Category Archives: foreign policy

A Useful Self-Identification

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The People’s Republic of China has decided not to apply its across-the-board 125% tariffs on certain goods that it imports from the US.

China’s government has exempted some US imports that the country would struggle to immediately source from elsewhere from its retaliatory tariffs, people familiar with the matter said.
Chinese authorities have told some importers of American goods that they would waive the most recent 125% increases in tariff rates for certain US imports. Those products include certain semiconductors and chipmaking equipment, medical products, and aviation parts, the people said.

These, then, are precisely the goods that we should cut off from exporting to the PRC.

On the other hand,

The Trump administration, similarly, announced exemptions on its “reciprocal tariffs” for China-made smartphones, laptops, and other electronics earlier this month, a recognition of the US’s reliance on China for such goods.

This is a mistake if the purpose is anything other than a negotiating tactic. There is a critical difference between the two sets of goods. The goods the PRC is exempting are critical components and component-making goods whose cutoff would severely impact that nation’s ability to make downstream products. The goods the Trump administration is exempting are finished products. Their supply chains can be adjusted to flow from non-PRC sources, including domestic, an adjustment that might be difficult, but an adjustment that both is eminently possible and is absolutely necessary: we should never have ourselves dependent on an enemy nation for such goods.

Americans’ Intellectual Property at Risk

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And that risk stems from President Donald Trump’s (R) alleged trade wars according to Daniel Gervais, a Vanderbilt professor and Director of Vanderbilt’s Intellectual Property Program, who should know better. In his letter to The Wall Street Journal‘s Tuesday Letters section, he wrote

The US is turning its back on the multilateral trading system it helped create after World War II, threatening Americans’ intellectual property…. Embodied by institutions such as the World Trade Organization (WTO), this system has provided stability through clear trade rules and dispute-settlement mechanisms….

And

The most important set of international rules protecting IP rights is the WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights, or Trips. The agreement obligates member countries to provide IP rights, with limited exceptions, and enforce them at their borders and in national courts.

What Gervais ignored is that it is the PRC that’s been busily blowing up the global trading system ever since its accession to the WTO. Politically, the PRC ignores WTO rulings it doesn’t like, including one regarding its seizure and militarization of South Sea islands that belong to other nations and not the PRC. Specific to that ruling, the PRC is ignoring the Republic of Philippines’ ownership of—not mere responsibility for—the islands in its EEC.

Regarding intellectual property, Gervais also ignored the PRC’s assault on other nations’—particularly the US’—intellectual property and proprietary technologies. The PRC has long had (for all that the current regime recently has begun paying lip service to limiting) requirements that foreign companies partner with PRC-domiciled companies and agree to intellectual property and proprietary technology transfers that comport with PRC-mandated requirements at zero compensation beyond the privilege of doing business. These requirements go far beyond the WTO’s minimalist transfers with compensation for the transferring company.

Gervais also ignored the PRC’s long standing and extremely extensive intellectual property and technology thefts through corporate espionage.

It’s not the current administration that’s turning its back on the multilateral trading system and the WTO, it’s the PRC with its long-extant studied efforts to destroy them.

What Cold War?

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The press continues to pretend obliviousness to what’s been going on between the People’s Republic of China and the United States for many years. The headline and second sentence of a recent Wall Street Journal article lays out the sham ignorance quite clearly.

Breakdown in US-China Relations Raises Specter of New Cold War
…
Today, with economic relations between the two careening off the rails, China and the US are headed toward what could be a Cold War….

The fact is the PRC has been inflicting a cold war on us for 15 or more years, and we’re only just starting to respond to it. For instance,

• The PRC has coerced intellectual property and proprietary technology transfers to PRC businesses and companies as a condition of doing business with them or within the PRC
• The PRC has coerced partnering with PRC-domiciled companies as condition of doing business inside the PRC to facilitate those transfers
• The PRC has demanded placement of party apparatchiks into company management
• The PRC has demanded backdoors be installed into company operating software to allow PRC officials—those apparatchiks or others—to monitor company behavior and to copy data of interest
• outright theft of intellectual property and proprietary technology
• cyber espionage, data theft, sabotage of data, entry into cyber, energy, water network nodes, demonstrations against several of those nodes

Some of those actions the PRC claims to have discontinued or never implemented, but we have only the word of PRC government officials on that, or the word of company managers desperate to have access to the PRC domestic market.

