U.S. federal government policies with the People’s Republic of China (PRC) involve trade and investment plus travel for tourism, education, and employment, plus migration. People and firms in the U.S. make agreements (contracts) with people and firms in China to import or export goods and services, and to invest in companies that produce goods and services. Governments make rules and regulations limiting these investment and trade agreements between Chinese and U.S. people and firms.
Trade agreements generally restrict as well as promote trade and investment in various ways, and are influenced by lobbyists trying to protect the interests and advance the agendas of various business, union, and environmental groups.
Current and proposed trade and investment agreements tend to be complex and confusing and the interests of both China and the U.S. could be advanced by simplifying or abolishing some.
Trade agreements like the Trans-Pacific Partnership (TPP) are shaped by interest groups advocating various social, labor, and environmental agendas. The TPP excludes China as a way to promote these social, labor, and environmental policies in China.
NSDA debaters have U.S./China policy reform as their 2016-2017 resolutions:
Resolved: The United States federal government should substantially increase its economic and/or diplomatic engagement with the People’s Republic of China. (NSDA website link)
NCFCA debaters has a similar topic for the 2016-2017 school year:
Resolved: The United States Federal Government should substantially reform its policies toward the People’s Republic of China.
And posts here started a year ago for the similar Stoa Asia Trade resolution:
Resolved: The United States federal government should substantially reform its trade policy with one or more of the following nations: China, Japan, South Korea, Taiwan.
Early posts on the Asia Trade topic emphasized that these listed economies, along with the U.S., have become tightly integrated over the last two decades. For example Foxconn, a Taiwanese firm that assembles Apple and other gadgets, is China’s largest private employer. South Korean and Japanese firms have vast investments and manufacturing operations in China. General Motors sells more cars in China than in the U.S. And in March, McDonald’s announced:
… that in the next five years it plans to add about 1,500 restaurants in China, Hong Kong, and South Korea—up from its current count of 2,800—including more than 1,000 in China alone.
For an overview of major U.S./China policy debates, I recommend three articles (and recommend earlier posts).
On the the economic benefits of trade: Douglas Irwin, “The Truth About Trade
What Critics Get Wrong About the Global Economy” in the July/August, 2016 issue of Foreign Affairs. Valuable analysis and recent history that answers most concerns and claims in the next two articles that are critical of today’s mostly open trade policy with China and other Asian countries.
This November, 2015 post in The Conversation argues: “The Trans-Pacific Partnership poses a grave threat to sustainable development.” The key here is that critics of the TPP trade agreement want it to include “enforcement mechanisms” to advance U.S. policy preferences for gender, labor, environmental, and climate issues.
The labor-backed Employment Policies Institute says trade with China has caused extensive job losses and wage stagnation in the U.S.: “Hearing on U.S.–China Economic Challenges: The impact of U.S.–China trade” (February 21, 2014).
These three articles should give debaters a sense of the claims and clashes with U.S./China policy reform proposals.
(Revised September 4, 2016)
Additional notes and links to recent posts:
Pdf with more recent China posts: ET Report-JanuaryChina2017
• China and Cuba Trade, Labor, and Migration
What issues should be on the table when negotiators from two governments hammer out what trade rules are relevant and reasonable? … A couple things connect the China policy topic and the Cuba Public Forum topic. First, the refugee policy that allowed those smuggled from China to be legal citizens of (then British) Hong Kong as soon as they touched land. … U.S. policy was similar and allowed those escaping communist Cuba, once they made it to U.S. territorial waters, to stay legally…revise in 1995 to a “wet foot/dry foot” policy. Then Obama Admin. shifted policy again, as part of normalizing relations with Cuba
• US/China Engaging in Nationalist Policies
Apart for the money governments spend directing research and development to area they deem strategic (ballpoint pens?), such subsidies and policies stoke nationalist responses in Japan, the U.S. and Europe…
• Bootleggers and Baptists Agree to Restrict Trade with China
When the President and Congress consider trade legislation, a wide range of interest groups gather to advance their agendas. These agendas are not always obvious, and sometimes corporate and union interests misdirect the public about their motivations.
