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Friend-shoring seems like a great idea. I think a key to it would be to raise awareness about the products and services we receive from unfriendly/unethical countries. Just like the growing number of consumers willing to spend more to support environmentally friendly businesses, I would imagine you could sell people on the idea of supporting our allies. The sentiment for buy-American could easily be transformed into buy from our allies.

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Feb 1, 2023·edited Feb 1, 2023

Isn’t this exactly the sort of thing that progressives advocate for? The WSJ recently wrote about how San Francisco was reconsidering laws that limit commerce with states that don’t align with its left-wing ideology. The idea that we need to decouple from China because it fundamentally doesn’t share our values strikes me as remarkably woke.

https://www.wsj.com/articles/san-francisco-reconsiders-business-ban-that-targets-states-social-values-11666789223

I’m not an expert in economic history, but prior to China’s rise didn’t Americans used to bash Japan in many of the same ways that we bash China these days? As Japan rose in the steel, automotive and semiconductor sectors in the decades after World War 2, Americans levied many of the same complaints against the Japanese back then that we do against China today. The Japanese were accused of engaging in currency manipulation and other unfair economic practices and were viewed as a threat to the American way of life.

https://www.washingtonpost.com/archive/opinions/1992/03/08/hammering-americas-image/bdd81faa-7f68-407e-afb9-dbc96baa718a/

Now that China has become public enemy number one, I feel like many Americans have historical amnesia regarding the period when Japan was the Asian country that we loved bashing. When the Biden administration first announced semiconductor export controls back in October 2022, I remember reading about how people in Japan drew parallels between America’s present day trade war with China and its trade war with Japan in prior decades.

Noah, I’m curious what your thoughts are here. I’m certainly no expert and as you pointed out one major difference is that Japan was a democratic ally even during the most hostile years of our trade war against them. I hear a lot of rhetoric these days about how China is authoritarian and a unique threat to the global order and how we’re embroiled in a struggle between democracy and autocracy. But as far as I can tell, our present-day hostility towards China mirrors much of the same vitriol that we directed against the Japanese in the past. It seems to me that anti-Asian sentiment in America is rooted mostly in competition rather than in any loftier ideological aspirations such as championing freedom or democracy.

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The rationale for decoupling from China is not because China does not share our values, Yan Shen. The PRC has never shared our values. It is because China has adopted the role of a strategic adversary. This has nothing to do with San Francisco's progressive policies. It would be a weak analogy; it's nonsense as a serious parallel.

There are features in common with our stance to Japan during the '80s and early '90s, and there are major differences. Our tensions with Japan were entirely economic; our tensions with China are both economic and political/strategic. Japan had become the dominant economic power in Asia, and was buying so much US debt that it seemed to be gaining decisive leverage. China is dominant in Asia economically (less so than Japan in 1980, I think, simply because it lacks the type of regional technological advantage that Japan enjoyed then) and also holds a lot of US debt (not on the scale of Japan in the '80s). But China is also a military threat to Taiwan and American naval power in the Pacific, with the potential for coercive influence over a number of smaller Asian countries. Japan was never a geopolitical adversary; the USSR was.

Americans are definitely ill informed about China's domestic situation, and tend to see it only through the lens of their own values. There are certainly many Americans who shape their views of American policy on China according to that lens and who are hostile to the government, assuming that most people in the PRC are as well. Those Americans are not shaping US policy towards China. That policy was governed by highly optimistic assumptions about China's economic strategy in the 2000s, but it no longer is. China lost economic goodwill by its violations of economic protocols, coercive economic and IP contracts for joint ventures, and large-scale theft of IP. China's global initiatives to use soft power to gain decisive leverage over small national economies, and its military moves in the South China Sea, which threaten the most dangerous power confrontation since WW2, are among the macro issues driving US policy, and there is nothing comparable to our relationship with Japan. There the parallels are all to the USSR, and the US most certainly had tight restrictions on trade with the USSR when it came to potential weaponization of trade (the case with policy towards PRC semiconductor trade now).

Some Chinese domestic policies are of legitimate concern because they touch on issues of international law and treaties that we have supported: specifically, the treatment of Uyghurs on human rights grounds and the de facto abridgment of the PRC/UK Joint Declaration on Hong Kong. China governmental authoritarianism is not a legitimate target for US policy: as you point out, for better or worse it has been a cultural norm for a long time (3500 years would be about as far as that could actually be pushed), and Americans aren't generally aware of the long history of violent political fragmentation that often seems the only likely alternative.

