How The Heck Does Wilbur Ross Think The Chinese Economy Works?

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Wilbur Ross has made a larege fortune in business. This does not mean that he understands how trade works. Good evidence of which is his insistence that China should sign large and long term deals to purchase American goods in order to close the trade gap. The problem with this being that it’s not actually China that trades with the US. It is people located in China who trade with people who happen to be in the United States.

So Wilbur m’lad – you’re going to insist that the Chinese government force private citizens buy American, are you? Actually, yes, that is what it seems he is arguing:

BEIJING—U.S. and Chinese trade negotiators are haggling over how to get Beijing to carry out recent promises to purchase more American farm and energy products, with Washington pushing for long-term contracts that Chinese officials are reluctant to commit to.

He really just doesn’t seem to have grasped this basic point:

Ross, who was preceded in Beijing this week by more than 50 U.S. officials, was expected during the two-day visit to try to secure long-term purchases of U.S. farm and energy commodities to help shrink a $375 billion trade deficit with China. U.S. President Donald Trump has demanded that China take steps to reduce the gap by $200 billion annually by 2020.

Purchases by who Wilb?

Imagine this the other way around. Would any American politician – even one appointed by The Donald – seriously consider a suggestion that the Federal Government tell private citizens who they must sign contracts with? Yes, we do accept – wrongly but we do – that government gets to tax people who make the “wrong” decisions with tariffs and so on, we even agree they can ban contracts with sanctions, but we do not even conceive that the Feds get to tell Ford to buy their steel from this or that foreigner now, do we?

So, why this insistence running the other way? Because, my conviction is, Wilbur just doesn’t understand that countries don’t trade, people do. We can even prove this contention. If Ross did understand that it is people who trade with each other then there wouldn’t be all this concern about the trade imbalance, would there? Because it doesn’t matter how many of the people are in China or not in China, does it, as it’s not the nations trading with each other. QED.

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Rhoda Klapp
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Rhoda Klapp

And countries don’t have trade deficits with other countries then. And only people, or maybe stop dividing it at households, have deficits between money coming in by selling labour and money going out for goods bought. To used any other granularity is to allow the suggestion of a town, county, tribe or whatever having a trade deficit. All such deficits being with the world, not with any smaller entity.

Southerner
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In the sad tone of Galileo muttering “And yet it does move,” I must point out that when there is international (inter=between national=national) trade, money moves across borders.

Grikath
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Grikath

Trumpet demands? Interesting.. There’s delusional.. and whatever goes on in the mind of Trumpet.

Grikath
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Grikath

Trumpet demands? Interesting.. There’s delusional.. and whatever goes on in the mind of Trumpet.

Spike
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Spike

Dr. Walter E. Williams often uses the example of his trade deficit with the supermarket: He buys a lot of stuff there, while selling them nothing. It seems reasonable to look at national aggregates, by way of defending the dollar, but dollars always return to the US (directly or through third countries) (in physical goods reflected in the “trade deficit” or through purchase of bonds or other investments–essentially “buying” the stability of the US). No one in government knows whether it is better that China buy American potatoes than buy American farms. Ross’s boss notoriously defends the preferences of American… Read more »

Spike
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Spike

Dr. Walter E. Williams often uses the example of his trade deficit with the supermarket: He buys a lot of stuff there, while selling them nothing. It seems reasonable to look at national aggregates, by way of defending the dollar, but dollars always return to the US (directly or through third countries) (in physical goods reflected in the “trade deficit” or through purchase of bonds or other investments–essentially “buying” the stability of the US). No one in government knows whether it is better that China buy American potatoes than buy American farms. Ross’s boss notoriously defends the preferences of American… Read more »

Hallowed Be
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Hallowed Be

A large part of the economy in China goes through relatively small number of state owned enterprises. In theory their procurement policies can be tweaked. Perhaps that’s what’s being sought for here. No doubt they are already heavily tweaked to favour Com Par power politics and secure loyalties. But inso far as this is not a good thing for china in the first place, it wouldn’t be wise to load up another politically driven factor in the running of these businesses.

Hallowed Be
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Hallowed Be

A large part of the economy in China goes through relatively small number of state owned enterprises. In theory their procurement policies can be tweaked. Perhaps that’s what’s being sought for here. No doubt they are already heavily tweaked to favour Com Par power politics and secure loyalties. But inso far as this is not a good thing for china in the first place, it wouldn’t be wise to load up another politically driven factor in the running of these businesses.