The new Cold War?

Jez

*Groan*

"Many Americans accuse China of stealing US jobs, of keeping the its currency undervalued, of exporting deflation by selling its products abroad at unfair prices, and of failing to meet its commitments to the World Trade Organisation."

The West has sold up and outsourced. It's dependance is now, not domestic but shippped out to other country's..... with different governments to their own.

F*ckin ay' the Chinese aren't playing ball.

Why the hell should they?

We're the bitches in this operation now.

Get used to it.

Jez

Free trade.

What does this actually mean?

To uproot all domestic industry / manufacture and transplant it to developing economies driven by exceptionally cheap labour.

Even in the West, the domestic job markets are manipulated by swamping them by cheap (er) labour from newly aquired EU states or the Third World.

And if you queary this then you're a 'Protectionist'?

Really great plan.

Ok then. With all plans there's a conclusion.

What happens ultimately?

Please tell us down here.

Edward McLaughlin

I think the strongest demand for a US/China clash is from you, Denial Korski.

If we had an event as critical as that to focus on, then maybe it would avert eyes from the tawdry construction of your infantile prose.

yank

The Spectator's cover story was an embarrassment to you all.

And now you're doubling down with quotes from that most disgraced of all authoritarian economics polemicists, Krugman?

Oh, and capped off with a poll taken of some members of a populist movement hereabouts, one no more organized than the local bingo hall?

That's what you're serving up, as proof of a new "Cold War"?

Do you all even know what the Cold War was?

The English language should be used with a sense of rigor and discipline with which the writers and editors here at the Spectator seem lacking. Putting aside your faulty perceptions and analysis, particularly regarding anything to do with the United States, it might raise your credibility a bit if you utilized the language more rigorously.

John Moss

Jez, it is the restrictions on free trade which make it harder for older, developed economies to adapt to change and which allow low-wage, poor welfare economies to exploit their advantages.

We have spent far more in Europe and the US on aid to Africa than our Farmers could ever have lost from being exposed to open competition with food grown under the sun on productive soil. And millions have died along the way who could, had they lived in prosperous, trading economies, have bought our exports.

Jez

A bit too OTT there by me maybe....

As an opinion though; in many ways it seems that this could be a lonely one way street our Western governments have (by stealth) embarked upon- and they have only just realised this.

lids

Chinese leaders are playing the game long and slow. They think in terms of decades instead of the cycle of general elections, four or five years here in the west. pretty obvious for all to see which is the smarter play. Strange that the Fed, in wishing to inflict pain on China will end up importing inflation through higher commodity prices caused by excessive US liquidity.

My money is on China, no war required.

Bit like the Taliban in Afghanistan. They sit back and watch the West teetering on the verge of bankruptcy and simultaneously announcing hard dates for pulling out of Afg, cos all the money has been spent. Patience, all that is required to beat the west.

Can't say I fancy the version of moral leadership China will provide, but it is probably too late to do anything about it..

libertarian

Krugman? Sorry you expect me to read and believe this from the most discredited "economist" that has ever written a polemic.

Puleezz

Major Plonquer 1

Good ol' Obama. Give it them nasty Chinese. Manipulate their currency?

Of course the USA doesn't do anything of the sort. There is no truth to the rumour that the USA is crapping all over the economies of Canada, Mexico and the EU by printing a billion trillion dollars.

Or maybe he just thinks we won't notice? After all, he walks on water and can do no wrong (it says on the teleprompter).

dave666

Just goes to show what happens when you stop making things back in your own country and where the profit lies.
So much for the moving up the value chain and becoming a Prime, of what exactly? Oh yes lots of imported bits.
Welcome to the third world.
Have we got enough security personnel to subjugate the starving masses?

Old China Hand

I have lived amongst the Chinese for the past quarter-century: in Bangkok, in Hong Kong, and in Singapore. One thing you learn very early on is, that you NEVER get into debt with the Chinese. You never, ever put yourself into a position of weakness when dealing with them. You certainly should not put your country into hock with them. This astronomical debt needs to be paid off, or it will eventually come to war: and there is no guarantee whatsoever that the West will win.

normanc

I don't know who Daniel Korski is but after reading his last half a dozen missives I was going to pass on this one.

I wish I had.

TomTom

Bretton Woods collapsed because persistent surplus countries did not face the prescribed sanctions ie tariffs and the adjustment fell entirely on deficit nations like the USA and Britain as part of their global defence paradigm. This helped Japan and Germany - but with Taiwan, Korea, Thailand, China following this pattern the USA and Britain simply cannot sustain being hollowed out and mortgaging the future to consume.

Persistent Trade Surpluses are reflected in Persistent Trade Deficits and Trade Surpluses do not mean Weak Currencies - that is for Deficit Countries to adjust their balance.

Jez

Hi John Moss,

I appreciate that we need to have flexibility in all aspects of trade.

We have not though. We have nothing of the sort.

The people that led is into the financial crash 24 months ago are the same brains that drive this 'free trade' dogma.

I was working on the building sites when the boom was here- and the sky was the limit.

On the groud we noticed ALL we were building were credit funded luxury flats in ghetto's or schools funded by the government.

Nothing was sustainable. A pyrimid scheme of economics, nationally.

I do not trust the same people (that were responsible for that) with this free trade global experiment.

They do not understand caution because it is not them at the sharp end.

