The China Trade
by David Archibald
2 July 2018
The No 1 panda-hugger/lapdog of the Chinese communist dictatorship is Henry Kissinger, who was born in Germany and arrived in the US in 1938. In his declining years Mr Kissinger has decided to trade on his reputation as a former Secretary of State, and sell his services to an enemy of the Republic that gave him refuge 80 years ago. There is a thing called the Kissinger Institute on China and the United States, within another institute that takes exception to US exceptionalism, the Wilson Center, named after the first do-gooder president.
Kissinger, Ford, and Mao, 1975
The way that Chinese political corruption around the world works is that a Chinese businessman connected with a state-owned company pays out funds, so there is no direct connection with the Chinese Government. It is all coordinated by their United Front Work Department. Now it is possible, but highly unlikely, that Mr Kissinger’s efforts in deepening understanding with China are completely altruistic and he is funding his pro-China institute from his own pocket.
Another thing that happened in 1938 was the passage of the Foreign Agents Registration Act, which requires agents representing the interests of foreign powers in a “political or quasi-political capacity” to disclose their relationship with the foreign government. If he already hasn’t done so, and he is receiving funds originating in the Middle Kingdom, Mr Kissinger should be as honorable as he can be and register as required under that act. There is a good chance that he hasn’t, as he is quoted as having said “The illegal we do immediately. The unconstitutional takes a little longer.” His philosophy recently reached full flower in the FBI.
The problem for China is that Kissinger’s utterances are so blatantly pro-China that nobody gives them any credence. Whether or not they are getting their money’s worth with Kissinger, there are other intellects who are attracted by the notion of centralized decision-making and sing China’s praises, seemingly without need for payment, in the same way that Nazi Germany had many ardent admirers.
Thus the erudite Spengler has an output of columns praising Chinese accomplishments, the latest of which argues that China should continue to have unfettered access to the US market. To back up his argument Spengler provides three graphs, the first of which is Chinese exports to the US:
His graphs are useful but not as he intended — they show how little the US has to lose by ceasing trade with China. In the first graph, the biggest Chinese import category is cell phones, which are assembled in China and include high-value parts made in the arc of countries to the east of it — Taiwan, Korea and Japan. They could just as easily be assembled somewhere else — Malaysia, Thailand, Vietnam, or the Philippines. As China is going to attack Vietnam, shifting such assembly work to Vietnam from China should be done as quickly as possible. The best thing that Apple could do for world peace is to shift its operations from China to Vietnam. This is the cheapest foreign aid the US can give an ally in the coming war with China.
The next biggest category is computers. We definitely do not want those things imported from China. As soon as they are plugged in they will be doing an ET and phoning home. Perhaps not always, but why find out after the event? From then on it is just Ikea/Walmart-type stuff that could be made in Mexico — screws and glues and plywood. As soon as the 200% tariffs come on, the factories will move elsewhere in the blink of an eye.
Let’s turn our attention to Spengler’s second graph — US exports to China:
Aircraft is a big one, but not permanent. Boeing has built a plant in China which will make one hundred 737s a year. Airbus has built a plant which will make six A320s a month. The jobs are going to China, as a condition no doubt of maintaining access to the Chinese market. Japan attempted to enter the passenger aircraft market back in the 1970s and failed. In the end, China is likely to do a Maersk on Boeing and Airbus and refuse to renew visas on the Americans and Europeans running their plants, effectively nationalising them without having to pay for them. Anyway, there are only a couple of years left of selling American-made aircraft to China.
Then comes the No 2 export to China, which is soybeans. China is not going to import any fewer soybeans because they now provide 20% of their protein intake. The Chinese public will become upset if pork disappeared from their diet. The only place China can get soybeans in that quantity is Brazil. The US will sell to the countries currently taking soybeans from South America. Brazilian soybean production has topped out over the last three years at about 117 million tonnes per annum so there will be less competition from here as per this USDA article. This graph shows how the market has evolved:
Next comes cars, which are $10 billion a year. That is 0.05% of the $20 trillion US economy. That is not enough to be worth providing comfort and succor to the enemy. As with the aircraft, cars as an export to China are at the whim of the regime.
Semiconductors and industrial machines at $6 billion and $5 billion respectively are next, which combined is less than the cost of the Gerald Ford at $13 billion. If the US didn’t have to fight a war with China, then they wouldn’t have to build such expensive aircraft carriers.
Semiconductors have China in a bind. If they stopped buying US semiconductors then they would have to buy more from Taiwan, Japan and Korea. Korea is the only one of those three that China may not be going to war with. Spengler’s article tells us that China imports $220 billion a year of semiconductors, of which the US provides less than 3%. That is another market which could disappear overnight.
From then on the list of top 20 US exports to China gets scrappy at about $2 to $3 billion per annum for each item. The 20th largest Chinese export to the US is $5 billion a year of camping goods. The 20th largest US export to China is $2 billion worth of cell phones and miscellaneous.
From Spengler’s charts of exports and imports, if the US were completely closed out of access to the Chinese market the effect would be a rounding error on the US economy. If China were completely closed out of the US market, the effect would be at least a 4% shrinkage of the Chinese economy. Just as importantly, that industrial activity would be transferred to countries that are aligned with the US or at least not setting out to kill us. That is a win-win outcome.
Another effect that China-worshippers like Kissinger and Spengler neglect is that the Chinese economy is being recentralised under President Xi. Just as President Erdogan of Turkey said that democracy is like a tram you get off when you get to the stop you want, China’s brief experience of capitalism is being abandoned now that their economy is about as large as it can be. But workers in state-run factories have only one third the productivity of workers in private industry, so this will hobble Chinese competitiveness. The most recent example of this effect in the US was the launch of the Falcon Heavy at one tenth of the cost of NASA’s efforts in getting large objects into space. The landing of the Falcon Heavy boosters, like a scene from a 1950s science fiction movie, was dispiriting to China’s Han supremacists. Democracies such as the US may be too messy for the likes of Kissinger and Spengler but they are far more creative and productive.
The biggest benefit of Trump’s opening to North Korea is that he can no longer be painted as a warmonger. That has given him considerable freedom of action on China. Bring on the 200% tariffs. Chuck China out of the World Trade Organization. Make China the pariah state it needs to be seen as. That won’t stop China from going to war with the civilized world but there will be fewer deaths, destruction, maiming and disfigurement on our side.
David Archibald is the author of American Gripen: The Solution to the F-35 Nightmare
