How should the US change to deal with China?

[BitTwiddler]

China has woken up and is rising fast.

What should the US do to deal with China?

Specifically, what policies should the US change to maintain its status as a world leader in engineering, manufacturing, and scientific research?

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"U.S. Has No Plan On How To Deal With China: U.S.-China Commission Advises Congress To Fill Bush's Policy 'Vacuum'"

http://www.manufacturingnews.com/news/05/1114/art1.html

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U.S. - China Economic and Security Review Commission Annual Reports to Congress (Executive Summary)

http://www.uscc.gov/annual_report/2005/05_executive_summary.htm

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"Chinese build a high-tech army within an army"

http://www.csmonitor.com/2005/1117/p01s03-woap.html

 

[wes616]

We should start teaching manderin (sp) or cantoneese (sp) in elemertary school.

Wes C.
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In this house, we OBEY the laws of thermodynamics! - Homer Simpson

 

[TheTick]

Starting my kids earlier than that! Started myself, too. Still haven't learned "Will work for food!", though.

 

[Heckler]

Sounds like General Zhu wants a reason to test his new found might. It will be interesting to see how the US diplomats deal with China in the coming years.


Taking China's power seriously

Such progress is catching attention, respect, and concern in the Pentagon. At Honolulu's US Pacific Command, and in military circles in Taiwan, Guam, and Tokyo, it is universally accepted that China is on its way to becoming a military challenge in Asia. US planners no longer talk dismissively of China's power or, potentially, its reach. In a key shift, US ability to quickly and easily defend Taiwan in an attack is no longer a given. Chinese cruise missiles are creating a more lethal environment in the Taiwan Straits.

This summer, Gen. Zhu Chenghu, dean of China's National Defense University, raised the subject of weapons of mass destruction, which China rarely mentions, in connection with Taiwan. Should US forces aid Taiwan in a war, he told bewildered US visitors, "Americans will have to be prepared that hundreds ... of cities will be destroyed by Chinese" nuclear weapons.

 

[ziggi]

This sort of fear mongering was prevalent in the 80s in response to the rise of Japan. However Japan never posed a military threat.

I think that the rise of China will peak soon enough, as soon as the important people have made their money the status quo will be maintained. There's no doubt that the world will be fundamentally changed, much as it was in response to Japanese manufacturing. But competition can only make us stronger or destroy us, I'm betting heavily on the former.
Many Western companies are alrady finding ways to beat Chinese competitors, by using slightly more expensive latin american and eastern european labor and offsetting costs by faster deliveries and better quality control. It is also easier to control production in latin america and eatern europe as those cultures are similar to that of the west. In a JIT world, cheaper maybe's from China are worse than more expensive definites from elsewhere.

As for attacking Taiwan, it won't happen, too many political landmines there. Investors will lose faith in a China that asserts itself too much, b/c an assertive China is an unpredictable China. And the Taiwanese and Mainlanders do not see each other as enemies, they see each other as family, an attack on Taiwan will cause uproar in the financially powerful Taiwanese community in China and around the world and popular revolts by Mainlanders could cripple the Chinese economy.

I'm not advocating a dismissive posture towards China, but I have a feeling that the US military is looking to find a near-real simulation training partner, China will do.

 

[rhodie]

I, for one, say welcome to our new Chinese Underlords...

(China is not as unified as the CCP would have us believe.)

 

[Beggar]

I was in our factory a couple days ago and speaking with our translator. At one point, I looked at her an said, "y'all gonna rule the world some day -- not in my life time, but maybe in yours." She smiled. I said, "Do you believe me?" She smiled again and said, "yes."


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Bring back the HP-15

http://www.hp15c.org

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[VisiGoth]

zigi,
I think you mean Japan in the 20' or early 30's, not the 80's.

I worked with Chinese factories and world class European factories making the same product at the same time. The European ones were good, the Chinese fantastic. There was a high work ethic in proactively tracking down problems, sharing information, and rolling up the sleeves and working. The experience was nothing but positive.

 

[moltenmetal]

What- do you mean tarrifs on manufactured goods?

Who says a western democracy has to have free trade or nearly free trade with a developing world "communist" autocracy anyway? Isn't the existing and growing trade deficit a hint that something is fundamentally amiss with this model?