The US government has enacted no policies specifically addressing Chinese authoritarianism, intended to foster regime change, or anything similar. The uptick in criticism about Chinese authoritarianism over the past decade is directly related to the specific policies of the Xi Jinping regime in that regard. (I do not think you'll hear ringing endorsements of that regime from cabdrivers in Shanghai, whom I always found one useful barometer for measuring the popularity of government in the PRC.)

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Feb 1, 2023·edited Feb 1, 2023

You claim that the rationale for decoupling from China is because China is a strategic adversary, but it's not clear to me at all why that makes sense. It's a gamble that's far from assured of succeeding and very possibly risks isolating America more than isolating China. It's also predicated on a profoundly flawed premise, that an entire civilization of 1.4 billion people spanning 5,000 years can or should be contained because Americans are somehow preordained to remain preeminent.

In any case, while you may not believe the moral argument carries significant weight, it’s clearly an argument offered by up many Americans. The comment at the top of this thread asserts that China is an unethical country and that therefore we should decouple from them. It compares doing so to those who are willing to pay more for products from environmentally friendly companies. This is literally the epitome of wokeness and eerily parallels the mindset of the San Francisco political class. Those who don’t share our values are bad people and therefore we should have nothing to do with them.

#CancelChina

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Yan Shen, I do think you're conflating several different issues that it is important to keep distinct: The US government rationale for "decoupling," the attitudes of Americans towards the PRC, anti-Chinese attitudes in the US, and American judgments about authoritarianism.

In the university town I live in a woman attacked and stabbed a student unknown to her last month because the student was Chinese, and the woman viewed her as a part of a national threat. The woman was mentally ill but she had clearly absorbed attitudes you (and I) deplore that are rising because of political tensions between the US and PRC. This local event reflects a serious rise in anti-Asian prejudice and violence in the US. While it is still at relatively low levels, evenif it remains so the dynamics of race-based violence are a form of terrorism: individual acts degrade the security of an large class of people. It needs to be addressed with all the force government and cultural leaders can bring to bear.

I don't know what comment you refer to at the top of the thread, because they keep changing. The idea of boycotting any nation because it is "an unethical country" is not one I'm familiar with. Boycotts of countries are generally based on views that their governments are acting unethically, either towards their general population (e.g., Iran), or towards specific groups (e.g., South African apartheid), or towards other states (e.g., current sanctions on Russia). None of those examples I gave were "woke" policies, although people we might call woke might well support them. (Anti-abortion groups who advocate boycotts of states where abortions are legal are not "woke.") I hope you will drop that analogy.

As for whether China's government is acting unethically, I have mixed views--I think it is in Xinjiang and Hong Kong. "Authoritarianism" is a broad term. China's traditional authoritarianism had many triumphs and post-Mao China has delivered spectacular economic goods to its population by relying on familiar political patterns. Concern about Chinese authoritarianism is high now because Xi Jinping's ascendancy has altered its character. Traditional Chinese authoritarianism incorporated important checks on imperial power, most particularly an operational commitment to a governing ideology beyond the power of the head of state to significantly alter, in which virtually every bureaucrat was steeped from childhood as a qualification for office, which acted as a powerful institutional constraint most of the time. Leadership in the PRC has manipulated an imported lineage of communist ideology much more flexibly, and Xi is now treated as a contributor to that ideology, which brings his regime, like Mao's earlier, much closer to the model of 20th century strongman authoritarianism. Under these circumstances I think it would be very foolish not to take the escalating rhetoric concerning Taiwan seriously on the ground that the PRC has not launched wars since 1979.

I think I've already made other points about why I think the rationale for US government decoupling policy is appropriate, so I won't repeat them.

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Feb 1, 2023·edited Feb 1, 2023

The accusations of economic espionage and IP theft have always struck me as interesting. I'm obviously not an expert in the matter but weren't we complaining about Japan doing the same thing in past decades? There are obviously instances where it happens, especially when a late comer is trying to catch up to the frontier, but I've always been a bit skeptical about the extent to which it occurs.

