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Trump Plans New Curbs on Chinese Investment, Tech Exports to China

98 points by handsomechad 8y ago

rayiner 8y ago
What I don’t understand about opposition to this is what economic theory says that one-way trade freedom serves US interests. China doesn’t let US companies buy Chinese companies. Leaving aside notions of fairness, what is the theoretical basis for arguing that the US should nonetheless allow Chinese ownership of US companies?
- vkou 8y ago
  > what is the theoretical basis for arguing that the US should nonetheless allow Chinese ownership of US companies? Why shouldn't it? Neither the stock market, nor capitalism cares who buys shares of a company. If China isn't interested in investments from the US, wouldn't that just make their own markets less efficient? If your goal is efficient markets, then it shouldn't matter where your investment dollars are coming from. I don't understand where this ridiculous notion of 'fairness' in capital markets is coming from. Money is money, if you want to ascribe morality to it, then this is not the economic system to do so in. Consider this question: Should, say Nigeria allow US-based companies or persons to buy Nigerian companies/mineral rights/agricultural land? If so, why? Under a reciprocal agreement, it's not like Nigerian companies are able to buy US companies/mineral rights/agricultural land. Even if they were allowed to in theory, they wouldn't have the money. Does this mean that Nigeria should close itself to outside investment? Would Nigeria be better off if it did so? Is it only hurting itself by being closed to American investment?
  - Sangermaine 8y ago
    You seem to be intentionally ignoring the parent's point. They're asking why, if China doesn't allow US ownership of Chinese companies, should the US allow Chinese ownership of American companies, not some abstract question of fairness. Currently there are severe controls on US activity in the Chinese market, ownership restrictions among them.
    - vkou 8y ago
      So what? Who cares what China does internally. Globalization dogma says that countries that limit foreign investment are only hurting themselves. If they want to shoot themselves in the foot, that's their problem. This economic mantra has been pushed by the United States for the past 70 years, mostly to get developing markets to open up to US companies. Maybe we should apply it domestically, and see what happens?
      - gonvaled 8y ago
        Ideology is not pure, it is just a tool to further one's position. Whenever the US considers that communism is to its advantage, it will turn communist. Unfortunately, it has the military might to impose its will.
- propman 8y ago
  Agreed. If the purpose of all this is to create a more even playing field then there really shouldn’t be much rational opposition. If tarrifs were placed specifically for artificially protecting non national security related goods then that would be an economic disaster. But if tarrifs are implemented to correct unfair trade agreements, then that isn’t economically unsound policy. How else do you rectify decades of wrong doing. IP theft, china can invest in whatever here, but we have artificial caps there. Significant tarrifs and regulatory issues there, far fewer here. Americans can’t buy property there, China purchases $150B a year in residential property here, pricing out many in the most sought after real estate markets. Forcing technology transfer to a totalitarian borderline authoritarian government and not doing anything would be pathetic. What other tools do we have that are more palatable than tarrifs? War? Sanctions? Stop trading altogether? How else are you supposed to fix something, if the other side never wants to fix it?
  - pavlov 8y ago
    > Americans can’t buy property there, China purchases $150B a year in residential property here Would you even want to want to buy property in what you describe as an authoritarian, borderline totalitarian country? The Chinese don't want their property to be subject to whims of party officials, so they invest elsewhere. This is a net positive for Americans (increasing real estate prices mean increasing total wealth), and also a creeping long-term negative for China which they can't easily fix without relinquishing control. Rather than trying to force the issue, USA should continue to take the high road and let the Communist Party slowly boil. It may take a long time, but the Chinese will eventually want their political freedom because they don't have real economic freedom without it.
    - swsieber 8y ago
      High real estate prices is a net win for a few Americans.
    - aniro 8y ago
      >>This is a net positive for Americans (increasing real estate prices mean increasing total wealth). Uh, not so much. Being priced out of home ownership means a smaller and smaller portion of Americans would (do) benefit from this increased "total wealth".
- djschnei 8y ago
  Agreed it is probably a bad state to be in; Chinese companies buying up ours. But if I own a company, I shouldn't need permission from Washington to do with it as I please as long as I'm not defrauding or directly harming others. Freedom is messy.
  - killjoywashere 8y ago
    If you're the sole manufacturer or patent-holder for critical communications equipment (e.g. Qualcomm) then I do think the Government is representing the people's interest by preventing your sale.
  - frgtpsswrdlame 8y ago
    >as long as I'm not defrauding or directly harming others I'm curious, why "directly harming others"? The argument here is that you doing as you please (selling critical technology to the Chinese) is indirectly harming others so I'm curious about the distinction you draw between when it's okay to harm others and when it's not.
    - djschnei 8y ago
