Scott Morrison’s “promise to Australia”

Scott Morrison’s 2019 election campaign speech: “To run a stronger economy requires a…

After a paltry increase, Morrison vows to crack…

By Mark Thompson While the rate will be raised, the Morrison government has…

Debt And Deficit For Dummies...

Lately I've been thinking about all sorts of things and I find…

Seeking the Post-COVID Sunshine: The Re-Election Budget With…

By Denis Bright Josh Frydenberg has presented a re-election budget. Its assumptions have…

Don’t believe the hype, housing affordability was ignored…

By Andrew Wicks Last night’s budget vowed to “help more Australians realise their…

Is it fair to call Scott Morrison a…

How much more proof does one need to advance the proposition that…

Held to Ransom: Colonial Pipeline and the Vulnerabilities…

It should be making officials in the White House tremble. Critical infrastructure…

Prime Minister Frydenberg

By Ad astra Does anyone doubt that Josh Frydenberg covets the role of…

«
»
Facebook

Was COVID-19 born in the United States? (part 5)

Continued from: Was COVID-19 born in the United States? (part 4)

By Outsider

The United States has been threatening China with trade sanctions for several years. At the outset of the Trump Administration in January 2017, the American government not only envisaged punitive trade measures, it also called for “an investigation into China’s trade practices” focussing on alleged violations of United States intellectual property rights.

This initiative was then followed by renewed threats “to impose steep tariffs on Chinese imports [into the U.S.], rescind licenses for Chinese companies to do business in the United States… ”

And then in September of 2019 The Trump administration enacted tariffs on roughly $112 billion worth of Chinese imports.(G. Heeb, IT’S OFFICIAL: The US and China slap tariffs on thousands of each other’s products in major trade war escalation, Business Insider, 01.09.2019).

An understanding of the geopolitical and strategic dimensions is crucial. The conflict with China is not limited to bilateral trade. President Trump’s political rhetoric directed against China became increasingly aggressive. The United States’ unspoken objective was to derail China’s Belt and Road Initiative (B.R.I.) which consists in developing trade relations with a large number of partner countries in major regions of the world.

China’s Belt and Road Initiative, predicated on Eurasian economic integration, is viewed by the United States as an encroachment on American hegemonic interests.

“Over time the B.R.I. could threaten the very foundations of Washington’s post-WWII hegemony.” (T. P. Cavanna, What Does China’s Belt and Road Initiative Mean for US Grand Strategy? (The Diplomat, 05.06.2018).

American hegemony is also coupled with United States militarisation of strategic waterways in the East and South China seas combined with numerous U.S. military bases in locations within proximity of China.

In a bitter irony, the rhetorical gush of threats by President Trump was accompanied by seemingly ‘constructive’ bilateral trade negotiations leading up to the signing of the First Phase of a detailed and comprehensive Economic and Trade Agreement between the United States and China in mid-January 2020 at the very outset of the COVID-19 pandemic in China. According to U.S. analysts this historic Agreement signed on 15 January 2020 would “hopefully signal the beginning of the end of the trade war“. (G. Traurig, Impact of the China-U.S. Trade Deal on Intellectual Property Protection, 21.01.2020).

But that did not happen. Two weeks after the signing of the Agreement, the Trump Administration announced the curtailment of air travel with China, which was accompanied by the disruption of transportation and trade relations with China, with repercussions on China’s export manufacturing sector.

Trump’s decision on 31 January 2020 was taken immediately following the announcement by the W.H.O. Director-General of a Public Health Emergency of International Concern – 30 January 2020. In many regards, this was an act of ‘economic warfare’ against China.