America recently ended the China Initiative, which as far as I can tell Noah hasn't blogged about. The China Initiative was begun by Attorney General Jeff Sessions during the Trump Administration with the explicit goal of rooting out espionage at American universities and research institutions. Predictably it ended up primarily targeting academics of Chinese descent. The problem as MIT Tech Review pointed out was that it was really bad at its stated goal.

https://www.technologyreview.com/2021/12/02/1040656/china-initative-us-justice-department/

The initiative ended up harassing Chinese academics mostly for administrative lapses such as failing to disclose ties to Chinese institutions regardless of whether or not such ties were untoward. Furthermore, many cases ended up being dismissed and the conviction rate for China Initiative cases was far lower than the conviction rate for white collar crimes pursued by the DOJ as a whole. The only conclusion I could draw was that either Chinese academics were really good at hiding their espionage, we were really bad at rooting out said espionage or the entire premise was overblown to begin with.

https://www.newyorker.com/magazine/2022/03/21/have-chinese-spies-infiltrated-american-campuses

The focus of the China Initiative was on espionage in academia as opposed to industrial espionage, but regarding economic espionage as a whole, I found one line in the New Yorker article linked to above to be particularly interesting. The article focuses on the government’s prosecution of Franklin Tao but also comments on the broader state of economic competition between China and the US. In particular it references the oft stated assertion that Chinese theft of American intellectual property amounts to as much as $600 billion annually, a number which it suggests is essentially made up. Here’s the relevant passage below. It’s hard not to be somewhat skeptical of the entire anti-China premise when reading such things.

"Trump Administration officials blamed American academics for being naïve collaborators, warning them in one F.B.I. memo that China “does not play by the same rules of academic integrity.” (The memo goes on to assert that the annual cost of stolen intellectual property is “between $225 billion and $600 billion,” oft-repeated numbers that Mara Hvistendahl, in “The Scientist and the Spy,” her account of Chinese economic espionage directed at Monsanto, shows to be essentially made up.) Most of the examples provided were drawn from industry, and the particular campus peril was left vague. Andrew Lelling, the former U.S. Attorney in Boston and one of the architects of the China Initiative, told me that the point was to encourage transparency: “The government was worried that there was a huge amount of collaboration with the Chinese that nobody knew about, and that was true!” F.B.I. agents toured American campuses to make their case, but the meetings often ended in mutual incomprehension."

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I’m perfectly willing to admit that I haven’t researched this to verify specific claims of the scale of IP theft, Yan Shen. I am certain, however, that US policy has been shaped in the belief that it is considerable, and that belief is of long standing.

The issue of espionage in universities is complicated. The PRC has a long history of sending some people to study here with the task of keeping tabs on others. But the cases you’re referring to involve much more, and I’m not familiar with them specifically. As for whether they were warranted or Red Scare-type operations, I wouldn’t be surprised either way. As you note they are separate from the issues Noah raises.

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Feb 1, 2023·edited Feb 1, 2023

I brought up the China Initiative partly because in the past Noah has advocated for elite immigration to America and highlighted the extent to which academics of Chinese descent are a part of the scientific and technological enterprise in America, the implication being that American preeminence lies in part in its ability to attract the best and brightest from around the world from places such as China and India.

https://www.latimes.com/opinion/story/2022-10-02/chinese-scientists-anti-asian

However, as a recent op-ed in the LA Times points out, the China Initiative and the heightened atmosphere of anti-Chinese sentiment in America may have spurred an increase in the number of Chinese academics giving up their positions at American institutions and returning to take up positions at Chinese institutions instead. Here’s another passage from the New Yorker article that I linked to that illustrates just how bad anti-Chinese sentiments have become within the American body politic. How far away is comparing students and academics of Chinese descent to a cancer to the sorts of anti-Semitic rhetoric that used to be voiced against the Jews? The fact that the FBI literally views students and professors of Chinese descent as cancers is seriously frightening to any American who happens to be ethnically Chinese.

https://www.newyorker.com/magazine/2022/03/21/have-chinese-spies-infiltrated-american-campuses

Andrea Liu, a physicist at the University of Pennsylvania, told me she attended a briefing in which “the F.B.I. likened working with Chinese researchers and students to a cancer, where the malignant effects might not be known for years afterward.”

There have been Republican hawks who have called for a ban on all Chinese students studying STEM in the United States. Personally I'd put the odds of that happening within the next 5-10 years at 50/50.

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I don't think the point is germane, eg (and I suspect that the "short memory" you refer to would actually need to be longer than any living one), but I'd be interested to know what you're thinking of. It's a subject I know nothing about.

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Feb 1, 2023·edited Feb 1, 2023

The idea that China poses a unique national security/military threat and that therefore sanctions are justified seems to me to ignore the fact that paradoxically the chips used in commercial devices like iPhones are generally speaking more advanced than the chips used in devices with military or national security implications.

For instance, the A16 bionic chip in Apple's latest iPhone 14 is based on a 4nm process node by TSMC but the majority of Huawei 5G base stations rely on chips based on 28nm process nodes. I’ve also read that a lot of military hardware relies on older process node technology as well. As others have pointed out, the main issue that China faces is manufacturing smaller process nodes at scale rather than manufacturing such chips at all. This would presumably impact commercial devices more so than things like military technology.