• For Still-Poor China, Coal Pollution from Home Heating
The Chinese government energy policy goals are to reduce air pollution around Chinese cities, and to reduce CO2 emissions in order to address climate change. These goals overlap, but are not the same. Wind farms and solar installations don’t emit air pollution, but neither does less-expensive natural gas combined-cycle power, which can be located closer to cities and customers. New coal power plants emit less air pollution, especially compared to the dense pollution from antiquated coal-fired power and home coal burning.
• US/China Farm Wars
In “United States Challenges Excessive Chinese Support for Rice, Wheat, and Corn” (September, 2016), the Office of US Trade Representative announced new action against China. … The U.S. government also subsidizes US farmers growing and exporting rice, wheat, and corn. Comparing government between countries is complex. … reducing and reforming farm subsidies would help rationalize commodity farm production in US and China, reduce environmental harms, and reduce financial burdens to taxpayers in both countries.
There is no more important bilateral relationship than that between the United States and China. Yet the Congressional Research Service warns that ties have “become increasingly complex and often fraught with tension.” Relations appear likely to become even more fractious with the election of Donald Trump as president. Every four years the People’s Republic of China (PRC) becomes a presidential election issue, but Americans deserve [more on] U.S.-China political and economic relations than candidates’ sound-bytes.
• China’s Sustainable Agriculture: “the biggest threat to humanity?”
“How Antibiotic-Tainted Seafood From China Ends Up on Your Table,” (Bloomberg Businessweek, December 15, 2016), describes the traditional “sustainable” Chinese use of animal waste to feed fish. Since the beginning of agriculture, animal waste has fertilized crops (it’s the organic way!). But the addition of antibiotics to boost animal size and disease resistance shifts the microbe ecosystem in animal waste. Some microbes gain resistance to antibiotics, and are then flushed into Chinese fish ponds, adding antibiotic resistance to microbes in fish later shipped (or transshipped) to the U.S.. (read more)
“Foot Soldiers of China’s Shopping Boom” (New York Times, Wednesday, Feb. 1, 2017, p B1, online as For Couriers, China’s E-Commerce Boom Can Be a Tough Road, Jan. 31), looks at the low wages and long hours for Chinese delivering packages:
But for the couriers — who are largely unskilled workers from China’s interior — the work can be low-paying and difficult. It is coming under scrutiny from labor activists and legal experts who say many couriers face punishing hours and harsh working conditions.
Nearly one-quarter of them work more than 12 hours a day, seven days a week… A majority work more than eight hours a day each day of the week.
Migrants from rural China also work long hours at low wages at factories making goods for export to the United States. Should U.S. trade agreements include minimum wages and maximum hours for workers in China, Mexico, or Cuba?
A challenge for international trade agreements is scope. What issues should be on the table when negotiators from two governments hammer out what trade rules are relevant and reasonable?
The long delayed and now defunct Trans-Pacific Partnership (TPP) was criticized by some for including labor and environmental regulations, not just trade rules. The TPP was criticized by labor unions and environmental organizations for not having strict enough labor and environmental regulations.
In Mexico, China, and Cuba, labor rates are far lower than in the United States. And not just labor rates, but rules about how many hours a day or a week employees can work, and what benefits employers are required to pay.
NSDA debaters have a US/China engagement topic, and the February Public Forum topic is:
Resolved: The United States should lift its embargo against Cuba.
The last days of the Obama Administration ended the long-standing wet-foot/dry-foot policy for Cubans (see below), and the Trump Administration wants to build a bigger wall along the Mexican border, renegotiate trade agreements between the US and Mexico (NAFTA), and also with China. The stated goal is to restore jobs lost as companies automated and shifted manufacturing operations to Mexico and China.
