Monday, April 25, 2011

China is our deadly enemy

Please read this post in conjunction with my basic position paper "What is this blog all about?".

When American manufacturers first transferred jobs to China, 40 to 50 years ago, Chinese government officials probably did not see great significance in the event.   I suspect, however, that as more and more jobs were transferred, and as high tech factories were built by American companies, China began to see the possibility of becoming the dominant manufacturing nation in the world. 

One of the key aspects was that through this process China was handed the latest technology, which otherwise would have taken many decades to develop.

The economies of all the western countries have been gutted through transfer of manufacturing activity to China and other low-wage countries.  It is not only America that is suffering.

I am trying to figure out when the American government and the American people will wake up to the severe damage done to the economy by having our manufacturing done for us by foreign countries.  If we look around our country today, and see the problems of unemployment and huge government deficits, don't we see enough damage to wake us up?  Or, do we have to wait until it gets much worse before we wake up?

There is a strong censorship in effect, preventing mention or discussion of the real issues and causes of our present economic situation.  This censorship may come from American corporations that have invested in manufacturing facilities in China.  The censorship may come from pressure groups controlled by China.  Regardless of who has originated the censorship, I can't see how any sector or interest group in America stands to benefit from complete destruction of American manufacturing and thereby complete destruction of the economy. 

Censorship is doing tremendous damage by delaying understanding of the problem and thereby delaying the inevitable wake-up call.  We have to get out from under this ridiculous censorship and speak frankly about our economic problem. 

When our leaders talk about "building our relationship with China", or sit down with Chinese officials to talk about human rights, it is clear how far the government is from waking up to see China as the deadly enemy it is.

What is going to happen to our economy?   The economy is not going to improve without very forthright actions (see below).  The President and his officials, and the Senate and House, are in a waiting and hoping mode.  This passive attitude expresses a "deer-in-the-headlights" fear of taking any action, obedience to the censorship, and political correctness toward China.   The latter two phenomena are closely intertwined. 

Students in Economics 101 learn that some economic problems are self-correcting.  A country that is importing too much and exporting too little will see its currency go down and down in value until imported goods become too expensive.  At that point entrepreneurs will spring up and will begin to manufacture the goods domestically.  The country will benefit dramatically from the increased domestic manufacturing activity and the economy will begin to improve.  Employment will increase.  I am praying that this phenomenon will kick in sooner rather than later, and save us from ourselves and from government inaction.

In at least one case, this phenomenon is already happening.  Several years ago a European auto manufacturer announced that the U.S. dollar had decreased to the point that it had become attractive to do more of its manufacturing in the United States.

All the people who say that manufacturing in the United States is impossible because costs are too high, or impossible for other reasons, and all the people who say that manufacturing employment is not important to the economy, will be proven totally wrong.  

But now there is a new threat from China that should assist people to wake up sooner rather than later. 

Let's note that we are currently selling some manufactured goods to China.  However, as everyone knows, the problem is that we are importing much more from China than we are exporting to China.  in fact we are importing four times more from China than we are exporting.  This situation is expressed by our negative balance of trade with China in manufactured goods of more than 270 billion dollars per year. 

But what happens if China no longer buys anything from us? 

This situation is foretold in new policy announcements made by China several months ago.

China has announced a policy in which by 2020 individual items currently purchased from the United States and other western countries will be reverse-engineered without reference to patent or  intellectual property rights, and thenceforth will be manufactured in China.  Some U.S. manufacturers are already aware that they  have only another 5 to 10 years to sell these items to China.  After that, the items will be "dead" because China will be manufacturing the items for its own use and for sale on the world market.  In an environment of unrestricted entry of Chinese products into the U.S., these U.S. companies may close down completely because they won't be able to sell their products in the U.S. market or any other market. 

China has announced a further policy which states that by 2050 China will be self-sufficient in all manufactured goods, including, presumably, more complex products such as airliners, communication systems, and railroad systems. 

Anyone who does not experience the same cold chill and near physical illness that I felt on learning of these announcements simply does not understand the threat.

China is telling us several things here:

1.  A smart and efficient country, a country that wants to get ahead of other countries in the world, ensures that needed goods are manufactured domestically.

2.  China's objective is to complete the destruction, already well along, of the manufacturing sectors of the United States and other western countries.

China has made some financial mistakes.  But China also has 5000 years of experience in operating a country that in many periods of history has been far advanced in relation to other countries.  And China is signalling  that it is not wise to be an importer of manufactured goods.

Now we go on to a more sticky issue.  I am sure that China is assuming that U.S. and other western countries will continue to purchase manufactured goods from China, even after China ends all purchases from the west.

I hope to heaven that the U.S. and other western countries are not going to be so stupid as to behave according to this Chinese scenario.

The United States of America and other western countries have a very clear choice:

1.  Continue to buy manufactured goods from China, and from other countries that don't buy approximately equal amounts from us.  Continue to do this until our economies are completely destroyed and we have no money left to buy anything from anyone.


2.   Immediately, this month, begin a forthright program of fending off the deadly threat posed by China.

Which choice do you favor?

What are the specific actions that are urgently needed?

+  The President must find the bravery and leadership to renounce political correctness toward China and political correctness toward existing trade agreements.  How can any country be expected to commit complete national economic suicide because of what is written on a few sheets of paper?

+  The President must find the bravery and leadership to go past the censorship and repeat what he said during the campaign in 2008:  "We have to get the jobs back from China."

+  The President must find the bravery and leadership to acknowledge to the American people that we have a negative balance of trade in manufactured goods with all foreign countries of over half a trillion dollars per year, and we cannot afford to lose this huge amount of wealth. 

+  The President must find the bravery and leadership to acknowledge to the American people that we have a further hemorrhage of half a trillion dollars per year, in the form of a variety of other foreign expenditures, including support of three foreign wars.  We cannot afford this loss of wealth and as a first step we have to end our involvement in these wars this year. 

+  The President must find the bravery and leadership to place an immediate tariff of 25% on manufactured goods coming in from China and from other countries that don't buy from us in approximately equal amounts.

+  The revenue from the tariff to be used to assist entrepreneurs to re-open factories or start new factories to manufacture here at home goods currently being imported.

+  Tariff to be increased to 50% on January 1, 2012, and 100% on January 1, 2013.  Further actions to be taken in 2013 and beyond.

These actions will give immediate hope to the American people and to the people of the other western countries.  The economy will pick up within weeks.

These actions will create tremendous consternation in the Chinese government.  The government will be forced to devote its resources to helping its own people, rather than working to destroy the economies of other countries.


President Obama has stated that we will solve the unemployment problem by creating new technological industries.  This statement contains very sad overtones because it implies that we are writing off the jobs that have been transferred to foreign countries.  No attempt will be made to get them back.

The other problem is that once the new technological industries get going, the new employment will probably be quickly   transferred to China and other foreign countries.

I say that before we can do anything about the unemployment problem, we have to put in place a tariff of at least 25% on imported goods from China and other countries that don't buy from us in equivalent amounts.  This initial tariff has to be accompanied by a firm commitment to further increase the tariff on a time schedule.

In other words, an encouraging and predictable environment has to be established, before anyone will work to develop new technological industries or will work to increase or re-start manufacturing of thousands of items now imported.

An initial tariff of 25%, or any tariff, is not a bar to importation of manufactured goods from China or any other country.  China or other foreign country can continue to ship goods in whatever amounts they wish.  What the tariff does is express through real actions, not just words in speeches, that U.S. government policy is to level the playing field and give our own people a chance to work and to compete.

No comments:

Post a Comment