There’s almost never a secret plan

The recent trade deals (Nafta 2.0, China, etc.) certainly look like failures. That’s my view and also the view of Paul Krugman.  More generally, I see governments as being big and clumsy organizations, and assume that the most straightforward interpretation of their motives is usually the correct one.  Tyler Cowen offers an alternative perspective:

Elsewhere you will see Paul Krugman suggesting Trump has lost the trade war, but I don’t think he comes close to even seeing what the trade war with China is about. No matter what Trump says, the trade war is not about lowering the trade deficit. It is about (for a start) two major considerations: a) ensuring that national security-motivated partial economic decoupling takes place on terms not so unfriendly to America, and b) giving America levers to make sure China does not make such significant inroads into the world’s tech infrastructure, most notably with 5G but not only.

The stipulation of Chinese purchases of American exports, which probably they will not and cannot meet, is in fact a lever to give the United States enforcement power over the less tangible parts of agreement, which is indeed most of the agreement. We want China to be in default of the agreement terms, so we may threaten them with tariffs to enforce compliance elsewhere, and so that is a better rather than worse outcome for the United States.

I’ll respond to the specific points made by Tyler and then make a broader argument.

1. As far as I know, the “phase one” trade deal with China does not make economic decoupling any less painful for the US.  If it does, I’d like someone to explain which provisions do this.

2.  If decoupling were our goal, then it would be odd to insist that China become more open to trade and investment with the US, changes that would make China richer and more powerful.  Is that how we should be treating an enemy?  It’s not how we treat Cuba.  (I don’t see China as our enemy, although I understand that much of the foreign policy establishment disagrees with me.)

3.  I don’t believe that the trade war gives “America levers to make sure China does not make such significant inroads into the world’s tech infrastructure”.  We may have some levers in this area, but they have nothing to do with the trade war.  The US is in a very weak negotiating position on trade, as Trump’s political position is much weaker than Xi’s.

Tyler seems to acknowledge that at first glance his hypothesis doesn’t seem to make much sense.  Our trade demands don’t seem to align at all with the foreign policy goals that he thinks are motivating the trade war.  His explanation, however, seems a bit too clever to me. He’s right that China will not live up to its promises to hit certain import targets, but I don’t understand his claim that this gives us extra leverage to use in achieving the foreign policy goals:

We want China to be in default of the agreement terms, so we may threaten them with tariffs to enforce compliance elsewhere

If they are not complying “elsewhere” then we can simply impose tariffs in retaliation.  The silly export targets don’t give us any additional leverage.  It’s not like when the Feds got Al Capone for taxes because they couldn’t prove murder; the rule of law does not apply to the US government.  If we say that China is violating any provision of the agreement, then we can punish them any way we wish.  We don’t have to prove anything in a court of law.  All the various trade provisions of the deal give us zero additional leverage on the national security issues.

I don’t see Huawei as a threat to our national security, partly because I don’t see any evidence that they are spying on us, and partly because don’t think that spying has much impact on the balance of power.  But if I’m wrong then the appropriate policy is a boycott of Huawei, not a trade war.

I have a much simpler explanation for the seemingly ineffective parts of the trade deal.  Trump asks China for big trade promises for the same reason he asked Ukraine to undertake a useless investigation of Biden.  It’s all PR.  Trump wants to tell voters (especially farmers) that he got China to do what he asked of them.  All Trump’s actions can be most easily explained if you assume his only goal is to help Donald Trump, politically and financially.

(Note that Tyler was discussing the Trump administration, not just Trump, so the following is not directed at his post.)

Think about how implausible it is that Trump is motivated by foreign policy considerations.  The biggest threat to America is Russia, not China.  Russia is an expansionist power with far more nuclear weapons than China.  And yet Trump consistently acts in ways that provide aid and comfort to Putin’s Russia, while undermining our allies in Ukraine, Kurdistan, and elsewhere.  Trump even undermines our own intelligence services when he suggests that they are lying about Russian interference in the 2016 election and that Ukraine was the real threat.  I’m not saying that Trump is a paid agent of the Russian government (I don’t believe in conspiracy theories), just that he acts in such a way as to help our enemies and hurt our friends.  Why would a president who is sympathetic to Putin care about the smaller threat provided by China?

