Why China Won’t Yield to Trump

China may give Donald Trump some face-saving way out from the trade war he has started, but it won’t offer any substantive concessions. In other words, Trump’s tariffs will do nothing to improve America’s external balance, output, employment, or real wages.

.. some defend Trump’s actions as a  to impel China to adjust its trade policies, such as the requirement that foreign companies share their intellectual property (IP) to gain access to the Chinese market.

.. Trump does not understand the basics of such a negotiation: he thinks that a country with a trade deficit necessarily has the stronger negotiating position. In reality, the surplus country is often in the stronger position, because it has accumulated financial claims against its “opponent.”

.. China does not necessarily even have to sell to wield influence. With US debt expanding and interest rates on the rise, even rumors that the Chinese might stop buying Treasury securities could be enough to drive down US bond prices and accelerate the increase in US interest rates.

.. While industries and consumers in China would also be hurt by a trade war, that country’s leaders can overrule interest groups and stifle protests.

In any case, public opinion will largely back retaliation against the US.

.. The Chinese remember well the Opium Wars of the nineteenth century, when the Middle Kingdom tried and failed to resist the British campaign to force it to open its economy to opium and other imports.

.. Add to that Trump’s reputation for flip-flopping, and the odds that Chinese leaders would bother making a deal with Trump to change their country’s trade policies seem small.

.. Even if China did decide to concede something to Trump, it would not be meaningful.

.. China could export less merchandise to the US directly, instead routing products through Taiwan and other countries, where some final assembly could take place.

.. The result would be economically meaningless; but so is the concept of the bilateral deficit itself, as Chinese exports to the US contain a high proportion of intermediate inputs produced in South Korea, the US, and elsewhere.

.. What really matters is that China’s current-account has been falling since 2008, and now stands at a relatively small 1% of GDP.

.. America’s external deficit is growing, but that is the result not of trade policy; it stems from Republicans’ , which is blowing up the budget deficit and reducing national saving.

.. As for Trump’s complaints about China’s IP “theft,” there are some valid grievances on this front. But addressing this issue requires technical expertise and negotiating skill, not blunt threats based on inadequate knowledge.

Crucially, it would also require cooperation with other partners who have similar grievances with China, ideally including pressure applied through rules-based institutions like the World Trade Organization.

Trump is pursuing the opposite strategy, arguing that neither multilateralism nor bilateral negotiations work with China. Yet such tactics have helped to compel China to allow a 37% appreciation of the renminbi in 2004-2014 and to crack down on counterfeiting of US merchandise and theft of US software.

.. Trump may also want to avoid the WTO because the US doesn’t win all of the cases it brings there. But it does have a 90% success rate. And it is not as if the US has never violated international rules

 

Trump is so obsessed with winning that he might make America lose

In his zero-sum universe, you’re either victorious or you’re defeated.

 “I win against China. You can win against China if you’re smart,” he said at a campaign event in July 2015.
.. “Vast numbers of manufacturing jobs in Pennsylvania have moved to Mexico and other countries. That will end when I win!”
.. “China, Japan, Mexico, Brazil, these countries are all taking our jobs, like we’re a bunch of babies. That will stop,”
.. In Trump’s view of the world, there is a finite amount of everything — money, security, jobs, victories — and nothing can be shared.
.. It’s a universe where the strong do what they can and the weak suffer what they must, as Thucydides said.
.. The problem is that the triumphs that Trump craves — strength, safety, prosperity — cannot be achieved alone.
.. They require friends and allies, and they require the president to see those people as partners, not competitors.
.. other governments don’t like to be punching bags, the only role he appears to envision for them.
.. In real estate, relationships often take the form of one-off transactions: You can cheat people you’ll never do business with again.
.. Winners have trade surpluses, and losers have trade deficits.
.. The United States is the biggest economy with the biggest military, and therefore the United States has leverage to get the best deals. If we don’t emerge from negotiation with a clear advantage, that’s because our negotiator was a soft-headed, do-gooder globalist who didn’t put America first.
.. Washington has the most leverage when it deals with countries one on one, which is why, he says, “we need bilateral trade deals,” not “another international agreement that ties us up and binds us down.”
To abide by the same rules as less-powerful countries would be to sublimate American interests to those of lesser nations.
..  Trump seeks to begin negotiations with a threat that forces the other side to defend its smaller piece. He pledges to tear up NAFTA, rip up the Iran nuclear deal and revisit America’s relationship with NATO — unless he gets concessions.
.. he gains advantage not by telling the truth but by saying things he believes will boost his bargaining power and sell his vision: China has been allowed to “rape our country.”
.. He’s just an alliance-hating unilateralist.
..  he sees three kinds of immigrants:
  1. smart guys from smart countries, like Norway,
  2. undeserving charity cases from “shithole” countries and
  3. terrorists/gang members who threaten ordinary Americans.

