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How Should the West Deal with China's Unfair Trade? (Tor Guimaraes, USA, 08/26/19 4:11 am)

Since I wrote that "to fix the China trade issues, a tariff war is probably the worst option," John E sucker-punched me with a very difficult question: "Tor, how would you address China's dishonest dealing on trade and intellectual property?"

First, where I am coming from: For the last several years, whenever applicable I expressed in this Forum my dismay that the US government allowed our corporations to make China our cheap goods manufacturing center. Dangling their potentially juicy markets, Chinese organizations not only employed their poor people but intelligently learned how to use Western technology and know how to rise to unimaginable levels of scientific knowledge, technology, and financial success. They made many big mistakes, but strategically China is out of the poverty box. Having a central government has created many huge problems for China like the enormous waste in roads/bridges to nowhere and empty/unfinished cities. However, undeniably the same central government transformed China by huge investments in infrastructure (energy, water management, transportation, communication, agriculture/food production, etc.). Well, all this is water under the bridge and the world has to live with it.

Under the WTO China's old status as a developing country gave it a good excuse for borrowing technology and know-how as part of doing business with foreign companies. But now China is looking more like a developed nation even though by some measure it is still a poor country. More important, it needs to be assertively confronted when it engages in stealing intellectual property, bullying small neighbors with unreasonable territorial claims, and any unfair trade practices based on the WTO agreement. In other words, take China to court first, make it look like a crook in the eyes of the world. If China insists, take directly related proportional punitive measures, including stealing some of their technology (they are ahead in some areas like 5G and possibly AI).

Whatever we do, an all-out trade war is likely to be a bad idea for many reasons: It is going to be a financial bloodbath for consumers and jobs. Even if we hurt China badly, which we will, we might lose more even though Trump may blame someone else for the results or he will subsidize his constituents (he already promised $28B to the big farmers). Because of their central government, China can react and implement changes much quicker than our chaotic government. This trade war may force China to finally reduce poverty in the countryside by shifting from exports to developing internal demand. On the other hand, the US economy is not as strong as our talking heads are saying, all our infrastructure is going rotten with no plans for necessary investments, our tax base is shrinking, the corporations don't know what to do with all the cheap cash except share buybacks, mergers and acquisitions, the US deficit is exploding, our old allies are getting pissed at us, our old enemies are laughing at us and making alliances (even Iran now is feeling much safer by cozying up to Russia and China). Strategically, all these bad developments plus a wild teenager in the White House, make me even more worried than before.  It seems like a never-ending increasingly worsening nightmare. Even the price of gold is telling us the world is in trouble.

Please, someone give me some truthful good news.

JE comments:  Take 'em to court?  Hasn't this been tried already?  And conversely, China is suing the US before the WTO because of the punitive tariffs.  It's a PR war at this point, but who is the audience?  Some vaguely defined "world opinion"?

(I don't call it a sucker-punch, Tor.  I prefer to think of it as "sparking further discussion"!)

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