Lifting the trade embargo with Cuba would open doors to similar job displacements as US firms open new factories and upgrade agriculture in Cuba. Cubans are very poor after a half-century of communist rule, so Cuban demand for goods produced in the US will be minimal.
China and Mexico posed similar trade and investment costs and benefits. US consumers buy lower-cost imported goods but US workers fear manufacturing work shifting south of the border or overseas to China. Factories closing in the US are easy to spot and report on the evening news. Families are hurt when jobs disappear. Harder to see and report are the widespread gains from less expensive clothes, furniture, appliances, and cars lower and middle income Americans can purchase. The gains are disbursed and rarely appear on the evening news or morning New York Times.
Cheap goods were imported from Japan, Taiwan, Hong Kong, and South Korea in the 1960s and 1970s, made by very poor people working long hours for low wages. But these jobs allowed tens of millions to escape poverty to relative prosperity. The same prosperity gains are in process now in Mexico and China, though not yet in Cuba.
Johan Norberg‘s 2003 documentary looks at the dynamics of international trade in Taiwan, Vietnam, and Kenya. This first segment shows some of the history of Taiwan where:
…just thirty years ago people…were poorer than many Africans today. Malnutrition was widespread and there were no natural resources. Today its people are as rich as the Spanish.
The New York Times article cited above quotes a courier from rural China about his job and long hours:
“I’m here to make money,” said Mr. Zhang, a 28-year-old former coal miner from Shanxi Province who is saving money to build a home, widely seen in the countryside as indispensable in attracting a wife. “If I’m not diligent now, I’m going to regret it. I’m almost 30 and still single.”
How do we compare Mr. Zhang’s long hours delivering packages in a city to the life he had mining coal in rural China? “The World’s Deadliest Profession: Coal Miners Pay for China’s Economic Miracle” (TheWorldPost, March 4, 2012) offers a glimpse of rural China:
“… Everywhere in rural China poor people, who can no longer sustain themselves as farmers, rush to coal mines, where wages are about equal (7 to 12 dollars a day) to what they would be paid in factories in the big cities. But in the cities, workers have a rough life and get cut off from their families and homes, so they prefer to stay in their village and work in the mines. Sometimes three generations in one family have worked the same mine.”
The Economist reports some progress in “Shaft of Light: The coal that fuels China’s boom is becoming less deadly to extract” (July 18, 2015), but work as a city courier, even with long hours, is likely preferred to rural coal mining by many young people.
The New York Times article further takes the opportunity to compare China’s low-paid couriers to growing “gig-economy” jobs in the U.S.:
Labor standards in the industry vary widely, but many couriers work under arrangements that might, for example, provide no overtime pay or no employer contributions to their government health care and pension benefits. Just as in the United States, where Uber drivers and many others work as contractors, those arrangements raise questions about what defines work and employment.
If future legislation or trade agreements allow government in China or the US mandate higher wages, benefits, or shorter work days, they will raise costs and lower demand for these jobs and services.
We can wish for higher wages and more benefits for Uber and package-delivery drivers in the U.S. as well as in China. But mandating higher wages and benefits doesn’t automatically raise worker productivity.
Across China some 50% of the working population still live in rural areas with average annual incomes of just $2,000. Migrant laborers in Chinese factories earn similar incomes on average to couriers, about $6,000 a year. Migration is how poor people can most quickly and dramatically raise their incomes, whether from rural China to cities, or from China, Cuba, or Mexico to the United States.
According to a study cited in the New York Times article, Chinese couriers earn about 15 cents per package delivered:
Most couriers make about $300 to $600 a month, according to the Jiaotong study — an amount roughly equal to the wages of China’s migrant factory workers. They can deliver 150 packages on a weekday, drivers said, sometimes helped by making mass deliveries to office buildings.
New legislation or trade agreements that try to force earnings up for delivery or factory workers in China will result in many returning to even lower-pay work in rural China.