.. The zero-sum cosmology touches everything. Obamacare supposedly sticks us with the bill for people who should pay for their own insurance — or a find a job that provides it.

..  he doesn’t exercise, because “the human body was like a battery, with a finite amount of energy, which exercise only depleted.”

..  China is more a strategic competitor than a real partner linked by shared values.

.. “after more than four decades of serving as the nation’s economic majority, the American middle class is now matched in number by those in the economic tiers above and below it.” That’s a real problem, and Trump is right to point it out.

.. He could have demanded that NATO members pay more without signaling that he might abandon the mutual-defense agreement that undergirds a treaty to contain Russia.

.. Relations among nations are not like real estate deals. The president has to negotiate with the same people again the next month, and they’ll remember how they’ve been treated.

Israel’s Benjamin Netanyahu never forgave President Barack Obama for openly criticizing his approach to settlement-building;

imagine how every other leader feels about being constantly humiliated by Trump.

.. Other countries form judgments about whether American promises are credible and whether they can trust the president. Trump says he’s willing to talk with North Korea about its nuclear program, but surely Kim Jong Un is watching as Trump threatens to shred the Iran nuclear agreement.

..  The Belt and Road Initiative, China’s plan to blaze new commercial trails and cement new political ties via infrastructure investment in dozens of countries, is seven times larger than the Marshall Plan when adjusted for inflation.

.. More than 120 nations already trade more with China than with the United States.

.. China is investing in smaller European Union members like Hungary and Greece to alter official E.U. attitudes toward Beijing. That’s why the Trans-Pacific Partnership, which Trump quashed, was more than just a trade deal. By joining, Trump could have expanded U.S. ties with many of China’s neighbors, governments that fear overreliance on China’s goodwill for future growth.

.. Trump’s win-or-lose philosophy is most confused when it comes to immigration. Foreigners who want to become Americans are not charity cases. They participate in the labor force at higher rates (73.4 percent, according to the Bureau of Labor Statistics) than native-born Americans.

.. Trump’s tendency to hire foreign guest workers over Americans at his own properties suggests that he understands something about how hard they work.

.. The undocumented contribute $13 billion to the nation’s retirement fund each year and get just $1 billion in return.

.. “More than three out of every four patents at the top 10 patent-producing US universities (76%) had at least one foreign-born inventor,”

..  tourism has fallen 4 percent, with a resulting loss of 40,000 jobs. Foreign applications to U.S. universities are down, too.

.. he doesn’t seem to know that some of our country’s greatest success stories began in failure.

  1. Thomas Edison famously erred 1,000 times on the way to inventing the light bulb — it “was an invention with 1,000 steps,” he said.
  2. Henry Ford went broke repeatedly before he succeeded.
  3. Steve Jobs, a college dropout, was fired from the company he founded. Even
  4. Trump’s own businesses have gone bankrupt.

.. If he wants to track terrorists before they try to enter the United States, he needs support from foreign intelligence services.

.. Today, the United States doesn’t have that kind of leverage, and Trump’s aggressive criticism of other countries, including allies, poisons public attitudes toward the United States and makes it harder for foreign leaders to cooperate with Washington publicly.

.. Trump and his leadership at some of the lowest levels since Pew began tracking the U.S. image abroad in 2002. Almost three-quarters of those surveyed said they have little to no confidence in Trump.

.. if Trump wants to make the best deals, he’ll need to learn a few words:

  1. respect,
  2. cooperation and
  3. compromise.

These ideas won’t fire up a campaign rally. But they might help build an American strategy that works.

 

 

Bannon’s departure has huge implications for the U.S.-China relationship

“Bannon’s particular unique idea was that this is a civilizational challenge,” said Michael Pillsbury, who met with Bannon regularly on China over the past year. “His warning is, if they surpass us, they will have earned the privilege of redesigning the world order.”

.. Bannon believes the United States needs a long-term strategy for maintaining advantage over China similar to what Marshall helped devise for the Soviet Union, while acknowledging that the China challenge is much harder.

.. Behind the scenes, Bannon had been busily operationalizing his plan to win the economic war with China. He spent 50 percent of his time on China, he liked to tell colleagues. Several of his China agenda items will continue to have advocates, including National Trade Council Director Peter Navarro and Commerce Secretary Wilbur Ross.

