Don’t Kowtow To China

Australia’s government recently called for an investigation into the source of the coronavirus epidemic, and China’s government responded by threatening retaliation. Australia may have been unwise in calling for the investigation (exactly what would be investigated, by whom, and for what purpose?), but they should not give in to Chinese threats.

China greatly benefits from trade with the world, and these threats are mostly empty:

In 2010, Beijing imposed restrictions on Norwegian salmon exports in apparent retaliation for the award of the Nobel Peace Prize in Oslo to Chinese dissident Liu Xiaobo — a move that cost Norwegian salmon exporters up to $1.3bn. And after Seoul agreed to deploy a US missile defence system in 2017, Beijing stopped travel agencies from sending tourists to South Korea, causing visitor numbers to almost halve in a year.

However, in both instances total trade with China continued to rise during the stand-offs and the targeted restrictions were eventually eased.

There is good reason to think Beijing’s implied threat of a consumer boycott of Australian goods and services may be overblown because of the disruption it would cause to Chinese companies’ supply chains and the shift in consumer behaviour that would be required.

After all, iron ore, gas and coal are all vital commodities for powering China’s economy. Beijing’s reliance on Australian iron ore mined by BHP, Rio Tinto and Fortescue grew from 40 per cent in 2011 to 60 per cent in 2019 and continuing supply problems experienced by Brazil’s Vale make it almost impossible to supplant.

The best way to handle China is to remove all trade barriers against China. Remove all barriers to Chinese investment, except perhaps defense contractors. Remove travel bans with China.  Give the Chinese people a big hug and dare the Chinese government to cut themselves off from the rest of the world. They won’t. But don’t refrain from speaking out against Chinese practices when appropriate. Don’t cower in fear.

Similarly, the rest of the world should stand up to US bullying. Don’t give in to US demands that they close tax havens as long as the US is the world’s largest tax haven.  Keep trading with Iran and Cuba. Welcome investment from Huawei. If the US government threatens to go sit in the corner and pout like a spoiled brat, let it.

This caught my eye:

Shelton’s views on the Federal Deposit Insurance Corporation have also drawn criticism. In her 1994 book, “Money Meltdown,” Shelton advocated for ending federal deposit insurance, which most economists credit with restoring faith in the banking system following the Great Depression. Shelton called it a government subsidy that distorted financial markets. “Depositors no longer have to make judgments about the competence of bank management or the characteristics of the loan portfolio,” she wrote.

She’s right. And then this:

“I totally support federal deposit insurance. We’ve had it since 1933. I think it’s essential to reassuring depositors that they can safely put their money into American banks,” Shelton said. She added that she wasn’t even certain where the idea came from that she opposed the insurance.

That’s why I could never, ever, ever hold an important position in government. I strongly oppose FDIC, and always will. (Not that I’d ever be nominated.)

BTW, here’s what life is like in Hong Kong, a place that took the coronavirus threat seriously and never had to close its restaurants:

Today social distancing measures were relaxed after authorities reported no new locally transmitted cases for a 16th consecutive day. Bars, gyms, beauty parlours, cinemas and other entertainment venues will be allowed to be reopen on May 8. A strictly enforced limit on the number of people allowed to dine together in restaurants will be also increased from four to eight people.

And this:

As local transmission has all but stopped, health authorities are relaxing some restrictions. Taipei reported one new imported infection on Wednesday, but it has not seen any new local transmissions for 24 days.

This is also good news:

Disney closed Shanghai Disneyland and Hong Kong Disneyland in January, Tokyo Disneyland in February, and its U.S. and France parks in mid-March. All Disney parks in the world remain closed right now.

But Disney sees light at the end of the tunnel. Disneyland Shanghai will reopen on May 11, “in light of the lifting of certain restrictions there in recent weeks,” new Disney CEO Bob Chapek announced on the Q2 earnings call.

Nice to know that at least some parts of the world are doing well.