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Letters from Down under

Trade Tsunamis

Submitted by Lindsay
Melbourne Australia!

(4/2018) Recent studies have shown that fake news has more readers and believers than the real stuff. Social media is largely to blame, yet in the scheme of things it doesnít matter all that much. Fiction instead of fact has been the role of populism for many years, and is designed to sell copy. (In your commercial society selling news and gossip is the only reason for existence - advertising pays.) Outside of local and verifiable news the actuality doesnít matter, because itís beyond our control, and we have learnt to live with it all our lives.

It is only when reality draws blood that we sit up and take notice, when we start forming protest groups, petitioning our representatives and marching, flags waving for all to see. When the reality of the decline of the middle class bites, when increasing real poverty is ignored and social isolation brings depression, addiction and suicide then a backlash against the establishment occurs and a maverick saviour emerges. With enough luck and appropriate circumstances, the unlikely event of becoming president emerges, whether or not heís a rogue, liar, cheat, misogynist and bigot. When he is not fazed by convention or protocol we have the larger than life President Trump.

He began as a wild bull in a carefully managed china shop, threatening and blustering, yet he seems to actually have more awareness of the dangers facing the country than his predecessors. Diplomacy, under his erratic proclamations, has taken a rougher edge, a Ďtake it or leave ití show of indifference to the hard cases that have dominated international relations.

Not just international things, of course, but anyone who dares disagree with him, or accuse him of behaving badly, even illegally. That makes him an intelligent megalomaniac, but he certainly doesnít care, he has a vision - yes, dark and self-serving - but one he will not give up. So Import duties on steel and aluminium are introduced not because they will benefit the country, but because they will keep the faithful in line. That his allies and friends are aghast is pointless. Tell the world that every country that manufactures those products will feel the heat of increased tariffs and then slowly take the important ones off the list shows how wise he is. And the faithful are duped again.

If he were to not do that then Canada and Mexico would retaliate with all the punitive measures they could, allowing their cheaper production to flood the markets around the rest of the world. China would breathe fire, predict ruin for all, but it would play into their strategy of dominating world trade, of replacing America as number one nation. Thereíd be trade wars, the economy of the world would suffer as his dream rolled on, and everyone would be caught in bipolar uncertainty.

But all that is only a diversion. The real war is far more serious, far more likely to wreck your economy, way of life and prosperity. Called Intellectual Property Theft, (IPT), it is not waged on primary production, but on everything from high-tech electricals to low-tech sneakers. It is the oldest trick in the book, of taking something already made which has become a high volume product, then copying it cheaply and selling it as genuine. The Chinese even have a name for it Ė original copies Ė and they have made it a business more valuable than everything else combined.

How valuable? The New York Times estimates that the cost to the US is about $600 billion a year, with China responsible for the great majority of it. Over the many years this has been done the cost is in the trillions, far more than could ever be lost on steel or aluminium.

The strange thing is that there is legislation in place to combat it. Itís not secret, itís been discussed for years, ever since the cold war, when protectionism was at its height, but never applied. The consequences have always been seen as devastating and unpredictable, but President trump is now seriously considering implementing them. Itís called section 301, and has a number of measures that can be used against a trading partner who is seen to be harming US business interests.

Sanctions, import quotas, tariffs, blocked take-over provisions and anything else that could be thought up can be used, and It allows a neat sidestep of WTO rulings prohibiting some of those things. The $130 billion of electrical goods China sells to the US each year dwarfs the $2 billion of steel, and is a major factor in the trade deficit you have with that country. This has grown steadily since the 90ís, running at about $60 billion a year for the past ten years. In this time Chinaís trade surplus has climbed from near zero to an average of about $40 billion a year.

It is not only China adding to the US deficit, of course, but in President Trumpís first twelve months it climbed to $665 billion. Itís impossible to estimate the IPT component of this, but it is very considerable.

You may not think you are adding to the problem when you buy a pair of say Converse sneakers or a Rolex, but it is quite possible. To do business in China you may well be forced to transfer intellectual property rights to them, which is, in fact, a kind of tariff, and retaliation is now being seriously considered. If section 301 is invoked the world would enter into unknown territory, with rolling trade wars, unpredictable stock exchanges, manufacturing in disarray, and raw material suppliers such as Australia a cot case.

Will this happen? Who can tell, but it would need more than policy by tweet to manage it. Atomic bombs devastate everyone in the immediate vicinity, but implementing 301 would have universal and longer lasting effects. America and China would be facing off in the biggest war of all time, a tsunami of stark reaity that would engulf us all.

Read Past Down Under Columns by Lindsay Coker