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April 07, 2005


very important topic... but not the only one (energy, anyone?) where the Dems need more than oppo positions.

Very important issue but who in the MSM - other than Lou Dobbs, regularly talks about this? People know something is wrong but need information about what is going on. The Waltons don't care. WalMart's policies have made them billionaires. And you won't hear it on Fox. Rupert has too much at stake with his China ventures. I fear the only way this gets attention is to link it to national security. After all it is not just clothing thats getting out-sourced but high tech. You can't transform the military if all the ICs come from the PRC!

Lots of great points. A few reactions:

I think Bush's options will be seen differently than the steel situation, because textile manufacturers and (wholesale) consumers are much less numerous and politically and economically important than steel producers and consumers. And as you alluded to, they're more concentrated, with NC probably the only swing state where textiles are important (the other main centers for textile production or wholesale consumption being SC, NY and CA). So, unlike that situation where Rove played economist (to the detriment of manufacturers who were consumers of steel), I think this is one where even a half-assed "economist" like Rove wouldn't see a simple solution that would have a supposedly easy to predict effect on votes in key swing states.

The other point is just to reiterate your point about the importance of infrastructure. With lean production and in-time inventories, it's a lot easier to produce many things with low-skilled workers. But there are still plenty of innate or invested advantages that are important. For instance, Lesotho, despite the skill of it's workers and whatever paltry wages they may be paid, is always going to be behind China in several key factors, such as access to shipping--how many miles is it from Lesotho to a major port? 500 or more?--access to raw materials, proximity to markets, etc. Plus, what's the "spin off" potential? For instance, one of the reasons Detroit developed as the center of auto manufacturing was that it was a center for marine engine production and specialty ship building going back to the mid-19th century. Grain, timber and ore shipping on the great lakes created the marine engine demand, and as a result you had a cluster of small engineering shops that created a critical mass of both tooling infrastructure, skilled workers and supporting industry so that it was easier to expand into other types of manufacturing. Most places where they produce textiles and clothing don't have that potential synergy between industries; of the developing world, only China and India seem to have it. Even Mexico, in the maquiladora zone, is essentially a bunch of factories practically pre-fabricated in the US--at least in terms of the robotics and machinery inside the factories--and then sent to Mexico and placed inside the factories. (That's why exports to Mexico were higher before the passage of NAFTA, because US manufactuers were preparing to increase production in Mexico; the "exports" to Mexico were really just the tools that would be used to increase the exports from Mexico to the US.) But now, China is reaching that "critical mass" where little needs to be exported to China to assist them in enhancing their manufacturing capacity, it can just be purchased in China. AFAIK, that's not the case in any of the other major export-driven economies (except, like I mentioned, India.) So while I hadn't put a lot of thought into it, I suspect you and the people you quote are dead on in predicting that, in the absence of some other countervailing developments, China's export capacity, physical and economic infrastructure, technological advancements, and slave wages are likely to lead them to overwhelm just about every other export economy in just about every other product that could be efficiently produced in the PRC.


Yes, I agree. Energy is closely connected to this. Part of the reason I wrote this post is because the rhetoric is quickly getting pretty heated. And against that background, I worry that we have only two choices--really solving the problem (and I'm particularly concerned about what happens to all those displaced developing nation workers), or protectionism and resource wars, the latter of which looks like a great recipe for a Hot War.


Great points. We ARE still exporting to China (at least that's what the folks who fly business class with me to Shanghai SAY they've been doing). They used to fly all over the world and now they just fly to China.

But they've made the investments to really transition quickly away from even those few exports.

I've grown more troubled, today, as I've responded to this post when I think that China is basically skipping the upcoming G7 meeting. Are they doing it because they don't want to discuss their plans for the Yuan with anyone? Or are they doing it because they no longer feel the need to cooperate? Whatever the reason, it seems ominous to me.

My question on those exports are:

A. Are they goods that will help the Chinese be more competetive, such as machine tools?

B. Are the good being exported consumer goods, or wholesale goods/materials not intended for end-point users, but something that will then be used for export-oriented production?

C. Is the good being exported something which the Chinese aren't likely to produce domestically, or is it just a matter of time before they don't need to get it from us because they can produce it themselves?

I suspect I know the answers to each of those questions, and the answers I suspect aren't good in terms of long-term prospects for the balance of trade between the US and China.