      Included "directly" very intentionally. I'm of the mind set that you never give government subjective authority over something. You put up very strict guardrails for their power. "Indirectly harming others" is way too subjective and leaves far too much room for abuse of power/corruption. I don't judge laws by their best meant intentions, but by their worst case scenarios.
      - frgtpsswrdlame 8y ago
        I would say harm vs. not harm is much less subjective than direct harm vs. indirect harm. Is yelling 'fire' in a crowded theater direct or indirect harm? Defining that seems much trickier than just defining whether it's harm.
        djschnei 8y ago
- fanssex 8y ago
  Could you please give an example of what company the US tried to buy but got turned down?
  - Sangermaine 8y ago
    All of them. Currently there are severe restrictions on foreign ownership of Chinese ventures, though the restrictions vary by sector and this year some of the restrictions in some sectors have been eased up a little.
    - throwbacktictac 8y ago
      Yahoo/Oath owned/owns a significant chunk of Alibaba.
      - asdsa5325 8y ago
        Alibaba is traded on the NYSE.
    - njarboe 8y ago
      It is not just buying a Chinese company that is forbidden, but foreign companies cannot build a factory for production in China without creating a company that is majority Chinese owned that owns the factory. No possibility for trade secrets. All your tech will be learned and transferred to China.
- rory096 8y ago
  Removal of trade barriers is always good, even if it's unilateral and asymmetric. https://econrsa.org/wkshops/tradepolicy/session2day1-whatshouldtradenegotiatorsnegotiateabout.pdf https://econrsa.org/wkshops/tradepolicy/session2day1-whatsho... https://nytimes.com/2018/06/20/opinion/trump-trade-tariffs-china.html https://nytimes.com/2018/06/20/opinion/trump-trade-tariffs-c... There is a game theoretical argument for imposing retaliatory tariffs in hopes of instigating the other party to change, eventually reaching an outcome with lower trade barriers than at the start. But there is every indication that Trump fundamentally believes trade is bad (because of a fundamental misunderstanding of trade deficits) and has no intention of negotiating such a deal. https://www.tcd.ie/Economics/assets/pdf/SER/2017/9trump.pdf https://www.tcd.ie/Economics/assets/pdf/SER/2017/9trump.pdf https://twitter.com/realDonaldTrump/status/971349864125788160 https://twitter.com/realDonaldTrump/status/97134986412578816...
  - frgtpsswrdlame 8y ago
    If you've got an argument that supports: >Removal of trade barriers is always good, even if it's unilateral and asymmetric. then just make it. A strong statement and a pdf link isn't very convincing.
    - rory096 8y ago
      I'd say the Nobel Prize winning trade theorist explains it better than I can, but feel free to read the NYT editorial by the (non-prize-winning) economist if you prefer html to pdf.
      - frgtpsswrdlame 8y ago
        I ask people to make their own arguments because I think it's lazy to post things that even you don't understand. But if you want to me talk Krugman then okay: Here’s an easy one: suppose that an industry generates negative environmental externalities that are not properly priced, and that international trade leads to an expansion of that industry in your country. Then that trade may indeed reduce national welfare Okay so he admits that externalities can outweigh our more traditional views of gains from trade and then he moves on to state and refute a different argument. The case for these tariffs is best going to be made through the externality argument though and tariffs/trade restrictions are an example where we believe externalities are outweighing our benefits. Seen through this lens common economic reasoning would tell us that a large improperly priced externality requires a tax to bring the item up to the proper price. In trade this tax is called a tariff and it's common sense to use it if you believe your country is being indirectly harmed by free trade. Trump (but more probably his advisors) believe there are large external effects to having a strong technology industry at home in the 21st Century. Accordingly they are using tariffs and trade restrictions to maintain that.
- yding 8y ago
  I've seen economists argue that most of the benefits of low tariffs actually comes from increased imports. Increasing imports increases the consumer surplus from the cheaper goods and is an easy way to increase a country's standard of living without much effort. Singapore, Switzerland, Hong Kong, and Macau all have 0 import tariffs, and rather than mass unemployment they are incredibly rich by international standards.
  - Gibbon1 8y ago
    Switzerland, Hong Kong are banking centers. Singapore, and Macau focus very heavily on manufacturing and pass through trade. One issue I have with economists and their theories of tariffs is they are unable to consider the effects of institutional tariffs and subsidies. Meaning companies while the could buy foreign products instead buy locally produced ones. And the banking sector shows strong preferences to who they extend capital to. For instance providing capital to build a factory and refusing to loan money to buy back shares.
  - be_jenk 8y ago
    Those are also a tiny fraction of the size of the USA and China and have few rural poor communities to consider
    - yding 8y ago
      Right, which is why they are not conclusive evidence that 0 tariffs are suitable for everyone, like some economists would suggest.
    - seanmcdirmid 8y ago
      In the case of Switzerland, protecting the farmers with agricultural import tariffs and subsidies is definitely a thing!
  - adventured 8y ago
