Made In China

China versus USA: Piracy on the High Seas of International Trade

While Thomas Jefferson was negotiating with France over the Louisiana Purchase, pirates operating out of Tripoli (now Libya) were menacing American mercantile ships in the Mediterranean – imprisoning and ransoming crews — and impeding the expansion of American trading relationships with Southern Europe.

Expanding global trade was imperative to the survival of the Republic.

In their book Thomas Jefferson and The Tripoli Pirates, authors Brian Kilmeade and Don Yaeger offer an engaging account of America’s first response to piracy on the high seas.

President Jefferson sent the US Navy and Marines.

Supported by Congress, Jefferson took major risks — ranging from the bombardment of Tripoli to the Trade Embargo of 1807 — to establish the RIGHT of American merchants to trade anywhere at any time without fear of assault by pirates or the British Navy. https://www.monticello.org/site/research-and-collections/embargo-1807

USA Founded on Principle of Trading Freely

Profitable trade has driven American economic development since the first European settlements.

For the next +/- 150 years, the colonies traded abundant natural resources (animal furs, lumber and fish) and commercial agricultural products (cotton, tobacco, molasses, sugar) for manufactured products and luxury goods (silk, tea).

More than 20 percent of North American trade was carried by ships built and owned by colonial merchants by 1773 — when the Boston Tea Party previewed the coming rebellion.

The British government should have taken note.

The seeds of the American Revolution were spread in reaction to British trading policies these merchants considered oppressive and confiscatory.

The British East India Company imported tea from China and sold it in the colonies — forbidding colonial merchants to engage in direct trade with China.

Not long after the Revolution the Stars and Stripes flew over the Canton, China harbor.

Our early trade with China was lopsided, corrupt, and tightly constrained by the Chinese Emperor — not very different from our trade with China today.

How China Plays by Different Rules

Since World War II, American trade policy’s been built on the assumption that strong trading relationships lead to strong friendships, a “level playing field” for expanding trade, and a strengthening global middle class.

A middle class opposed to war and eager to buy American manufactured and agricultural products.

China and the United States resumed trading after a thawing of relations during the 1970s.

Rather than level the playing field – American concessions as acts of “friendship” — tariff reductions — cost jobs.

But there’s no reciprocity from China. America imports 91 percent more from China than it exports to China.

China’s emerging middle class has shown a willingness to pay for quality American made goods but their government continues to protect Chinese businesses from foreign competition.

China’s global power house factory system was built on what the World Trade Organization often finds to be unfair trading practices: erecting barriers to some products  and “dumping” others.

Apple Inc. Suffers Chinese Trade Piracy

For example, CEO Tim Cook argues Apple cannot manufacture iPhones in the United States because wages for Tool and Die Makers would add 40% to the cost of iPhone.

The facts are different. The manufacturing cost difference would be about $2.50 for every $700 retail phone

The real reason – China requires products sold in China to be made in China.

China is Apple’s largest iPhone market.

But acquiescence has not protected Apple from Chinese trade piracy.

Just last week, Chinese Courts ruled that a Chinese (defendant) firm can manufacture and sell worldwide goods stamped with the iPHONE logo and the internationally recognized registered trademark symbol (“R”) without a license from (compensating) Apple. http://www.bbc.com/news/business-36200481

Counterfeiting goods is big business in China.

It is government sanctioned 21st century piracy!!

The Real Reason Behind our Murky Relations

With such an abysmal record on trade, why is China is still a “most favored nation”?

Why are China’s military provocations in South China Sea, cyber assaults on our government agencies and overt military spying met with pronouncements of concern rather than actions of real consequence?

Easy: China holds nearly $2 Trillion – 1/3 of the total US Debt in foreign hands.

We Must Retool Our Assumptions about China

President Obama and his successor – whoever she or he may be – must make clear to China bilateral trading relationships and genuine friendships are not necessarily the same thing.

We trade with nations we do not consider friends – for example Vietnam or Russia.

BUT – we do favors – eliminate tariff barriers – only for our friends.

The United States economy – troubled as it is – is still the largest economy in the world. (http://www.investopedia.com/articles/investing/022415/worlds-top-10-economies.asp)

If China doesn’t sell their goods to the United States who will buy them?

If China does not buy US Treasuries where will they safely invest their dollars?

We have economic leverage. Chinese outrages have stirred the administration but quick, bold trade renegotiation is required.

China should have no doubt we remain committed to eliminating any and all piracy.

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