And then, following President Trump’s 31 January decision to curtail air travel and transportation to China, a campaign was launched in western countries against China as well against ethnic Chinese. The Economist reported that “The coronavirus spreads racism against and among ethnic Chinese.” (The pathogen of prejudice, The coronavirus spreads racism against – and among – ethnic Chinese, 17.02.2020; “Britain’s Chinese community faces racism over coronavirus outbreak.” According to W. Wang, of the South China Morning Post (Hong Kong), ‘Britain’s Chinese community faces racism over coronavirus outbreak’, 13.02.2020) .“Chinese communities overseas are increasingly facing racist abuse and discrimination amid the coronavirus outbreak. Some ethnic Chinese people living in the United Kingdom say they experienced growing hostility because of the deadly virus that originated in China.” And this phenomenon happened all over the United States.

While China is the object of tariffs, trade restrictions, not to mention veiled threats, what the Trump Administration failed to comprehend is that the United States is heavily dependent on commodity imports from China.

The unspoken truth is that America is an import led economy with a weak industrial and manufacturing base, heavily dependent on imports from the People’s Republic of China (P.R.C.). Despite America’s financial dominance and the powers of the dollar, there are serious failures in the structure of America’s ‘real economy’: i.e. marked by the closing down of factories as well as failures at the level of both physical and social infrastructure.

This import-led economic structure has a long history. It was the result of United States policies formulated in the late 1970s and early 1980s to move a large part of its industrial base to ‘low cost’ locations in China including the Special Economic Zones (S.E.Z.) – set up in 1979 – and the ‘development zones’ or ‘special trading areas’ – established in 14 designated coastal cities in 1984.

A large share of American manufacturing was relocated, followed by a later stage of relocation of several high technology production sectors.

The United States no longer has a hegemony in high technology production and intellectual property. In the course of the last decade, China has consolidated its position. China is now leading in several areas of high tech development and production which are dependent on Chinese-owned intellectual property.

This inevitably had repercussions on California’s Silicon Valley, the once prosperous cradle of high-tech industries and research laboratories.

A contradictory relationship has evolved in which the United States is not only dependent on ‘Made in China’ imported manufactured goods, but China has surpassed the United States in several areas of high technology including the telecom industry and 5G.

All the cases form a big picture in which the United States and its allies – as well as ‘hostage economies’ such as Australia’s – are suppressing Chinese telecom companies. Huawei is the world’s largest telecom equipment maker and second largest smart-phone manufacturer in the world. It also produces high-quality chips. It is ridiculous that such a comprehensive high-tech enterprise as Huawei is accused and undermined. The United States is realising its political purposes by judicial means. (Huawei victim of high-tech McCarthyism, Global Times, 17 January 2019).

According to the Wharton Business School of the University of Pennsylvania, “China’s technology sector has grown so rapidly in the last two decades that it is pushing the United States out of its long-held position at the top of the digital food chain. Advancements by companies like Huawei, WeChat, Baidu, Tencent and others are helping the Chinese economy grow at an unprecedented rate and influencing the global economy. China and the U.S. are battling to be the leader in 5G technology, a fight it seems that Chinese tech companies are winning.” (TECHNOLOGY, What’s Pushing China’s Tech Sector So Far Ahead?, Knowledge @ Wharton, 9.10.2019).

According to Rebecca Fannin, “The U.S. needs a policy that can address China’s rise in technology.” It would appear that the “policy” contemplated by Washington precludes the notion of US “acceptance” of China’s lead in several high technology sectors.

“China has top-down government directives that are propelling the country forward in all kinds of technology sectors. The “Made in China 2025” [plan] has designated time periods where China is going to lead globally in certain sectors, and the U.S. really does not have anything that’s the equivalent to that.” (From a Wharton School Interview, emphasis added). (R. A. Fannin, The titans of China, John Murray Press, London 2019).

The “Made in China 2025,” first launched by Beijing in May 2015, essentially consists in supporting the high technology sectors while also upgrading China’s industrial base in manufacturing. The ‘Made in China 2025’ agenda also “highlights green manufacturing, energy saving and new energy vehicles, high-end equipment manufacturing, including new information technology and robotics…” (Global Times, 20.05. 2015).

