Trump, Trade and China

Photograph Source: The White House from Washington, DC – Public Domain

Rarely a day passes when one or another U.S. ruling class institution or personality fails to criticize President Trump’s unilateral imposition of ever increasing and broad-ranging protective tariffs against Chinese imports. Trump’s critics include the Democratic Party as well as leading Republicans, the prestigious corporate “newspaper of record,” The New York Times and the aptly dubbed “ruling class think tank,” the Council on Foreign Relations. The latter’s September/October 2019 Foreign Affairs, headlined, “How A Global Trading System Dies,” features five articles and essays warning U.S. policy makers against Trump’s course.

The titles themselves are indicative of Foreign Affairs’ viewpoint. They include: “The Sources of Chinese Conduct: Are Washington and Beijing Fighting a New Cold War?” and “Competition Without Catastrophe: How America Can Both Challenge and Coexist With China” as well as “Trump’s Assault on the Global Trading System And Why Decoupling from China Will Change Everything.”

All Trump’s trade policy critics begin with the proposition that China today operates on the world stage as a leading capitalist power, indeed as a leading imperialist power with ever-increasing intentions to dominate world markets to the disadvantage of its competitors.

Nothing new here! In the world of high stakes globalized imperialist competition, there are no friendly players or permanent “historic allies.” Indeed, Trump’s imposition of major tariffs include painful measures inflicted against its traditional European allies, including France, Germany, Italy and England, as well as Canada and Mexico. To date estimates of Trump’s tariffs, imposed or to be imposed in stages at rates from 10% to 15% and even 30%, have been levied on Chinese, European, Canadian and Mexican imports valued at close to $700 billion, the great proportion of which are aimed at China. But with regard to all these effected nations, who have retaliated with their own tariffs against U.S. exports to their nations, Trump’s critics share the view that unlike the Cold War  “containment” and isolation strategies imposed on the Soviet Union for some 70 years prior to its restoration of capitalism in the late 1980s and early 1990s, China, with a Gross Domestic Product ranked second in the world at 63 percent of the U.S. GDP, and the largest trading partner with more than half the world’s nations, cannot and must not be excluded from the world marketplace.

Workings of the WTO

Dependent on world trade to export their commodities outside their own limited domestic markets, Trump’s critics seek to engage U.S. competitors in broad-ranging negotiations via the aegis of the World Trade Organizations (WTO) and similar international bodies as opposed to Trump’s belief that he can unilaterally bludgeon competitors into submitting to his dictates, usually in accord with the specific interests of various components of the U.S. ruling class closest to or beholden to Trump’s personal circles.

The U.S.-led Cold War policies of previous decades were aimed at the Soviet Union from the time of the 1917 Russian Revolution and continuing through the post-WWII period when Eastern Europe, via the Soviet Union’s defeat of the largely German occupied and pro-Hitler capitalist governments there, laid the basis for extricating this huge swath of Europe from capitalist domination. Imperialism’s fear that the Soviet workers’ state’s abolition of private property, its original world revolutionary intentions and its instituting a monopoly of foreign trade aimed at preventing world imperialism from undermining its nascent domestic economy with superior technologies and commodities were central to U.S. policies. The seventy-plus years of the U.S. Cold War were aimed at bringing down the Soviet state and its Eastern European counterparts as well as China and Vietnam. In Western Europe, where the wartime governments in France and Italy embraced and collaborated with the German Nazis occupation, the immediate post war period was marked by massive working class mobilizations that posed a serious threat to capitalist rule and led to major victories that persist to this day, including systems of free health care and major extensions of union and workers’ rights. Similarly, the 1946 post war U.S. strike wave, the largest in history, saw millions take to the streets to close down major U.S. industries demanding union recognition and an end to the wartime wage freeze that had brought unprecedented profits to the warmakers’ military-industrial behemoth and misery to the working class majority. A frightened U.S. ruling class, fearful that Europe’s mass anti-capitalist worker mobilization would inspire similar challenges to capitalist prerogatives, but untainted with Nazis collaboration as in France and Italy, launched the infamous McCarthy era witch hunt aimed at purging socialists and communists from leadership positions in the growing trade union movement.