Today, Trump is surrounded by henchmen like Pompeo and Barr, but during the course of his 3 years in office he has had some top aides who were actual patriots, even if one disagrees with their views (as I often did.)  When they leave office they describe the administration as a clown show, using terms like “drug deal”, “idiot”, “moron”, kindergartener”.   But this is exactly what it seems like from the outside!  If an administration seems incompetent from the outside, and also seems incompetent to its own top officials, then the most parsimonious explanation is that it is actually incompetent.

People who disagree with me might argue that Trump himself is incompetent, but the “deep state” hijacked his trade agenda and diverted the negotiations away from mercantilism and toward neoconservatism.  Maybe, but the actual agreements looks much more like what you’d expect to get if you had mercantilists like Trump, Lighthizer, and Navarro running the show, but able to achieve only a small portion of their goals.  If containing China were the goal, then why did we make demands that would have the effect of making China more powerful, such as demanding that they open up their capital markets?

There’s a much simpler explanation.  Tyler’s right that the US government is trying to limit China’s power.  Thus the recent sanctions on Huawei were probably motivated by exactly the factors that Tyler describes.  But actions taken to limit China military power, such as export controls, sanctions on Huawei, etc., are essentially unrelated to the long trade war.

Tyler concludes:

In general, I am finding that commentary on the trade war is of relatively dubious value, in part for partisan reasons.  The key here is to set aside your political views, and spend a lot of time talking with national security people.

It’s hard to think of a more distinguished China expert than Henry Kissinger.  Here is the view of this leading advocate of realpolitik:

Former U.S. Secretary of State Henry Kissinger told an audience in Beijing on Thursday that China and the United States are in the “foothills of a Cold War,” warning that the current trade war between the two nations could escalate into an armed conflict worse than World War I if left unresolved. . . .

“If conflict is permitted to run unconstrained, the outcome could be even worse than it was in Europe,” Kissinger said. “World War I broke out because of a relatively minor crisis … and today the weapons are more powerful.”

“That makes it, in my view, especially important that a period of relative tension be followed by an explicit effort to understand what the political causes are and a commitment by both sides to try to overcome those,” Kissinger continued, according to Bloomberg. “It is far from being too late for that, because we are still in the foothills of a Cold War.”  (emphasis added)

That’s also my view, and yet I get called a starry-eyed naive idealist, who doesn’t understand power politics.

PS.  Some will say that my views of Trump’s policies reflect my political bias.  Is that also true when I lavish praise on his new kidney transplant policy:

The U.S. government proposed new rules Tuesday to increase organ transplants — steps to make it easier for the living to donate and to make sure that organs from the deceased don’t go to waste.

The proposals come after President Trump in July ordered a revamping of the nation’s care for kidney disease that included spurring more transplants of kidneys and other organs.

Or when I praise the corporate tax cut?  Or the recent reduction in labor market regulation?

And is my current pro-free trade policy view different from what my view was years ago, before Trump came on the scene?  How about the views of other Republicans (Rubio, etc.), who once favored free trade and are now born again trade warriors?  Who is letting partisan politics twist their views?



40 Responses to “There’s almost never a secret plan”

  1. Gravatar of LC LC
    18. December 2019 at 11:00

    Good post Scott. Some of the economic commentary on this stupid trade ware are asinine, comparable to the quality of the propaganda churned out by CCP. For example, when Tyler says there is an effort to make sure China doesn’t make inroads in world’s tech infrastructure, the consequence is the withdrawal of Chinese tech companies’ R&D efforts in US. These R&D investments are now focused on Europe. (Follow the venture capital funding for tech start ups in Europe. Also see how many American tech companies are setting up new subsidiaries outside of US to get around anticipated US bans.). There is a recent CNBC report on Chinese government ordering the removal of all foreign tech in government offices in 3 years. That’s the tip of iceberg on China’s movement away from US tech and an unintended consequence of this stupid line of thinking. I don’t see how US can effectively block China from integration with the rest of world unless it resorts to Cold War style alliances and blockades of China. The current effort is clumsy and half hearted and unnecessarily hurts US.
    When Tyler ays partial economic decoupling, what does he mean? Which part are we supposed to decouple and which part are we supposed to still allow connected? I have never gotten a good answer from any of these commentaries or people on that side of argument. Can someone at least start a list or proposal? Also, this effort to decouple couldn’t have come at a worse time. There is the latest Credit Suisse report that shows there are more Chinese in top 10% of world wealth in Americans (100M vs 99M). This just means some of these Chinese won’t buy American imports with the same enthusiasm as they had before.
    When Tyler says talking to national security people, he is forgetting that national security people have their own incentives. As Peter Lee (formerly of State Department) remarked, these people need to pay their kids’ college tuition too. The only game (hyping up a national security threat) that’s big enough is China. I am also reminded of Tom Barnett’s famous saying: I don’t want to live in Russia because I don’t want to live in a country run by national security interests first. Also, memo to Tyler and Marco Rubio, the implied political message that “we want Chinese people to live in poverty and despotism so they can’t challenge us” doesn’t sell very well to the average Chinese. The CCP will use that and show there’s a foreign threat that justifies their rule. It will only hype up rabid Chinese nationalism.
    There is much half truths, unreasoning and hyped propaganda currently circulating regarding Sino-US relationship. We really do need some serious adults to come in and right the ship. If not, the next few decades will be rough.

