Chinese & US: Strange bedfellows' impact on the world... 1

[rhodie]

See link: "China threatens nuclear option of dollar sales"

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/08/07/bcnchina107a.xml

I'm trying to think out of my egocentric US mindset.

When I read the linked article, the severity of the situation as an American strikes home. I realize that my country is firmly held in the thumbscrews and does not have any leverage against what can be traditionally interpreted as "the next biggest bully on the block".

I have realized for a while that the impending "war" against the USA by China would be a bloodless, bulletless conflict and it would resemble something like the above link describes. All that aside- I present the following for your comment:

With "Global Economies" considered, is it really in China's best interest to dump US dollars and in the process destroy their biggest customer?

 

[Comcokid]

There's always a flip-side to the coin. If China dumped dollars, the dollar would fall against other currencies. Then exported American goods would be more of a bargin on the world market. What we are primarily known for on the world market are high-tech and expensive-capital goods. These industries that are primarily US based in their manufacturing would benefit.

At the same time, imported goods would rise in price. We would import less "cheap" goods from China. WalMart would be upset. US companies that have off-shored many operations would be upset.

Bring it on!

 

[flamby]

The foreigners working in US will be the most badly hit masses and may decide to leave. I do not know whether this will be a good thing or bad thing - it has implications on both the sides.

Ciao.

 

[moltenmetal]

I don't have the time to look up the stats, but I'd imagine that the US is importing at least $10 worth of goods from China for every $1 worth they export to China. China exascerbates this problem by pinning the value of their currency against the US dollar, preventing the world markets from re-valuing the yuan to restore some trade balance.

The obvious solution is for the US to raise import tarrifs against China. Not only is that ideologically impossible for the current US Federal administration, but the people in the US benefitting from the $1 worth of export trade would scream so loudly if import tarrifs are raised that it would become a political impossibility rather quickly. Targeted illegal tarrifs against their "free trade" partner Canada, sure- they can get away with that, because they know Canada won't retaliate in any effective way, but China's another matter entirely. As the article in the OP's thread points out, the size of the US debt held by the Chinese would render that move pretty much impossible economically too.

 

[kenvlach]

China can spend $200B/year on US Treasury notes, propping up the dollar (instead of spending them on the free market) due to annual US budget deficits & the increasing national debt. US National Debt increased an average $540B per year, Sept. 2001 to Sept. 2006:

http://www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt_histo5.htm

What is needed is fair trade agreements that include worker rights & safety, health & environmental regs., etc.
The US should send EPA, OSHA, FDA, CPSA, ACLU, MSA [Mine Safety], & USDA to help the Chinese comply with First World standards, thereby 'leveling the playing field.' It's unfair having to compete with a factory using slave labor with cheap electricity from polluting powerplants burning unsafely mined coal. Nope, our govt. has done the opposite, providing an FAA an office in China to bring their aircraft mfrs. up to Boeing's level [although maybe for Boeing parts suppliers, but in the long run, watch out Boeing!).

And, the US Administration refused to include worker or environmental provisions in the fast track Fair Trade agreement language, and Congress backed down. One Bush minion in Congress claimed that leaving the workers' right language in trade agreements would allow Hugo Chavez to take over US unions!?!

 

[KENAT]

Star Kenvlach, while I haven't thought it through in principle I've felt the same way for a while.

It's one thing having free trade, alowing the market to find its price but at some point this leads to sweat shops etc.

Is this really the direction we want to go. Obviously enforcing tarifs on the poorest nations would make things worse for them, I don't think there's a one size fits all solution.

However for countries that can spend billions on arms etc then you've got to start thinking, maybe they should provide a comparable level of workers rights/benefits etc.

I'm not sure how far you'd take it, arguably with their state healthcare and higher vacation etc most european countries have a higher level of workers rights than the US which could lead to arguments about EU having higher tarifs for US goods but I do believe in the principle.

KENAT, probably the least qualified checker you'll ever meet...