In the Izzit.org documentary A Taste of Chocolate, Jimmy Lai describes his first days of factory work in 1960 after being smuggled as a 13-year-old into capitalist Hong Kong from communist China. The YouTube video below is queued to 2 minutes 36 seconds, when Jimmy Lai is introduced. At 8 minutes in, Jimmy Lai describes arriving after all night in a fishing boat crowded with others escaping mainland China:
And by the afternoon we arrived in Kowloon. And at that time, when you arrive in Hong Kong you touch base, you’re legalized… You’re considered legal. I was taken to my mother’s sister and she paid $370 dollars for the smugglers. Later I found out how poor my mother’s sister was…
The narrator continues: “Their poverty meant that Jimmy was sent to work the same night he arrived in the Kowloon District of Hong Kong.” And Lai remembers that first day:
I was taken to a factory to work as a odd-job worker. And I was very happy in the morning. I smelled a lot of food that I had never smelled, the great aroma of food. And the manager gave me ten dollars. That… that was a lot of money at that time. I was very happy, as if I had arrived in Heaven. Although as a young kid we had to wake up before seven. We got to sweep the floor, finish everything, open the door before eight o’clock. People come, and then we work until like ten o’clock, but it was a very happy time. It was a time that I know I had a future…
A couple things connect the China policy topic and the Cuba Public Forum topic. First, the refugee policy that allowed those smuggled from China to be legal citizens of (then British) Hong Kong as soon as they touched land.
U.S. policy was similar and allowed those escaping communist Cuba, once they made it to U.S. territorial waters, to stay legally. The Clinton Administration revised this in 1995 to a “wet foot/dry foot” policy. After 1995 those escaping Cuba had to get their feet on dry land before they could stay in the U.S. legally. Then in early January the Obama Administration shifted Cuban immigrant policy again, as part of normalizing relations with Cuba: “Obama Ends Exemption for Cubans Who Arrive Without Visas,” (New York Times, Jan. 12, 2017)
President Obama said Thursday that he was terminating the 22-year-old policy that has allowed Cubans who arrived on United States soil without visas to remain in the country and gain legal residency, an unexpected move long sought by the Cuban government.
Countries like the United State, China, Mexico, and Cuba engage through voluntary exchange (trade), travel and migration, as well as through international capital flows (investment). Cubans were coming in larger numbers to Mexico and once they set foot in the U.S. Embassy they could stay in U.S. legally.
Many from China also come to Mexico on their way to the U.S. “California sees surge in Chinese illegally crossing border from Mexico” (Los Angeles Times, June 7, 2016) reports:
Between October and May, the first eight months of the fiscal year, Border Patrol agents in the San Diego sector apprehended an estimated 663 Chinese nationals, compared with 48 in the entire previous fiscal year and eight in the year before that, according to data provided by U.S. Customs and Border Protection.
People from poor countries, especially young men, are often willing to migrate long distances for a chance to make a better live for themselves. Wage and work rule restrictions slow the process of poor people working long hours to escape poverty.
Opposition to globalization has expanded and energized in the U.S. by both the Bernie Sanders and Donald Trump campaigns. “Globalization” sounds unappealing, like throwing goods and traditions from around the world in a blender and chopping them up. Consumers appreciate lower prices but worry about factories closing and “jobs being shipped overseas” to lower-paid workers in Mexico, China, Vietnam, or India.
Globalization, multilateral trade agreements, and “the international order” are regularly attacked by populists and nationalists in the US and Europe. And also in China.
China leadership has shifted nationalist in recent years, as discussed in “China Protection Writ Large,” (Wall Street Journal, January 31, 2017, online title “With Pen Plan, China Etches Nationalist Economic Policy“):
Studies rank China’s economy, the world’s second largest, among the most closed. From cars to wind turbines, Beijing limits foreign participation in domestic production. Citing “food safety,” Beijing insists that almost all grains consumed in China are domestically grown, and sets artificially high prices to support bumper harvests. State media touts locally made consumer products including bidets and rice cookers.