  2. Gravatar of Becky Hargrove Becky Hargrove
    18. December 2019 at 11:47

    Rural areas are already having to pay more for digital infrastructure, since they may have to rely mostly on U.S. tech in the near future. Apparently, in a scenario not unlike that of farmers, they are now getting government subsidies to help with the additional expense, for they are being compelled to rip out anything China made that they already bought. And that is only one example of a growing list of negatives. What about this?
    Adam Smith helped to build a conceptual foundation that seemed incredibly strong and worthy for global trade. Yet inexplicably it seems that foundation is being undermined on a daily basis.

  3. Gravatar of Christian List Christian List
    18. December 2019 at 12:33

    Kissinger seems to be a good contraindicator. If he has an idea, it might be best to do the opposite. He can’t even decide whether he wants to predict a new Cold War or a new First World War.

    What would be so bad about a Cold War? After all, this would be a blueprint of how to bring down the most powerful authoritarian system of the current time.

    I would be on the side of the free traders, but their problem is that they don’t present a single plausible idea of how they want to bring down the regime in China. So far you’ve only managed to make the regime more and more powerful, so that this regime might now even replace the US as a leading nation and negate the lighthouse function of the Free World.

    You’re sailing into completely unknown territory, it looks really dark so far, you have no plan at all, not even a plan B; to make it short: you are completely mad. Almost every policy that opposes this seems better right now.

    Say about Trump what you want, but it was him who changed the way the US looks at China. As Scott has involuntarily proven, today so many US politicians on both sides agree that China is a huge problem.

    That was the first very important step. At the beginning of the last Cold War it took some time until all politicians were on board. Compared to this, all the details and concrete steps are only secondary. In the details there will be regression and progress, this is quite normal. You can even try the steps out in a trial and error procedure if necessary, but first of all it was really important that the fundamental danger was recognized. Now it can be addressed.

  4. Gravatar of rayward rayward
    18. December 2019 at 13:16

    Sumner is right: Trump just wants a “win” in the trade war with China. Whatever that is. His negotiators made a veto power over China’s industrial policy the central feature of the negotiations. Did they really believe China would give the US veto power over China’s domestic economic policy? The irony is that Trump was elected because he ran on the promise of an American industrial policy, a promise, like his others, that wasn’t kept. So Trump didn’t implement his own industrial policy, and he failed to get a veto power over China’s. Is that a win, win, or a lose, lose?

  5. Gravatar of Gordon Gordon
    18. December 2019 at 13:58

    Scott, as another example of the sheer incompetence of Navarro and Trump’s other trade advisers there was the outrage Trump expressed two weeks ago regarding the currency “devaluation” by Brazil and Argentina. We’ve seen time and again that Navarro has no clue about exchange rates. In the case of Brazil, there was a drop in the real exchange rate though it’s due to falling demand for its exports. For Argentina, it’s the ongoing effort of the central bank to cover the fiscal incompetence of the government. I agree with you. What we see happening with Trump’s trade war is the result of laughable levels of incompetence. BTW, you’d probably undercut some of the accusations of partisanship if you point out that both Bernie and Elizabeth Warren exhibit Trumpian levels of incompetence on the topic of trade as well.

  6. Gravatar of Bob Bob
    18. December 2019 at 14:05

    I think Russia is our biggest current threat, but that’s only because of Trump. Russia has serious limits and appears to have peaked. Assuming that the republican party regains some perspective on Russia, long term Russia doesn’t need to be a big threat. I think we should work very hard to have good relations with China and we should absolutely avoid another cold war, but long term they pose a real threat. They are not trending in the right direction on authoritarianism, and they are getting really good at it. The regime has proven to be absolutely ruthless when pursuing it’s interests. What’s happening to the Uigars is truly horrifying. I think surveillance has the potential to be a serious front in the future and they are mastering it. And they produce a lot of our consumer products. And their market share will make them very hard to contain and counter. China is a very really threat to the US just by the nature of who they are. But we should not focus our energy on how many soy beans they buy from us.