China’s 1949-54 revolution eventually abolished capitalist property relations and ended the centuries of world imperialist division, exploitation and colonization of the Chinese people. As with the ending of capitalist rule in the USSR and Eastern Europe, the U.S. and the imperialist world more generally sought restoration and/or expansion of its “interests” in all these states, using ever-increasing military measures (NATO), overt intervention in China during the Korean War, sanctions, embargoes, and economic isolation, coupled with CIA secret wars, assassinations and industrial sabotage.

Stalinism’s role in Russia and China

They were aided in these efforts by the ceaseless disputes that emerged between the Stalinist-led bureaucratic regimes in China and the USSR, both of which periodically sought “peaceful co-existence” alliances with U.S. imperialism against each other as opposed to advancing the interests of the world’s working masses. The Russians, under Stalin, demanded that the Chinese refrain from alienating the defeated Chinese capitalists in 1949 by nationalizing their property and repeatedly insisted on Russian ownership of disputed border areas in the Chinese East. The Chinese under Mao Zedong, armed and financed U.S. and apartheid South African-backed “guerilla fighters” in efforts to overthrow the Russian-allied Angolan government. The infamous 1972 Nixon-Mao meeting in Beijing at the height of the U.S. genocidal war against Vietnam informed world opinion that China preferred an alliance with U.S. imperialism as a counter to its rivalry with the USSR – the Vietnamese liberation war be damned! China was the first nation to recognize the fascist-like Augusto Pinochet government of Chile that came to power in 1973 via a U.S.-supported military coup. China’s heinous 1979 invasion and war against Vietnam, in retaliation for Vietnam’s 1978 invasion of Cambodia to stop the mass murder of millions of Cambodian workers and peasant at the hands of the China-allied Pol Pot regime was yet another horrific example of China’s “Russia [not U.S. imperialism] is the main danger” thesis. Russia’s Stalinists too pulled out all the stops to advance their “nationalist” interests against China, not to mention Russia’s reactionary invasions of Hungary (1956) and Czechoslovakia (1968) aimed at smashing working class rebellions against Stalinist rule.

Beginning with the 1979 rise to power in China of the capitalist-restorationist  regime of Deng Xiaoping China’s Stalinist leaders signaled world imperialism that it was more than willing to re-open its nation to imperialist penetration and plunder. A decade later the Russian Stalinists too submitted to massive imperialist penetration and facilitated a capitalist restoration process that brought untold misery to the Russian people.

China enters the WTO

Convinced that capitalist restoration in China was the order of the day, in 2001 the U.S. ended all aspects of hostility toward China and presided over China’s admission to the WTO. The terms were simple enough; China would allow U.S. corporations to set up shop and employ endless numbers of Chinese workers at near slave wages and using state-of-the-art technologies to produce unprecedented numbers of commodities for the U.S. and world marketplace. This super-exploitation of Chinese labor had the effect of temporarily boosting declining U.S. profit rates, closing non-competitive U.S. factories and freezing or reducing U.S. wage rates – a ten-plus year bonanza for U.S. corporations, which happily shipped back to the U.S. Chinese made commodities from U.S.–owned factories at near zero tariff rates.  Indeed, U.S. tariff rates at some 1.5 percent or zero on most Chinese imports were among the lowest in the world. And why not? Historically, tariffs are imposed by nations with inferior technologies that cannot effectively compete on world markets. The age-old debate between protectionists and free traders always comes down to which nations need protection and which need total and unobstructed access to world markets. In the eighteen some odd years since China was admitted to the WTO China went from operating as one of the world’s lowest technology nations to today, when Chinese technology rivals or exceeds most all other nations on earth. In the past 20-plus years China, for example, went from providing “internal migrant” teenage girls from the Chinese countryside working in prison like foreign-owned dormitory factories at six cents per hour and seven days a week producing garments to China today – a nation with some of the most modern factories in the world producing world class industrial tools and machinery and state-of-the-art 5G (fifth generation) electronics and telecommunication products. Super high tech 5G Chinese corporations like Huawei are today capable of challenging and exceeding the world’s most sophisticated operations. A 2017 Financial Times survey of the global mobile infrastructure market showed that Huawei had a world market share of 28%, with Sweden’s Ericsson at 27%, Finland’s Nokia at 23% and ZTE, another Chinese firm, at 13%. Japan’s Samsung had 3%. All the others, including the U.S. corporation Cisco, had only 6% between them.