And now there's rumblings that the benifactors of this grand sale, the Chinese etc aren't going to play ball now that they are starting to hold all the aces.

seb

Jez

You just don't get it. I'll explain. The West outsources. Assets are sold up and factories re-built in countries where sweatshop labour rates can be paid. We live by exporting worthless currency, by borrowing and by, in a word, lying. But there is no alternative, don't forget. And it will all turn around eventually. When governments and corporations from those sweatshop nations are rich, they'll all flock back here to build factories in Gateshead and Port Talbot!

What? Sounds utterly barmy to you? Okay. Let's have another look at this theory. You have the Emperor, right? He's walking along the road at the head of all of his courtiers. Loyal subjects are lining the route. Some are gasping in amazement, others are laughing and pointing and saying lewd things. Strain those orbs a bit and you'll see that, yes, His Royal Highness is decked out in dazzling finery....

oldtimer

I do not have a problem with the Rachman article that some here appear to have. He is merely reporting the evolving situation as he sees it. FWIW (ie nothing), I broadly agree with it.

The China-US trade imbalance is not the only problem facing the trading world. There is similar issue with the Germany-ROW trade imbalance. This has been clearly exposed by one of Rachman`s FT colleagues, Martin Wolf in his ant and the grasshopper (and other) articles.

It is not the first time there have been huge readjustments in trade relationships between nations. Consider these FX rates of exchange for the £ to the US$, the DM and the Yen in 1970, 1980 amd 1990 respectively;
£ vs $: 2.4 > 2.3 > 2.8
£ vs DM: 8.7 > 4.2 > 2.9
£ vs Yen: 857 > 525 > 257

Over time the same sort of evolution will need to occur in US4 and £ FX rates vs the Yuan. Many have seen this coming for a long time. It has been well ventilated in international fora; the policy options were openly discussed at Davos a few years ago.

The weakness of the US critics argument is that this will prove to be a zero sum game. Economic growth in China, India and Brazil will be beneficial for their citizens - and provide opportunities for businesses in the West if they have the wit and imagination to take them. That is the way countries like the USA and the UK will have to rebalance their books. It will be a very long haul - 10 to 20 years - and will need the adoption of tax policies that encourage business, investment and growth. That means that present UK tax policies will have to change and fast.

justathought

China is sensitive to the fact that after every expansion of its borders came a crushing invasion like the dynasties of Lial,Jin and Yaun, much like the loss of the British Empire only over a longer timeframe.

Failure to deliver economic advancement to its billion odd population is not an option and this explains the need for breakneck speed.

The West can compete easily with China through innovation and design however Intellectual Property Rights (IPR) must be registered. Infringements and violations of IPR must be challenged and governments not individual companies must take the lead so that western business can compete on a level playing field.

The internal administrative channels of China are inconsequential and the judicial channels are deliberately costly and time consuming in breach of WTO Article 41 General Obligations. The west needs to coordinate vigorous enforcement of IPR at the WTO Dispute Settling Body which China cannot block. If this is the retaliation that Krugman refers to then fair enough.

denis cooper

With China set to become the largest economy in the world, at least on one basis for calculation, it seems unlikely that Chinese long term plans include playing second fiddle to any other country in any other sphere of activity.

Hence the expansion of its navy to enable it project power around the world, eg:

http://www.economywatch.com/in-the-news/chinese-naval-expansion-changing-look-of-global-east-asian-waters-04.29.html

"The Chinese military is seeking to project naval power well beyond the Chinese coast, from the oil ports of the Middle East to the shipping lanes of the Pacific, where the United States Navy has long reigned as the dominant force, military officials and analysts say. China calls the new strategy “far sea defense,” and the speed with which it is building long-range capabilities has surprised foreign military officials."

Going back to an earlier article - there is a good reason for keeping an eye on events in Burma, but that's not the personal story of Aung San Suu Kyi and the human rights and democracy angle.

Rather it's the geopolitical story of China's interest in Burma as a source of important raw materials, and conceivably also as a potential location for Chinese naval and air bases on the Indian Ocean.

Verity

Dennis Cooper - V interesting about the Chinese interest in Burma. As far as raw materials goes, I think they've got Africa pretty much nailed down for that, but as a base ... yes, very intereting ... you are right. China will start expanding as a super power.

According to the old Chinese curse, it looks as though we are about to live in interesting times ...

Jez

@ justathought,

The problem there is that product IPR is being sold over to the Chines faster than the franchise licenses.

If they can manufacture it, they are given the licence to do so.

Because it's cheaper.

Because it's been made so diffficult to make it over here- due to government direction pointing toward globalisation.

The hardest part of it is that we send lads over to Shanghai, etc to train these outfits in the far east in the art of manufacturing our products, then two months or so later the very same lads (along with the rest over here) are made redundant.

This is not good.

Jez

@ dennis cooper,

"..... and its definition of its own core interests has expanded along with its economic clout."

How can kids like Cameron / Osborne / Hague and Co. even come close to comprehending what may be on the cards in the next 3 decades to come?

Strewth.

It as been a constant plague for the Northern East Asian states to aquire Oil to drive their economic machines.

China may look to newly aquired friends in Africa to pour surplus consumables in, if theres a blowback from the US/West.

We would be absolutely stuffed if we had a spat with the main supplier of everything we used to make ourselves domestically.

And if any Western Coalition wanted to bring China to heel with Oil, then i hope that the instigators of such a prospective cluster**** will pick up a general knowledge book and read about 'Face'.