    > Singapore, Switzerland, Hong Kong, and Macau So a banking haven, with banks so massive they'd require the big US banks to get over 10x larger to match the relative scale to the Swiss economy. A tiny, highly regulated gambling haven, that can't be replicated to the US scale at all. And then two tiny islands in Hong Kong and Singapore, with a combined 13 million people. That's a really terrible comparison sheet for arguing low tariffs are a big benefit to the US economy. Now show me the same for: Germany, France, UK, Japan, Australia, Canada, China, India, Italy, Brazil, Russia, Spain, South Korea. The world's largest economies, and countries that actually have serious population sizes.
- throwawayjava 8y ago
  Some people will contest your question's premise, but there's also a geopolitical argument. There's a strong sentiment in certain circles that the best way to deal with emerging powers is by incorporating them into global neoliberal institutions. The theory is that including these countries sets up the correct incentives for liberalization, and that liberal markets beget a middle clas s which eventually demands democratic voice. And democracies are western-friendly. So the roadmap for China was supposed to be a gradual liberalization, first economically and then politically. This strategy is a long game and "requires patience". I'm not particularly convinced by this argument (it's too... cold war-y), but I'm doing my best to portray it accurately. And if you accept its basic premise, then there's a strong geopolitical long-game case for "putting up with" asymmetric trade barriers.
  - defen 8y ago
    > The theory is that including these countries sets up the correct incentives for liberalization, and that liberal markets beget a middle clas s which eventually demands democratic voice. And democracies are western-friendly. That was supposed to be the plan, but the Chinese government didn't blink in 1989, when the demand for democracy happened. And they suffered no consequence for it. In retrospect that is when we should have realized that the script wasn't going to work.
    - throwawayjava 8y ago
      As I indicated in my post, you'll find no disagreement here. It's just one consistent worldview that answers rayiner's question.
      - defen 8y ago
        Right, I agree that it's a good high-level assessment of US geopolitical strategy. Was just offering an idea of when we possibly should have realized it wasn't going to work on China.
- guelo 8y ago
  As a leftist this is one thing I agree with Trump on. Before the bipartisan free-trade consensus emerged it was the corporate-wing of Republicans that pushed for free trade while the union and human-rights wings of the Democrats pushed for restrictions.
- baby_wipe 8y ago
  I believe one argument is if China owns US companies, it means China is providing capital to a US company. Maybe it becomes clearer by asking, "How does allowing China to own US companies harm the US (economically)?"
  - vkou 8y ago
    Related questions: How does allowing the US to own Canadian companies harm Canada (economically)? How does allowing the US to own French companies harm France (economically)? How does allowing the US to own Nigerian companies harm Nigeria (economically)?
    - lainga 8y ago
      None of those three countries have a highly-guarded technology advantage which the US is trying to catch up on.
      - vkou 8y ago
        China investing into US companies is completely separate from the IP issue. For all intents and purposes, once you've bought a company, you've bought its IP. Buying a company is about the most legal way I can think of, for acquiring IP. Again - how does allowing foreign ownership of companies in your country harm your country? You mention IP - but it's not your country's IP - it's a particular company's IP. If its owners want to sell it, why does it matter if they sell it to an American, or a Chinese investor?
        rayiner 8y ago
        > If its owners want to sell it, why does it matter if they sell it to an American, or a Chinese investor? Because there are second order benefits to Americans of America being the world power. (E.g., Americans really don’t want to live in a world where you have to learn Chinese to succeed in the business world, as opposed to everyone else having to learn English.)
    - kevin_b_er 8y ago
- Apes 8y ago
  I don't have a problem with the idea of trying to stop China's unfair trade practices, I have problem with how inept and awful Trump's policies have been in trying to do so. China has really perfected the practice of massively unfair trade practices and perform them with the masterful foresight of a chess grand master. They've managed some pretty brazenly one-sided practices all without falling afoul of the WTO. The problem I have with Trump's agenda is that he's playing this whole thing like a rank amateur going up against Magnus Carlsen, and he's going to get smacked down hard. Trump has managed to piss off all of our closest trade partners, and has seemingly taken bribes from the Chinese to relax the embargo on ZTE. The US economy is on the verge of a major collapse from Trump's rather arrogant and unfocused use of tariffs against every major trade partner. Trump's efforts are going to fail, and in a massively spectacular way that will cause massive damage to the US economy, and will leave China in a very favorable position. A better strategy would have been a coordinated effort with our closest trade partners and allies to place pressure on China via technology and financial embargoes, as well as getting the WTO to identify and penalize China's massive indirect corporate subsidies. A global coordinated effor of cutting China off from the global markets until they open they massively reform their trading practices and open up their local markets to foreign companies is probably the only viable way to equalize trade with China.
- optimalKEK 8y ago
  It seems that Trump idiot Trump supporters have infiltrated HN. Quick reply for you: Open border and free trade is good. Look it up :-)
