UK withdraws from China

Some bloke at the ANU wants us to deepen ties with China, at the AFR:

High trade shares with China are not a liability but evidence of success. Government policy should not aim to diversify away from success but to ensure international governance to manage it. The key is to manage the risks from economic engagement, not to avoid them, including with China.

The public debate in Australia about reducing dependence on the Chinese economy has been turbocharged by the breakdown in trust between Canberra and Beijing over Sino-American strategic competition, and control of the narrative around the COVID-19 pandemic.

Governments can intervene in the market to slow or stop business with China, as President Donald Trump has done. The Japanese government has allocated $US2 billion ($2.87 billion) in subsidies to onshore production and a further $US219 million to strengthen supply chains with south-east Asia.

The Poms have a much better idea, at the FT:

Boris Johnson’s government is drawing up a strategy to reduce the UK’s reliance on China for key imported goods, as ministers acknowledge that a combination of the coronavirus pandemic and Brexit will force a big shake-up of the country’s supply chains.

The planned overhaul will aim to implement the results of “Project Defend” — an internal exercise to ensure Britain retains access to critical goods while diversifying the country’s trading relationships.

Those working on the project, which is overseen by foreign secretary Dominic Raab, stressed it was primarily about strengthening the country’s trade links in the wake of coronavirus but would also lead to the production of some critical goods being brought back to the UK, after the pandemic exposed the UK’s reliance on imports.

“Reshoring everything doesn’t fit with our ambition to be a champion of free trade,” said one person briefed on the talks.

But a recurring theme of the discussions has been the need to reduce Britain’s reliance on trade with China, the second-biggest source of imports by value after Germany.

The Covid-19 crisis has forced ministers to confront the lack of domestic sources of critical medical supplies, such as protective equipment, vaccines and certain chemicals, after the pandemic led to global shortages.

But the Project Defend team also looked at the need to ensure Britain was able to source other vital equipment in future such as transformers and telecoms kit, which were vital for national security Ministers are looking to develop supply chains that do not rely on China in “lower risk” areas, after Beijing’s move to tighten control over Hong Kong and its handling of the Covid-19 crisis further raised tensions with the UK.

We’ve tried regulating China by inviting it into the Bretton Woods rules-based system. It has abused it mercilessly by gaming its currency, stealing IP and providing all kinds of behind the border protections.

Then, when crisis struck, it demanded open borders to spread its virus while it siphoned off global PPE, followed by selling it back to the afflicted.

There is no regulating the CCP. You’re a joke if you think so, frankly.

Time to boot it instead.

Houses and Holes
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    • The Economist really is an appalling rag. I cancelled my subscription nearly 10 years ago and use the funds to pay for MacroBusiness 🙂

  1. Know IdeaMEMBER

    In my experience the Chinese were very open about the need for foreign companies to lift the skirt when it came to IP. The fact that those companies progressed regardless has me perplexed. Are the neo-Liberal acolytes really that dumb?

    • When it comes to profits the erect neoliberal has no conscience. The major investor in United States IP was never the corporations that sold their communities down the river. Almost all original high tech IP has come from public money invested in R&D mostly via military contracts to public R&D institutions. The IP was in effect given to corporations on the basis of “jobs ‘n growth” economics. The corporation outsourced that “jobs ‘n growth” to China in order to make a tidy profit.

      It’s a slightly different story in Australia – on a different scale and via direct governmental cowardice. Because we had no IP worth much and refused to invest, we just caved in. We went from Bob Hawke’s “Clever Country” to deciding that it was all too hard and that we can’t shake, bake or make anything. That’s the biggest cringe of all – pure lack of belief, vision and utter incompetence at a political level that applied neo-classical economics to a ‘competition of ideas’ and decided to use tariff cutting to make us ‘competitive’ in all the wrong ways.

      In the US the corporations sold out IP due to neoliberalism. In Australia our government never had the vision that we could compete. Since Robert Menzies shut down Woomera this has been Australia’s trajectory. No Australian PM has ever truly believed that Australia can do high tech and the reason for that is that out political class come with a built in incapacity to understand it. Our public service sector has been sub-contracted to KPMG etc. We don’t want innovators, inventors, engineers or scientists in our governments – they upset the neoliberal gravy train. And we don’t want people like Barry Jones as Science Ministers – intellect and vision upsets the drivers of the gravy train.