The WSJ story begins with a discussion of Chinese state initiatives to fund Chinese steel firms to produce higher-grade steel, such as needed for the tip or point in ballpoint pens. (The WSJ article offers a nice video overview telling the story.) China’s Ministry of Science and Technology funded this “meaningful breakthrough”:
The ministry provided $8.7 million for the research, which Beifa undertook with state-owned Taiyuan Iron & Steel Group Co., China’s largest stainless-steel mill. By September, the mill produced its first fully-domestic ballpoint pen.
Fortune also runs a story “China Couldn’t Make Its Own Ballpoint Pens—Until Now” (Jan. 10, 2017), noting Chinese firms produce 38 billion ballpoint pens each year but import ballpoint pen tips from Japan, at a cost of $17.3 million a year.
Premier Li Keqiang first drew the nation’s attention to the pen tip dilemma in January last year, lamenting that China still relied heavily on imported high-grade steel despite producing more than half of world’s crude iron and steel. State media reported that Li’s inability to make the tips reflected badly on Chinese manufacturing in general.
The article says Chinese firms spent “half a decade of research” to produce the pen tips. So here is a problem with politically-directed nationalist policies. Divide the $17.3 million a year pen tip “savings” over 38 billion pens. Chinese firms making tips themselves may reduce costs by some part of $0.000455 (about 1/20th of a penny per pen).
The Pen Addict reviews the top five ballpoint and other pens. The top rated ballpoint pens sell for $2.50 to $20 with $62 for the most expensive.
Probably there are better ways for Chinese ballpoint pen engineers to focus their attention than on that learning to make their own tips. A key challenge for Chinese firms is developing brands people worldwide will recognize and pay more for. But brand recognition usually follows innovation and marketing, not politically-directed manufacturing advances.
“Why You Haven’t Heard of Any Chinese Brands” (The Atlantic, April 8, 2013) looks at the challenge China has faced developing brands:
Here’s a little thought exercise: Think of a Chinese brand. Any Chinese brand. Go on, I’ll wait. Give up? Don’t feel too bad: According to a recent poll conducted by HD Trade Services, 94 percent of Americans cannot think of a single brand from the world’s second-largest economy.
Strange, isn’t it? Japan and South Korea, countries China zoomed past in the GDP-rankings, boast globally-respected brands across a variety of industries. Even Sweden and Finland — mere minnows in comparison to China — offer IKEA and Nokia, respectively. Given China’s incredible transformation into an economic powerhouse over the past three decades, why doesn’t the country have more recognizable brands?
A key problem with nationalist policies follows from politicians supporting domestic “champions”– state-funded or subsidized firms state officials hope will succeed in the global economy. But governments have a poor track record choosing the best firms to support. Japan’s MITI tried for years to stop Honda from expanding from manufacturing motorcycles to cars, in part due to influence by successful and established Toyota and Nissan.
See also, China’s National Champions: The Evolution of a National Industrial Policy — Or a New Era of Economic Protectionism? (2013, pdf), which begins:
An increasing concern of foreign governments is the emerging pattern of industrial policies established by the government of the People’s Republic of China (PRC)…favoring Chinese state-owned enterprises (SOEs) at the expense of their foreign counterparts.1 According to the US Chamber of Commerce, concerns that the Chinese government is retreating on opening its economy to foreign direct investment (FDI) are at a 10-year high among US companies directly investing in China (Reuters, 2010).2
Apart for the money governments spend directing research and development to area they deem strategic (ballpoint pens?), such subsidies and policies stoke nationalist responses in Japan, the U.S. and Europe:
While President Xi defends globalization abroad, his nationalist policies favor state-run companies back home. Many foreign companies and governments say China unfairly restricts access to its markets while flooding markets with low-price exports such as steel, helping to stoke a populist backlash abroad against globalization.