 

[kenvlach]

Thanks, KENAT. There needs to be uniform worldwide environmental, worker safety regulations and anything re global warming. Otherwise, industries such as steel production, foundries & metal plating that require more environmental treatment end up in nations with fewest standards. Meanwhile, the cleanest operating plants go bankrupt. Similar situation with childrens' toys; now produced in nations with fewest oversight on lead content and paint.

Gresham's Law (simplified): 'Bad money drives out good.'
Now we're seeing the analogy, 'Bad goods drive out good.'

 

[csd72]

flamby,

Us foreigners working in the US are not all poorly paid labourers.

It is good though to have the option to jump ship if this empire comes to an end.

Anyhow, just because these things are being made in china doesnt mean that they need to be designed in china.

csd

 

[moltenmetal]

csd72: certainly the goods manufactured in China need not be designed in China. Given China's appalling record in relation to intellectual property rights, it doesn't really matter WHERE the thing was designed in the first place- they're equal-opportunity design thieves, happy to steal from anyone and everyone who does business there.

As to standardizing health and safety and environmental practices worldwide: don't hold your breath. The first world and the developing world are just that: worlds apart. Economic development will help to normalize practices between the developing world and the West over time, but enormous cultural and political differences will remain. Differences in laws and standards are inevitable.

 

[KENAT]

moltenmetal, I don't think kenvlach or I were thinking it would be easy, or even possible to standardize work practices etc.

What we, or at least I, was thinking was that if a tariff was imposed when importing goods from a country that didn't make any attempt at meeting reasonable work, environmental, safety, animal welfare etc. standards then at least it would make it a more level playing field for our own manufacturers. Also it may stop the practice of just outsourcing dirty/dangerous work rather than making it cleaner/safer.

Of course what you define reasonable level is a difficult question.

Even within Europe, at least a few years ago, there were wildly different rules on animal welfare for instance. English farmers were complaining about new standards for keeping battery hens, one argument was that some other European countries didn’t have as high standards but due to the free trade agreements would be able to sell their eggs in Britain, presumably cheaper.

Also while a tariff approach may be reasonable for some of the more developed of the 'developing countries' such as China, India & some of the other APac states it would perhaps be a major blow to the welfare of the poorest nations on earth.

Perhaps working in a sweatshop is better than no job at all, at least for some people in some situations.

You could partially counter this by using at least some of the money raised for international aid programs and the like but this starts to stink of social engineering etc. Alternatively perhaps there was no tariff for the poorest nations, or at least different levels of tariff depending on poverty levels.

However, this is all starting to sound a bit Nanny state ish

Like I said I hadn’t thought it thru but the basic idea of leveling the playing field isn’t so bad is it? Not everyone has the aptitude, skills etc to thrive in high tech/knowledge based (whatever you want to call them) industries, not necessarily through any fault of their own. At the moment it seems like they are almost being penalized for happening to be born in the West, though they are probably much better off than a lot of people in poorer countries.

Back to the OP, I don’t get why the US is so hard line on Cuba while being relatively open with another communist country, China. Can anyone spell nimby?


KENAT, probably the least qualified checker you'll ever meet...

 

[csd72]

KENAT,

The reason is simple. US foreign policy is dominated by big business lobbying. There are lots of investment opportunities in china, there arent many in Cuba.

moltenmetal,

As for china not recognising copyright, if western countries refused to allow importation of the violations then they would lose much of their market.

csd

 

[kenvlach]

We should recognize that policies (consumer safety, environmental, workers' right) are changing in China, and considerably faster than suggested by moltenmetal IMHO. This is partly due to government recognition of consumer attitudes within trading partners, internal demands by the Chinese people, recognition of long-term consequences of pollution, plus a desire to look good for the 2008 Olympics. Their somewhat dictatorial central government can execute (an effective word!) rapid changes without observing democratic niceties. Examples: An edict shutting down all metal finishing operations within the large Pearl River floodplain. Ordering a significant number of less energy efficient steel producers to shut down. A massive tree planting program attempting to slow desertification. An electronics hazardous materials law similar to Europe's.

The copyright & patent violations will continue for some time, but the Chinese are putting a lot of money into R&D (and money goes a lot further there) and thus obtaining a lot of new patents, so economics dictates enforcement will improve.