      • Clive – I agree with almost all you have written here, except for the part about Barry Jones.

        I liked BJ when he was the brains on BP Pick a Box in the 1960s, but in all honesty he was not able to implement anything of substance in real life. Like a lot of really bright people they can have severe limitations in practical matters. Who can ever forget his loopy Knowledge Nation diagram.

        Back in the day Oz governments saw R&D as being linked with the need to sustain a local manufacturing base to assist in maintaining Australian independence, at least to some limited extent. Once Oz got very comfortable with the idea that we are an “Asian” nation and no Asian country would do any harm and that manufacturing sector workers were too hard to control due to union action then governments were willing to rationalise that getting rid of it was beneficial as it reduced the cost of the end product. To a degree manufacturing has been replaced by open border policies to encourage tourism and education services, and the international trade of Oz real estate, which are being run as dumbed down activities for the benefit of various elites.

        • Arthur Schopenhauer

          Agree about BJ. Had a lovely chat to him in the Bookshop at the top of Collins St. Engaging and curious, even as he was heading to 80. When it came to practical policy, John Button was more effective in the Hawke/Keating government IMHO.

      • Arthur Schopenhauer

        And yet we did manufacture a considerable amount of high end engineering plant and equipment. Transformers, electricity turbines, most of the national grid equipment, jet engine parts, assembled Air Force Jets up to the F-18a (excluding F-111), made our own steel and trains.
        Now we import inferior parts from our neighbors and replace them 3 times as often, losing the benefit of lower capital expenditure in the process.
        The rest of the region promotes and protects their manufacturing, all the way down to food processing. Our Government has allowed the sale of just about every key junction in the food supply chain. It wasn’t for good money either, just stupidity and ideology (they go together).

    • drb1979MEMBER

      It would be too hard, too many other countries with a say which are under China’s influence – either economically, or Chinese intelligence has interesting “stuff” on some of the leading politicans from certain countries

      (I continue to wonder what China has on the WHO leadership)

      WTO, WHO and most other international orgs are captured and unable to reform themselves, much better to leave

  2. The western world made a deal with China a long time ago; We will give you the technology, intellect and skills to make the products we want and you use your army of cheap labour to make them and sell it back to us for a cheap price. Western countries were more than happy to kill its manufacturing with all its citizens unwilling to make the same products and enjoying the move to a service based economy. Companies all around the world set up factories in China. They moved machinery and robotics into China and setup their production systems for them and then taught them how to manage production runs. We all knew they were getting efficient, resourceful and good at it. We all knew manufacturing in our own countries withered down to nothing but as long as we got our shiny new phones at the price of a few days wages we were happy.
    Not so happy now.

  3. This is a great interview of McKinsey traitor, I know, I know its Tucker Carson etc but the message is so strong. You feel the guilt.

    In a former life I competed with those consultants and similar to lose often to their grand globalisation theory. We tried rescues based on more than the ripping out of a countries personality.
    Now I can say I told you so but still we lost so much.
    I put a curse on him.

  4. MB seems to have become a promoter of Anglosphere exceptionality suggesting Australia like the UK should walk into the arms of the US:

    ‘Boris Johnson’s US trade deal will make Britain a paradise for disaster capitalists….The trade secretary, Liz Truss, has made it clear that any such tariffs would be removed within 10 years. It’s impossible to see the American trade negotiators allowing them to pass in the first place. The US intends to secure “comprehensive” access to our food markets, while “reducing or eliminating tariffs”……… The pigheaded obstructionism of the UK in the current EU talks is at stark odds with its willingness to prostrate itself before US power. Dominic Cummings says he intends to stay in his post as adviser at No 10 for the next six months. In other words, he will stay for long enough to ensure that the transition period for leaving the EU is not extended, making a no-deal Brexit more likely.’

    UK, or John Bull should be ready to drop trousers, take false teeth out and be ‘spit roasted’…… seems many think Australia should do the same, why, simply naive or masochistic?