The WTO’s inherent contradiction

Established in 1995, and including more than 124 nations, the WTO is an intergovernmental organization concerned with the regulation of international trade in goods, services and intellectual property. Its functions include negotiating trade agreements and establishing dispute resolution mechanisms to enforce them. While the free trade-oriented WTO prohibits tariff and other discriminatory practices between trading partners, it provides exceptions for so-called environmental protection and “national security” issues, the latter now invoked by the Trump administration to mean the “right” to ignore WTO rules. Trump, for example, recently threatened to invoke U.S. “national security” concerns to ban Japanese cars from the U.S. market. Needless to say, the most powerful WTO nations, with the ability to ban key commodities from their markets make the rules in the context of their so-called “free trade” system. Thus, “deal-making” is the norm among trade negotiators. The most powerful are able to make “concessions” when they negotiate with the weaker based on the fact that the latter usually compete with regard to a handful of products while the former compete on world markets with literally thousands of commodities. Further, and perhaps less known is the fact the WTO’s “dispute resolution” mechanisms consist of a rotating group of arbitrators that the U.S. does not always dominate, posing the possibility that U.S. unilaterally-imposed tariffs might be reversed, hence perhaps a clearer explanation for Trump’s public distain for WTO rules and its leading component powers.

Decline of U.S. economic power

Of course, the most obvious aspect of Trump’s and U.S. imperialist concerns rests in the undeniable fact that the U.S. economy is far from stable, that the U.S. no longer operates with impunity on world markets, that its technological supremacy is increasingly challenged by its major competitors and that, in consequence, its corporate profit rates are steadily in decline. In short, the inherent factors that periodically lead all capitalist powers to crises and decline are fully operative today. This is the primary explanation for why every serious assessment of the state of the U.S. and world economy includes dire warnings that perhaps another great recession, deeper than the devastating 2008-09 massive and near financial collapse and associated devastating effects on U.S. workers, may well be on the horizon. When in mid-August Trump publically attacked Federal Reserve Chair Jerome Powell, charging that Powell posed “a greater threat to the U.S. than China’s President Xi Jinping,” serious analysts took notice, not because of Trump’s buffoonery, but rather because Trump sounded the alarm that the corporate elite needed even lower interest rates to facilitate corporate “borrowing.” And borrowing for what purpose? As with past and recent periods of near zero interest rates under the Obama administration, corporate borrowing is qualitatively less for infrastructure investment and building new U.S. factories than it is for a new wave of stock market and related highly speculative “investments” that have lined the pockets of the billionaire elite with “paper money’ that has little or no correspondence to real commodities. Trump’s bragging that the U.S. dollar is the strongest currency in the world is increasingly challenged when China, Japan and a growing number of other nations conduct business in their own currencies as opposed to the ever-inflating U.S. dollar. Indeed, China’s deflating its own currency, the renminbi, to counter Trump’s tariffs told the world that two can play the same game. And further, Trump’s public complaints about the U.S. trade deficit with China, wherein Chinese imports to the U.S. exceeded U.S. exports to China by $419 billion in 2018, fail to take into account that the U.S. corporations pay or these imports with increasingly inflated dollars, printed with abandon by the U.S. Treasury in the form of paper money or the issuance of computer generated federal bonds and/or related promises to pay. Again, any government that prints money with no regard to its material basis in commodity production risks disaster. The U.S. “coin of the world realm” is, in this writers view, in deep trouble.

China’s transition to capitalism

Again, with regard to China, upon its 2001 WTO entry, it was incapable of competing with regard to any commodity, except its capacity to “sell” its labor force in greater quantities and cheaper than most nations on earth. To enter the WTO China was compelled to open its country to every nation seeking this super cheap and seemingly inexhaustible supply of labor, near zero taxes and other concessions.