One wonders what would happen if an American president decided from one day to the next significantly to curtail ALL the United States’ ‘Made in China’ imports. It would be absolutely devastating, disrupting the consumer economy – an economic and financial chaos.

A large share of goods displayed in America’s shopping malls, including major brands is ‘Made in China.’

“Made in China” also dominates the production of a wide range of industrial inputs, machinery, building materials, automotive, parts and accessories, etc. not to mention the extensive sub-contracting of Chinese companies on behalf of United States conglomerates.

What the Trump Administration did not comprehend is how the United States trade deficit ultimately benefits the domestic economy. It contributes to sustaining America’s retail economy, it also sustains the growth of America’s Gross Domestic Product.

‘Made in China’ is the backbone of retail trade which indelibly sustains household consumption in virtually all major commodity categories from clothing, footwear, hardware, electronics, toys, jewellery, household fixtures, food, TV sets, mobile phones, et cetera.

As reported early this decade, “China makes 7 out of every 10 cellphones sold worldwide, as well as 12 and a half billion pairs of shoes’ – more than 60 per cent of total world production. Moreover, China produces over 90 per cent of the world’s computers and 45 per cent of shipbuilding capacity. (M. Schiavenza, China’s Dominance in Manufacturing – in One Chart, The Atlantic, 05.08. 2013).

 

 

Trade with China is the source of tremendous profit and wealth in the United States. Consumer commodities imported from China’s low cost economy are often sold at the retail level ten times their factory price. This process creates a “value added” which then leads to an increase in Gross Domestic Product.

In a wide range of economic activities, production does not take place in the United States. The producers have given up production.

The U.S. trade deficit with China is instrumental in fuelling the profit driven consumer economy which relies on ‘Made in China’ consumer goods.

Case studies suggest that China imports trigger an increase in value added in the United States of 8-10 times the factory price of the commodities imported from China. What this means is that a large share of U.S. G.D.P. growth is attributable to production outside the U.S., namely China. Without Chinese imports, the US growth of GDP would inevitably be undermined.

What this signifies is that, in real economy terms, China is the largest national economy worldwide.

Chinese policy makers are fully aware that the United States economy is heavily dependent on ‘Made in China’.

With an internal market of more than 1.4 billion people, coupled with The Belt and Road Initiative and a buoyant global export market, the threats by President Trump were not taken seriously. Trump is “a paper tiger”. Chinese are still reading the words of Mao Zedong: “Now U.S. imperialism is quite powerful, but in reality… it is nothing to be afraid of, it is a paper tiger. Outwardly a tiger, it is made of paper, unable to withstand the wind and the rain…” (US Imperialism is a Paper Tiger, Selected Works, 1951).

United States imports from China have declined significantly as a result of the pandemic, and the impacts on United States retail trade are potentially devastating. But a distinction should be drawn between the following factors:

1) The disruption in trade largely triggered by concrete economic factors: production, supply lines, international transport caused by COVID-19. This process of disruption was largely initiated in late January early February.

2) The disruption of a political and geopolitical nature largely related to accusations and threats by the Trump Administration, claiming that China is responsible for “spreading the virus.” These accusations started in April. There is no evidence that President Trump’s accusations have a bearing on the April commodity trade figures analysed below. In April the tendency was towards a recovery of US-China trade.

It is difficult to assess the implications of the most recent wave of Trump accusations. Despite Trump’s most recent threats, the 15 January 2020 bilateral US-China trade agreement was signed and exchanged.

It provides the following 2018-2019 data: U.S. imports from China were of the order of $452.243 billion. In contrast, U.S. exports from the U.S. to China were of the order of $106.627 billion reflecting a significant decline in bilateral U.S.-China trade in relation to 2018.

The U.S. trade deficit with China in 2019 was a staggering $345.617 billion.