It’s interesting that as far as I can tell the biggest impact American sanctions have had against Huawei are related to its consumer smartphone business. Huawei spun out a large chunk of its smartphone unit into a separate company called Honor and HiSilicon has had to pause its design of Kirin chipsets, but Huawei’s 5G business which purportedly was the main area of American concern seems as robust as ever after a couple years of American sanctions.

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Feb 1, 2023·edited Feb 1, 2023

I agree that there's a military/geopolitical aspect to our rivalry with China that didn't exist when it came to Japan, but once again I’m skeptical of the premise that China poses a unique military threat. It hasn’t been officially involved in a major war since 1979 when it fought against Vietnam, while America has fought wars in Iraq and Afghanistan in just the past couple of decades, the former ultimately based on a premise that turned out to be wrong.

Graham Allison compared China today to America at the end of the 1800s and argued that Americans should actually be wary of wanting the Chinese to be more like us. We had asserted our primacy over the Western Hemisphere with the Monroe Doctrine and during the presidency of Teddy Roosevelt fought the Spanish American war, gaining Cuba, Puerto Rico, Guam and the Philippines as colonies. It’s hard for me to see China asserting anything more than limited regional dominance based on its own interpretation of its territorial sovereignty. I'm willing to bet that the Chinese are very unlikely to invade countries thousands of miles away with the goal of regime building.

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This might be true, but Taiwan is certainly close enough to be vulnerable to Chinese military power and "regional dominance".

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Much as I'm a big fan of Chen Jiongming and his attempts to create a federal China in the 1920s, I can certainly see why most Chinese people see any form of non-authoritarian central government as being liable to lead back to the fragmented and violent warlord era.

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eg, I think no one believes China is currently capable of "projecting power" (in the sense of militry power) beyond the South China Sea, in the same sense that Russia is not capable of projecting power beyond countries adjacent to it. Your view is a consensus one.

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Feb 1, 2023·edited Feb 1, 2023

I should also add that I find the entire notion of a global struggle between democracy and autocracy to be deeply amusing. Personally, I don’t believe in censorship but I’m also not convinced that democracy is necessarily the best form of governance for China. In any case the social contract between the Chinese people and their government is something for them to negotiate. I don’t see it as my personal concern as an American citizen.

I’m amazed by the level of anti-Chinese hostility in America today and the pervasive moralization of the China issue. The CCP is universally regarded in this country as an authoritarian menace, but as Kishore Mahbubani points out in his recent book Has China Won, most Chinese rate the central government as highly competent, the recent reversal of zero-Covid restrictions aside. We basically have a situation where Americans view the Chinese government far more negatively on average than do people in China. It's particularly ironic that Americans are constantly urging the Chinese to rise up against their government. In my prior comment I compared anti-Chinese sentiment in this country to wokeness and the divergent views of the CCP between people in China and people in America reinforces this point. In the United States woke progressives are actually more anti-police than Black Americans are as a whole. It seems like the woke always seem to know better than the people whose interests they supposedly represent.

Kishore also makes the point that the CCP actually acts to moderate some of the worst excesses of nationalism and that a more democratic China is likely to be more overtly anti-Japanese and anti-Western. The Chinese consider the period from the end of the First Opium War in 1842 to the unification of the country under Mao in 1949 to be the Century of Humiliation during which the country suffered from the depredations of both Japanese and Western imperialism. China’s 21st century rise is viewed as restoration of the historical norm. The idea that a China more similar to America in terms of political governance and values would pose far less of a threat to American well-being seems quite silly when you consider that we went through a trade war with our erstwhile democratic ally Japan a few decades prior that many are comparing to our trade war with China today. The roots of anti-Asian sentiment in this country ultimately lie in competition and not in ideology.

Bari Weiss’ site the Free Press recently published an article that exhorted progressives to disabuse themselves of the notion that they were on the right side of history vis-à-vis the political right. I couldn’t help but think to myself that Americans should adopt that same mindset when it comes to China. Samuel Huntington’s Clash of Civilizations is coming across as increasingly prescient compared to Francis Fukuyama’s End of History.

I believe that the world will be better off if America adopts a more pragmatic approach to its relations with China. The idea that an entire civilization of 1.4 billion people spanning almost 5,000 years can or should be contained seems misguided at best. An America that learns to leverage its strengths and work with a rising China seems to me more likely to be on the right side of history than an America hell-bent on winning at all costs, global stability be damned. One might think that no country should be more anti-China than Taiwan, but even TSMC is deeply wary of the Biden administration's semiconductor export controls against China. Friend-shoring might seem like a nice idea but it ignores the reality that countries like Japan, Taiwan, South Korea, the Netherlands, Germany, etc. ultimately have their own self-interest to consider. Others don’t exist merely to maintain American preeminence.