The question therefore inevitably arises, how did China make the transition from a relatively poor nation, largely bereft of modern technology to a world-class player on international markets? The answer lies in how China made the transition over the past forty years from a deformed workers’ state that essentially banned capitalist private property, established a planned economy that focused more on addressing human needs, including providing free health care and education to all its citizens, than capitalist profits, to a leading capitalist and imperialist nation with $trillion dollar infrastructure investments in China and, increasingly around the world, as with, China’s Belt and Road initiative aimed at increasing China’s market penetration on a world scale. A serious approach to answering this critical question, a complex matter to be sure, begins with China’s adoption of the key features of the BRICS nations – Brazil, Russia, China, India and South Africa. In all these relatively underdeveloped nations, the ruling elite focused on a massive transfer of wealth from the poor to the rich that they expected to result in the emergence of a relatively well-off layer of perhaps 20 to 25 percent of the population, consisting of “middle class” and working class sectors, who would be capable of purchasing a broad range of nationally produced consumer commodities typical of their counterparts in advanced nations. This massive transfer, of course, was to be at the expense of the vast majority of their respective populations, who were in turn driven into abject poverty. This BRICS phenomenon is indeed operative internationally wherein a tiny ruling class elite the “one percent” own and control more wealth than the bottom half of the population. In the U.S. for example, Bernie Sanders often notes, without reference to a solution, that “three U.S. individuals own and control more wealth than the bottom half of the country.”

In China, with a population of 1.3 billion, this massive transfer of wealth from the poor to the rich and a layer of a new middle class and some well-paid workers, is consciously pursued via the relative impoverishment of some one billion people, who today have largely been denied the social gains of the 1949 revolution.

In short, China’s capitalist class, through a process akin to the “primitive accumulation of capital” in past centuries, that is, the massive extraction of surplus value via the super-exploitation of the vast peasantry, amassed the initial capital to begin the process of transforming its backward productive infrastructure into a first rate competitor on world markets. This forced transfer of literally millions of poor peasants, “internal migrants” requiring special passports, from the countryside to the periphery of China’s cities, virtually locked into slave labor like factories accounts for China’s “rise” and NOT the wonders of the capitalist system. So intensive was this super-exploitation that many of the near-enslaved and literally starved peasants had to be periodically transferred back to the countryside to be rejuvenated for future use!

For the Chinese capitalists, the construction of an internal market of three million people, comparable to the U.S. population, is viewed as sufficient to absorb increasing Chinese corporation manufactured commodities. These Chinese corporations, of course, employ state-of-the-art technologies, including robots that allow them to effectively compete against U.S. and other foreign corporations seeking access to China’s massive internal market.

“Theft” of intellectual property

Trump and his associates ever chastise China for “stealing U.S. intellectual property rights” and for violating WTO rules against government funding of private corporations. Few seriously believe these rants. All serious players operating in the world of international banking, finance and world trade fully understand that the name of the game is never-ending competition between the world’s leading corporations, that are always backed to the hilt by their own governments. In the U.S. this backing includes multi-trillion dollar tax breaks and subsidies to U.S. corporations, who really write the tax codes, and the most massive surveillance operations in the world, overseen by the CIA and the myriad of associated U.S. spy agencies, aimed at stealing the technologies and secret scientific breakthroughs of all U.S. competitors.

The “moron” Trump

While Donald Trump is truly the “moron” described by his former and fired Secretary of State, Exxon Mobile chief Rex Tillerson, he and his U.S. critics, and the central leaders of world capitalism, from China, Japan to Europe, are all aware not only of the declining power of U.S. imperialism, but of the emerging crises facing the entire world capitalist system. China too, a major player in this world constellation of ever competing and inherently warring nations, has seen its record growth rates of previous decades sharply decline. None of the players in this deadly venture of subordinating human needs, and the environment itself, to the private profits of the few, including endless hot and cold wars to achieve heinous ends, have any serious solutions other than more of the same. The bully Trump’s current weapons include embarrassing and uninformed displays of disgusting bluster and bluff. But his critics, with zero exceptions, accept and embrace the same basic tenets of capitalist plunder, but seek to sugarcoat its ongoing and inevitable consequences with Cheshire cat smiles

Jeff Mackler is a staffwriter for Socialist Action. He can be reached at  socialist