.. he was opposed by other top officials, including National Economic Director Gary Cohn and Treasury Secretary Steven Mnuchin.

.. The Chinese government has also cultivated close ties with Jared Kushner and Secretary of State Rex Tillerson, with the help of former secretary of state Henry Kissinger.

.. The Kushner-Kissinger view holds that the U.S.-China relationship is too complex and important to risk throwing into disarray. They advocate cooperation over confrontation and integration over isolation. China shares that view and wants to set forth a new model of great power relations based on mutual respect and noninterference.

In Bannon’s view, the liberal international order the United States led since World War II has ceased to work in America’s interests. The theory that bringing China into that structure would transform China has failed and now the Chinese government abuses those systems to siphon huge amounts of wealth, technology and know-how from the United States and its partners, he believes.

He also sees a new China policy as a pillar of his plan to reorient American politics around economic nationalism. He views the rebalancing of the U.S.-China economic relationship as key to returning manufacturing jobs to the United States and vice-versa.

.. One of Bannon’s final acts before leaving the administration was to announce in an interview that to him, “the economic war with China is everything.” He argued the United States must marshal all elements of national power to confront China in various spheres or yield world hegemony.

“Bannon’s particular unique idea was that this is a civilizational challenge,” said Michael Pillsbury, who met with Bannon regularly on China over the past year. “His warning is, if they surpass us, they will have earned the privilege of redesigning the world order.”

 

Mr. McCain and The Mooch

Unlike the communications director and Mr. Trump, Mr. McCain does not equate service to country with service to the president.

.. Mr. McCain went on to call for qualities for which this White House has shown nothing but contempt, urging his colleagues to “rely on humility, on our need to cooperate, on our dependence on each other.” He extolled “the necessity of compromise.”

.. “Stop listening to the bombastic loudmouths on the radio and television and the internet,” he implored the Senate. “To hell with them. They don’t want anything done for the public good. Our incapacity is their livelihood.”

.. Mr. Trump has shown himself to be a small man, and he is engaged in shrinking the presidency to fit himself.

Donald Trump Poisons the World

This week, two of Donald Trump’s top advisers, H. R. McMaster and Gary Cohn, wrote the following passage in The Wall Street Journal: “The president embarked on his first foreign trip with a cleareyed outlook that the world is not a ‘global community’ but an arena where nations, nongovernmental actors and businesses engage and compete for advantage.”

That sentence is the epitome of the Trump project. It asserts that selfishness is the sole driver of human affairs. It grows out of a worldview that life is a competitive struggle for gain. It implies that cooperative communities are hypocritical covers for the selfish jockeying underneath.

.. This essay explains why Trump gravitates toward leaders like Vladimir Putin, the Saudi princes and various global strongmen: They share his core worldview that life is nakedly a selfish struggle for money and dominance.

.. It explains why people in the Trump White House are so savage to one another. Far from being a band of brothers, their world is a vicious arena where staffers compete for advantage.

.. In this worldview, morality has nothing to do with anything. Altruism, trust, cooperation and virtue are unaffordable luxuries in the struggle of all against all. Everything is about self-interest.

.. People are wired to cooperate. Far from being a flimsy thing, the desire for cooperation is the primary human evolutionary advantage we have over the other animals.

.. You don’t have to teach a child about what fairness is; they already know. There’s no society on earth where people are admired for running away in battle or for lying to their friends.

.. Jonathan Haidt has studied the surges of elevation we feel when we see somebody performing a selfless action.

.. Good leaders like Lincoln, Churchill, Roosevelt and Reagan understand the selfish elements that drive human behavior, but they have another foot in the realm of the moral motivations. They seek to inspire faithfulness by showing good character. They try to motivate action by pointing toward great ideals.

.. By behaving with naked selfishness toward others, they poison the common realm and they force others to behave with naked selfishness toward them.

.. By treating the world simply as an arena for competitive advantage, Trump, McMaster and Cohn sever relationships, destroy reciprocity, erode trust and eviscerate the sense of sympathy, friendship and loyalty that all nations need when times get tough.

.. By looking at nothing but immediate material interest, Trump, McMaster and Cohn turn America into a nation that affronts everybody else’s moral emotions. They make our country seem disgusting in the eyes of the world.

.. I wish H. R. McMaster was a better student of Thucydides. He’d know that the Athenians adopted the same amoral tone he embraces: “The strong do what they can and the weak suffer what they must.” The Athenians ended up making endless enemies and destroying their own empire.