Ultimately time will tell how things shake out, but I'd like to offer up the thesis that an America that pushes too hard risks isolating itself more than it isolates China. There's already talk about how allies like Japan or South Korea might work to develop supply chains free from American technology in response to American sanctions. It's very possible that American sanctions pushed to the extreme will result in the development of America-free supply chains more so than China-free ones. For instance, recent articles have pointed out that Huawei 5G small base stations now contain only 1% US components. About half of the components are from Chinese companies and the remainder are presumably supplied by American allies.

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Excellent post. China, which is on the other side of the world, is no threat to the American nation or people. It’s a threat to American hegemony, which is a different thing.

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RemovedFeb 2, 2023·edited Feb 2, 2023
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American hegemony/imperialism isn’t going away because the US may not need to import as much oil. Empires try to continue to exist regardless.

The promotion of democracy or women’s rights isn’t actual the role of the US, and that’s just ideological fodder for the masses anyway.

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RemovedFeb 2, 2023·edited Feb 2, 2023
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Someone named Yan Shen sides with China against America. Lol. That's a point against Noah immigration ideas. Anyway, all your talk is irrelevant. The US and China are in competition, and the number of people in China or its long history is not going to change any of that.

The idea that China is not a military threat to the US is ridiculous. There is a high probability that China will attack Taiwan, and there is a high probability that the US will defend Taiwan if that happens, then war between US and China. The idea that it is smart for the US to fund and help develop the technology of its potential wartime enemy is preposterous.

The notion that US allies disagree with the US position against China is also absurd. Japan is starting to rearm because an aggressive and imperialist China is a threat to them, in fact a direct threat to their homeland, much more than the US homeland. Australia is also not happy with the idea of China's hegemony in the region. Taiwan obviously depends on the US for its independence, and Europe is less than happy with China supporting Russia. Yes, there are differences of opinion and interest in the Western alliance, but nobody there wants to see China expand without being checked by the US.

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It's really because there is a vast, bloated and very effective lobbying organization that former President Eisenhower warned us against: the military industrial complex. During the Cold War they spread fear using propaganda about things like "the missle gap" to get public support to boost military spending. Then when that didn't work anymore they invented the "Global War on Terror" which blew through about $5T in taxpayer dollars and didn't accomplish anything. No one is afraid of Muslims anymore so they need a new adversary.

When the Cold War wound down, military spending dropped. It was the first time since WWII that spending dropped and it was a real hardship for the industries and political elements that depend on it. After about 2013 or so, military spending started dropping again, so a new enemy needed to be invented to boost the military economy.

Now the electorate is not completely foolish, so there has to at least be a thread of truth to the claims that they push upon the American people. It is certainly true that China's economy has grown fast enough to be a significant economic rival to the United States. And it has a much larger population. It is perfectly reasonable to call them our rivals.

But it's kind of silly to think that China is some kind of existential threat to the United States. There is no way they can project power half way around the globe, much less support a large military in the Western Hemisphere, such as we did in Asia (at great cost to ourselves economically) during the wars in Iraq and Afghanistan.

I think that our real strength lies in our economic prowess, not the size of our fleet. We won WWII pretty quickly once we ramped up production. To the extent that military spending is a dead loss upon the economy, it weakens us. Some of the spending is fruitful, particularly in R&D, and we should probably continue that. There are roughly 750 US foreign military bases; they are spread across 80 nations. China has three. We should try and spend our military budget more efficiently, not just throw more money at it.

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How impervious to facts do you have to be to believe that the world is not a dangerous place after Russia just launched a war to try to rebuild its empire in Europe? The other thing that the Russian invasion demonstrated, not that people didn't also know this, is that what you start with in a war matters immensely. The US will not be able to out-produce China after the war starts.

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China pulled the mask off long ago in Tiananmen Square, it has not changed course since.

We are in agreement with the need to keep our allies afloat, both economically and under our secure military umbrella. America needs to restrain itself, gain a sense of perspective, and do what is necessary to insure that both America and its allies are strong economically and remain so.

According to a a pair of demographers, each a pair themselves, by 2100 China's population will be under 1 billion, that should do enough to give us some space going forward.

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FWIW, it seems Sony (and probably Nikon and Canon) are moving their camera production out of China to South/Southeast Asia. Prior to late last year, all my Sony stuff was made in China, but the latest version of my main camera was made in Thailand.