  7. Gravatar of Lorenzo from Oz Lorenzo from Oz
    18. December 2019 at 15:47

    The US economy in PPP terms is $21.4trillion, the Russian economy is $4.3trillion. Moreover, the trend is not in Russia’s favour. So, apart from the nuclear weapons, not exactly a strategic rival to the US, more a strategic irritant in some places.

  8. Gravatar of Lorenzo from Oz Lorenzo from Oz
    18. December 2019 at 15:49

    Also, a case can be made that the Clinton Administration made some miscalls that turned Russia into a strategic problem.

  9. Gravatar of ssumner ssumner
    18. December 2019 at 15:54

    LC, You said:

    “When Tyler says talking to national security people, he is forgetting that national security people have their own incentives.”

    I had the same thought. And I’m just as unimpressed as you are by the arguments for creating a new cold war.

    Becky, Good point.

    Christian, You said:

    “Kissinger seems to be a good contraindicator. If he has an idea, it might be best to do the opposite.”

    How clever!

    Rayward, Yes, that’s a win win.

    Gordon, Yes, there are so many examples it’s hard to know where to start.

    Bob, You said:

    “China is a very really threat to the US just by the nature of who they are.”

    Who they are? What does that mean? All I know is that Russia attacks its neighbors and represses its own citizens, whereas China (like India) represses its own citizens.

  10. Gravatar of ssumner ssumner
    18. December 2019 at 15:55

    Lorenzo, Brazil’s economy is much bigger than North Korea’s economy. Which country worries you more?

  11. Gravatar of Scott H. Scott H.
    18. December 2019 at 17:43

    I’ve got to not only believe in the Deep State, but also believe it’s economically adept and now working seamlessly with Trump? I agree there’s got to be a simpler explanation.

  12. Gravatar of dtoh dtoh
    18. December 2019 at 20:39

    1. CCP is an existential thread to humanity.

    2. De-coupling will a) be a lot easier for the U.S. than people think, b) has gotten easier since President Trump put U.S. companies on warning, and c) is a price well worth paying to save humanity.

    3. U.S. trade negotiators have always been spectacularly incompetent but are probably slightly better now than they have been for the last half century.

    4. Russia has a tiny economy and is an annoyance rather than a serious threat.

    5. Huawei’s business was built entirely on software and technology stolen from Cisco and other companies. The U.S. should impose sanctions on them or any successor company and also apply the same sanctions against any country that does business with Huawei. The U.S. should seek reparations from Huawei and its shareholders for the theft of technology.

    6. If Trump gets re-elected, we will see the re-imposition of stricter sanctions and trade restrictions.

  13. Gravatar of DF DF
    18. December 2019 at 21:33

    Simply find ways to ban Huawei and other Chinese surveillance tech de facto, not de jure. That’s the Chinese way, respond in kind.

  14. Gravatar of Anon Anon
    18. December 2019 at 21:58

    scott, “whereas China (like India) represses its own citizens.” the proof is in the pudding. Where is the proof for this – and no pointing to “Kashmir blocked after Article370 repeal” isn’t proof; that is a temp measure to ensure vandals and miscreants don’t run amok. And pointing to idiots preaching about Muslim suppression in Kashmir in a American House of Commons theatre – that isn’t proof.

  15. Gravatar of Benjamin Cole Benjamin Cole
    19. December 2019 at 00:17

    I put on my tinfoil hat, but I still cannot understand US trade, foreign and military policies.

    The best I can come up with is that the US military is a global guard service for multinationals, but that the military apparatus, as federaized agencies, have become so large they sometimes create their own agendas.

    So there is some tension between US military agencies that want China perceived as a looming and growing threat, and the multinationals who want to use the Communist Party of China’s low-cost manufacturing base and ultimately have access to the large China consumer market.

    I think for all of his manifest flaws, Trump is earnest in his desire to reduce the current account trade deficit, especially with China. This may reflect the views of Peter Navarro and Robert Lighthizer, both of them also seem earnest.

    Speaking of foreign influence in US elections, the multinationals can pour unlimited funds into academia, media, lobby groups, think-tanks, foundations, trade groups, and even directly into political campaigns.

