime of revenue, these are the most effective use of these—of this particular policy.”

Sauer went on to say that these foreign policy tariffs do, in fact, generate revenue, but that’s deeply secondary to their purpose, which is to persuade the tariffed nation to change its ways. The editors acknowledged that in an earlier editorial, though only by deeply burying it near the end of that piece. This time, the editors completed elided it.

Then there’s this bit of illogic, even as the editors deride the Trump administration’s logic.

If tariffs are most effective if no one ever pays them [as Sauer also argued], then how are they going to raise the revenue Mr Trump needs to pay those rebates?

Here the editors are exposing the fantasy of their world. “No one” ever pays tariffs because they work perfectly, nations are persuaded, and Hallelujah. No. The world isn’t an ideal place, no foreign policy measure ever works perfectly, friction occurs, and nations adapt according to their own imperatives. Foreign policy tariffs will still raise revenue, even as they do move nations to change, if not completely so, in desired directions.

Finally, this bit of editorial foolishness.

This is a teaching moment for a high school logic class. Start with the contradiction that Mr Trump can both pay a tariff rebate and pay down the national debt. The annual federal budget deficit is roughly $1.8 trillion even with tariff revenue, so paying a rebate would add to the national debt, not reduce it.

Start with the derision of Trump both paying a tariff rebate and paying down the national debt. Of course, both can be done. The rebate won’t, of necessity, absorb all of the current tariff revenue raised, and there’s no reason to expect it to do so in the future. Tariff revenue easily can be committed to, and split between, both goals.

And this: paying a rebate would add to the debt? The editors announce this as received wisdom, declining to provide any facts or logic to support their announcement. That’s because they cannot. The debt arises from spending more of individual and business taxpayer money than the government receives in individual and business taxpayer money. Tariff money is outside of that path. Even if foreign policy tariff revenue were taxes, their expenditure is outside the citizen and business tax revenues the government receives, and spending that revenue adds nothing to our national debt, even if all of the foreign policy tariff revenue were committed to rebates.

And this, straight from the horse’s mouth (which postdates the editors’ missive):

All money left over from the $2000 payments made to low and middle income USA Citizens, from the massive Tariff Income pouring into our Country from foreign countries, which will be substantial, will be used to SUBSTANTIALLY PAY DOWN NATIONAL DEBT. Thank you for your attention to this matter! President DJT

A Mixed Message

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President Donald Trump’s (R) tariff program is before the Supreme Court (oral arguments were heard last Wednesday), it appears to be in trouble, and I claim it’s due to his mixed messaging to us in the public.

I have long argued, especially during Trump II’s tariff implementations, that there are two purposes for tariffs, and so two kinds of tariffs. One kind is protectionist tariffs, tariffs implemented to protect domestic industries, especially those in their nascent stages and those that are national security critical. Protectionist tariffs are, in the main, badly mistaken for a variety of reasons; although, an argument can be made that protectionism related to national security is a cost of national security that must be paid if we’re to remain free as a nation.

The other kind of tariff is that used as a foreign policy tool, tariffs applied in order to persuade another nation or bloc of nations to desist from their unfair trade practices, viz., dumping product at below cost, unfair subsidies of their own domestic industries, withholding export of products critical to the importing nation’s economy or national security, or other policies to which the tariffing nation might object.

Trump has been busily touting both the revenue raised by all of his tariffs, of both kinds, while also insisting that they’re necessary foreign policy tools intended to get other nations to leave off their unfair trade practices, to “stop ripping off America,” and to mend their ways on other matters.

Which brings me to the present article by The Wall Street Journal‘s Greg Ip.

Lawyers often stretch the facts to make their case, but even so, this was quite the howler from US Solicitor General John Sauer in defense of President Trump’s tariffs at the Supreme Court on Wednesday: “They are not revenue-raising tariffs.”

Ip, with that lede, stripped his Sauer sentence of its context. The rest of what Sauer was saying is that their purpose, as a foreign policy tool, is to persuade the targeted nations to change their ways. That these foreign policy tools also happen to produce money is deeply secondary. Ip later acknowledged that, but not until deep into his piece. Sauer again, originally:

“The fact that they raise revenue is only incidental. The tariffs would be most effective, so to speak, if no person ever paid them,” because they would have achieved their goal of changing another country’s behavior, or diverting all American purchases away from imports to domestic goods[.]

And that’s the problem with Trump’s rhetoric here. He’s made no distinction in his program between tariffs as protectionism and revenue-raising, the latter which is a Congressional prerogative and not Executive, and tariffs as foreign tools, which is an Executive prerogative and not Congressional.

This is a milieu where Trump’s studied vagueness in his rhetoric may well backfire. Keeping adversaries suitably confused as to our intentions through ambiguity can be highly useful. However, American law, and so our courts—especially our Supreme Court—deal in clearly stated specifics within each case that comes before them. Vague, especially, internally conflicting, speech is properly disdained by judges and Justices.

Trump’s contaminating his use of tariffs as foreign policy tools with his use of tariffs as protectionist policy may well produce the elimination of his tariff program in toto. That would be to our nation’s economic ill, and to our nation’s national security detriment.

Immorality

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The men and women of the People’s Republic of China government, led overwhelmingly by President Xi Jinping, are behaving in an utterly immoral fashion when it comes to lethal, illegal drugs and the precursors for manufacturing them.

Those men and women have been continually welching on the agreements they pretend to make to curb fentanyl and fentanyl precursors exports.

Even when Beijing toughens regulations on individual precursors, as it has done several times in recent years, including this summer, Chinese producers can get around the rules by slightly altering the chemical structure of their products.

This bit saucers and blows it.

China calibrates its cooperation on counternarcotics in response to the overall US relationship, said Vanda Felbab-Brown, a counternarcotics expert at the Brookings Institution.

That’s a polite way of saying that the PRC’s government men and women will continue to poison our children unless and until we kowtow to their demands.

Or maybe Xi and his syndicate simply are amoral, with no concept of what’s right or wrong or the differences between the two—only naked power for themselves, nationally, and egoistically globally.

This, more than any military or cyber superiority, is what makes the PRC exceedingly dangerous.