Also, while previously most stuff I had ordered from Land's End was made in China, the most recent three (two shirts and a hoodie) were made in Cambodia, Bangladesh, and India.

I submit that the move away from China is happening faster than you think.

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Yep, this will be a topic of future posts... :-)

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Feb 1, 2023Liked by Noah Smith

Great post. If we rewind the clock back to the 1990s leading up to China's entry into the WTO in 1999, who in the American political sphere was strongly advocating for unrestricted free trade with China? Was it large corporate interests, ala Wal-Mart, or globalists who believed that China would liberalize as it became integrated with the global free market, or some combination thereof?

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Well, Wal-Mart is a thing that exists and as the No. 1 retailer did more than any other company to squeeze margins out of its suppliers, who chose to offshore production to China or else lose access to Wal-Mart's shelves and market share to a competitor who would've offshored production to China anyway.

And liberalization was always a canard. Kayfabe. Like the hunt for WMD in Iraq. American businesses, and the Washington Consensus, saw China's entry to the global market as purely transactional. They were negotiating with the Chinese government -- was the other side going to embrace an economic doctrine that was openly calling for its replacement?

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Ideology is downstream of profiteering

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Last I checked, Vietnam is still a communist country. Offshoring to Vietnam has nothing to do with supporting democracy. The US is playing protectionism. Period. You are trying to compete with the 2nd largest economy(China) with protectionism. Free trade is dead. WTO is dead. Shifting manufacturing from China to other countries still won't bring manufacturing jobs back to US. In the end, even the dirty strategy may hurt the Chinese economy but the US will gain nothing from the game.

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When NATO was founded in 1949 it included then-fascist Portugal as one of its founding members.

The US would support offshoring to Vietnam because they view Vietnam as a potentially useful ally against China: remember that Vietnam resisted American imperialism for over a decade, it resisted French imperialism for close to a decade, but it has resisted _Chinese_ imperialism for millennia.

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Admirable self restraint in saying nice things about people who say idiotic things.

I'd just add that there is no need to attempt to de-Chinafy all our imports. Not everything is strategic. Our beef is with the CCP not the guy on the teddy bear assembly line.

And are subsidies necessary to execute a friendshoring strategy?

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I would like to think that I can disagree with my friends without thinking they're idiots! Nobody gets everything right, including me!

And yes, I agree about China. That's a topic for an upcoming post...

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Oh, and subsidies aren't necessary, but they help.

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Admirable! No kidding!

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I hope that means pointing out that the world can still benefit from trading and exchanging intellectually with China notwithstanding the CCP. "Decoupling" ought to be narrow and well targeted and aware of costs to ourselves of our actions. Perhaps subsidies are a way to be target better.

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My own theory of the world is that manufacturing powerhouses become the major powers; from the British (workhouse of the world), and European empires, then post war the Soviets and the US, and now China. Losing manufacturing reduces GDP growth over time, as productivity increase in services is harder to achieve. Manufacturing societies historically dominated the seas, and have gone to the moon. They give the managerial and worker the transferable skill sets to build to build the weapons the powers need for war, the ability to turn ploughshares into swords, or rockets.

There’s a generational lag, the US was bigger in GDP than Britain pre war, when it had a comparatively tiny army, despite having a large manufacturing base. Eventually though power transfers to the countries with the largest economies, particularly those where manufacturing dominates.

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I think GDP is a stronger measure here. Logistics, IT, managing complex organizations - these are skills that are a really big deal for winning wars and don’t obviously fall into the manufacturing base bucket as well as simple GDP. Could be convinced economic complexity (so Russia power is overstated because of its oil wealth) is a bit better.

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I'd just differentiate between manufacturing and manufacturing employment.

And there is always the future. Maybe the group that first cracks raising the productivity [TFP really] of services will the the superpower of the 22nd century.

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Ro Khanna says plenty of idiotic things, not just about free trade. He even says there are authentic homeopathic drugs that the FDA should approve.

https://twitter.com/reprokhanna/status/1433939541610618881?s=46&t=iaLn8mIDcLDiUMHAnoSY9Q

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Feb 1, 2023·edited Feb 1, 2023

I'm certainly not any sort of expert on these issues, but the idea that we can somehow magically erase China from international supply chains strikes me as wildly naive at best. The issue isn’t just moving American or Korean or Japanese production out of China. The issue is also preventing Chinese components and technology from being part of a non-China global supply chain.