Build a Better Monster

We’re all trying to understand why people can’t just get along. The emerging consensus in Silicon Valley is that polarization is a baffling phenomenon, but we can fight it with better fact-checking, with more empathy, and (at least in Facebook’s case) with advanced algorithms to try and guide conversations between opposing camps in a more productive direction.

A question few are asking is whether the tools of mass surveillance and social control we spent the last decade building could have had anything to do with the debacle of the 2017 election, or whether destroying local journalism and making national journalism so dependent on our platforms was, in retrospect, a good idea.

We built the commercial internet by mastering techniques of persuasion and surveillance that we’ve extended to billions of people, including essentially the entire population of the Western democracies. But admitting that this tool of social control might be conducive to authoritarianism is not something we’re ready to face. After all, we’re good people. We like freedom. How could we have built tools that subvert it?

.. The economic basis of the Internet is surveillance. Every interaction with a computing device leaves a data trail, and whole industries exist to consume this data.

.. It is the primary source of news for a sizable fraction of Americans, and through its feed algorithm (which determines who sees what) has an unparalleled degree of editorial control over what that news looks like.

.. Together, these companies control some 65% of the online ad market, which in 2015 was estimated at $60B. Of that, half went to Google and $8B to Facebook.

.. These companies exemplify the centralized, feudal Internet of 2017. While the protocols that comprise the Internet remain open and free, in practice a few large American companies dominate every aspect of online life. Google controls search and email, AWS controls cloud hosting, Apple and Google have a duopoly in mobile phone operating systems. Facebook is the one social network.

.. There are two interlocking motives for this data hunger: to target online advertising, and to train machine learning algorithms.

.. A considerable fraction (only Google and Facebook have the numbers) of the money sloshing around goes to scammers.

.. The more poorly current ads perform, the more room there is to tell convincing stories about future advertising technology, which of course will require new forms of surveillance.

.. The real profits from online advertising go to the companies running the casino—Facebook and Google.

.. we assumed that when machines reached near-human performance in tasks like image recognition, it would be thanks to fundamental breakthroughs into the nature of cognition. We would be able to lift the lid on the human mind and see all the little gears turning.

What’s happened instead is odd. We found a way to get terrific results by combining fairly simple math with enormous data sets. But this discovery did not advance our understanding. The mathematical techniques used in machine learning don’t have a complex, intelligible internal structure we can reason about. Like our brains, they are a wild, interconnected tangle.

.. The algorithms learn to show people the things they are most likely to ‘engage’ with—click, share, view, and react to. We make them very good at provoking these reactions from people.

.. If you concede that they work just as well for politics as for commerce, you’re inviting government oversight. If you claim they don’t work well at all, you’re telling advertisers they’re wasting their money.

Facebook and Google have tied themselves into pretzels over this. The idea that these mechanisms of persuasion could be politically useful, and especially that they might be more useful to one side than the other, violates cherished beliefs about the “apolitical” tech industry.

.. All the algorithms know is what they measure, which is the same for advertising as it is in politics: engagement, time on site, who shared what, who clicked what, and who is likely to come back for more.

The persuasion works, and it works the same way in politics as it does in commerce—by getting a rise out of people.

But political sales techniques that maximize “engagement” have troubling implications in a democracy.

.. One problem is that any system trying to maximize engagement will try to push users towards the fringes. You can prove this to yourself by opening YouTube in an incognito browser (so that you start with a blank slate), and clicking recommended links on any video with political content. When I tried this experiment last night, within five clicks I went from a news item about demonstrators clashing in Berkeley to a conspiracy site claiming Trump was planning WWIII with North Korea, and another exposing FEMA’s plans for genocide.

This pull to the fringes doesn’t happen if you click on a cute animal story. In that case, you just get more cute animals (an experiment I also recommend trying). But the algorithms have learned that users interested in politics respond more if they’re provoked more, so they provoke. Nobody programmed the behavior into the algorithm; it made a correct observation about human nature and acted on it.

Social dynamics on sites where people share links can compound this radicalizing force. The way to maximize engagement on Twitter, for example, is to say provocative things, or hoist an opponent’s tweets out of context in order to use them as a rhetorical bludgeon. Twitter rewards the captious.

.. So without explicitly coding for this behavior, we already have a dynamic where people are pulled to the extremes. Things get worse when third parties are allowed to use these algorithms to target a specific audience.

