what amazes me is that this was pretty obvious decades ago but the lazy/greedy/incompetent western political and business leadership were too busy canabalising public infrastructure and inflated property markets to care - China has also benefitted from years of blatant patent theft, market protections and cheap labour - China has also been lending other countries money to buy things from China - at some point all of this must fall apart but in the meantime we party on.
I guess we need to be careful about getting drawn into the same game. If all Western nations decide to play to gain a competitive advantage then we will all be worse off. Perhaps the best thing the West can do is to each focus on our comparative advantages but to ensure there is much more collaboration. A tricky balance.
Thank you for this article. Current trade imbalances are unsustainable, and anything that is unsustainable will end one day. Either mainstream politicians tackle this issue in an orderly way, or the resolution will be messy.
If the Chinese Government wants to subsidise our lifestyle by creating cheap manufactured products for us to enjoy then bully for us. People used to say exactly the same about the Japanese. It is a transfer of wealth created in China to consumers in the west. With the money we save as a result we can buy local services which improve our standard of living and provide local employment.
Much manufacturing is now moving from China to Vietnam. India, Bangladesh etc because labor is cheaper than in China. Charity you are right has nothing to do with it. It creates jobs as much as it takes them away.
Brilliant piece Ed. Trade Wars are class wars is a seminal piece of work. The historical stuff on Hamilton and the founding fathers debate on manufacturing is so relevant here. Something echoed in David Sainsbury’s super book Windows of Opportunity.
Quote: “To put it differently, if China subsidizes EV exports, American consumers of EVs do indeed benefit from cheaper prices. But whether Chinese producers or American producers pay for the cost of these subsidies depends on whether higher Chinese exports result in higher Chinese imports or higher Chinese surpluses. In the former case, one set of Chinese producers pays for the subsidies delivered to another set of Chinese producers. In the latter case, it is US producers that pay for the subsidies delivered to Chinese producers.”
I think Stiglitz pointed this out too.
You can have “competition” only between roughly equal players. Take a premier football team against an average “village 11” and there is no competition at all.
Great article. They has never been a level playing field and it never will be as long as countries have sovereignty: boarder, currency, and demographics, which allow for arbitrage, mostly environmental. China's march to industrial dominance is more a function of them exploring this arbitrage. Case in point 70% of China's rivers and lakes are not suitable for humans this is a consequence heavy industry pollution. Name me a OCED country with pollution at that level-the answer is none. The rise in China industrial dominance coincides with the decrease in pollution of OCED countries, why? well because of offshoring. An easy measurement to look at is how energy intents the economies of OCED and China compare. It is hard to compete when your competitor idea of environmental regulation is a pipeline to the ocean-shout out to Doomberg. Which is why we see the climate-change narrative at the front of the OCED agenda which will give OCED countries control and access to critical energy resources (fossil fuels, critical minerals & metals, etc.) & infrastructure (power, processing, and refining plants) all to "even the playing field" to keep countries like China from benefiting from this arbitrage. This has taken place in another front with respect to taxes more than 140 countries have signed up to the Global Minimum Tax deal. The tax treaty imposes a minimum rate of 15% on the profits of multinationals. This came about because mainly the U.S. needed to close it's budget deficits and sure up it's social programs-with a little help from illegals aliens thrown in to boot. Attacking the tax arbitration of others countries like Ireland-which truly did benefit from tax arbitration-was a excuse.
All playing fields in the English Premier League are level. All playing fields in the MLS are level. The only playing fields that are NOT level are at the lowest amateur rank like elementary schools.
Ed, yes, sure, 'subsidies' c.f. OECD but ... look at parameters 'per capita' especially consumption and strategic priorities, e.g. Electricity kWh/yr
1 China 5,474
2 United States 11,267
3 India 1,025
China's strategy priorities: urbanisation / housing; electrification; education; transport infrastructure (e.g. h. speed rail); and latterly automation.
A comparison of per capita primary energy consumption by source is instructive for UK c.f. China (World of Data 2022). China consumes now marginally more primary energy per capita than UK - but looks like China has bigger fraction of hydro/wind/solar in the mix which accounts for that margin. Yes, coal allowed for all that catch up, but ... the future?
When you come up with a coherent answer on what to do about it, that doesn't trigger a massive inflation boom please let me know.
FWIW US DOE have a RFI on this very subject. The simple answer is tax the E&S differential - but if the competitive advantage is finance (and I believe it is) both in capex and being able to live through price slumps the answer is less obvious.
I suspect that ultimately many of these policy attempts will fail because Senator X from State Y won't vote for more expensive iPhones.