Data for the period January-April 2020 were as follows:

The available monthly figures for 2020 suggest a substantial decline in (monthly) U.S. commodity imports from China – in relation to 2019: A 28.3 per cent decline – average over first three months of 2020 in relation to the first 3 months of 2019, largely attributable to the coronavirus crisis.

What are the prospects? The decline of United States imports from China in the month of March was of a staggering 36.5 per cent in relation to March 2019.

Does this figure indicate a significant collapse in U.S.-China trade?

While China’s export economy is in the process of normalisation in the wake of the China pandemic, the political confrontations including the accusations directed against China by President Trump could potentially lead to a ‘slump’ in U.S.-China bilateral trade.

Moreover, according to figures quoted by The Financial Times (US-China economic decoupling accelerates in first quarter of 2020 ,largely attributable to the deep-seated financial crisis which started in February 2020), the value of newly announced Chinese direct investment projects into the U.S. has fallen by about 90 per cent: $200m in the first quarter of 2020, down from an average of $2bn per quarter in 2019. Chinese direct investment into the U.S. stood at $5bn, a slight drop from $5.4bn in 2018 and well off a recent peak of $45bn in 2016, when Chinese companies were much more free to acquire U.S. counterparts.

2020: U.S. trade in goods with China

NOTE: All figures are in millions of U.S. dollars on a nominal basis, not seasonally adjusted unless otherwise specified. Details may not equal totals due to rounding. Table reflects only those months for which there was trade.

 

Month Exports Imports Balance
January 2020 7,215.3 33,280.6 -26,065.3
February 2020 6,815.0 22,813.1 -15,998.1
March 2020 7,971.9 19,805.4 -11,833.5
April 2020 8,604.7 31,070.8 -22,466.1
May 2020 9,641.7 36,598.2 -26,956.5
June 2020 9,242.2 37,639.5 -28,397.2
July 2020 9,037.0 40,657.3 -31,620.2
August 2020 11,036.1 40,816.4 -29,780.4
September 2020 11,536.8 41,208.3 -29,671.6
TOTAL 2020 81,100.7 303,889.6 -222,788.9

 

2019: U.S. trade in goods with China

NOTE: All figures are in millions of U.S. dollars on a nominal basis, not seasonally adjusted unless otherwise specified. Details may not equal totals due to rounding. Table reflects only those months for which there was trade.

Month Exports Imports Balance
January 2019 7,105.1 41,514.4 -34,409.3
February 2019 8,083.3 33,154.9 -25,071.6
March 2019 10,574.9 31,175.6 -20,600.6
April 2019 7,883.0 34,682.7 -26,799.6
May 2019 9,069.4 39,173.4 -30,103.9
June 2019 9,166.7 38,967.6 -29,800.9
July 2019 8,694.3 41,449.2 -32,754.9
August 2019 9,415.6 41,151.1 -31,735.5
September 2019 8,597.3 40,165.5 -31,568.2
October 2019 8,851.2 40,114.9 -31,263.7
November 2019 10,103.3 36,436.6 -26,333.3
December 2019 8,903.0 33,665.5 -24,762.6
TOTAL 2019 106,447.3 451,651.4 -345,204.2

 

2018 : U.S. trade in goods with China

NOTE: All figures are in millions of U.S. dollars on a nominal basis, not seasonally adjusted unless otherwise specified. Details may not equal totals due to rounding. Table reflects only those months for which there was trade.