You might be surprised. During my last trip, there were a number of newspaper articles about how LITTLE China has taken in technology transfer from, say, the automotive companies. They admit they still can't compete against VW and the Americans, to say nothing of the Japanese who are just coming online. Which says,

1) The developed countries ARE able to retain their advantage at some things

2) The Chinese aren't getting as much technology out of the manufacturing going on in their country as you would think

3) Contrary to fears among Americans, the piece-of-shit Chery car that the CHinese are preparing to import probably will be no more of a threat than the Yugo

I've actually said this before, but the Chinese car company most prepared to compete is SAIC, who has been getting their technology transferred from GM. So they will follow in some of GM's woes before they'll be able to compete with them.

And to answer some of your further questions--yes, I see a lot of guys travelling to China to sell very exact tools and gauges, things like valves and measurement devices and so forth. I'm not sure if China just hasn't tried to manufacture these items, or hasn't yet gone online with them. But for the moment (and I'll grant you, this may not last) they seem to rely on the developed countries for the trappings of highly advanced manufacture.

We'll see what happens in the next two years, though, when China will become the world's dominant chip manufacturer. That may be the tipping point on some of this exacting stuff.

But for now, from what I hear on the the old NW "Bus" to China, the Chinese still have some really serious inconsistencies wrt to manufacturing. They're working it out. And I've seen more than one veritable shack with an ISO-9001 compliance sign outside of it. But it's not a done deal yet for China.

Auto assembly I'm actually not as worried about; they're sort of like large home appliances, in that size and weight are factors. For the auto companies producing for the US market, it makes more sense to produce in Mexico and ship the cars on trains than dealing with shipping from China. (Auto parts, however, are another story; that's a case where the Chinese could wipe out our domestic suppliers.)

I'm actually more concerned with high tech stuff, like the chips you mentioned. And in terms of US comptetiveness, once Bush is out of office our "cultural" exports will probably increase some more, but I'm worried about big unit manufacturing (like aerospace) from the EU and high-tech stuff from China and India.

Trouser war? Pshaw! Why in my day, we went to war over pasta and citrus! Ah, Pasta-Citrus. Now that was a war!

Meanwhile, I guess we're only just now learning that trade, currency holdings, and the "race to the bottom" are the non-lethal superweapons of the future.

Why in my day, we went to war over pasta and citrus!

Don't forget Pecorino Romano chese...

And I think truffles were in the mix at some point when we were in a pissing match with the French about agricultural subsidies.

In other words, the Europeans didn't stick it to all of us, just the Americans who don't mind spending over $100 per person for dinner...not including drinks and dessert.

Don't forget the other, even poorer countries like Bangladesh that used to make clothes. Too many of them are losing out to China as well.

Fascinating, thanks Emptywheel.

There was an interesting article hitting on a lot of what you write regarding Cambodia a few months ago in TNR, including the infrastructure problems vis a vis China. It's here:


Thanks again. Great post and links.

Unfortunately, the success they describe and the rewards Cambodia's "good player" status seem to have had a lot to do with the fact that Cambodia had inked a specific trade deal with the US that tied quota reductions to labour standards. Now that they're in the WTO and the WTO is trying to impose the removal of all quotas, the question is whether just repuatational effects can continue to maintain Cambodia's advantage without the specific tarriff incentive is swamped by MFN.

I just finished Baghwati's "Defence of Globalization" and he seems to put a lot of truck into the role of NGOs into shaming corporations and countries into imposing labour standards since the WTO doesn't officially control things like product-standards-labelling. But outside the upscale liberal sphere, I don't know that this sort of name-and-shame really has much effect on the marketplace. "Buy American" hasn't worked very well so would "Buy Third World Living Wages"?

It does seem to me that the US can't handle both trade and financial obligations to China without big problems. Certainly, it's impossible to bargain or try to impose standards on Chinese production either formally or informally when the Chinese government maintains the tacit threat of trashing the dollar. It's shocking to me how little emphasis is being put on the danger of the combination of trade and fiscal deficits in the global economy when not all players are equal.

Admittedly, trade is not my strong suit. Just off the cuff, though, it seems to me that letting the Chinese get a leg up in the trouser war could lead to trouble. Maybe even a corda war.

Lest anyone think we're slacking off around here, those jokes were really bad. I hope we don't more flaring up...

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