[Update: new Foreign Policy article, “Surprise Findings: China’s Youth Are Getting Less Nationalistic, Not More” (February 7, 2017):
For the United States’ part, its policymakers’ concern about a new crop of stridently anti-American Chinese youth may be overblown. If anything, future Chinese leaders may emerge from a generation noticeably less nationalistic than those that produced Xi and his predecessors.
When the President and Congress consider trade legislation, a wide range of interest groups gather to advance their agendas. These agendas are not always obvious, and sometimes corporate and union interests misdirect the public about their motivations.
• Unions want to protect union jobs in the U.S., and extract revenues for retraining workers displaced by imports. Here is the AFLCIO’s page on why it opposes the TPP (Trans-Pacific Partnership for Free Trade), a trade agreement Congress long considered, before it was blocked by the new Administration).
• Environmental organizations work to add their environmental goals to trade agreements. Here is the Sierra Club’s page opposing the TPP (and other “dangerous trade agreements”). This page includes a Sierra Club video with claims against the TPP, including the claim that allowing exports of coal and natural gas from the U.S. would be dangerous.
• Human rights and women’s rights groups advocate trade restrictions to pressure China and other countries to reform. Here is a 2013 article focused on China: “China: The West Needs to Promote Both Trade and Human Rights.” The article notes the danger of mixing rights advocacy with trade policy:
Some, both in Europe and the U.S., are demanding a much tougher approach towards China, including the imposition of punitive sanctions and high import tariffs. But this is undeniably motivated more by a desire to protect vested domestic economic interests, rather than as a way to put political pressure on the Chinese government. Crucially, such an approach risks fueling the perception that the voicing of human rights concerns is only used as a means of criticism in order to justify protectionist measures against China.
• Christian groups consider trade policy a way to pressure China’s government to increase religious freedom. Robert Sirico, in a 1998 Cato Trade Briefing Paper notes:
The freedom of Americans to trade and invest abroad is being challenged in the name of promoting human rights. Conservative Christian activists and others seek to impose trade sanctions against nations that do not protect human rights. Proposed sanctions include the Freedom from Religious Persecution Act and the revoking of China’s Most Favored Nation status.
“Free Trade and Human Rights: The Moral Case for Engagement” begins with an overview:
Three fundamental misunderstandings cloud the current debate over free trade and human rights. First, cutting government aid to target countries is not the same as raising barriers to trade and investment. Ending foreign aid and corporate subsidies actually promotes development by removing market distortions. Blocking trade, in contrast, hurts U.S. consumers and exporters as well as the most economically vulnerable people in the targeted nations.
Second, some advocates of free trade in the U.S. business community have weakened their case by failing to acknowledge that human rights abuses exist. U.S. multinational firms further undermine their credibility by supporting government intervention through such agencies as the Export-Import Bank and the Overseas Private Investment Corporation.
Third, Christian conservatives who support sanctions betray a lack of understanding of how trade promotes freedom and development. Economic reforms in China have transformed daily life for hundreds of millions of people who now enjoy greater opportunity, freedom of movement, material abundance, and access to Western ideas. Trade with China benefits Americans through lower prices, wider consumer choice, and greater returns on investment.
Imposing sanctions against China will disrupt this mutually beneficial relationship while doing nothing to improve human rights. Like the failed embargo against Cuba, trade sanctions isolate the victims while strengthening their persecutors. Sanctions imposed in the name of human rights also serve the interest of domestic protectionists by limiting competition. The best policy for promoting freedom and human rights remains economic and moral engagement.
So… industry, unions, environmental, human rights, and Christian organizations lobby to restrict trade agreements. The story of the Bootleggers and the Baptists can be helpful in sorting out opposition to international trade and to trade agreements.
Climate negotiations offer an illustration of the problem, explained in this PERC page and paper. Though from 1998, the lessons apply to current trade policy issues with China:
As nations argue over global warming policies, PERC economist Bruce Yandle brings fresh insights to the discussion. In “Bootleggers, Baptists, and Global Warming,” a new paper from PERC, Yandle sheds light on puzzling features of the international negotiations over climate change.
