Trump meets Xi: China’s trade role under fire
The US president has met his Chinese counterpart in Florida, after criticising the country over its trade policies. Is China’s dominance of global manufacturing good for the world?
In 2011 a blogger came across a shop in Kunming, southwestern China. It had many hallmarks of an Apple store. It appeared to be selling Apple products. The staff believed they worked for Apple. But some things did not seem right.
The entire store was a fake. And when officials arrived in Kunming to investigate, they discovered 27 more fake Apple stores.
This was just one bizarre result of a much wider phenomenon. Since China — a communist-run country — undertook free market reforms in the 1980s, its manufacturing sector has boomed. It now makes more money from producing goods than any other country.
The phrase “Made in China” has become ubiquitous. In 2011 China made 91% of the world’s computers, 80% of its air conditioners, 71% of its mobile phones and 63% of its shoes.
These trends were on President Trump’s mind yesterday as, for the first time, he met Xi Jinping, China’s president. Trump is a staunch critic of China’s economic policies and the US trade deficit with China.
Before last year’s election he said China was “ripping us off”. He promised to brand it a currency manipulator and introduce 45% tariffs on goods imported from China. He has since appointed two prominent critics of the country to his trade team.
China’s opponents accuse it of using unfair tactics, such as giving government subsidies to high tech industries and imposing excessive tariffs.
Critics say these make its rivals uncompetitive and harm job prospects. Last year cheap Chinese steel was blamed when 15,000 jobs were threatened at Tata Steel’s plants in the UK.
And studies have suggested areas of the US with the most Chinese imports tend to elect more extreme political candidates.
But China shows little sign of changing. In 2015 its government released a plan called “Made in China 2025”, which aimed to boost Chinese manufacturing. And this week a government-sanctioned newspaper in China ran an editorial headlined: “U.S. job losses are not China’s fault”. So is the criticism of China justified?
Slaying the dragon?
Yes, say critics. Cheap Chinese goods create a race to the bottom. Companies can only compete by offering staff worse wages, hours and working conditions. They threaten skilled manufacturing — a source of pride to many — and damage the environment. Meanwhile people in areas which are hit hardest lose faith in their democracies.
Nonsense, others reply. Competition from Chinese innovation forces companies to produce better, more affordable goods to stay in business. The US trade deficit just shows that China has produced what Americans want to buy. And China’s embrace of liberal capitalism has made us all more interdependent — so we are less likely to fight each other.
- Would you prefer to buy something which is cheap, or which is produced locally?
- Is China’s dominance of global manufacturing good for the world?
- Work in pairs. You are in charge of a company which manufactures something you like. Create an advert for your product. What particular qualities does it have?
- Research and write a two-page response to this article, explaining whether you support China’s role in global trade and why.
Some People Say...
“Global trade creates winners and losers — we should just accept that.”
What do you think?
Q & A
- What do we know?
- China is the biggest manufacturer in the world and has seen rapid growth in recent decades. Trump dedicated a lot of time to attacking China on trade while campaigning for the presidency. Some of his complaints are based on fact: for example, China often breaks intellectual property laws, which are designed ensure that the inventors make money from their inventions.
- What do we not know?
- What policies Trump will adopt, how China will react and what the impact will be.
- What do people believe?
- Trump is expected to be tougher on China than his predecessors. Supporters say this will force China to play more by the rules. Opponents say jobs will go from China to lower cost countries (such as Bangladesh) rather than the USA. And they say Trump will provoke a powerful adversary.
- For example, the sign outside said “Apple store”.
- According to a UK Parliament briefing, Chinese manufacturing was worth $1.9 trillion in 2014, 19% of the total value of global manufacturing. In 1990 China’s share of global manufacturing by value was less than 3%.
- According to Bank of America Merrill Lynch.
- Trade deficit
- The USA imports more from China than it sells to it.
- Taxes applied to imports, making goods more expensive, and thus harder to sell them. This harms the economy of the exporter country (and infringes the economic theory of comparative advantage).
- A grant the state pays to help a company or industry keep prices low.
- According to a study led by David Autor, from US university MIT. Candidates were ranked according to their voting records. It also found Hillary Clinton would have narrowly beaten Donald Trump last year if Chinese imports had been halved.
- China will use: automation to replace many staff; more of its own core materials when manufacturing goods; new “innovation centres” to develop new technology and methods.