On this episode of China Uncensored,
It's time for the blame game.
Hi.
Welcome to China Uncensored.
I'm your host, Chris Chappell.
The US-China trade conflict has been heating up in July—
like a New York City apartment without an air conditioner.
I would know.
President Trump put tariffs on
34 billion dollars worth of Chinese goods.
And the Chinese Communist Party retaliated,
by doing the same thing to American goods.
Why the tariffs in the first place?
As US Trade Representative Robert Lighthizer put it,
the tariffs are "proportionate and responsive
to forced technology transfer
and intellectual property theft by the Chinese."
In other words,
the Chinese regime was cheating,
and the tariffs aim to balance that out.
It's like a golf handicap.
Except instead of taking a handicap
because your opponent is better at golf,
you do it because your opponent cheats at golf.
And anyway,
with the Chinese regime putting its own tariffs on American goods...
that kind of defeats the purpose of the US tariffs, right?
Well don't worry, because Trump has threatened even more US tariffs.
They would tax imports on a whopping 200 billion dollars of Chinese goods.
Which is smart when you think about it, because China doesn't even buy
200 billion dollars worth of American goods in a year.
So in order for China to retaliate with equal tariffs,
they'd actually have to buy more American goods than ever before.
It's a foolproof plan.
Of course, there are other ways the Chinese regime could retaliate.
No, no, no.
They know that can't win that kind of war.
So they've chosen a different tactic:
Blame the US for being a horrible, no-good bully.
"They are just a trade bully.
They are hurting the global value chain."
And you wouldn't hit a guy with glasses, right?
Yes, China is a major victim of trade protectionism,
according to Chinese state-run media.
Don't worry, though.
Because the trade war is going to hurt the US more than China,
according to Chinese state-run media.
I know that makes it sound like the US is going to be the victim,
and that's true.... as long as you remember that China
is still actually the biggest victim here, ok?
Actually, that sounds like a great idea for a reality TV show.
The US vs. China: Who is the biggest victim?
Again, remember, it's China.
And that's why Chinese officials announced on Monday
that they had filed a complaint to the World Trade Organization
against the US over the proposed new tariffs.
Meanwhile, Chinese state media have launched a campaign
to show the world how China is actually the country
everyone should do business with.
Multinational firms hail China's global role as a trade partner,
And China and the EU agree to support free trade, hint hint.
So is China really the best trading partner?
And is the US to blame for starting a trade war?
Well, to answer those questions,
let's take a time machine back to 2001.
A simpler time,
when Harry Potter was still innocent...
...when the coolest phone you could buy looked like this...
...and when China was admitted to the World Trade Organization,
or WTO.
At the time,
hopes were high that China would embrace our rules-based system
of international trade.
Chinese authorities promised they would play fair.
And really, how could you not trust a face like this?
Just because the Chinese dictator
was illegally throwing Chinese dissidents in jail...
without due process...
and torturing them...
that doesn't mean he wouldn't respect the laws
of other nations, right?
And anyway,
Chinese officials at the time totally promised
not to do unfair stuff—
like forcing foreign companies to turn over key technologies
in exchange for market access.
Or artificially blocking Hollywood movies
from screening in the Chinese market.
Or giving subsidies to factories to help them
outcompete foreign companies.
Or... well, the list goes on.
But this report titled "False Promises:
The Yawning Gap Between China's WTO Commitments and Practices,"
says...well, it's called "False Promises",
so what do you expect it to show?
Did China live up to its WTO commitments?
Looks like no, no, no, no, no, no, no, no, no, no, and...no.
Ok, but things are getting better, right?
According to the report, also no.
"If anything, [China's] aggressive innovation mercantilism
has grown stronger in recent years."
Mercantilism is an aggressive trade policy
of intense government meddling in a nation's economy,
with the intention of making that country's economy stronger
at the expense of other trading partners.
Mercantilism has fallen out of vogue
over the last several hundred years
because of its nasty tendency to cause not just trade wars,
but also actual wars.
This study titled "Economic Nationalism:
From Mercantilism to World War II"
concludes that "economic nationalism tends to make peace
more precarious and conflict more likely."
In fact,
one of the reasons the WTO was set up
was to give countries a forum
to resolve trade disputes peacefully.
But, as the "False Promises" report says,
"China has simply failed to fully comply with
its WTO accession commitments
and membership requirements.