Yandle looks at the post-Kyoto negotiations in the light of a theory that he has coined as the “bootleggers and Baptists” theory of regulation. Yandle points out that in the South, Sunday closing laws make it illegal to sell alcohol on Sunday. These laws are maintained by an inadvertent coalition of bootleggers and Baptists. The Baptists (and other religious denominations) provide the public outcry against liquor on Sunday, while the bootleggers (who actually sell liquor on Sunday) quietly persuade legislatures and town councils to maintain the closing laws.
In June of this year, EPA administrator Gina McCarthy announced the Obama administration’s far-reaching, anti-coal-burning Clean Power Plan. It drew wide support from the environmental community for its promise to reduce carbon emissions and mitigate climate change. Speaking for environmentalists worldwide, McCarthy said: “This plan will clean the air we breathe while helping slow climate change so we can leave a safe and healthy future for our kids.” Put another way: Those who love their children and the environment would surely leap on President Obama’s anti-coal bandwagon.
Here similar story “Bootleggers, Baptists and e-cigarettes” (R Street, Jan. 14, 2016)
Environmentalists were happy, but so were producers of other fossil fuels that compete with coal (natural gas producers, for example). Interestingly, dirty coal producers were pleased with the new legislation too. They are the bootleggers of the story.
Before the imposition of the new requirements, producers of clean coal, which comes mainly from Wyoming and Montana, were in the catbird seat because their clean coal met high air-quality standards without the use of expensive technology. But now, with the new technology required, coal-burning plants can burn cheaper, dirty coal. Sellers of dirty coal see their business growing faster while the pace for clean-coal shippers is weakening.
All this gets more interesting when it turns out that dirty-coal producers in Obama’s home state of Illinois are chief among the bootleggers laughing all the way to the bank as they ship trainloads of coal to generators far and wide. The Obama administration’s Clean Power Plan has made lots of people happy — environmentalists, producers of clean-power technologies, and producers of dirty coal. We think the plan should receive a medal for bringing together such a disparate set of bootlegger–Baptist interests, provided it can clean the dirt off, of course. [Link to National Review article.]
Students researching the China topic should note that coal from Wyoming and Montana burns cleaner than coal mined in China and burned for energy production there. Also, shipping costs from Montana and Wyoming to South China coal plants is actually less expensive than shipping by rail to coast then shipping along China’s coast. “Cleaner” coal with lower shipping costs (though coal burning is still more polluting than natural gas, wind, solar, and hydro power).
Environmental groups strongly oppose permits and trade policies enabling Wyoming and Montana coal to be shipped by rail and river to the Washington coast, and exported to China. Dirty coal producers in China and around the world also oppose exports of clean coal from the U.S., but not for the best of reasons.
CASPER, Wyo. — Wyoming coal exports will likely suffer as a result of an agreement by the United States and China to cut carbon dioxide emissions, analysts said Wednesday.
The surprise announcement Tuesday by President Barack Obama and his Chinese counterpart, Xi Jinping, commits the world’s two largest carbon emitters to greening their respective power sectors.
And this Bloomberg News story has more, “China’s Clean-Fuel Focus Tests U.S. Coal-Export Lifeline.” And with exports from US ports blocked, coal is headed out through Canada, “Coal company shifts to Canadian port to reach Asia markets,” (US News, October 13, 2016)
In all the above stories of special interests and trade policy, we shouldn’t impute bad motives to most of the people and organizations involved. People see the world through their own interests and often persuade themselves that policies they benefit from also benefit the world.
There are people and organization who know policies they benefit from personally and as interest groups will raise costs and limit freedoms for others. Debaters should be alert to see the bootleggers behind various proposed restrictions on trade with China.
Bagoly mondja verébnek, hogy nagyfejű.
(English version: “Pot calling the kettle black.”
