Paul Krugman: We need a trade war with China ?

[Ghent12]

This jumped out at me on the top of Google News.

http://www.telegraph.co.uk/finance/c...the-world.html

When the self-proclaimed "conscience of liberal America" and a one-time free trader to boot starts arguing for protectionism, you know that things have come to a pretty pass. But that's what's happened over the past week.

Paul Krugman, a Nobel Prize-winning economist, has taken to advocating a 25 per cent "surcharge" – he refuses to use the more descriptive term of "import tariff" – on goods from China as a way of bringing the Chinese leadership to heel over currency reform. So potentially dangerous and out of character is this idea that when I first read it, I assumed he was being ironic. But sometimes the cleverest of people can also be the most stupid, and he's now said it so often that you have to believe he's serious.

Well China has already had the first blow in in this trade war for quite some time. Retaliation, however, is probably suicidal.

[touchring]

Re: Paul Krugman: We need a trade war with China ?

Most people only consider the present. In my opinion, it is almost impossible for the world to avoid the fallout from China.

When the Chinese real estate and local government credit bubble blows, and building slows down, Chinese exporters will be dumping steel, cement, equipment, wires almost everything to the rest of the world. Before foreclosure, they might even be stripping wires from completed buildings for export. The banks will find themselves with bare buildings.

[c1ue]

Re: Paul Krugman: We need a trade war with China ?

Krugman continues to show what a moron he is.

Before - he could be said to be a principled moron - the principle being neoliberal free trade.

Now, he is just a moron. Sock Puppet of the FIRE oligarchy.

[Penguin]

Re: Paul Krugman: We need a trade war with China ?

Would this not serve to put him on the opposite side from the FIRE oligarchy? Capital flows, especially those being recycled into the US as a result of the trade imbalance, being a prime source of rent for them?

If you ask me, and TBH nobody did , the lack of principles occurred when China was allowed to enter into trade agreements with the rest of the world without being required to sacrifice their own import tariffs and to float their currency. Especially the latter as it has been quoted by the die hard free trade contingent as one of the feedback mechanisms that tends to balance trade over the long run.

I see the trade imbalance as the root of our current evils. Many of the ills we complain of can be traced back to our indifference to this issue. I have seen a couple very influential economists recently come out and question the assumption that free trade as practiced is good for America. A couple decades late perhaps but refreshing anyway. The assumptions made to prove that it would have been good for us have been shown to be non-existent as practiced.

I say either make the Chinese, and others, play fair or tear the whole thing stem to stern.

Will

[Munger]

Re: Paul Krugman: We need a trade war with China ?

Would this not serve to put him on the opposite side from the FIRE oligarchy?

It certainly would so seem. Unless you just like to rant against the "establishment," which seems to be the case for 90% of iTulipers.

In my opinion, Krugman's retionale (if anyone has actually bothered to read it) lines up with stuff I've seen on iTulip:

(1) China can't afford to get rid of its dollar holdings -- its assets would devalue and its economy would rapidly destabalize (i.e., when you owe the bank $100 it owns you; when you owe it $4 trillion, you own the bank);

(2) China will not let its currency float without pressure, and has for years rebuffed diplomatic efforts; a strong move is necessary to overcome.

But nevermind, FIRE, MSM, TBTB, blah blah blah. Have fun with that stuff.

[sunskyfan]

Re: Paul Krugman: We need a trade war with China ?

Well, it would make Wal-Mart prices rise %25 right off the bat. Is there anything is that place not made in China?

[radon]

Re: Paul Krugman: We need a trade war with China ?

Well, it would make Wal-Mart prices rise %25 right off the bat. Is there anything is that place not made in China?

The cash in the registers?

[Ghent12]

Re: Paul Krugman: We need a trade war with China ?

In my opinion, Krugman's retionale (if anyone has actually bothered to read it) lines up with stuff I've seen on iTulip:

(1) China can't afford to get rid of its dollar holdings -- its assets would devalue and its economy would rapidly destabalize (i.e., when you owe the bank $100 it owns you; when you owe it $4 trillion, you own the bank);

(2) China will not let its currency float without pressure, and has for years rebuffed diplomatic efforts; a strong move is necessary to overcome.

But nevermind, FIRE, MSM, TBTB, blah blah blah. Have fun with that stuff.

I'm curious about point 2. Would "a strong move" of this magnitude be the cause to produce the desired effect, or would it produce undesirable effects as well? What are the chances of it backfiring? My geopolitical economic history is a little fuzzy when it comes to trade wars, but in my mind they always seem to start when "a strong move" is made.

[touchring]

Re: Paul Krugman: We need a trade war with China ?

The cash in the registers?

In 15 years, you'll need to use gold instead of those to buy Chinese goods.

[Penguin]

Re: Paul Krugman: We need a trade war with China ?

What are the chances of it backfiring?...

Damned good chance.

Just as we have our powerful elites who have benefited from the status quo and wish to preserve it, so does China.