- potlee 8y ago
  American companies benefit from access to Chinese capital. Chinese companies are denied access to American capital. Given that investment opportunities in china are no better (or worse) than anywhere else in the world (efficient markets), it seems dumb to try to change the status quo, from the US point of view.
- ksk 8y ago
  Well, every country is protectionist when it wants to, and projects itself as egalitarian when it doesn't hurt them as much. The 'do as I say' and not 'as I did' approach has a bit of a smell to it. Walmart shoppers overwhelmingly purchased cheap Chinese goods and made their American owners very very rich, while giving average consumers access to a larger section of goods and services than those provided by US companies. Rising unemployment signals the end of that gravy train. >China doesn’t let US companies buy Chinese companies Is that really true? I found this stat - https://imgur.com/a/z5eAykw https://imgur.com/a/z5eAykw Seems like there is a lot of inbound activity. >Leaving aside notions of fairness, what is the theoretical basis for arguing that the US should nonetheless allow Chinese ownership of US companies? The US has sold bonds to China. It doesn't mind taking money from China to finance itself. I'd say the same foreign policy should extend to foreign investment, no? Oh and it has the power to stop legal purchases of US businesses from China (e.g. Micron) when it wants to. The US government can and has exerted a lot of power to keep certain kinds of tech in the US. And as a point of comparison .. Not sure if there are any Chinese companies here :- http://fortune.com/fortune500/list/ http://fortune.com/fortune500/list/ But there seem to be a lot of US companies here http://www.fortunechina.com/fortune500/c/2017-07/20/content_286785.htm http://www.fortunechina.com/fortune500/c/2017-07/20/content_...
- omarforgotpwd 8y ago
  The rationale is that the capital assets of the United States, owned by the citizens of the United States become more valuable due to more demand aka more money chasing the assets. China is the second largest economy in the world, the fast growing economy has created a lot of very wealthy citizens, and the savings rate is much higher there. These people are huge purchasers of every kind of US asset: equities, bonds, real estate -- you name it. Without them, the price of US stocks will go down, the valuation of your company will go down, the value of your house will go down, and more. Having said that, if Chinese deal flow is temporarily restricted so that US citizens gain the ability to buy Chinese equity and US companies get better access to Chinese markets, that would be a HUGE win for US companies and the US economy.
  - zerostar07 8y ago
    > price of US stocks will go down, the valuation of your company will go down, the value of your house will go down, and more. You say that as if it is a bad thing, but in europe foreign investment like this can be a source of inequality and makes houses unaffordable for the middle class
    - omarforgotpwd 8y ago
      You can have foreign investment and affordable housing. Don't blame the whole housing crisis on foreigners -- we created the affordable housing crisis ourselves. Foreign investment makes us better off, not worse off. Maybe your rent goes up $25 because of increased housing demand from foreign buyers, but then your city is now benefiting from tax revenue from these foreigners and providing you with more services that you benefit from -- let's say, for example, they hire more teachers to deliver a higher quality education at the same price for your children. Now these new teachers need to look presentable for their students so now maybe the local hair dresser is getting more business, and so she decides to expand into the neighboring space and hires you to manage construction... What i'm getting at here is that more value and economic activity in a community flows around and benefits everyone in a lot of ways. It's somewhat ridiculous to say it would be a good thing to watch the price of US assets fall when foreign investment is probably not even in the top 3 reasons for the current housing situation in the US. Even if housing becomes slightly more affordable, you are losing the money you saved out the other end in your stock, 401k, options, and ownership stakes in any private companies. We're better off allowing foreigners to invest, with certain restrictions of course.
rory096 8y ago
It should be noted that Steven Mnuchin disputes this report's accuracy: >On behalf of @realDonaldTrump, the stories on investment restrictions in Bloomberg & WSJ are false, fake news. The leaker either doesn’t exist or know the subject very well. Statement will be out not specific to China, but to all countries that are trying to steal our technology. https://twitter.com/stevenmnuchin1/status/1011258207182966786?s=19 https://twitter.com/stevenmnuchin1/status/101125820718296678...
- addicted 8y ago
  This is the most transparent non-confirmation confirmation he could have possibly given. The US has only been discussing one country in the context of stealing technology. And if there are smaller countries whose companies are trying to steal technology that have been discussed but not reported (probably because they are tiny) it’s unlikely their companies are trying to buy US companies.
- yding 8y ago
  So basically China and Russia, and maybe a couple of token others like North Korea and Iran thrown in then?
yding 8y ago
One big open question about this policy is whether it will severely restrict Chinese VC investment in the US. There's been discussions about subjecting all Chinese VC investment to the CFIUS, which would effectively stop all but the very largest deals.
deleted 8y ago
[deleted]
neonate 8y ago
http://archive.is/2qDIu http://archive.is/2qDIu
alottafunchata 8y ago
Good.