Month Exports Imports Balance
January 2018 9,910.2 45,749.9 -35,839.7
February 2018 9,741.8 39,003.6 -29,261.9
March 2018 12,653.2 38,295.1 -25,641.9
April 2018 10,510.5 38,269.4 -27,758.9
May 2018 10,396.6 43,938.7 -33,542.0
June 2018 10,858.3 44,571.2 -33,712.9
July 2018 10,156.5 47,087.6 -36,931.1
August 2018 9,280.9 47,817.5 -38,536.6
September 2018 9,732.4 49,988.1 -40,255.7
October 2018 9,187.5 52,170.1 -42,982.6
November 2018 8,650.9 46,445.7 -37,794.8
December 2018 9,210.5 45,906.3 -36,695.9
TOTAL 2018 120,289.3 539,243.1 -418,953.9

 

What is significant, however, is that China’s overall exports (expressed in dollars) in April rose by 3.5 per cent (in relation to April 2019), according to data from China’s General Administration of Customs released in early May. While these figures reflect a recovery of China’s overall export trade, China’s exports to the U.S. in April experienced a significant decline, namely 7.9 per cent. Similarly, in May there was decline of 8.5 per cent in relation to May 2019.

A major redirection of China’s exports has taken place:

A 3.5 per cent overall increase in exports coupled with a 7.9 per cent decline in exports to the United States, which inevitably will have a detrimental impact on the U.S. economy.

Exports to the United States in April were of the order of the order of 32,060.4 million – compared to 34,798.9 million in April 2019. In contrast, compensating for the decline in exports to the United States, China’s Eurasian trade has picked up.

China’s total imports in April 2020 fell 14.2 per cent in relation to the same period in 2019. China’s trade surplus for the month of April was a staggering $45.34 billion.

How will United States-China Relations evolve?

President Trump was not only blaming China for the Covid-19 pandemic without a shred of evidence, and his newly appointed Director of National Intelligence Rep. John Lee Ratcliffe stated unequivocally at the U.S. Senate confirmation hearing: “I view China as the greatest threat actor right now,”

“Look with respect to Covid-19 and the role China plays; the race to 5G; cybersecurity issues: all roads lead to China.” he told the panel. To which the Senate Committee asked him to clarify: “whether he would politicize the intelligence process to keep the president happy.”

Does this appointment have a bearing on the future of United States-China relations?

On 21 May Rep. Ratcliffe was nominated as Director of National Intelligence – D.N.I. with a mandate to “counter threats from great powers” on behalf of the Trump Administration.

The Director of the D.N.I. oversees and coordinates 16 intelligence bodies, including the C.I.A., the National Security Agency (N.S.A.), and the F.B.I.’s counterintelligence division.

The head of the D.N.I. has links to the White House. While the D.N.I. coordinates the various Intelligence entities, it is not an intelligence agency. Declarations from the head of the D.N.I. are more of political nature. (M. Chossudovksy, The corona pandemic and Trump’s trade war against China: America’s dependence on ‘Made in China’, williambowles.info, 15.06.2020).

To be continued…

Like what we do at The AIMN?

You’ll like it even more knowing that your donation will help us to keep up the good fight.

Chuck in a few bucks and see just how far it goes!

Donate Button

1 comment

Login here Register here
  1. New England Cocky

    An excellent read showing that US manufacturing shot itself in both feet by moving to Asian low labour cost & poor OH&S standards by removing jobs from within their national boundaries, thus naturally corrupting economic data based on national boundaries.

    When citizens are deprived of work, the available amount of disposable income drops like a lead balloon and both the local & national economies slow down to nothing. See the emptiness of ”modern Detroit” once motor vehicle capital of the world, now decaying empty factory shells being cleared for family agriculture plots.

    The same scenario will occur in Australia under the COALition that has already killed off the automobile assembly industry for ideological reasons rather than economic advantage.

    Being the food bowl for Asia is an empty concept when COALiiton policy on water favours corporations, both mining and agricultural, over family farming enterprises, and appears to require the clearance of family farms as occurred in early 20th century America

Leave a Reply

Your email address will not be published. Required fields are marked *

The maximum upload file size: 16 MB. You can upload: image, audio, video, document, spreadsheet, interactive, text, archive, code, other. Links to YouTube, Facebook, Twitter and other services inserted in the comment text will be automatically embedded.

Return to home page
Scroll Up
%d bloggers like this: