US Government Escalates Trade Hostility

The United States government initiated at least two escalations against Chinese communications company Huaweii. These escalations are troubling. 

One escalation is the imposition criminal charges against Huaweii for intellectual property theft. The problem with this process is that it is not the way we do business in the United States when an American company disputes property theft against another US company. Almost all litigation is civil, not criminal. The penalty is generally a monetary payment to the offended party. That is the method that should be used against Huaweii. If the government even has a case, it should be a civil case if the United States is interested in expanding business into China in the future.

A second escalation is the hard line both political parties took with Europe. This escalation could seriously offend the Chinese, because Europe agreed with the US point of view, while preferring dialogue instead of confrontation. 

Just as China is Rope-a-doping the US because of the onslaught of American hostility, so too is Europe Rope-a-doping the US, trying to stay on the good side of America while not wanting to go hard line with China as the US (both parties) has pushed for. China and Europe are hoping that the US punches itself out, as George Foreman did while fighting Ali in the Rumble in the Jungle.

US Hostility Toward China

Nancy Pelosi is in the news saying that Huaweii is from an authoritarian nation, therefore do not do business with them. Does she want to sound like Steve Bannon? Apparently so. This position is absurd beyond normal human comprehension. How about the Blue States stop doing business with the Red States or vice versa? Red States are racist. Blue States are Socialist. How do we manage to get along? 

 China has 1.4 billion people to feed and has a proven record of capitalist success. The World Bank has said 700 billion people have been brought out of poverty in China since the 80's. What does Pelosi want, mass Chinese starvation? Does she want a world recession? And Trump seeks to limit China by stopping delivery of GE jet engines to China. That policy has not been decided as of this writing.

Pelosi and the Democrats must understand that China is for free trade and for capitalism. While I would not want to live under one party, our two parties are pretty bad these days as well. An oligarchy in the USA is not that great. This is not what the Founding Fathers intended. We have free speech, but we had Diane Feinstein saying a few years back that free speech was a privilege, not a right. While I believe she has backed off since then, it was the oligarchy speaking. 

The US is turning against free trade and capitalism. Our government is interfering right at the time that China is prospering, and was on track to buy more from us voluntarily. But that was before the Trump trade war. The Coronavirus (COVID-19) will allow China some slack, as it may not be able to buy what all that we want to sell. Even big oil has said that we cannot provide the oil that Trump wants China to buy. 

There is no point in acting hostile towards China. Even Israelis have said that China is the future of growth and tech. The danger is that US businesses in China will be boycotted. Is that worth it? These businesses like Apple and Starbucks are trying to sell product to the Chinese, and yet our government is giving those companies grief. 

WTO and Europe

With the US escalating those two fronts, it also seeks to escalate in a third way by refashioning or leaving the World Trade Organization.

These escalations put Germany in a bad place as well. If China or the US were to take a hard line against Germany, that economy would face permanent negative growth. Because of German weakness, Europe is fragile to competing interests. Germany cannot replace exports of roughly 90 billion dollars yearly to China. 

The US could also face weakness through a two pronged tariff war with China and Europe. The Democrats would likely not pursue a tariff war with Europe, instead focusing on China. But they are over in Europe leaning on them to act against their own national interests. Pelosi leaning on Europe is based upon her hard line 2018 statement on China.

On top of all this, the US government is boasting about stopping the Russia-German gas pipeline. Again, this is interference in the affairs of Germany. I am no fan of Putin, but this is about pressuring a friend, Germany, to sell more liquid gas from America. Germany must be reeling from all this American hostility. The US government wants to make Germany, which is growing below 1 percent, even less efficient with high priced liquid gas. It makes no economic sense. 

The Libertarian Position

I am not a Libertarian. That does not stop me from agreeing with some of their economic analysis. Face it, the Mises folks are right about this:

Although the national trade account balance is a harmless definition, the government’s reaction to it can produce harmful effects. Government policies that are aimed at attaining a more “favorable” trade account balance by means of monetary and fiscal policies disrupt the harmony of the marketplace. This disruption leads to a shift of scarce resources away from the production of the most desired (by consumers) goods and services, towards the production of less desirable goods and services.
and:
No individual or group of individuals can suffer as a result of an “unfavorable” trade account balance. But suffering can emerge from a drop in the incomes of individuals because of government tampering with the economy.

Conclusion

In the words of Ozzie, we (meaning the USA government) are "going off the rails on a crazy train." As we face recessionary pressures, our government is interfering on many fronts with our trading partners, Europe and China. This will have the affect of lowering GDP for everyone. China is a massive nation, and has room for US business to compete with Chinese businesses in China. Europe sells more to China than we do because they probably sell preferred products. It is time for America to shut up and compete.