98 points by handsomechad 8y ago

What I don’t understand about opposition to this is what economic theory says that one-way trade freedom serves US interests. China doesn’t let US companies buy Chinese companies. Leaving aside notions of fairness, what is the theoretical basis for arguing that the US should nonetheless allow Chinese ownership of US companies?

vkou 8y ago
> what is the theoretical basis for arguing that the US should nonetheless allow Chinese ownership of US companies? Why shouldn't it? Neither the stock market, nor capitalism cares who buys shares of a company. If China isn't interested in investments from the US, wouldn't that just make their own markets less efficient? If your goal is efficient markets, then it shouldn't matter where your investment dollars are coming from. I don't understand where this ridiculous notion of 'fairness' in capital markets is coming from. Money is money, if you want to ascribe morality to it, then this is not the economic system to do so in. Consider this question: Should, say Nigeria allow US-based companies or persons to buy Nigerian companies/mineral rights/agricultural land? If so, why? Under a reciprocal agreement, it's not like Nigerian companies are able to buy US companies/mineral rights/agricultural land. Even if they were allowed to in theory, they wouldn't have the money. Does this mean that Nigeria should close itself to outside investment? Would Nigeria be better off if it did so? Is it only hurting itself by being closed to American investment?
- Sangermaine 8y ago
  You seem to be intentionally ignoring the parent's point. They're asking why, if China doesn't allow US ownership of Chinese companies, should the US allow Chinese ownership of American companies, not some abstract question of fairness. Currently there are severe controls on US activity in the Chinese market, ownership restrictions among them.
  - vkou 8y ago
    So what? Who cares what China does internally. Globalization dogma says that countries that limit foreign investment are only hurting themselves. If they want to shoot themselves in the foot, that's their problem. This economic mantra has been pushed by the United States for the past 70 years, mostly to get developing markets to open up to US companies. Maybe we should apply it domestically, and see what happens?
    - gonvaled 8y ago
      Ideology is not pure, it is just a tool to further one's position. Whenever the US considers that communism is to its advantage, it will turn communist. Unfortunately, it has the military might to impose its will.
propman 8y ago
Agreed. If the purpose of all this is to create a more even playing field then there really shouldn’t be much rational opposition. If tarrifs were placed specifically for artificially protecting non national security related goods then that would be an economic disaster. But if tarrifs are implemented to correct unfair trade agreements, then that isn’t economically unsound policy. How else do you rectify decades of wrong doing. IP theft, china can invest in whatever here, but we have artificial caps there. Significant tarrifs and regulatory issues there, far fewer here. Americans can’t buy property there, China purchases $150B a year in residential property here, pricing out many in the most sought after real estate markets. Forcing technology transfer to a totalitarian borderline authoritarian government and not doing anything would be pathetic. What other tools do we have that are more palatable than tarrifs? War? Sanctions? Stop trading altogether? How else are you supposed to fix something, if the other side never wants to fix it?
- pavlov 8y ago
  > Americans can’t buy property there, China purchases $150B a year in residential property here Would you even want to want to buy property in what you describe as an authoritarian, borderline totalitarian country? The Chinese don't want their property to be subject to whims of party officials, so they invest elsewhere. This is a net positive for Americans (increasing real estate prices mean increasing total wealth), and also a creeping long-term negative for China which they can't easily fix without relinquishing control. Rather than trying to force the issue, USA should continue to take the high road and let the Communist Party slowly boil. It may take a long time, but the Chinese will eventually want their political freedom because they don't have real economic freedom without it.
  - swsieber 8y ago
    High real estate prices is a net win for a few Americans.
  - aniro 8y ago
    >>This is a net positive for Americans (increasing real estate prices mean increasing total wealth). Uh, not so much. Being priced out of home ownership means a smaller and smaller portion of Americans would (do) benefit from this increased "total wealth".
djschnei 8y ago
Agreed it is probably a bad state to be in; Chinese companies buying up ours. But if I own a company, I shouldn't need permission from Washington to do with it as I please as long as I'm not defrauding or directly harming others. Freedom is messy.
- killjoywashere 8y ago
  If you're the sole manufacturer or patent-holder for critical communications equipment (e.g. Qualcomm) then I do think the Government is representing the people's interest by preventing your sale.
- frgtpsswrdlame 8y ago
  >as long as I'm not defrauding or directly harming others I'm curious, why "directly harming others"? The argument here is that you doing as you please (selling critical technology to the Chinese) is indirectly harming others so I'm curious about the distinction you draw between when it's okay to harm others and when it's not.
  - djschnei 8y ago
