China will succeed in building a powerful technology industry that will rival the United States, even if President Trump starts a trade war to stop it. The reason can be found on the fourth floor of a nondescript factory in a city once famous for cheap manufacturing and prostitution.
.. Rising labor costs and a new generation with little interest in toiling in factories forced a new tack. Now the sea of people is being replaced by a whirring array of boxy machines, each performing work it used to take 15 people 26 steps to finish.
The factory suggests that Beijing’s vision of Made in China 2025 — the ambitious state-driven plan to retool China’s industries to compete in areas like automation, microchips and self-driving cars — is not being pushed just by the Communist Party’s top leaders. Instead, the drive is also coming from the bottom up: from the businesses and cities across China that know they must modernize or perish.
.. The modernization may not happen in 2025. In fact, it may be long after that. But China will get there, mostly because it has to.
.. China’s very prosperity threatened Dongguan’s future. The average worker’s income rose fourfold over the past decade. Fewer young people wanted to work on dull and stressful assembly lines, preferring service jobs — like waiting tables and delivering e-commerce packages — that let them interact with people or move around. Some factories moved to lower-cost countries or shut down for good.
.. Today, a factory floor that once needed over 300 workers now needs 100.
.. The workers clustered around the machines will probably be replaced by machines themselves in a year or two.
.. The factory requires 16 workers on a shift, instead of 103 before it was automated. The robotic arms are made in China.
.. Made in China 2025’s other goals, such as building up world-class microchip industries or self-driving cars, remain out of sight for now.
.. Yet when it comes to manufacturing, Dongguan suggests Made in China 2025 will succeed partly because the effort is bigger than Beijing. Chinese companies and local government officials are determined to climb the value chain so they will not fall into obsolescence.
White House to Impose Metal Tariffs on E.U., Canada and Mexico
By keeping trading partners guessing, the president has sought to create leverage in trade negotiations, including in talks over the North American Free Trade Agreement with Mexico and Canada. But in the process, he has sowed an atmosphere of chaos among allies as well as manufacturers uncertain about the ultimate impact on their vast supply chains.
.. Prime Minister Justin Trudeau of Canada said it was “inconceivable” that Canada “could be considered a national security threat.”
.. “For the first time in generations, we’ve really thrown out the rule book with our best trading partners,” said Rufus Yerxa, the president of the National Foreign Trade Council, which represents some of the largest exporters in the United States. “We can’t expect them to continue business as usual with us if we are throwing out the rules. So that means everything from airplanes to agriculture is on the chopping block.”
.. But Vice President Mike Pence on Tuesday phoned to tell the Canadian prime minister that the precondition of a deal was a sunset clause, meaning the pact would automatically expire unless the three countries voted to continue it. The idea has drawn ire from both foreign leaders and business executives, who say it undercuts the surety that trade agreements are meant to create.“I had to highlight that there was no possibility of any Canadian prime minister signing a Nafta deal that included a five-year sunset clause,” said Mr. Trudeau, “and obviously the visit didn’t happen.”.. Germany, in particular, had pressed for a negotiated solution, but officials there grew wary after Mr. Trump announced that he would begin a separate trade investigation into automotive imports. If car tariffs go into effect, they would especially hurt Germany’s economy... The Trump administration has argued that imports have weakened the country’s industrial base, and, by extension, its ability to produce tanks, weapons and armored vehicles. “We take the view that without a strong economy, you can’t have strong national security,” the commerce secretary, Wilbur Ross, said Thursday... The European Union and Canada have objected strongly to the idea that they pose any kind of threat to national security, citing their close alliances and defense agreements with the United States... Canada announced corresponding tariffs on a broad list of American exports, including steel and aluminum, as well as dozens of basic consumer products like ketchup, insecticides and laundry machines. The Canadian tariffs, which go into effect July 1,.. The United Steelworkers union, which represents members in Canada as well as the United States, said the decision called “into serious question” the design and direction of the administration’s trade strategy... The Aluminum Association, the industry trade group, also said it was disappointed. Heidi Brock, the group’s president, said the tariffs would do little to address the larger issue of overcapacity in China “while potentially alienating allies and disrupting supply chains that more than 97 percent of U.S. aluminum industry jobs rely upon.”
.. “These tariffs are hitting the wrong target,” said Representative Kevin Brady, Republican of Texas. “When it comes to unfairly traded steel and aluminum, Mexico, Canada and Europe are not the problem — China is.”
.. In a more pointed statement, Senator Ben Sasse, Republican of Nebraska, called the tariffs “dumb.”
“Europe, Canada and Mexico are not China, and you don’t treat allies the same way you treat opponents,” he said.
The Case for Responsible Nationalism
The excesses of globalization are real, but trade wars aren’t the answer.
More than two decades ago, Harvard economist Dani Rodrik warned that globalization was driving a wedge between workers who had the skills and mobility to prosper in the global economy and those who did not. The key challenge, he argued, was to make globalization “compatible with domestic social and political stability”—that is, to ensure that international economic integration “does not contribute to domestic social disintegration.”
.. International trade weakens the postwar social contract between American employers and their workers. Less-skilled workers often are forced to accept lower wages, inferior benefits and diminished job security. Leading economists acknowledged that increased trade with lower-wage countries would widen the gap between highly skilled and less-skilled workers in advanced economies, but they played down the magnitude of these effects.
Western policy makers embraced the Panglossian assumption that maximizing open markets and minimizing social policy would produce better living standards for all. The West assumed that its edge in innovation and productivity would enable it to dominate in the 21st century as in the decades after World War II.
.. China’s accession to the World Trade Organization in 2001. Yes, China had a large state-owned sector, used public resources to encourage the private economy, and broadly subsidized its producers. But over time, the thinking went, the communists would see the folly of propping up inefficient producers. The state sector would shrink, and the market would become more powerful. China’s economy would converge with the Western model, and its political institutions eventually would evolve too.
Democratic and Republican administrations then presided over a flood of Chinese imports that gutted entire sectors of the U.S. economy. After a period of stability in the 1990s, U.S. manufacturing employment shrank by more than three million between 2001 and 2007—before the onset of the Great Recession, which destroyed another two million jobs. These developments hit rural and small-town areas with particular force, creating the geographically concentrated sense of abandonment and loss that helped propel Mr. Trump to the White House.
.. automation—not protectionism—is the key to the future.
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.
.. “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:
- smart guys from smart countries, like Norway,
- undeserving charity cases from “shithole” countries and
- 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.
- 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.
- Henry Ford went broke repeatedly before he succeeded.
- Steve Jobs, a college dropout, was fired from the company he founded. Even
- 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:
- respect,
- cooperation and
- compromise.
These ideas won’t fire up a campaign rally. But they might help build an American strategy that works.