I know that was a cheap shot but I'm trying to finance a tungsten mine and to get lenders over the line we need a minimum price.....
How much to “help” our industries or not depends on a lot more than what other countries re doing.
The place to start is to close the fiscal deficit that pulls resources away from investment AND overvalues the dollar => reduces the price of traded goods like manufacturing relative to non-traded goods.
Then we might consider whether this or that industry deserve spec ail encouragement. If it does, it probably should be encouraged to sell it output abroad as much as it is encouraged to sell domestically, which means that tariff protection is out.
There are three possible responses available to the West:
1. Continue to suck it up. Good for multinationals - they'll just continue to offshore manufacturing and supply chains to China and other mercantilist states - bad for normies (workers, taxpayers etc);
2. Subsidise our manufacturers. Again, good for multinationals, bad for normies;
3. Erect aggressive tariff barriers against subsidised imports, including those made elsewhere from materials and energy sourced from mercantilist states (looking at you, Germany). Bad for multinationals, good for normies.
UK policy pivots between 1 and 2, US between 2 and 3, with Biden preferring the second and Trump the third, though even Sleepy Joe is coming round to the inevitability of the third option. How long before the UK follows? Unlikely to happen under Starmer, sadly, since he and Reeves are so heavily captured by corporate interests.
China is a 'company'. Every Chinese is a worker in this 'company'. There is only on paper a divide between 'private' held companies and the government. So the 'West' are competing with a very, very large company called China, all the while having to operate within the rules of changing and sometimes non coherent government policy. I'm not saying what is good or bad, but I don't think we should act suprised of the outcome when players have a different set of rules.
GHE theory says that without it Earth would become a -18 C, 255 K, ball of ice.
That is just flat wrong.
“TFK_bams09” GHE heat balance graphic shows 396 W/m^2 of LWIR “extra” energy upwelling from the surface radiating as a 16 C BB (violating LoT1), 333 “back” radiates (violating LoT 2) with a duplicate net 63 reaching ToA (violating LoT1 and GAAP).
what amazes me is that this was pretty obvious decades ago but the lazy/greedy/incompetent western political and business leadership were too busy canabalising public infrastructure and inflated property markets to care - China has also benefitted from years of blatant patent theft, market protections and cheap labour - China has also been lending other countries money to buy things from China - at some point all of this must fall apart but in the meantime we party on.
I guess we need to be careful about getting drawn into the same game. If all Western nations decide to play to gain a competitive advantage then we will all be worse off. Perhaps the best thing the West can do is to each focus on our comparative advantages but to ensure there is much more collaboration. A tricky balance.
There’s plenty of “state aid” in OECD countries… it just doesn’t go to productive people.
That’s on the consumption side. The author is discussing subsidies on the production side.
Thank you for this article. Current trade imbalances are unsustainable, and anything that is unsustainable will end one day. Either mainstream politicians tackle this issue in an orderly way, or the resolution will be messy.
If the Chinese Government wants to subsidise our lifestyle by creating cheap manufactured products for us to enjoy then bully for us. People used to say exactly the same about the Japanese. It is a transfer of wealth created in China to consumers in the west. With the money we save as a result we can buy local services which improve our standard of living and provide local employment.
They don’t do it out of charity. They get financial assets in return.
Also, as the author points out, the impact on factory workers has been pretty brutal in the US.
Much manufacturing is now moving from China to Vietnam. India, Bangladesh etc because labor is cheaper than in China. Charity you are right has nothing to do with it. It creates jobs as much as it takes them away.
Brilliant piece Ed. Trade Wars are class wars is a seminal piece of work. The historical stuff on Hamilton and the founding fathers debate on manufacturing is so relevant here. Something echoed in David Sainsbury’s super book Windows of Opportunity.
Thanks for such stimulating and important work.
We e been very very complacent, and many good businesses have folded because of our lack of an industrial strategy.
Quote: “To put it differently, if China subsidizes EV exports, American consumers of EVs do indeed benefit from cheaper prices. But whether Chinese producers or American producers pay for the cost of these subsidies depends on whether higher Chinese exports result in higher Chinese imports or higher Chinese surpluses. In the former case, one set of Chinese producers pays for the subsidies delivered to another set of Chinese producers. In the latter case, it is US producers that pay for the subsidies delivered to Chinese producers.”
I think Stiglitz pointed this out too.
You can have “competition” only between roughly equal players. Take a premier football team against an average “village 11” and there is no competition at all.