It isn’t credible that the august publishers and news writers and commentators really haven’t recognized this, even as they cite examples from the long standing cold war. The news writer at the above link mentioned a couple in passing:

• data, call logs, and other information it [PRC] gathered from years of intrusions into computer networks at US ports, water utilities, airports, and other targets
• PRC acknowledgment of a series of cyber assaults on US infrastructure

The question, then, is why these members of the press have insisted on turning a blind eye toward this cold war of some duration, “worrying” about it only since President Donald Trump (R) has begun fighting back.

Something is Missing

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James Mackintosh had a piece in Saturday’s Wall Street Journal concerning President Donald Trump’s moves to reduce our nation’s trade deficit, particularly our deficit in the goods trade. In his piece, he delineated what he believes must happen in order for the deficit to come down the way Trump wants it to.

Trump’s obsession is the goods deficit—and there are two ways it can come down.
The first is that the overall goods-and-services deficit remains unchanged, but services—about which Trump doesn’t seem to care and in which the US runs a surplus—are sacrificed for manufacturing. … This, though, would need shifts in domestic tax and regulation.
The second way for the goods deficit to shrink is to reduce the overall trade deficit. That will mean less foreign money coming in (remember, the balance has to balance). Combine that with more investment in manufacturing—because imported goods are made less competitive by tariffs—and it will mean America has to provide more of the savings to finance new assembly plants, clean rooms, and sweatshops.

Stipulate Mackintosh is correct. That’s from a purely fiscal perspective, though. Regarding his first way, Trump and the Republicans in Congress are working in that direction, albeit for broader reasons than just changing the trade emphasis on services.

It’s the second way that matters here, and related to that is this: Mackintosh claims to not understand—that no one can understand—Trump’s policy. I claim that there’s more to our national weal than just the fiscal.

It’s a Critical Item that we revive our manufacturing base, including sourcing its critical inputs from ore to components for finished goods to finished goods—not just build more assembly plants. That manufacturing base, too, must include making large goods like automobiles and weapons systems, it must include small-to-tiny goods like medicines, and it must include cheap energy sources to power all the factories we need in our new economy and to fuel those automobiles and weapons systems. Those autos can be powered, sort of, with batteries, but the weapons systems and factories—and the electricity needed to recharge those batteries—need cheap, reliable oil for the weapons systems, and cheap, reliable, always on oil, natural gas, nuclear power, and coal for the power generating systems.

See pre-WWII Japan and WWII Germany for the outcome of depending on other nations, enemy or not, for those Critical Items. That’s what’s missing in Mackintosh’s lack of understanding.

Paying higher prices for restarting and maintaining at least a core manufacturing base that can surge production and expansion in a crisis generated by an enemy nation, which we likely will, is simply part of the price of maintaining a defense establishment capable of answering that crisis on terms favorable to us. It’s the other side of the coin used to pay directly for the development and acquisition of those weapons systems.

It’s just barely possible that this is Trump’s policy goal.

And Do What Instead?

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President Donald Trump (R) says he’ll pause US efforts at peace negotiations between Ukraine and Russia over the latter’s barbaric invasion of the former, if those efforts don’t start bearing fruit.

Russia has refused, and it continues to refuse, to agree any ceasefire unless and until its demands for “root cause” questions are addressed and its terms for peace are agreed—terms that amount to abject surrender to Russia and to Russian control by Ukraine.

It’s entirely appropriate that we—and Europe and Ukraine—should walk away from the effort in the face of Russian studied intransigence. Given the barbarian’s steadfast refusal, it’s long past time we should have walked.

But then what?

For my money (literally and otherwise) both the US and Europe should step up—drastically—the amount and type of military and fiscal support and heavily accelerate the pace of their delivery for Ukraine. There is no other way to drive the barbarian back out of Ukraine, and by extension, prevent the barbarian’s subsequent moves into the rest of eastern and central Europe in furtherance of Russian President Vladimir Putin’s avowed goal of reconstituting the erstwhile Russian empire. And his likely continued expansion beyond that.