Who benefits from such an arrangement? US consumers? For a while perhaps, but in the long term? China is certainly benefiting, but with their present (and likely future) governmental structure, is money enough to change that society for the better?

If your real question is "how do we get US production costs on par with a nation where labour costs are 1/10th as high or less, environmental regulations are basically non-existent or irrelevant and dissent, labour unionism etc. are brutally repressed etc. etc.?", then I haven't got a satisfactory answer for you that doesn't involve putting virtually all of the US manufacturing workforce out of a job. Maybe that's inevitable. Without tarrifs, it probably is inevitable. And I'm not so hopeful that you can run an economy entirely on services.

As to (US based) multinationals competing with China using labour in Eastern Europe or South America, that's hardly the same thing as competing with China from a US base. These same companies are also setting up shop in China. Their capital moves whereever they can make money using it. Some of the profits may come home to the US, but the economic consequences to the US are entirely different than the benefits from having a substantial portion of the workforce in the US paying taxes and circulating money in the local economy.

 

[wes616]

Moltenmetal,

While I STRONGLY agree with you regarding your position on Tarrifs, I believe that by the time our government reverses it's current policy regarding this so-called free trade, that it will be too late for us. Our economy (which at that point will be us workers, because the corporations will have moved elsewhere) will be in the toilet.

I mean is it really an US company when only the executive suites are within the US borders?

but that is for another post.... in the meantime, I'm brushing up on my chinese history.... and my new astrilogical chart.



Wes C.
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When they broke open molecules, they found they were only stuffed with atoms. But when they broke open atoms, they found them stuffed with explosions...

 

[mapelCE]

Gents/Ladies

China isn't the problem.
Our resistance to change is our biggest liability.
We have to transition now from a primarily product based economy to a primarily service based economy.
Not unlike our transition from agriculture to industry, this change requires us to retool the way we do business.
We have decades, and in some cases centuries, of experience to draw from that the rest of the world is now realizing a need for.
We as a country haven't had a good unifying challenge since the "red scare" and the space race.
The explosion of the global economy and the rapid growth of China among others has given us the chance once again to transform ourselves and step up to be world leaders.
Instead of worrying about China we should be running to embrace them as a customer, figure out what they need, and supply it to them better than anyone else can.
The growth of our economy and our standard of living depends on our ability to successfully interact with them and the rest of the world.
Education is more important than ever, hard work and risk taking is more important than ever, and we as a group once again have the opportunity to either get in the game and be the best or stand on the sidelines, let someone else take the lead and the risks, and wait to see what happens. I for one am in the former category. I hope you are too.

 

[ziggi]

mapeICE,
I agree with you, Western society does need a bit of competition to make us stronger. Besides it's better to embrace your competitor, you get more in return.

visigoth,
I was refering to Japanese manufacturing power in the 80s, however Japanese military might (as well as German)was the big scare in the 30s. But the Japanese and German military scare only applied to Asia and Europe respectively, the US considered itself immune.
And while some Chinese products are excellent, from my experience they represent a minority. The majority of Chinese companies I hear about still have a communist
mentality, ie. It looks good enough, no need to improve.

moltenmetal,
More companies are realising that cost savings aren't all that's involved in China. Besides the majority of US firms are realising that services are actually a huge money maker, General Electric for one now makes more money from finance and investments than from actual product.
The world is becoming more unified every day, so concievably a buck made in China, when put through their economy could come back into Western hands eventually.

My point is that I disagree about the tariffs, why would you want to do all the grunt work when you can sit in a cushy office getting paid by your employer whose primary purpose is to finance Chinese projects, which with regards to low labor costs are very profitable. Why wouldn't you want to sell something to a properous China? The analogy of real estate flipping applies here, you buy a house, someone builds it for you, then you turn around and sell it at a profit, maybe right back to the person who built it. The business world is a strange beast, no nearly a linear as the engineering world, x.y sometimes does not equal xy.

 

[moltenmetal]

wes616: at least if the corporate suites are in the US, the headquarters are there and hence the corporate taxes go there. Better than nothing, but nothing like manufacturing on your home base.

mapeICE: Embracing the Chinese as customers, figuring out what they want and selling it to them is how you'd make money if China were the US or some other similar democratic nation. Unfortunately, it's tough to imagine being a supplier to China long-term of anything other than raw materials. The nation has proven it has zero respect for human rights, much less intellectual property or the rule of law. All foreign capital in that nation is at risk while that repressive regime remains in control. Pretty tough to imagine offering services to China using workers in the US- the latter is far more likely. You'd probably have more luck using this strategy in India.