    I think this is why Trump’s molehill-tariffs are made into mountains in the media.

    I will say one thing: Trump does not wisely pick his enemies

  16. Gravatar of Mike Sandifer Mike Sandifer
    19. December 2019 at 01:19

    People acting like a cold war with China is somehow desirable don’t know anything about international relations. China has a capacity to be far more competitive in a cold war than the Soviet Union was, and they will likely continue to grow faster than the US for decades. And, especially if we continue with erratic policy that ignores the concerns of our allies, we will increasingly push allies into the arms of China, precisely as we increasingly need them to help us balance China’s growing power. This could accelerate the diminishment of the importance of the dollar overseas, diminishing our soft power in the process. And then there is the problem of slower growth for the US that comes with less economic cooperation with China and even allies, which will further erode our relative and absolute power in the future.

    If present trends continue, the US will end up isolated and in more rapid relative decline, which is just what hardliners in Beijing want.

    And by the way, anyone here who thinks they know more about international relations, particularly the relationship between the US and China, than Kissinger, simply isn’t living in reality.

    The correct approach with China is to trade as much with them and the rest of the world as possible, nurture our relationships with allies like India, Japan, South Korea, and the EU, and continue to offer a democratic/republican free market alternative to China with the carrots of trade and cooperation in areas of confluent interests with the Chinese, and an increasingly strong security alliance to counter China’s ambitions in Asia and the rest of the world.

  17. Gravatar of Benjamin Cole Benjamin Cole
    19. December 2019 at 01:24

    How important are the Trump tariffs?

    The S&P 500 is up about 25% year-to-date, and the Shanghai Composite is up about 21%.

    Much ado about (nearly) nothing.

  18. Gravatar of Benjamin Cole Benjamin Cole
    19. December 2019 at 01:53

    “Did Xi surrender to Trump? China struggles to silence chatter”
    —-Nikkei Asian Review-6 hours ago

    Maybe the Sino-US trade deal is a intellectual Rorschach test.

  19. Gravatar of larry larry
    19. December 2019 at 04:17

    This article:

    claims “If Beijing turned off the spigot today, pharmacy shelves would be empty within months” In other words our trading policies have given China power over parts of our economy.

    I think the same may be true of rare earths used in electronics and military equipment.

    I do not see any trade policy that addresses this kind of issue.

    We are a big powerful country but if we become dependent on our enemies for crucial materials and products we will not be big and powerful for long.

  20. Gravatar of Mark Mark
    19. December 2019 at 04:29

    Christian, is Putin’s Russia really much better than the Gorbachev-era Soviet Union? The only way to sustainably bring down authoritarian regimes is to develop their countries until they are wealthy, as liberal democracy only occurs in wealthy countries. See South Korea, Taiwan, Chile, Spain, etc. Even the Soviet Union was far more benign in the later years when it had developed a decent economy (higher GDP per capita than China today) than in the early years when Russia was still a poor peasant economy. Poor countries are almost always going to be authoritarian even if they are democracies—see the deaths squads in the Philippines or the prisons for 2 million Muslims being built in India.

    The world is sailing towards a better future where global wealth is going to be more spread out and the masses of people in large developing countries China and India are going to enjoy living standards closer to what is taken for granted in the West, instead of the West being a sort of feudal elite that everyone else begs for scraps. It only looks dark to US foreign policy elites who claim to oppose authoritarianism while thinking they should have the authority to dictate the form of government foreign countries have.

    Dtoh, there was litigation between Huawei and Cisco in the US and Huawei paid damages as determined in the US legal system already. It is now double punishment for the government to go after it. Notably, the worst example of trade secret theft the government has been able to pin on Huawei was the employee swiping the testing finger from a robot, which another American jury determined caused only $5 million in damages. This is small peas compared to the many American-on-American trade secret thefts that happen every day.

  21. Gravatar of Mark Mark
    19. December 2019 at 04:36

    Larry, this is a non-issue. There are many non-Chinese pharma companies that could easily step in if China were ever to ban exports, which is itself extremely unlikely. China tried to embargo rare earths from Japan in 2010 and it backfired spectacularly on China, with China’s market share in rare earths falling from almost 100% to 70%-ish and only minor damage to Japan’s economy. China hasn’t tried it again. You need a global empire and control of the global financial system to really have effective sanctions of the sort we’ve used against Cuba and Iran and China neither has that nor has shown an interest in bearing the costs of acquiring it.