This relationship is toxic as it stands now. We allow our manufacturing base to be systematically dismantled and go deeper in debt to achieve and unsupportable lifestyle. They intentionally hold down wages and living standards in order to gain manufacturing edge. The whole thing is rotten to the core.

I don't know that this relationship can be rebalanced into a healthy one without pain. It isn't just the trade balance that must be rectified, our entire economy has mutated into one that is top heavy on government and finance. We disparage those who produce things as living in a 'pig iron' age mindset. We have millions upon millions whose livelihoods and careers are built upon a premise of white collar wealth that isn't realistic and we have treated engineering/science in such a way that we have trouble getting kids to embrace it as a healthy alternative.

It isn't just the trade balance that needs adjusting our entire mindset has to be brought forward into reality.

Will

[touchring]

Re: Paul Krugman: We need a trade war with China ?

Is there anything is that place not made in China?

I discovered you can even buy prefab apt blocks and houses made in China, packed in 40 foot containers.

http://www.alibaba.com/product-gs/22...Building_.html

[llanlad2]

Re: Paul Krugman: We need a trade war with China ?

China tightens stranglehold on rare earth minerals

Mining rights for the 17 rare earth elements will now be restricted to only a handful of Chinese state-controlled mining companies, according to a draft proposal submitted this week for approval to China’s State Council, or cabinet.

The move comes just six months after China - which produces 95pc of the world’s rare earth metals - capped production levels for 2010 and imposed a moratorium on all new mining licenses until June 30, 2011.


The increased restrictions, reported by the state-run Xinhua news agency, are likely to deepen international concerns that China is unfairly hoarding its reserves of rare earth metals and other key raw materials at a time of rising global demand.


The 17 elements from the middle of the Periodic Table are used in magnets, lasers, computer monitors, fibre-optic cables, cell phones, ceramics, stainless steel and are also essential for the on-going development of green technologies, such as low-energy light bulbs, wind turbines and batteries for hybrid and electric cars.
In a separate case, the US, the EU and Mexico has already taken legal action at the World Trade Organisation (WTO) against Chinese import restrictions on nine key raw materials nine key raw materials including coke, bauxite, fluorspar and magnesium.
With trade relations already fraying, experts have warned of the potentially damaging consequences of a further confrontation if developed countries now follow up with a WTO legal action against China’s rare earth metal restrictions.
Developed countries, including the US, are almost totally reliant on China for rare earth metals after years of cheap Chinese exports in the 1980s and 1990s rendered Australian and American rare earth mines uneconomic.
China says that its restructuring of the rare earth mining industry is intended to conserve reserves and maintain prices after years of over-exploitation that has damaged the country’s environment.
“Once approved, the Ministry of Land and Resources (MLR) will issue licenses and start allocating the resources to those companies," an anonymous official told the state-run China Daily newspaper, “Private enterprises can only collaborate with the selected firms through shareholding.”
Zhang Anwen, deputy secretary-general of the Chinese Society of Rare Earths, added that the new rules would “benefit the whole industry” after years of over-exploitation and improper management of the resource.
However a report prepared by the WTO for China’s two-yearly Trade Policy Review questioned whether China’s restrictions on the export of an increasing number of raw materials were legal under WTO rules.
The restrictions produced lower input prices for Chinese manufacturers, giving them a “competitive advantage” over firms sourcing on the world markets, the Geneva-based WTO secretariat said.
Metal industry analysts said the Chinese move on rare earth metals would push up prices in the short to medium term, but would also spur rare earth mining and exploration outside China, with the US, Australia and Vietnam currently looking at bring fresh deposits on stream.
“China is doing two things with this policy,” said Nigel Tunna, managing director of Metal Pages, an industry information provider, “they are protecting against foreign ownership of strategic resources and at the same time creating incentives for foreign companies to bring their manufacturing plants to China.
“The broad picture here is that the West has grown used to enjoying cheap raw materials over the last few decades, but is going to have to get used to the fact that prices will be going up as countries scramble to secure finite resources.”
The complaints against Chinese hoarding of raw materials comes against the background of a growing chorus of complaints for US and EU businesses and diplomats over China’s increasing use of back-door protectionism.
Both the EU and the US ambassadors to the WTO warned following the publication of the WTO report that China’s market liberalization had slowed appreciably over the last three years, despite frequent Chinese government protestations that it was committed to trade liberalization.
Michael Punke, the U.S. ambassador to the WTO, said liberalization began to slow in 2006 and had continued to worsen over the past two years. “China has demonstrated a highly selective interest in continuing to open its market more fully and fairly to foreign participation,” he added.
John Clarke, the EU Ambassador to the WTO said China had employed “a large number of non-tariff barriers and a burdensome regulatory process” in order to protect its own industries and prevent foreign business having equal access to the market place.
“We see clear signs of reform stagnation in China: one of the clear indications is the fact that we are raising today very similar concerns to those already expressed during China's last Trade Policy Review in 2008,” Mr Clarke said in his statement.