China isn't as monolithic in terms of government or manufacturing as commonly believed, either. The central government often has difficulty controlling local officials, Taiwan is a major investor so economics trumps ideology in some respects, they have aerospace quality as well as bottom end mfrs, etc. For the sake of the US and other 'First World' nations, we had best demand higher standards from China and encourage the Chinese people to demand them too, along with a higher living standard. China now the 3rd largest economy, so no excuses either about paying for pollution controls or limiting CO₂ emissions (China passed the US either in 2006 or 2007 depending upon whose estimate). BTW, regardless of Eng-Tips members' opinions on global warming, Chinese govt. studies forecast disastrous effects there (while maybe favorable for Russia's Siberia!).

 

[GregLocock]

The trouble is that any attempt to establish a level playing field would merely become a playground for the lawyers, like the anti-dumping commissions.

Cheers

Greg Locock

Please see FAQ731-376 for tips on how to make the best use of Eng-Tips.

 

[KENAT]

True enough Greg, CSD I'm sure you're right about the lobbying too.

Sometimes I can't help being idealist, I know it'll lead no where but heart ache but there you go.

KENAT, probably the least qualified checker you'll ever meet...

 

[dcasto]

Has anybody read the bach of their everyday toothpaste? I get all kind of health warnings from my supplier that doesn't use Chinese materials. Hummmmmm do we need tin foil helmets again?

 

[kenvlach]

Re attempting to achieve a level playing field via tariffs: Theoretically possibly (e.g., calculate the additional cost in producing a ton of steel using strict environmental controls vs. no controls and add it to the 'dirty steel's' price), but it would 1) involve bureaucracy and 2) probably be illegal under current WTO rules. Economic tariffs rarely work; such artificial constraints on the supply-demand relation begat smuggling.

Two ways to level the playing field are via mutual trade agreements (the US Fair Trade agreements mentioned above on August 12) and by applying the laws of supply and demand. Consumers must demand safe products, safe food, clothing & other items produced in non-sweatshop conditions, quality metals, etc. The government of China is executing or imprisoning corrupt officials & businessmen (and publicizing such) and enacting safety measures out of economic self interest in preserving overseas markets (demand). People in China & India, etc., must demand clean water, clean air, safe mining conditions, safe buildings, better labor conditions & free speech (to ensure progress in all areas). Laws exist (the Chinese Constitution prohibits pollution) but aren't enforced; the government is a poor supplier. In many cases, the Chinese central government has lost control over local officials and is using the state (and foreign) media to encourage local populations' demands for safety, clean water, etc. Two examples:

Hopes dim for Chinese miners
More than 180 are trapped in a flooded work site in Xintai, where rain hampers rescue efforts.
August 19, 2007
“...According to government figures, 4,746 people were killed in 2,845 mining accidents in 2006, an average of nearly eight incidents a day.

Most deaths occur at illegal digs, and the number of accidents is believed to be higher than reported in government statistics. The Xintai mine operates legally. Officials said it was opened in 1957 and had a production capacity of 750,000 tons of coal annually.

Government officials have accused mine owners and managers of covering up accidents and have vowed to improve mine safety. The government has ordered the closing of 10,000 small mines this year; such small operations are more prone to accidents....”

http://www.latimes.com/news/nationworld/world/asia/la-fg-chinamine19aug19,1,7511682.story

The Green Leap Forward
Environmentalism is China’s fastest growing citizen movement. Beijing isn’t cracking down on these
new activists—it’s empowering them.
By Christina Larson, Washington Monthly

Chinese environmental groups publish a “China Water Pollution Map (

http://www.ipe.org.cn/english),

a free online database that allows users to access information about water quality in their region. The site also publishes a list of factories that violate national environ- mental standards—including many state-owned enterprises.