Great article. They has never been a level playing field and it never will be as long as countries have sovereignty: boarder, currency, and demographics, which allow for arbitrage, mostly environmental. China's march to industrial dominance is more a function of them exploring this arbitrage. Case in point 70% of China's rivers and lakes are not suitable for humans this is a consequence heavy industry pollution. Name me a OCED country with pollution at that level-the answer is none. The rise in China industrial dominance coincides with the decrease in pollution of OCED countries, why? well because of offshoring. An easy measurement to look at is how energy intents the economies of OCED and China compare. It is hard to compete when your competitor idea of environmental regulation is a pipeline to the ocean-shout out to Doomberg. Which is why we see the climate-change narrative at the front of the OCED agenda which will give OCED countries control and access to critical energy resources (fossil fuels, critical minerals & metals, etc.) & infrastructure (power, processing, and refining plants) all to "even the playing field" to keep countries like China from benefiting from this arbitrage. This has taken place in another front with respect to taxes more than 140 countries have signed up to the Global Minimum Tax deal. The tax treaty imposes a minimum rate of 15% on the profits of multinationals. This came about because mainly the U.S. needed to close it's budget deficits and sure up it's social programs-with a little help from illegals aliens thrown in to boot. Attacking the tax arbitration of others countries like Ireland-which truly did benefit from tax arbitration-was a excuse.
All playing fields in the English Premier League are level. All playing fields in the MLS are level. The only playing fields that are NOT level are at the lowest amateur rank like elementary schools.
Whence this absurd phrase?
Ed, yes, sure, 'subsidies' c.f. OECD but ... look at parameters 'per capita' especially consumption and strategic priorities, e.g. Electricity kWh/yr
1 China 5,474
2 United States 11,267
3 India 1,025
China's strategy priorities: urbanisation / housing; electrification; education; transport infrastructure (e.g. h. speed rail); and latterly automation.
A comparison of per capita primary energy consumption by source is instructive for UK c.f. China (World of Data 2022). China consumes now marginally more primary energy per capita than UK - but looks like China has bigger fraction of hydro/wind/solar in the mix which accounts for that margin. Yes, coal allowed for all that catch up, but ... the future?
When you come up with a coherent answer on what to do about it, that doesn't trigger a massive inflation boom please let me know.
FWIW US DOE have a RFI on this very subject. The simple answer is tax the E&S differential - but if the competitive advantage is finance (and I believe it is) both in capex and being able to live through price slumps the answer is less obvious.
I suspect that ultimately many of these policy attempts will fail because Senator X from State Y won't vote for more expensive iPhones.
I know that was a cheap shot but I'm trying to finance a tungsten mine and to get lenders over the line we need a minimum price.....
How much to “help” our industries or not depends on a lot more than what other countries re doing.
The place to start is to close the fiscal deficit that pulls resources away from investment AND overvalues the dollar => reduces the price of traded goods like manufacturing relative to non-traded goods.
Then we might consider whether this or that industry deserve spec ail encouragement. If it does, it probably should be encouraged to sell it output abroad as much as it is encouraged to sell domestically, which means that tariff protection is out.
There are three possible responses available to the West:
1. Continue to suck it up. Good for multinationals - they'll just continue to offshore manufacturing and supply chains to China and other mercantilist states - bad for normies (workers, taxpayers etc);
2. Subsidise our manufacturers. Again, good for multinationals, bad for normies;
3. Erect aggressive tariff barriers against subsidised imports, including those made elsewhere from materials and energy sourced from mercantilist states (looking at you, Germany). Bad for multinationals, good for normies.
UK policy pivots between 1 and 2, US between 2 and 3, with Biden preferring the second and Trump the third, though even Sleepy Joe is coming round to the inevitability of the third option. How long before the UK follows? Unlikely to happen under Starmer, sadly, since he and Reeves are so heavily captured by corporate interests.
China is a 'company'. Every Chinese is a worker in this 'company'. There is only on paper a divide between 'private' held companies and the government. So the 'West' are competing with a very, very large company called China, all the while having to operate within the rules of changing and sometimes non coherent government policy. I'm not saying what is good or bad, but I don't think we should act suprised of the outcome when players have a different set of rules.
GHE theory says that without it Earth would become a -18 C, 255 K, ball of ice.
That is just flat wrong.
“TFK_bams09” GHE heat balance graphic shows 396 W/m^2 of LWIR “extra” energy upwelling from the surface radiating as a 16 C BB (violating LoT1), 333 “back” radiates (violating LoT 2) with a duplicate net 63 reaching ToA (violating LoT1 and GAAP).
That also is just flat wrong.
There is no GHE.
GHGs do not do anything.
CAGW is a big fat NWO scam!