    Included "directly" very intentionally. I'm of the mind set that you never give government subjective authority over something. You put up very strict guardrails for their power. "Indirectly harming others" is way too subjective and leaves far too much room for abuse of power/corruption. I don't judge laws by their best meant intentions, but by their worst case scenarios.
    - frgtpsswrdlame 8y ago
      I would say harm vs. not harm is much less subjective than direct harm vs. indirect harm. Is yelling 'fire' in a crowded theater direct or indirect harm? Defining that seems much trickier than just defining whether it's harm.
      - djschnei 8y ago
fanssex 8y ago
Could you please give an example of what company the US tried to buy but got turned down?
- Sangermaine 8y ago
  All of them. Currently there are severe restrictions on foreign ownership of Chinese ventures, though the restrictions vary by sector and this year some of the restrictions in some sectors have been eased up a little.
  - throwbacktictac 8y ago
    Yahoo/Oath owned/owns a significant chunk of Alibaba.
    - asdsa5325 8y ago
      Alibaba is traded on the NYSE.
  - njarboe 8y ago
    It is not just buying a Chinese company that is forbidden, but foreign companies cannot build a factory for production in China without creating a company that is majority Chinese owned that owns the factory. No possibility for trade secrets. All your tech will be learned and transferred to China.
rory096 8y ago
Removal of trade barriers is always good, even if it's unilateral and asymmetric. https://econrsa.org/wkshops/tradepolicy/session2day1-whatshouldtradenegotiatorsnegotiateabout.pdf https://econrsa.org/wkshops/tradepolicy/session2day1-whatsho... https://nytimes.com/2018/06/20/opinion/trump-trade-tariffs-china.html https://nytimes.com/2018/06/20/opinion/trump-trade-tariffs-c... There is a game theoretical argument for imposing retaliatory tariffs in hopes of instigating the other party to change, eventually reaching an outcome with lower trade barriers than at the start. But there is every indication that Trump fundamentally believes trade is bad (because of a fundamental misunderstanding of trade deficits) and has no intention of negotiating such a deal. https://www.tcd.ie/Economics/assets/pdf/SER/2017/9trump.pdf https://www.tcd.ie/Economics/assets/pdf/SER/2017/9trump.pdf https://twitter.com/realDonaldTrump/status/971349864125788160 https://twitter.com/realDonaldTrump/status/97134986412578816...
- frgtpsswrdlame 8y ago
  If you've got an argument that supports: >Removal of trade barriers is always good, even if it's unilateral and asymmetric. then just make it. A strong statement and a pdf link isn't very convincing.
  - rory096 8y ago
    I'd say the Nobel Prize winning trade theorist explains it better than I can, but feel free to read the NYT editorial by the (non-prize-winning) economist if you prefer html to pdf.
    - frgtpsswrdlame 8y ago
      I ask people to make their own arguments because I think it's lazy to post things that even you don't understand. But if you want to me talk Krugman then okay: Here’s an easy one: suppose that an industry generates negative environmental externalities that are not properly priced, and that international trade leads to an expansion of that industry in your country. Then that trade may indeed reduce national welfare Okay so he admits that externalities can outweigh our more traditional views of gains from trade and then he moves on to state and refute a different argument. The case for these tariffs is best going to be made through the externality argument though and tariffs/trade restrictions are an example where we believe externalities are outweighing our benefits. Seen through this lens common economic reasoning would tell us that a large improperly priced externality requires a tax to bring the item up to the proper price. In trade this tax is called a tariff and it's common sense to use it if you believe your country is being indirectly harmed by free trade. Trump (but more probably his advisors) believe there are large external effects to having a strong technology industry at home in the 21st Century. Accordingly they are using tariffs and trade restrictions to maintain that.
yding 8y ago
I've seen economists argue that most of the benefits of low tariffs actually comes from increased imports. Increasing imports increases the consumer surplus from the cheaper goods and is an easy way to increase a country's standard of living without much effort. Singapore, Switzerland, Hong Kong, and Macau all have 0 import tariffs, and rather than mass unemployment they are incredibly rich by international standards.
- Gibbon1 8y ago
  Switzerland, Hong Kong are banking centers. Singapore, and Macau focus very heavily on manufacturing and pass through trade. One issue I have with economists and their theories of tariffs is they are unable to consider the effects of institutional tariffs and subsidies. Meaning companies while the could buy foreign products instead buy locally produced ones. And the banking sector shows strong preferences to who they extend capital to. For instance providing capital to build a factory and refusing to loan money to buy back shares.
- be_jenk 8y ago
  Those are also a tiny fraction of the size of the USA and China and have few rural poor communities to consider
  - yding 8y ago
    Right, which is why they are not conclusive evidence that 0 tariffs are suitable for everyone, like some economists would suggest.
  - seanmcdirmid 8y ago
    In the case of Switzerland, protecting the farmers with agricultural import tariffs and subsidies is definitely a thing!
- adventured 8y ago
