There’s More to a Trade War Than Jacking Up a Few Tariffs

GELFAND’S WORLD--From a political standpoint, the Chinese are right to counterattack in the trade war by going after soybeans. That is a direct message to Trump supporters. (Darn! I was intending to write a piece without mentioning this particular president, and there I go right from the outset.)

The immediate effect of the proposed soybean tariff has been to impel farmers -- a key Trump support group -- to ask for a reversal. But the Chinese are impolite to go after airplanes. That means Boeing, and Boeing is a Seattle company. On the other hand, besides the Boeing 737, agricultural products, and movies, maybe there aren't all that many other products to ban. (Photo above: American employees working at Japanese Subaru company in Indiana.)




Remember forty-plus years ago, when Japan was taking over our automotive and electronics industries? We used to build television sets out here (anybody remember Calbest?) Elsewhere, RCA cranked them out. We had a GM assembly plant in the southland. 

But bit by bit, American stores started selling Sony, Toshiba, and Mitsubishi. Fuji swore to outcompete Kodak in the film business, and suddenly film canisters were showing up green instead of yellow. 

But we had assets too. the United States was an agricultural powerhouse. California by itself was a major agricultural producer. 

But when we tried to offset some of those manufacturing losses by selling fruit, wheat, and rice, we ran into resistance. It wasn't anything as crude as tariffs against our goods. It was just that our goods somehow couldn't pass the stringent eligibility tests that were required for importation. Economists have a term for what we ran up against. It's called non-tariff trade barriers. 

A whole cottage industry created books and magazine stories that exposed how we were getting scalped by non-tariff trade barriers in the Asian market. 

But that wasn't the only reason that Japanese products became competitive in the American marketplace. We learned how Japanese industrial conglomerates were more interested in building market share and providing job security to their employees than they were interested in squeezing the last dime of immediate profit out of each sale. They could undercut American pricing and in so doing, take over the American markets. They had the benefits of a captive domestic market, lower labor costs, and at the time, a pretty much wide open American market.




At least for a while -- several decades at minimum -- American exporters were handicapped by the non-tariff trade barriers. I suspect that it is this history that Trump is trying to refer to in his own crude way. He forgets that American foreign policy interests (building up Japan as the non-communist center in East Asia) overrode simple financial jockeying at the time. It's also fair to mention that Japan took a decade to come out of its postwar slump, and the incursion of brands like Toyota and Sony into the American market were, to a certain extent, a surprise for our un-nimble, arrogant managers. 

Still, it is possible to hold Trump's efforts in almost decent regard. He's trying to turn back the calendar to a time when American technology was mostly superior to that of our devastated wartime foes, and light years beyond that of our wartime ally China. 

What has he missed? Basically everything. China isn't postwar Japan. It is devoting huge amounts of resources to science and technology, and the effort has paid off. Admittedly, China has been a bit of a vampire in terms of our American technology, but there are lots of things like small electric motors where the Chinese now are at the top of the food chain. 

And interestingly enough, the Chinese aren't demonstrating science-phobia the way our Republican leadership does. The current war on science is focused on global warming, evolution, and gun violence, but the official antipathy towards honest inquiry ultimately has an effect on other aspects of research. Attempts by recent congresses and the current administration to cut back on medical and biological research have been thwarted, but real damage was done along the way.




To repeat something I seem to be shouting into a vacuum, nobody seems to be talking about the human population explosion anymore, but it allows for lots of workers who would have no other option but to starve unless they fill low wage jobs.




Interestingly, the same writers who were dissecting Asian import-export strategies were also looking at Europe. They found that many successful European manufacturers had adopted a strategy that was at least analogous to what was happening in Asia. The Germans, for example, were determined to create long term growth in their firms. National laws contributed, because it was hard to fire a full time worker. 

When you looked at the Asian and European economic systems, it was hard not to conclude that they had each found a middle road that was more socially sensitive to the needs of its people.




And not to belabor the point of our domestic politics contributing to America's decline -- we've just been through a half-decade's analysis which has shown definitively that western European health care systems deliver superior care at substantially lower prices. That's where the potential of social democracy comes in -- you know, that term that is no longer scary to America's newer generations. The effect is not just in terms of human suffering and personal bankruptcies. It's the macro-cost to our economy too. You might say that America as a whole pays a huge amount to our overpriced healthcare system, particularly in comparison with our industrial rivals overseas. Think of it as a huge national tax on consumers that is funneled to owners and employees in the healthcare sector.


(Bob Gelfand writes on science, culture, and politics for CityWatch. He can be reached at [email protected])