As to paradigm shifts in the economy, it's tough for me to imagine the US economy continuing to function and generate anything approximating the wealth that it currently does if you remove a large part of an entire economic sector such as manufacturing. In fact, if I had to choose a sector to remove to do maximum damage to the US economy,it'd be manufacturing. Manufacturing is the greatest generator of value added and wealth there is, which explains how the US could have thrived when converting from an economy dominated by agriculture to one dominated by manufacturing. Most of the service industries, including a huge fraction of the engineering done in the US for US clients, are ultimately parasitic on the manufacturing sector- that's why you hear of so many spin-off jobs associated with each job in auto manufacture etc. When and where the manufacturing goes, so will those service jobs. And I doubt you'll find China as receptive to purchasing services such as engineering from the US at US labour rates when they have a massive and growing pool of engineers on their own soil.

We Canadians have too long been "hewers of wood and drawers of water"- living primarily off the export of our natural resources. The downside is that our manufacturing base and hence the value added to our economy isn't as high as it could be as if we were selling finished goods made from those raw materials. The upside is that the Chinese will still need raw materials to manufacture goods to sell to us, so we'll have something they value to trade. We have less to lose from this process than the US does, but it will still do serious damage to our economy if left to proceed unfettered.

 

[mapelCE]

Moltenmetal,

Your too doom and gloom.
Think positive.

Talk to Westerners that actually work in China and they'll tell you you're crazy for staying in North America.
The government and market structure are an issue, but that is a short term problem. They'll change because market forces will drive them to change.
Think what would have happened if nobody went West because there was no law an order. Law and order came about because not having it iterfered with efficient business. People liked making money and they needed established rules and enforcement to ensure they could do that. The growth of the market forced the change. China is no different.
Manufacturing will never completely leave the United States. We will continue to have a dominant position in the manufacturing of complicated goods and total sytems that require high levels of cross integration. Our manufacturing will become more automated and less labor intensive, but we will forever lose the ability to make plain widgets faster than developing countries.
China may be able to provide engineering, but what they can't provide is effective management and complicated service solutions such as financial,healthcare,energy, environmental, or numerous others. That kind of service takes experience. China is entering the market place faster than any other country in history because the market place is already established and global communications are instantaneous, so they don't have time to wait and gain the experience. They'll pay for it now which is what they're doing. China and India both are veritable gold mines for those who engage in high end solutions.
As far as human rights I wouldn't go blowing our horn too loudly. China may not be perfect but then anyone who's ever dealt with the Garment District knows full well that we are far from that. Outside of Nike, and even that was a flash in the pan, when's the last time you saw a significant portion of Western consumers willing to pay more for products because of Corporate Social Responsibilty concerns?
The rest of the world is here to stay, and we can't curl up into a ball and ignore it or try to slow it down. Many have argued that the faster the standard of living in China increases, the faster our market for goods and services will grow. I agree with that argument and look forward to devising new and innovative ways of making money in emerging marketplaces.

 

[RDK]

One thing would be that the US would have to start to deal with its other international trade disputes in an honourable and ethical manner.

Take for example the softwood lumber fiasco. The US has lost several tribunals and decisions on its illegal tariffs on softwood lumber but has continued to ignore the rulings and charge these illegal duties and unfairly penalize Canadian producers in this manner.

How can China take you seriously when you complain about copyright infringement when you are violating your agreements? Why should they respect their agreements with you when you do not respect your agreements with others?

The US should take a good look in the mirror and at its own actions before embarking on any more trade negotiations with other countries.

If you cannot deal with a major dispute with your biggest trading partner why should you be trusted to deal with China any differently?




Rick Kitson MBA P.Eng

Construction Project Management
From conception to completion

http://www.kitsonengineering.com

 

[astructurale]

This post will not specifically deal with China, but it will strengthen the US so I believe it applies to this thread:

One positive thing we could do is adopt the Fair Tax. It will bring businesses back to the US that are US companies operating overseas, and it will also encourage foreign businesses to base their operations in the US, therefore boosting our econcomy, providing jobs, and increasing our position in the world economy.