In most other spheres, Beijing’s government remains intolerant of this sort of scrutiny and criticism. It silences journalists deemed overly energetic in their investigations of official malfeasance; it jails human rights activists and religious leaders whom it sees as subversive...
Not only is China’s emerging environmental movement tolerated by the central government; for the most part, it’s encouraged. More than 3,000 groups like Green Camel Bell currently operate in China, constituting the largest and most developed segment of the country’s budding civil society....
More important, environmental problems now threaten the sustainability of China’s economic expansion. Already the costs of environmental cleanup, property damage, and lost productivity are staggering. China’s State Council, the nation’s highest administrative body, reported that pollution cost the country more than $200 billion in 2005, almost 10 percent of the country’s GDP...
The country’s deputy environmental director, Pan Yue, has warned, “China’s economic miracle will end soon because the environment can no longer keep pace.”

Even more troubling, the effects of pollution—poisoned water and contaminated fields—are provoking riots in the countryside...The dilemma is enforcement....Although laws are promulgated in the capital, provincial authorities are responsible for implementing them. But provincial governments depend on tax revenue from local industries, so shutting down polluters often runs counter to their interests...China has numerous national laws that sound wonderful on paper but can’t be enforced....More than 4,000 rogue mines leach mercury into the soil. An estimated one in five power plants operate illegally—enough to fully power the United Kingdom...To deal with this predicament, Beijing has invited help from an unexpected corner: civil society. Citizen groups can help spread information, provide oversight, and put some pressure on local authorities...

To a great extent, then, hope for a cleaner earth lies with the ability of China’s unlikely bedfellows, its mandarins and its environmentalists, to make this experiment work.”

http://www.washingtonmonthly.com/features/2007/0707.Larson.html

So, leveling the playing field largely consists in raising the living, working and environmental standards in countries where they are now substandard. Although, President Bush has tried scuttling the US Consumer Product Safety Commission, since 2001 claiming the public interest is best served by voluntary standards, i.e., Caveat emptor! Good parents will obviously test everything their children eat or touch or play with.
Gaping holes in product safety net
August 19, 2007
“...As of Jan. 15, the commission lacked a quorum and was restricted from taking action on regulatory matters or civil penalties. In March, Bush nominated Michael Baroody, a top manufacturing-industry lobbyist, to serve as chairman and thus oversee regulation of the business that for years provided him with a livelihood.

Baroody withdrew from consideration for the post in May, just one day before his Senate hearing was to have taken place. He'd been asked by senators to provide copies of his severance agreement with the National Assn. of Manufacturers. [It included a payment of $150,000; a quid pro quo is rumored involving his return after a 3-year term. Baroody was opposed by every consumer, public interest and medical group, e.g.,

http://www.consumersunion.org/pdf/PedOppBaroody07.pdf

]

No other nominee is in sight. It's been seven months since the Consumer Product Safety Commission has had full and continual authority to levy fines or force a recall...”

http://www.latimes.com/business/la-fi-lazarus19aug19,1,3909201.column?ctrack=6&cset=true

 

[rtmote]

Hey all,
I think we are already behind the curve. Our future is one of expertise to the chinese economy and industry.

In 2003, between India and China, there were 4 million graduates! Twenty percent are engineering related. A a first wave industry most of the enginers are lower tech like civil, mechanical and chemical. So compare this 800,000 graduates against the 100,000 graduates of the USA which are more higher tech like computers, life sciences and environmental. We are now into 2007 with seriously huge gaps.

Duke University tried to argue the huge disparity by saying US graduates are 'dynamic' and others 'transactional'. The clever definitions and rework of the numbers was to prove the US are still innovators and leaders. For how long? Is this really true? By their defintions, Steve Jobs and Bill Gates would not fit! I disagree, the writing is on the wall.

http://memp.pratt.duke.edu/downloads/duke_outsourcing_2005.pdf

I would use the idea of 1% of the square root of the population pool has the power to innovate and change the future. This puts China/India up there now, 90 people versus 30 people annually.

China and India will lead into the future with their own ideas and people will subscribe to them, one by one or en masse, ignoring american models.

That China can hold the US nation to ransom is enough for them, not that I think they will. The US government do it to themselves. China plays the longer game. They will absorb expertise and continue to strengthen their markets. Just today I read about their hold on Kazakhstan petrochemical purchases, paying fantastically well over the market odds, they are buying their future not their investor profits.