Chinese battery companies make up over 55% of the global EV market. CATL alone makes up more than 1/3 of the global market for electric vehicles and supplies batteries for companies like Tesla. Tesla’s Shanghai plant is a paragon of productivity and efficiency and has played an integral part in the company being able to hit its global production quotas. In fact, the Shanghai factory has been so productive that Tesla is bringing over engineers from Shanghai to their Fremont factory in an attempt to bolster productivity in California. How does all of this fit into the notion that we need to friend-shore and isolate China entirely?

It'd certainly be nice if every country in the world apart from evil ones like China, Russia, North Korea and Iran became vassal states to America, completely subjugated their own self-interest to that of ours and existed for the sole purpose of propping up American preeminence vis-à-vis China. But at the risk of coming across as flippant and crude, which certainly isn't my intention, it’d also be pretty nice if Taylor Swift, Scarlett Johansson, Anna Kendrick, Jennifer Lawrence, Anya Taylor-Joy and Gal Gadot suddenly found me to be the most irresistibly attractive man in the world and decided to come over to my place to have a sevensome.

I guess only time will tell what’s possible and distinguish between the plausible and the fantastic.

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Feb 5, 2023·edited Feb 5, 2023

Well I think that's why he was emphasizing friend shoring - much easier to get other countries to play along with the US China strategy if we make it clear that we will offer benefits and won't just screw them over with protectionism.

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Granted, you were not necessarily going through the actual specific subsidies here (which I regrettably am in the weeds on) but saying we need to give all of the tax credits, presumably including production tax credits, to foreign produced items is a “wut, LOL” moment for me. Quoting: “ We need to negate that advantage by offering Japan and Korea full access to the U.S. market, including all the same tax credits that we give to domestic producers. Otherwise it will look like the U.S. is the kind of country that hangs its key allies out to dry. And that is an image we absolutely can’t afford.”

A few points:

1. If it’s an image we can’t afford we’re going to be declaring bankruptcy because the political route to do this is very close to zero probability, at least for the next two years.

2. The consumer tax credits on things like EVs have very plausible arguments that they should apply to non-North American produced vehicles, but regarding the vast bulk of other subsidies - they are not consumer credits, but paid to the company which (presumably) has US tax liability to use them. Giving tax credits to a foreign company, doing the work in another country, booking income in the home country, and paying the bulk of its taxes in another country is not only politically difficult, but economically bewildering to me. Someone would have to convince me that this is remotely efficient and wouldn’t result in XYZ, Inc simply becoming an entity that has two business lines in the US - manufacturing and selling tax credits into the financial markets, with US taxpayers footing the bill issuing credits for items that likely would have been made and sent here anyway except for a small marginal adjustment.

3. It’s a small thing, but although the free trade country sourcing provisions for the EV credit have all sorts of issues - it is the ONLY pro free trade thing I can think of being legislated in recent past. It’s actually led members of the EU, Japan, Indonesia, some African nations, to start asking “what if we revisit those efforts”... Even Yellen has said as much, and floated the idea of reconsidering agreements with Europe and others, while bipartisan members of Congress have raised secure lithium and copper supplies as urgent reasons to support renewing the (soon to expire) Chilean trade treaty. It’s definitely swimming against the tide, but I’ll take small small victories.

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I mostly agree, with the major caveat that one significant difference between “Cold War II” and version 1.0 is that last time the US didn’t have a domestic version of the “enemy” ideology that could take over the country.

Joe McCarthy was a demagogue, but he was at least aimed at the US’ stated adversaries.

Now, Trumpism/Putinism/Xi-ism are the other camp. The call is coming from inside the US House. Literally.

No less than Tim Snyder has said the Midwest was fertile ground for Trumpism because of deindustrialization. Isn’t reversing that the bet Biden is making, not sticking it to South Korea or France just because?

If the US is just another pole in the world, than the concern between allies and friends over socio-economic and political health should be mutual. We also have a duty to fight Trumpism here and not inflict it on our allies and friends again.

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That’s totally confused. There was a world communist ideology which was clearly the “enemy”. This was even more true in Europe. Meanwhile Putin and Xi have no exportable ideologies, and the idea that trump is in hock to these non existent ideologies isn’t even worthy of a response.

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Xi literally developed a state-mandated personality cult. Xi Jinping Thought is a throwback to Mao, whose Thought ended up killing tens of millions through famine and state-sponsored terrorism. Besides ideology, the One Belt One Road initiative was China's efforts to promote an infrastructure diplomacy and bring nations into its sphere of influence.