But even worse is the fact that Chinese economic
and trade policies increasingly reject
or undermine the foundational tenets
and principles upon which the WTO,
and indeed, globalization is based."
Not that multinational firms shouldn't hail China's global role,
according to state-run media... it's just that its global role has been
to undermine the very rules global trade is based on.
For example, China has been manipulating its currency
and using export subsidies to run up
a massive global trade surplus.
Its surplus with the US alone
is hundreds of billions of dollars per year.
By the way, when American politicians pitched the idea
of China being in the WTO,
they promised China's trade surplus would look
more like this blue line—
where the trade surplus eventually balances at zero.
Boy, that did not happen!
The "False Promises" report says that
"China continues to develop a robust set of mercantilist policies,
virtually all of which violate the spirit,
if not the letter, of the World Trade Organization's laws."
Now if you think that report is just making things up to criticize China,
well, it turns out, the Chinese regime's policy is actually outlined
in its own strategic plans.
Like this 2006 plan by China's State Council.
It reveals that Chinese policymakers intentionally violated WTO rules
by restricting Chinese markets for advanced technology,
limiting it to Chinese companies.
But, they also exploited the same WTO rules
to get Chinese technology companies
unfettered access to global markets.
The US has filed 22 WTO complaints
against China since 2001.
Of course, the US isn't perfect.
China has filed a dozen cases against the US,
and, well,
everyone complains about each other in the WTO.
That's kind of what it's for.
But China is definitely the winner.
Assuming the goal is to commit
as many WTO violations as you can.
But don't forget,
it's also the victim.
Carson Block, who lived in China and co-authored the book
Doing Business in China for Dummies...
...says it's not just the US that's getting a bum deal
doing business with China.
In his recent article "Yes, China Does Cheat In Trade -
The Rest Of The World Needs To Wake Up",
Block says that entire global trading system
is being harmed by China's cheating.
And that comes from the guy who literally wrote the book
on how to do business in China.
But that book was published back in 2011.
Clearly his views have changed.
And I get it.
Your views can change
as you learn more and wise up.
Like, five years ago,
I thought this mustache looked amazing.
Anyway, according to the US Trade Representative's report
this past January,
over the past several years,
China has been using its state power more and more
to undermine the free market
and hamstring foreign companies,
and that "it is now clear that the WTO rules
are not sufficient to constrain
China's market-distorting behavior."
And that is why that "False Promises" report we looked at earlier
suggests that "only a policy of 'constructive confrontation'
will prove adequate in addressing China's increasingly
'innovation mercantilist' trade practices."
And so when you get to the bottom of it,
US tariffs are looking more and more like
standing up to a trade bully than being one.
So when China's Deputy Trade Minister says this...
"As a WTO member,
China needs to do something
to safeguard the WTO rules."
I suggest that instead of going around
complaining about the US,
the best thing the Chinese regime can do
to safeguard WTO rules
is to follow them.
I know, it's so unfair.
And before we go,
it's time for another question from someone
who contributes a dollar or more per episode
on the crowd-funding website Patreon.
Saitama asks:
"Can China withstand the trade war with the US?"
That's a good question.
One of the great things about being ruled
by an authoritarian regime that controls
most major sectors of the economy
is that China has a lot more ability
to withstand economic hardship than, say,
a democracy does.
Like in the 2008 financial crisis,
the US suffered an enormous recession.
But the Chinese Communist Party
was able to bail out its economy
with a massive stimulus package.
And that's largely because it controlled
China's banking sector, energy, mining,
steel, and really most of the big industries.
Now usually in a trade war,
the net exporter will lose the most.
And China is the net exporter in this case.
But at the same time,
the Chinese Communist Party is highly skilled at
dealing with financial crises
and it has a lot of money to spend.
So it will try to outlast the US as long as it can.
It's not going to just give in to Trump's arm-twisting
after a few months.
This could be a long war.
What the Chinese Communist Party is most worried about
is a massive economic downturn.
That could easily lead to unemployment,
unemployment to riots,
and riots could bring down the Communist Party—
since its legitimacy is based on its promise
to deliver economic prosperity.
In America, angry citizens can vote new people into office.
But in China, angry citizens can bring down the entire system.
Thanks for your question, Saitama.
And what do all of you think about the reasons
behind the US-China trade dispute?
Leave your comments below.
Once again, I'm Chris Chappell.
See you next time.
You, too, can get your question answered on this show.
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