(To learn more about the Fair Tax go to

http://www.fairtax.org

or read the New York Times Best Seller "The Fair Tax" by Neal Boortz and John Linder.)

 

[VisiGoth]

When Ireland removed the property tax they could not pour the concrete fast enough. The economy boomed. Australia is another country that does not have a direct property tax. So I agree with
astructurale
that removing the property tax is good for the people and the economy. Property tax is also unfair and has high overhead costs. I think income tax is a much better alternative than the consumption tax in the fair-tax mehod, especially at the community level. Funding for police, teachers and firefighters would be stable and there would be more funds (because the US real estate tax system has over a 20% overhead and in some areas more, and the income tax collection overhead is around 2%).
When Ireland removed the property tax they could not pour the concrete fast enough. The economy boomed. Australia is another country that does not have a direct property tax. So I agree with
astructurale
that removing the property tax is good for the people and the economy. Property tax is also unfair and has high overhead costs. I think income tax is a much better alternative than the consumption tax in the fair-tax mehod, especially at the community level. Funding for police, teachers and firefighters would be stable and there would be more funds (because the US real estate tax system has over a 20% overhead and in some areas more, and the income tax collection overhead is around 2%).

 

[davefitz]

astructurale is onto something regarding the need to change the US tax system,in order to address the massive change in the US economy which occurred over the last 100 yrs.

100 yrs ago, the US more or less played a similar role to that of today's China- we were the low cost producer and most of the US economy was based on produced goods , manufactured or farmed by a manual laborer, thus an income tax could be used as a fair way to distribute the costs of running the gov't.

At this point in time, only a fraction of the goods purchased in the US are actually manufactured in the US. Check the tags in WalMart. Goods and services that are manufactured or produced overseas and not subject to a US tax ( either import tariff or VAT value added tax , or national sales tax) do not have associated with them any contribution to the funding needed to run the US gov't, while products that are manufactured in the US have various contributions associated with them, including all income taxes and SS and medicare taxes which are paid by the US laborer ( and investor) that participated in its production. Without a VAT, the US goods are penalized by having to carry the costs of running the US gov't while the foreign goods do not have this penalty.

Most other democratic nations already use a VAT to fund their gov'ts,, and the WTO rules are structured to allow a VAT. Replacing the income tax with a VAT would help to equalize the playing field insofar as foreign vs US made goods, but special efforts would be needed to offset the regressive characteristic of the VAT- unprocessed staple foods, basic clothing, rent , heating oil, etc would need to be tax free to avoid unfairly harming the "working poor".

The common opinion that the US income tax is "progressive" doesn't ring true, in that the lower class working poor pay a higher net tax rate ( when SS and medicare are included) than the established large corp.s and investors, and retaining the income tax while prohibiting an import tariff does not address the imbalance caused by allowing imported goods to avoid paying any of the costs of gov't.

 

[astructurale]

Here's some FYI since it seems that the Fair Tax is not well known and there is a lot of false information out there.

The Fair Tax would: (just a few highlights)
*Create jobs in the US
*Bring companies back to the US and attract foreign companies here also
*Eliminates the Income tAx
*Abolishes the IRS
*Benefits the poor better than ANY current system or VAT or proposed Flat Tax (Flat Tax is not the same as the Fair Tax. It is an income tax.)
*Rebates given to every person for taxes on spending up to the poverty level.
*Taxes only on new goods
*Would bring in the same amount of revenue that the current system does for the goverment, but by reducing the complication and heavy burden of the current tax system and embedded taxes you'll actually pay less in taxes than the current system!

It would take me forever to list all of the positives of the fair tax and what it would mean for the US.

Video to easily learn morejust 20 min long)

http://myfairtax.org/ITFTvideo.html

I encourage you to visit

http://www.fairtax.org

also or read the Fair Tax book by Neal Boortz and John Linder. Every person that I have talke about this with who has develed into it to learn more has gotten excited about the Fair Tax. It's something everyone, democrats republicans, libertarians, constitutionalists, etc, can get behind. If you like what you learn call your local representative and ask them to support the Fair Tax.

 

[ziggi]

There's probably a good reason that the current US tax system is in place and so bureacratic and consequently expensive, it has alot of parasites attached to it.