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US trade policy appears to be a scaled-down version of the Chinese trade policy, granting or withholding access to customers to achieve some profit or principle.

You and Me Against the World

Customers — buyers of manufactured materials and goods, but also individual consumers … us — are being negotiated: Will we gain greater access, or will we lose more autonomy? More important, will the negotiators see us as products to be evaluated? Or as assets to be protected.

Last year U.S. manufacturers — including forgers — were effectively split about the new turn in domestic trade policy, which seemed to start by aggressively challenging all foreign-made products, but eventually (through negotiation and some moderation) was revealed to be a restructuring of multilateral trade principles and a reassertion of bilateral arrangements. Even this does not stand out as a new policy, because the U.S. maintains participation in multilateral arrangements, like NAFTA partners or the European Union..

We may conclude, however, that the 2018 phase of these developments was intended to put China in a corner and to force some new discussion about how that country’s trade polices affect U.S. manufacturers. We can conclude that because the bilateral negotiations with China commenced rather quickly after the imposition of U.S. tariffs on various Chinese manufactured goods — especially steel and aluminum. Those negotiations are ongoing still.

Tariffs were a boon to U.S. steelmakers and a blight to manufacturers (like forgers) who buy steel.  Domestic steel producers thrived in 2018 under the cover of tariffs — increasing annual output by 6.2% to 86.7 million metric tons (95.6 million short tons.) These producers of course are thrilled by the tariff policy, and the President understandably took credit that the move “totally revived our Steel Industry.”

But the tariffs did not, apparently, inflict the intended punishment on Chinese steelmakers. According to the World Steel Assn. 2018 statistical summary the Chinese industry — which by capacity is essentially equivalent to the rest of the world combined, and which is the object of constant manipulation by central planners trying to manage industrial development — increased its 2018 year-over-year output by 6.6% to 928.3 million metric tons.

China’s steel industry is too big to fail: Every other nation’s steel industry (as well as the technology and raw material suppliers, brokers and analysts) operates in reaction to it. And Chinese leaders are not going to surrender the advantage they have built in global markets simply to smooth over a dispute involving access to U.S. forgers and other manufacturers. We know, too, that Chinese policies will seek to protect the viability and longevity of other domestic industries, even at the expense of workers’ compensation and safety. In Chinese trade policy, a good offense is the best defense against other nations’ objections. 

Apart from the President’s satisfaction with U.S. steelmakers’ 2018 results, we cannot yet know what the current trade policy: Are steel and aluminum alone among the U.S. manufacturers to be defended?  What is the policy for manufacturers who pay the premium for this defense?

As noted in 2018, where you stand on tariffs depends on where you sit in the manufacturing supply chain. Those who benefit from tariffs see the value of the policy; those who endure the mark-up see the virtue of free trade.

What is clearer now than last year is this: U.S. trade policy is simply a scaled-down version of Chinese trade policy, as two authorities seek a bilateral understanding about granting access to customers within their respective control, to achieve some profit or principle.

Customers — buyers of manufactured materials and goods, but also individual consumers — are what these negotiators are bartering. Will we gain greater access, or will we lose more autonomy? More important, will the negotiators see us as products to be evaluated? Or as assets to be protected.

We have progressed  beyond “globalism”, the period over the past 30 years when national and regional markets became accessible to producers and consumers everywhere. Now, economic growth is not happening globally, but granularly. It’s you and me against the world.

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