Many other cultures here. )
In “United States Challenges Excessive Chinese Support for Rice, Wheat, and Corn” (September, 2016), the Office of US Trade Representative announced new action against China:
Today, the Obama Administration has launched a new trade enforcement action against the People’s Republic of China at the World Trade Organization (WTO) concerning excessive government support provided for Chinese production of rice, wheat, and corn. [Admin. officials joined] by bipartisan members of Congress in announcing the complaint which challenges China’s use of “market price support” for three key crops (rice, wheat, and corn) in excess of China’s commitments under WTO rules.
The U.S. government also subsidizes US farmers growing and exporting rice, wheat, and corn. Comparing farm subsidies across countries is complex. Iowa plays a key role in each Presidential election cycle because of the early caucuses lead other state primaries. And because corn is big business in Iowa, Presidential candidates usually call for maintaining corn and ethanol subsidies in their Iowa campaign stops.
In 2015 Iowa farmers exported $1.4 billion in corn and other agricultural goods to China and Iowa exports have increased 257% since 2006.
According to an “Agricultural Subsidies” (October 7, 2016 ) on Downsizing Government, the U.S. Department of Agriculture (USDA) spends an average of $25 billion a year on eight major farm subsidy programs. The amount varies depending on farm prices.
Reasons to end US farm subsidies are listed and discussed in the article, and number 4 should be of particular interest to students debating US/China policy reform:
1. Subsidies Redistribute Wealth Upwards.
2. Subsidies Damage the Economy.
3. Subsidies Are Prone to Scandal.
4. Subsidies Undermine U.S. Trade Relations.
5. Subsidies Harm the Environment.
6. Agriculture Would Thrive without Subsidies.
Crop prices fell in 2016 and Reuters reports “USDA to pay farmers more than $7 billion due to low crop prices,” (October 4, 2016). Though USDA and farm groups argue the federal insurance subsidies help provide just a “safety net” for farmers when prices fall, they encourage farmers to expand production, since they can expect to make money whether prices at harvest time are high or low (selling at market prices or at government-subsidized insured prices).
Farm exports to China in 2015 were over $20 billion in 2015, according to the USDA Foreign Agricultural Service:
U.S. agricultural exports to China have grown more than 200 percent over the past decade and China was the United States’ second-largest international market in 2015. U.S. farm and food exports to China totaled more than $20.2 billion in 2015, led by soybeans, coarse grains, distillers’ grains, hides and skins, and cotton.
So… what if both the US government and the Chinese government worked together to reduce or eliminate subsidies to farmers. US subsidies allow farmers to export corn, wheat, and other subsidized crops to other countries at artificially low prices. Subsidies also cost domestic taxpayers billions, and the money mostly goes to wealthy farmers. Chinese government farm subsidies similarly distort world markets and cost Chinese taxpayers billions.
US relations with China may be most influenced by Terry Branstad, the Trump Administration’s USDA nominee. According to the Des Moines Register (December 10, 2016):
Iowa’s long-serving governor earned selection as U.S. ambassador to China by virtue of his long-standing personal ties to Chinese President Xi Jinping, which stretch back three decades. But how far does friendship go in managing relations between the world’s two most powerful countries? Branstad will soon find out in his new role.
Though the Des Moines Register mostly discusses US/China geopolitical issues and the long personal relationship between Terry Branstad and Chinese President Xi Jinping, reducing and reforming farm subsidies would help rationalize commodity farm production in US and China, reduce environmental harms, and reduce financial burdens to taxpayers in both countries.
A 2013 NCPA study “How U.S. Agricultural Subsidies Harm the Environment, Taxpayers and the Poor,” though not discussing China directly, focuses on environmental harms encouraged by US farm subsidies, and concludes:
Agricultural subsidies distort market prices and interfere with trade, causing deleterious distortions that adversely affect poor famers in developing countries and burden U.S. taxpayers. Moreover, in some cases agricultural subsidies can lead to environmental degradation. Reducing agricultural subsidies has the potential to help developing countries, the environment and taxpayers.