June 22, 2018

On China, Tariffs, Trade Wars and Intellectual Property

FoxConn factory workers in China (screenshot)

Vassar Bushmills

A little background to President Trump’s proposed use of tariffs to punish China, a background that most businessmen his age will understand, while many of more recent generations won’t.

China cheats and steals.

And has for as long as I can remember. And since Taiwan was equally as bad about intellectual property, especially in their bootlegging of copyrighted books, I’ve often pondered if it isn’t cultural.

During the Vietnam War we had a small military mission in Taiwan, which allowed for a lot of TDY travel to the island. Military who traveled there were given small handouts warning against buying bootleg books which printers there had copied, in really cheap print and binding, but still, for a NYT best seller going for $10 back in the states, a great buy at $1. A friend of mine bought coins there and told me there was a pretty good export business for buying some books in large lots then bringing back to the states via Air Force runs from Japanese airbases such as Tachikawa or Yokota AB, near Tokyo. There was a regular hashish run from Thailand at the time, so criminal teams were all over the place, but the next leg back to the States was much safer for big boxes of books. College textbooks were more preferred than hot novels.

Publishers were losing millions, but students didn’t care.

That was Taiwan, not mainland China, which was not yet into economic expansion into commercial Western markets. Mao was still in charge, the Cultural Revolution still at full throttle, and Deng Xiaoping, who would transform the Chinese economy, was still in some type of internal Party exile.

So by the time I left my corporate position in textiles in ’89, with some history with the PRC Chinese, and decided to take my knowledge of Chinese business practices on the road, as a private consultant, it was with the belief, based on some practical observations, that they were not, in the western sense, men of honor in business.

They believed then, and to a great extent still do, that “foreign devils” from the West were well beneath them, notwithstanding that every improvement to their material culture since the fall of the Manchus had come about by Western invention. Still, that every Westerner was beneath contempt and worthy of being fleeced was deeply engrained. And a few American presidents proved them right. (Interesting factoid: “Kowtow” is a Chinese word, and not a New York Times word to define an effete Obama mannerism.)

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I won’t turn this into an ethnic screed, as I know far too many Chinese living here who are not of this frame of min. But still, a thousand years of acculturation of royal Chinese worldviews could not have been erased by a few short years of “democracy” in the period just before WWII, when China was largely run by warlords. Chairman Mao simply provided a Marxist validation and system of control for what centuries of despotic rule had bred into them, especially about how humanity was designed, by nature to be ranked, top to bottom.

My business model (how I was going to make money) was in showing companies who were considering manufacturing in China, as well as other Asian counties who might compete with China’s perceived unbeatable low-labor costs, that they could beat them if they understood China’s game, in part because of the way they cooked their books internally in those days; especially that, even though they could produce the finest quality goods at prices no one could touch, they cut corners on quality and parts to such a degree, the same product manufactured in Malaysia or even Vietnam could actually provide investors a better price-value for the goods if manufactured elsewhere.

Smoke and mirrors. Pardon the expression, but there was a real chink in the Chinese manufacturing model.

And although I could never get any of those companies to hire me, I knew how they stole intellectual property such as machine technologies and manufacturing systems. Sometimes they would make the first overture, at other times, they would wait until a corporation approached them, wishing to set up a manufacturing facility in China. Their primary feint in negotiations was their low labor costs. Americans design their systems to use the least amount of human labor (capital intensive) while the Chinese would insist on labor intensifying a process, so that, e.g., instead of employing five people to run a line, they would require twenty. In the back and forth of exchanging designs, they could steal the whole factory.

But that was 30 years ago, and they are much more sophisticated today. This was in the Reagan era and things have changed.

So, I’m only commenting on the mindset, and the unchanged bias toward foreign devils beneath them.

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I’ve paid little attention to China since the 80s, only to note that they’ve never had a trade agreement with any country that they didn’t try to finesse (cheat). They didn’t join the World Trade Organization until after 9/11, but had private trade agreements with all the western markets before. America was the biggest (most profitable) market, and their biggest headache, for some presidents actually tried to keep them within the four corners of their agreements. Reagan was the toughest, but then they had the first Trudeau, the weakest link, to help them transship thru Canada.

China has changed much in 30 years, now much more urbane and sophisticated, but in their general corporate/business view of the moral power of the contract and the strength of the handshake, they are as lethal and dishonest as the snake in the song by Al Wilson.

If you want to get a glimpse, and still is, of cultural China, read Pearl Buck and several of James Clavell’s novels about pre-Mao China. When you go into a Cantonese restaurant in Kowloon that you had visited many times over several years, and look around to see that you are the only gringo in the building, as I did with my son in 20o6, then pay and leave a tip, and, as you leave the waitress holds up the tip and yells “Aieyah!” you know you have been insulted. In the worst way.

So while Karl Marx had culturally transformed several parts of the world, and is striving to do the same in America, he is little more than icing on ther cake of China. Since we still see this same indifference to honorable dealings in modern Democrats, I’ll continue to believe that Leftist ideology carries this demon seed everywhere.

It’s a recognized economic belief that tariffs are protectionist in nature, and they can bring on a trade war. So both are generally considered to be bad.

But to direct tariffs at a particular villain-trader does not fit into that label.

There is distinct difference in telling an ass from a hole in the ground

About Puma ByDesign 475 Articles
Unhyphenated American female, born and raised in the Empire State and who like most New Yorkers, in spite of being a registered Democrat, I voted for the candidate, not the party which meant voting often across party lines throughout the years. In 2008, coming to terms once and for all with the fact that Democrats and I had nothing in common, I left the liberal cesspool forever. Of course, I now have a grudge to settle after decades of being lied to and so I blog to right the wrongs and expose the lies.