 

[moltenmetal]

rtmote: it's hubris to assume that all we need to do to have our economy soar is to train more engineers! And we've been suckered by this one again and again throughout history. Any time an industry has to pay any kind of a premium to their staff, they scream "shortage!" and governments oblige by cranking open the supply. When the bust comes, time and again nobody is there to turn off the supply taps again!

In Canada, fewer than 25% of the 10,000 or so bachelors- level engineers we graduate yearly bother to go on to professional licensure- a sobering stat, even though the license is non-mandatory for employee engineers and poorly enforced for the rest. Though no accurate stats are available in relation to how many engineering students go on to actually practice engineering, I'd put the number at about 50% based on the research I've done. The rest leave the profession immediately due to finding greener pastures elsewhere. The numbers in the US are higher, in the range of 70-80%.

We have no shortage of engineers in Canada. A shortage of experienced engineers in booming industries like oil and gas and tarsands extraction that were a "bust" for the period between 5 and 20 years ago, sure. Tough to find people with 15+ years of experience in a field that wasn't hiring new grads 15 years ago! But between our 10,000 graduates and our 15,000 immigrant engineers yearly, I think Canada's still got a significant surplus of engineers. Graduating more, or allowing more to immigrate, will do nothing but drive yet more engineering grads and immigrants outside their chosen profession to make a living. And it's already tough to find a taxi driver in Toronto who ISN'T an engineer from India or Pakistan!

 

[kenvlach]

rtmote, we've already heard about the high numbers of engineering graduating in China & India for years. There really isn't a shortage of engineers in the US, and when a momentary shortage does occur in some industry, campaign contributions get made & the govt. lets in more Indians et al. rather than allowing natural supply & demand to funnel people into the necessary areas.

A bigger problem for the US is the continued flow of both manufacturing and R&D to lower salaried areas overseas. This will definitely decrease innovation within the US. It mostly hurts smaller cos. at present; profits still flow for the large cos. with global operations, but even Boeing is worried about the flow of technology and China producing airliners. See
China's influence spreads around world
By WILLIAM FOREMAN, Associated Press Writer, Sep 1, 2007

http://hosted.ap.org/dynamic/stories/C/CHINA_GLOBAL_IMPACT?SITE=WIMIL&SECTION=HOME&TEMPLATE=DEFAULT

This story also answers rhodie's OP question:
""The Chinese don't want war - the Chinese just want to trade their way to power," said David Zweig, a professor at the Hong Kong University of Science and Technology. "In the past, if a state wanted to expand, it had to take territory. You don't need to grab colonies any more. You just need to have competitive goods to trade."

If China stays on the same economic track, it would become the world's largest economy in 2027, surpassing the United States, according to projections by Goldman, Sachs & Co., a Wall Street investment bank. And unlike Japan, which rose in the 1980s only to fade again, China still has a huge pool of workers to tap and an emerging middle class that is just starting to reach critical mass. Many development economists believe China still has 20 years of fairly high growth ahead."

My comment: China deals with everyone everywhere regardless of politics. They won't get involved in any military wars (except possibly some very limited affairs over resources in disputed South China Sea areas). Their growing power does encourages throwing weight around:
China warns US not to sell fighter jets to Taiwan
Jul 22, 2006

http://www.sinodaily.com/reports/a060721191014.h886ei0u.html

I agree with Prof. Zweig's statement (above). China figures upon passing the US as the predominant superpower via economic means while the US burdens itself with large deficits, lack of infrastructure investment & counterproductive Middle East policies. They are well aware that the USSR fell apart due to economic deficiencies, not lack of firepower.

For a contrary view, see
A Chinese Military Superpower?
by John J. Tkacik, Jr.

http://www.heritage.org/Research/AsiaandthePacific/wm1389.cfm

 

[csd72]

rhodie,

What makes you sure that the US is their biggest customer? Even if the US is, the US poulations is only 5% of the world, that leaves a lot of other markets out there.

csd