.. Political speech that tries to fly below the radar has always existed, but in the past it was possible to catch it and call it out. When no two people see the same thing, it becomes difficult to trace orchestrated attempts to target people in political campaigns. These techniques of micro-targeted political advertising were used to great effect in both the Brexit vote and the US election.

.. This is an inversion in political life that we haven’t seen before. Conversations between people that used to be private, or semi-private, now take place on public forums where they are archived forever. Meanwhile, the kind of political messaging that used to take place in public view is now visible only to an audience of one.

.. Politically engaged people spend more time online and click more ads. Alarmist and conspiracy-minded consumers also make good targets for certain kinds of advertising. Listen to talk radio or go to prepper websites and you will find pure hucksterism—supplements, gold coins, mutual funds—being pitched by the same people who deliver the apocalyptic theories.

Many of the sites peddling fake news during the election operated solely for profit, and field-tested articles on both sides of the political spectrum. This time around, they found the right to be more lucrative, so we got fake news targeted at Trump voters.

.. Apart from the obvious chilling effect on political expression when everything you say is permanently recorded, there is the chilling effect of your own peer group, and the lingering doubt that anything you say privately can ever truly stay private.

.. Orwell imagined a world in which the state could shamelessly rewrite the past. The Internet has taught us that people are happy to do this work themselves, provided they have their peer group with them, and a common enemy to unite against. They will happily construct alternative realities for themselves, and adjust them as necessary to fit the changing facts.

Finally, surveillance capitalism makes it harder to organize effective long-term dissent. In an setting where attention is convertible into money, social media will always reward drama, dissent, conflict, iconoclasm and strife. There will be no comparable rewards for cooperation, de-escalation, consensus-building, or compromise, qualities that are essential for the slow work of building a movement. People who should be looking past their differences will instead spend their time on purity tests and trying to outflank one another in a race to the fringes.

.. Moreover, powerful people have noted and benefited from the special power of social media in the political arena. They will not sit by and let programmers dismantle useful tools for influence and social control. It doesn’t matter that the tech industry considers itself apolitical and rationalist. Powerful people did not get to be that way by voluntarily ceding power.

.. Consider the example of the Women’s March. The March was organized on Facebook, and 3-4 million people attended. The list of those who RSVP’d is now stored on Facebook servers and will be until the end of time, or until Facebook goes bankrupt, or gets hacked, or bought by a hedge fund, or some rogue sysadmin decides that list needs to be made public.

.. We need the parts of these sites that are used heavily for organizing, like Google Groups or Facebook event pages, to become more ephemeral

.. These features are sometimes called ‘disappearing’, but there is nothing furtive about it. Rather, this is just getting our software to more faithfully reflect human life.

.. You don’t carry all your valuables and private documents when you travel. Similarly, social sites should offer a trip mode where the view of your account is limited to recent contacts and messages.

..  I’ve pushed for “Six Fixes” to the Internet. I’ll push for them again!

  1. The right to examine, download, and delete any data stored about you. A time horizon (weeks, not years) for how long companies are allowed to retain behavioral data (any data about yourself you didn’t explicitly provide).
  2. A prohibition on selling or transferring collections of behavioral data, whether outright, in an acquisition, or in bankruptcy.
  3. A ban on third-party advertising. Ad networks can still exist, but they can only serve ads targeted against page content, and they cannot retain information between ad requests.
  4. An off switch on Internet-connected devices, that physically cuts their access to the network. This switch should not prevent the device from functioning offline. You should be able to stop the malware on your refrigerator from posting racist rants on Twitter while still keeping your beer cold.
  5. A legal framework for offering certain privacy guarantees, with enforceable consequences. Think of this as a Creative Commons for privacy. If they can be sure data won’t be retained, users will be willing to experiment with many technologies that would pose too big a privacy risk in the current reality.

.. At a minimum, we need to break up Facebook so that its social features are divorced from the news feed.

.. But it cannot simultaneously be the platform for political organizing, political campaigns, and news delivery.

.. Shareholder pressure doesn’t work, because the large tech companies are structured to give founders absolute control no matter how many shares they own.

.. The one effective lever we have against tech companies is employee pressure. Software engineers are difficult to hire, expensive to train, and take a long time to replace. Small teams in critical roles (like operations or security) have the power to shut down a tech company if they act in concert.

.. Unfortunately, the enemy is complacency. Tech workers trust their founders, find labor organizing distasteful, and are happy to leave larger ethical questions to management. A workplace free of ‘politics’ is just one of the many perks the tech industry offers its pampered employees. So our one chance to enact meaningful change is slipping away.