  22. Gravatar of Derrick Derrick
    19. December 2019 at 08:27

    Scott- this is a well crafted post which even the most mercantilist person must admit that it at least asks the right questions. You don’t have to refrain from any criticism of Trump to be considered impartial, in fact you do have a clear history of giving his administration praise when they do things right.

    I read fox, national review, Washington examiner, and other conservative outlets regularly to prevent my perspective from self-reinforcement and to consider alternative views. I don’t even see a hint of anything that might suggest that Trump can make errors. I’ve really never seen anything like this. The media, and by extension his supporters, have adopted his posture of “any slight, great or small, should be met with either 100% retaliation, anger, or denial”. A reasonable conservative person even 20 years ago would be able to clearly see that Trump and his administration have no clear policy goals with respect to China and Russia, least of which would put the U.S. in a stronger position over the long term.

    This is not Trump derangement syndrome, it is an objective evaluation of policy action and public commentary made by Trump. The conservative right have built an absolute fortress of opinion around him, and I really can’t understand why. It is the threat of existential crisis of the party? What?

  23. Gravatar of Anon Anon
    19. December 2019 at 08:47

    mark, “see the deaths squads in the Philippines or the prisons for 2 million Muslims being built in India”. What the heck are you blabbering about?

  24. Gravatar of Bob Bob
    19. December 2019 at 08:59

    You asked what I mean by the nature of who they are:
    They are destined to be second if not the most powerful country on earth, and on every front; as opposed to Russia which only has military and energy power. They don’t share our values, assuming we still have any values. They appear to act purely on self-interest internationally, while the US and our traditional allies act at least to some degree to advance the interests of others. Obviously, Russia’s actions are worse than China’s.
    I expect our interests will frequently collide with both Russia’s and China’s in the future. But China will be way more powerful than Russia, and thus a greater threat.
    That said, another cold war is a terrible idea.
    You are totally right. The fears that China is a threat because they can hold us hostage with pharma, natural resources, us treasuries… are always over blown. They are in no position to embargo/sanction us in any way. However, they are approaching a point at which we are no longer able to embargo/sanction them in a meaningful way. We can still sanction the hell out of Russia. Not saying we should.

  25. Gravatar of ssumner ssumner
    19. December 2019 at 10:05

    dtoh, You said:

    “CCP is an existential thread to humanity.”

    You keep saying this, without a shred of evidence. You made a big deal about the million imprisoned in Xinjiang, but are noticeably silent on the 2 million imprisoned in Assam.

    China doesn’t invade other countries in the way Russia does, and has far fewer nukes.

    I don’t believe your claim about Huawei; IP theft was a trivial factor in their rise.

    If a historian were to claim that “America’s first industrial revolution was entirely built on theft of IP from the UK”, conservatives would accuse him of being an America-hating leftist. But the claim would be less false than your claim about Huawei.

    anon, You said:

    “What the heck are you blabbering about?”

    You might want to read the latest issue of The Economist, or any other reputable news outlet, before making a fool of yourself.

    Mike, A voice of reason.

    Larry, You said:

    “We are a big powerful country but if we become dependent on our enemies for crucial materials and products we will not be big and powerful for long.”

    China doesn’t want to be our enemy. Russia is our enemy. It’s the US that is trying to start a cold war.

    Mark, Thanks for correcting my commenters.

    Derrick, Yes, most of the conservative movement is now totally discredited (with a few exceptions.) Trump has become the leader of a personality cult.

    Bob, You said:

    “They don’t share our values,”

    You mean Trump’s values? Seriously, I agree with your (negative) perception of the Chinese government, and I agree with your view that a cold war does more harm than good. The best way to improve the values of other nations is to trade with them. Is that also your view?

  26. Gravatar of Gene Frenkle Gene Frenkle
    19. December 2019 at 10:57

    I think it comes down to China being an easy scapegoat for people feeling left behind by two trends in America—the move to the Sun Belt and deindustrialization. So I was listening to the Marc Maron podcast and he was talking to an actor I like Eugene Levy. Eugene Levy is a comedic actor that isn’t a funny person, he just happened to grow up in the 1960s in Canada’s “Pittsburgh” which is Hamilton, Ontario. Apparently the same deindustrialization that happened in America happened in Canada. So a group of young male Hamiltonians knew they weren’t going to get jobs in the steel factory like their fathers so they had to do other things. That group of people included Ivan Reitman, Eugene Levy, John Candy, Martin Short, and Dave Thomas the comedians of SCTV and then wider fame.