  > Singapore, Switzerland, Hong Kong, and Macau So a banking haven, with banks so massive they'd require the big US banks to get over 10x larger to match the relative scale to the Swiss economy. A tiny, highly regulated gambling haven, that can't be replicated to the US scale at all. And then two tiny islands in Hong Kong and Singapore, with a combined 13 million people. That's a really terrible comparison sheet for arguing low tariffs are a big benefit to the US economy. Now show me the same for: Germany, France, UK, Japan, Australia, Canada, China, India, Italy, Brazil, Russia, Spain, South Korea. The world's largest economies, and countries that actually have serious population sizes.
throwawayjava 8y ago
Some people will contest your question's premise, but there's also a geopolitical argument. There's a strong sentiment in certain circles that the best way to deal with emerging powers is by incorporating them into global neoliberal institutions. The theory is that including these countries sets up the correct incentives for liberalization, and that liberal markets beget a middle clas s which eventually demands democratic voice. And democracies are western-friendly. So the roadmap for China was supposed to be a gradual liberalization, first economically and then politically. This strategy is a long game and "requires patience". I'm not particularly convinced by this argument (it's too... cold war-y), but I'm doing my best to portray it accurately. And if you accept its basic premise, then there's a strong geopolitical long-game case for "putting up with" asymmetric trade barriers.
- defen 8y ago
  > The theory is that including these countries sets up the correct incentives for liberalization, and that liberal markets beget a middle clas s which eventually demands democratic voice. And democracies are western-friendly. That was supposed to be the plan, but the Chinese government didn't blink in 1989, when the demand for democracy happened. And they suffered no consequence for it. In retrospect that is when we should have realized that the script wasn't going to work.
  - throwawayjava 8y ago
    As I indicated in my post, you'll find no disagreement here. It's just one consistent worldview that answers rayiner's question.
    - defen 8y ago
      Right, I agree that it's a good high-level assessment of US geopolitical strategy. Was just offering an idea of when we possibly should have realized it wasn't going to work on China.
guelo 8y ago
As a leftist this is one thing I agree with Trump on. Before the bipartisan free-trade consensus emerged it was the corporate-wing of Republicans that pushed for free trade while the union and human-rights wings of the Democrats pushed for restrictions.
baby_wipe 8y ago
I believe one argument is if China owns US companies, it means China is providing capital to a US company. Maybe it becomes clearer by asking, "How does allowing China to own US companies harm the US (economically)?"
- vkou 8y ago
  Related questions: How does allowing the US to own Canadian companies harm Canada (economically)? How does allowing the US to own French companies harm France (economically)? How does allowing the US to own Nigerian companies harm Nigeria (economically)?
  - lainga 8y ago
    None of those three countries have a highly-guarded technology advantage which the US is trying to catch up on.
    - vkou 8y ago
      China investing into US companies is completely separate from the IP issue. For all intents and purposes, once you've bought a company, you've bought its IP. Buying a company is about the most legal way I can think of, for acquiring IP. Again - how does allowing foreign ownership of companies in your country harm your country? You mention IP - but it's not your country's IP - it's a particular company's IP. If its owners want to sell it, why does it matter if they sell it to an American, or a Chinese investor?
      - rayiner 8y ago
        > If its owners want to sell it, why does it matter if they sell it to an American, or a Chinese investor? Because there are second order benefits to Americans of America being the world power. (E.g., Americans really don’t want to live in a world where you have to learn Chinese to succeed in the business world, as opposed to everyone else having to learn English.)
  - kevin_b_er 8y ago
Apes 8y ago
I don't have a problem with the idea of trying to stop China's unfair trade practices, I have problem with how inept and awful Trump's policies have been in trying to do so. China has really perfected the practice of massively unfair trade practices and perform them with the masterful foresight of a chess grand master. They've managed some pretty brazenly one-sided practices all without falling afoul of the WTO. The problem I have with Trump's agenda is that he's playing this whole thing like a rank amateur going up against Magnus Carlsen, and he's going to get smacked down hard. Trump has managed to piss off all of our closest trade partners, and has seemingly taken bribes from the Chinese to relax the embargo on ZTE. The US economy is on the verge of a major collapse from Trump's rather arrogant and unfocused use of tariffs against every major trade partner. Trump's efforts are going to fail, and in a massively spectacular way that will cause massive damage to the US economy, and will leave China in a very favorable position. A better strategy would have been a coordinated effort with our closest trade partners and allies to place pressure on China via technology and financial embargoes, as well as getting the WTO to identify and penalize China's massive indirect corporate subsidies. A global coordinated effor of cutting China off from the global markets until they open they massively reform their trading practices and open up their local markets to foreign companies is probably the only viable way to equalize trade with China.
optimalKEK 8y ago
It seems that Trump idiot Trump supporters have infiltrated HN. Quick reply for you: Open border and free trade is good. Look it up :-)
potlee 8y ago