Putin has an ideology, developed by Alexander Dugin. It's far right, but Dugin purports that he theorized the Fourth Political Theory. Steve Bannon is a friend of Dugin's and has through his brief stint in the Trump White House plugged himself into ultranationalist movements throughout the world. Orban, Erdogan and Lukashenko have applied his ideas in their respective governments.

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Seems to throw doubt on the whole idea of a broader conflict, then. In which case, what's wrong with protectionism? After all, it was the dominant economic paradigm of the US from the 1790s to the 1940s, far long than any other.

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Because in pure economic terms, protectionism doesn't work as well as free trade.

Now economic growth has to be balanced against national security, which is why we're talking about delinking with China. But there's not nearly as persuasive a national security argument against trade with Australia or Europe or the Phillipines.

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The problem is that “buy American” isn’t just just about nationalism, it’s also about social class, regional resentment, and national stability. Fairly or not, American establishment has gotten a reputation for the last 40 years of destroying jobs of the working class in Ohio to enrich professional class people in in New York and LA. This is one of the greatest factors leading up to Trumps rise.. rebuilding trust in these communities, and the high cost of having lost that trust should has lead me to be a lot more sympathetic to protectionism even if I know it’s makes little economic sense. What’s the point in keeping South Korea and Japan happy to protect democracy if we lose Wisconsin to authoritarians?

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Economists love to say this and that doesn't work because their model says so, unfortunately in the real world your models are useless. Assume we have a can opener. Down here in Oz we are having the same argument, pollies left, right, and centre are saying we should make stuff. Now, that doesn't mean we will but it is worth the conversation. The pandemic showed just in time supply chains and management that had cut every last cost out of their businesses to fuel share buybacks were left exposed and needed to be saved by the big bad government. Do you buy insurance? I do, why don't we have the ability to make stuff if we need to, and why don't companies (and governments) have enough things on hand if the world turns to shit again

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Because it's really fucking expensive and that means everybody would have to reduce their SoL.

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Also FWIW, "semiconductors" are complicated. The latest greatest fastest whizz-bang chips from the latest fab aren't the ones in your car, or anything else (except, maybe, your cell phone, and even there, not really). The problem is that most "semiconductors" are made on fab lines that used to be latest greatest fastest whizz-bang lines, but now have been depreciated, so chips from them, while comparatively low-tech are almost free. But keeping a depreciated fab line going is still pretty serious high-tech, even for a line, say, 10 years old. And you can't really build a 10-year old technology fab line new. Thus the whole game is flaky. So far, it's not imploding on us. So far.

Also, "semiconductors" are made in two steps: the fab lines themselves and the packaging process. Those semiconductor packaging plants are pretty high tech themselves, but since corporations hate paying salaries, they tend to be in low-wage countries. China and the Phillippines come to mind, but my knowledge of where those plants are is out of date.

Anyway, I get nervous when people say simplistic things about semiconductors. Said simplistic things might not be actually wrong, but...

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So, given that it's all about EV and batteries... Cold War 2: Electric Boogaloo?

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In the first Cold War, we wisely realized that when allies like South Korea and Japan and France got rich, it made the U.S. and the world more secure.

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Great post, but not nearly deep enough consideration of India—it will be the biggest, and also politically not as committed to democracy as we thought.

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Why do you think so? Certainly India has certain authoritarian tendencies and lots of internal conflict that could cause issues but the same can be said of the US.

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I'm no expert, and would love to read more on the topic -- but my basic understanding is that BJP is more consistently dominating elections, and getting stronger. Further, India could have joined the US in punishing Russia for its invasion of Ukraine, but has undermined the US's sanctions regime. My naive understanding is that in the 80s and 90s, India was just a much more reliable ally and taken for granted as a secular, liberal democracy. For a country of its size and strategic importance, I just think the complexity needs a closer study, and risks of non-alignment need to be considered more carefully. But, maybe my skepticism is misplaced! Would love to learn more deeply on the topic.

It's a fair point that the US is trending in the wrong direction, too, but the balance of power between the two major parties has been keeping the less-democratic tendencies at bay, more than the BJP gets. In the US, social media bias is met with outrage and scrutiny. Not so much in India....

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Fair points, although I dont weigh India's fence sitting vis a vis Russia vs Ukraine very highly because frankly I get their POV as far as their interests are concerned.

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If you start from the premise that China is a military threat to overwhelm the world's developed democracies, in part because it's "so much bigger" than the US, then the rest of your discussion rests on quicksand.

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Well I think the premise is that China wants to change world institutions in ways that we don't like, as proponents of liberal democracy (in the broad sense). China being 'so much bigger' means this will be hard to stop.

As for military threats, China is clearly a threat to at least one allied developed democracy - Taiwan.

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