    If you recall in 2006 we were supposed to be driving cars made in China now…and yet we aren’t. In 2006 plans were being made for LNG import terminals…and now we are building LNG EXPORT terminals!! So fracking was proven economical in 2009 and that is the game changer that has allowed us to have this very long expansion after the Great Recession. So the worst fears never came true but Trump was able to play on those fears in 2016 and his supporters lapped it up. Characterizing China as the enemy is just like terrorists called America the “great Satan”. Existential threats get people to rally around a common cause.

  27. Gravatar of bob bob
    19. December 2019 at 11:28

    I believe our values evolve around human rights, civil liberties, equal protection, equal opportunity… and a belief that we should support people around the world to achieve the same. The Chinese government does not want the same for their citizens, and undermines and/or fails to support efforts to help others achieve those benefits.
    But short answer
    Short answer to “is that your view” is mostly yes. Thanks. Good post and discussion.

  28. Gravatar of Christian List Christian List
    19. December 2019 at 12:38

    Christian, is Putin’s Russia really much better than the Gorbachev-era Soviet Union?

    Mark, you seem to forget that Russia is not the USSR. Russia lost control over a whole lot of countries. A whole lot.

    Not to mention all the satellite states of the USSR. You want to tell me that life in East Germany, Poland, Hungary, Czechoslovakia, Bulgaria, Romania, and Yugoslavia, is the same as back then when the USSR infested the world???

    It is true that Putin’s Russia itself is not so much better than the USSR. Everyone knows how much I detest Putin. But even I have to admit that even Russia itself is politically a bit freer than the USSR. So even in Russia, there was a bit of improvement. Now compare that to China where we see zero improvement regarding political rights. ZERO.

    This is extremely contrary to the theory by Scott and yourself, which actually predicts that political rights improve as countries get richer. China has become extremely richer in recent years, but nothing has changed in terms of political rights. How should we evaluate a theory that has not kept its predictions for many years? How are we to evaluate people who do not want to adapt their theory even though the theory has failed the reality test for many years? Is that fanatic, religious, or obsessive?

    Scott has so many good theories on NGDP targeting, on inflation, on price bubbles, and so on. His theories are so good in those areas because he backs them up with impressive evidence that is hard to refute logically.

    When it comes to China, I think he does it the other way round. There is no evidence whatsoever that political rights in China have improved in recent years; on the contrary, all the reports tell us that the situation has gotten worse. But Scott simply ignores the facts because he wants to stick to his theory. It is not serious, it is not scientific, and unfortunately it now thwarts everything else that Scott is writing. Sad!

    See South Korea, Taiwan, Chile, Spain, etc.

    See Germany, Italy, Japan, South Africa, India, Greece, etc.

    I believed your theory until a few years ago. There are many examples. Unfortunately however, these examples all have in common that there was never only pure economic liberalization in these countries. There has always been some pressure and some incentives to make political reforms worthwhile as well.

    Oftentimes political reforms were even carried out before economic reforms. Oftentimes both types were implemented in parallel. In rare cases, there may have been a little more economic reform (which country would that be???), but there was always political pressure. In my view there has never been a case like China; especially not on this crazy scale. The pressure and incentive systems regarding China have hitherto concentrated on economic areas, political rights have simply been ignored, and now, unfortunately, we are in a situation in which these failures can take an extreme toll.

    The theory by Scott and you that everything will *somehow* work out is not a theory. It’s just a very optimistic hope based on nothing. I hope you’re right, but I think the Free World needs to prepare for the worst-case scenario. We cannot build the future on pipe dreams.

  29. Gravatar of Todd Kreider Todd Kreider
    19. December 2019 at 13:04

    Scott wrote: “China doesn’t invade other countries in the way Russia does, and has far fewer nukes.”

    True, but China’s ICBMs could kill over 50 million Americans, probably most on the East and West Coasts.

  30. Gravatar of Edward Zimmer Edward Zimmer
    19. December 2019 at 13:17

    Isn’t it time to stop thinking of other nations as “enemies” & start thinking of ways of becoming “friends”, regardless of their form of government. Stop thinking in terms of yesterday’s weaponry – the age of nukes & missiles is over – this is the age of biological weapons. Technologically we have the capability of selectively killing or disabling masses of people (by race, age, sex, etc.), over limited or unlimited distances, with biological weapons deliverable by a single individual, in such diversity of configurations as to make them indefensible. To think that we, China, Russia, & possibly other nations don’t have such weapons is simply naive. Eliminating fear & hate from our global society may well be the bigger challenge for our survival than the most dire predications from climate change. Why don’t we hear about these weapons? Money! It would eliminate need for the military/industrial complex that Eisenhower warned against so many years ago.