American companies benefit from access to Chinese capital. Chinese companies are denied access to American capital. Given that investment opportunities in china are no better (or worse) than anywhere else in the world (efficient markets), it seems dumb to try to change the status quo, from the US point of view.
ksk 8y ago
Well, every country is protectionist when it wants to, and projects itself as egalitarian when it doesn't hurt them as much. The 'do as I say' and not 'as I did' approach has a bit of a smell to it. Walmart shoppers overwhelmingly purchased cheap Chinese goods and made their American owners very very rich, while giving average consumers access to a larger section of goods and services than those provided by US companies. Rising unemployment signals the end of that gravy train. >China doesn’t let US companies buy Chinese companies Is that really true? I found this stat - https://imgur.com/a/z5eAykw https://imgur.com/a/z5eAykw Seems like there is a lot of inbound activity. >Leaving aside notions of fairness, what is the theoretical basis for arguing that the US should nonetheless allow Chinese ownership of US companies? The US has sold bonds to China. It doesn't mind taking money from China to finance itself. I'd say the same foreign policy should extend to foreign investment, no? Oh and it has the power to stop legal purchases of US businesses from China (e.g. Micron) when it wants to. The US government can and has exerted a lot of power to keep certain kinds of tech in the US. And as a point of comparison .. Not sure if there are any Chinese companies here :- http://fortune.com/fortune500/list/ http://fortune.com/fortune500/list/ But there seem to be a lot of US companies here http://www.fortunechina.com/fortune500/c/2017-07/20/content_286785.htm http://www.fortunechina.com/fortune500/c/2017-07/20/content_...
omarforgotpwd 8y ago
The rationale is that the capital assets of the United States, owned by the citizens of the United States become more valuable due to more demand aka more money chasing the assets. China is the second largest economy in the world, the fast growing economy has created a lot of very wealthy citizens, and the savings rate is much higher there. These people are huge purchasers of every kind of US asset: equities, bonds, real estate -- you name it. Without them, the price of US stocks will go down, the valuation of your company will go down, the value of your house will go down, and more. Having said that, if Chinese deal flow is temporarily restricted so that US citizens gain the ability to buy Chinese equity and US companies get better access to Chinese markets, that would be a HUGE win for US companies and the US economy.
- zerostar07 8y ago
  > price of US stocks will go down, the valuation of your company will go down, the value of your house will go down, and more. You say that as if it is a bad thing, but in europe foreign investment like this can be a source of inequality and makes houses unaffordable for the middle class
  - omarforgotpwd 8y ago
    You can have foreign investment and affordable housing. Don't blame the whole housing crisis on foreigners -- we created the affordable housing crisis ourselves. Foreign investment makes us better off, not worse off. Maybe your rent goes up $25 because of increased housing demand from foreign buyers, but then your city is now benefiting from tax revenue from these foreigners and providing you with more services that you benefit from -- let's say, for example, they hire more teachers to deliver a higher quality education at the same price for your children. Now these new teachers need to look presentable for their students so now maybe the local hair dresser is getting more business, and so she decides to expand into the neighboring space and hires you to manage construction... What i'm getting at here is that more value and economic activity in a community flows around and benefits everyone in a lot of ways. It's somewhat ridiculous to say it would be a good thing to watch the price of US assets fall when foreign investment is probably not even in the top 3 reasons for the current housing situation in the US. Even if housing becomes slightly more affordable, you are losing the money you saved out the other end in your stock, 401k, options, and ownership stakes in any private companies. We're better off allowing foreigners to invest, with certain restrictions of course.

rory096 8y ago

It should be noted that Steven Mnuchin disputes this report's accuracy: >On behalf of @realDonaldTrump, the stories on investment restrictions in Bloomberg & WSJ are false, fake news. The leaker either doesn’t exist or know the subject very well. Statement will be out not specific to China, but to all countries that are trying to steal our technology. https://twitter.com/stevenmnuchin1/status/1011258207182966786?s=19 https://twitter.com/stevenmnuchin1/status/101125820718296678...

addicted 8y ago
This is the most transparent non-confirmation confirmation he could have possibly given. The US has only been discussing one country in the context of stealing technology. And if there are smaller countries whose companies are trying to steal technology that have been discussed but not reported (probably because they are tiny) it’s unlikely their companies are trying to buy US companies.
yding 8y ago
So basically China and Russia, and maybe a couple of token others like North Korea and Iran thrown in then?

yding 8y ago

One big open question about this policy is whether it will severely restrict Chinese VC investment in the US. There's been discussions about subjecting all Chinese VC investment to the CFIUS, which would effectively stop all but the very largest deals.

deleted 8y ago

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neonate 8y ago

http://archive.is/2qDIu http://archive.is/2qDIu

alottafunchata 8y ago

Good.