  31. Gravatar of Larry Larry
    19. December 2019 at 14:12

    You quickly dismiss my argument, but the pentagon apparently takes it seriously and is moving to find other sources for critical items other than China.

    Here’s an argument:

    And it’s easy to find more.

    I’m glad you know better than the pentagon.

    I feel better now.

  32. Gravatar of Negation of Ideology Negation of Ideology
    19. December 2019 at 15:10

    Derrick –

    “I read fox, national review, Washington examiner, and other conservative outlets regularly to prevent my perspective from self-reinforcement and to consider alternative views. . I don’t even see a hint of anything that might suggest that Trump can make errors.”

    I agree with you about the conservative media in general, but I don’t think you should have included National Review. They have had many articles critical of Trump, particularly from Goldberg, Williamson and French. They even had an “Against Trump” during the primaries.

  33. Gravatar of Brian Brian
    19. December 2019 at 22:43

    Christian List, I just checked the data. You are right that PR and CL (political rights and civil liberty) have not been improving in China. The data start in 1972. Quite free equals 1 and not free equals 8. The China indexes of these are 6 or 7 across the years from 1972 to 2018. The USSR/Russia graph shows it was 6 or 7 in 1972 and improved to be 3 or 4 by 1994 and in the time since it has deteriorated back to 6 or 7. I hate to write about graphs but I cannot post a graph here.

    Xi Xinping’s influence does not show up in the data if you are willing to say it started in 2012 which was when he ascended to power. A scale of 8 levels is not sufficiently fine.

    You wrote:

    “China has become extremely richer in recent years, but nothing has changed in terms of political rights. How should we evaluate a theory that has not kept its predictions for many years? How are we to evaluate people who do not want to adapt their theory even though the theory has failed the reality test for many years?”

    Perhaps your impression of the theories of optimists is incomplete. I do not expect linear progress.

  34. Gravatar of Brian Brian
    19. December 2019 at 23:12

    Furthermore, it would be wrong to suggest there is a homogeneous China that has become richer. There is significant inequality between regions and across the urban versus rural divide so wait to see what happens when the laggards do better economically.

    Lastly, regardless of how China’s internal freedom affects any future action that would be hostile to the U.S. it would seem there is no incentive for hostility when increasing trade has been one of their main goals. In other words if there is no macro level progress look at what the incentives suggest.

  35. Gravatar of Brian Brian
    19. December 2019 at 23:16

    That’s macro in the sense of no big picture political liberalization since 1972.

  36. Gravatar of Anon Anon
    20. December 2019 at 06:09

    scott, mark, if you are referring to, calling it repression of ‘citizens’ is bit rich. So what does one propose to do for illegal immigration?

    scott – is your take that The Economist is always rightz not biased and so are all reputable media? That you never take any material from such media with a pinch or a spoonful of salt?

  37. Gravatar of Sunday assorted links – Marginal REVOLUTION Sunday assorted links - Marginal REVOLUTION
    22. December 2019 at 09:29

    […] on the trade deal.  I just don’t get Scott Sumner’s unwillingness — expressed here — to frame the trade deal in national security terms.  That changes everything, and it is […]

  38. Gravatar of Anon Anon
    24. December 2019 at 21:54

    what should the American gov do? Say that 100K 7-10 year olds are sent to US with no accompanying parents (assuming that asylum laws have an exception for unaccompanied minors so they are let in). What is the policy prescription without upsetting the already in legal aliens and citizens? Given that there is this concept of nation-state/sovereignity/citizenship and they are here to stay for quite a good time to come.

  39. Gravatar of Anon Anon
    24. December 2019 at 22:01

    And say they stay over and have progeny and so grow to about 300-400K folks in the next 400 years all coming from this 100K illegal immigrants in 2019-2020. What should the gov of US do today? What should a future gov in 2060 do?

  40. Gravatar of Gene Frenkle Gene Frenkle
    24. December 2019 at 22:34

    Anon, when Obama and Ben Rhodes determined Cuban refugees were gaming our asylum laws he characterized them as “economic refugees” and made it more difficult for them to get legal status.

    Todd Kreider, China refers to Americans as “customers”. Last time I checked you shouldn’t kill your potential “customers”.

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