By Kevin D. Williamson
Monday, July 08, 2024
The sun is behind me.
Nothing has changed since I began.
My eye has permitted no change.
I am going to keep things like
this.
Ted Hughes, “Hawk Roosting,”
1960
Donald Trump loves tariffs. Joe Biden loves tariffs. The
next president elected to lead these United States of America is—probably!—going
to be a guy who loves tariffs. He will be surrounded by people who love tariffs
or by people who will, for the right salary and an occasional chance for
throne-sniffing, pretend to love tariffs.
There’s a whole hatchery of trade hawks in the making out
there. As Ted Hughes knew,
hawks don’t have to be particularly smart or have good arguments on their side:
My manners are tearing off heads—
The allotment of death.
For the one path of my flight is
direct
Through the bones of the living.
No arguments assert my right.
There are a few different ways of thinking about trade
restrictions. Some of them are plausible, and a few are even necessary: That
“one-sentence free-trade agreement” that my libertarian-minded friends dream of
(“There shall be free trade between the United States and x”) is
never going to be, and there are good reasons for that. Genuinely free trade
means that goods and services of foreign origin compete in the U.S. market on
the same terms as goods and services of U.S. origin, which is not going to be
the case for sensitive military and intelligence provisions—we aren’t going to
build Air Force fighters in ChiCom-owned factories, and we aren’t going to have
ChiCom-owned firms doing the IT work for the Treasury Department or the CIA.
(We won’t even contract that sort of thing out to the Swiss, as attractive as
such a proposition might be: SIG Sauer, the armorer
that is building the new generation of U.S. battle rifles, is kinda-sorta a
German-Swiss company, but most of its employees and operations are in its
U.S.-based subsidiary. I’m happy to have Swiss-German types building the
rifles, but what I really want them to do is take over Amtrak.) Where you draw
the line on that kind of thing can be tricky.
For example, I don’t think it matters very much for
national security purposes if the socks issued by the Navy are made in a
foreign factory—even a ChiCom-owned factory!—though there may be a point of
pride there. I think security-sensitive goods should be defined relatively
narrowly. On the other hand, there are those who argue for a very broad
interpretation of security sensitivity, one that encompasses not only
manufactured goods used by military and intelligence agencies but also critical
industrial inputs of all kinds: rare-earth minerals, microprocessors,
steel—hell, Sen. Marco Rubio thinks
sugar is a national-security priority. (It is a priority to some of
his cronies in Florida, for sure.)
The problem with that tendency toward strategic autarky
is that it isn’t … strategic. There are costs and risks associated with
importing strategic goods, but the costs and risks of attempting to create a
hermetically sealed domestic market for such goods are much greater.
As it stands, U.S. steel consumers have access to the
output of about
600 crude steel plants around the world, only 39 of which are in the United
States. The security implications of that should be obvious enough: Crippling
the U.S. steel industry would be a big undertaking, but crippling the output of
every U.S. steel-trading partner simultaneously would be a positively titanic
one. (While China does have a very large footprint in the worldwide steel
industry, the biggest
sources of imported steel in the United States are our neighbors—the
nefarious Canadians in the No. 1 spot, Mexico in the No. 3 spot—along with
Brazil.) Having lots of trade partners and established trade relationships in
lots of markets means the United States has a lot of options. China might
boycott exports to the United States (enjoy that cash crunch, Chairman Xi) or
even use military force to interrupt trade with Japan and Korea, but Beijing is
unlikely to be able to control both the Atlantic and the Pacific while waging
war with a technologically, militarily, and economically superior United
States. On the one hand, you don’t want to set yourself up for sabotage or
blackmail. On the other hand, you don’t want to unnecessarily limit your
options as a strategic matter or, on the economic front, unnecessarily reduce
your standard of living.
Which is a longish way of getting around to the big point
here: The real problem with free and open trade is not the flow of ordinary
goods and services, as intensely as overseas competition may be resented by
politically connected domestic firms and industries that would very much like
to charge U.S. consumers higher prices or sell them inferior goods. The
problem—and, as the trade hawks rightly insist, it is most urgently a problem
with China—is not trade per se at all, but abuses that are to some extent enabled
by trading relationships: the theft of intellectual property (IP), the
counterfeiting of goods, forced technology transfers, and Beijing’s generally
dishonorable behavior when it comes to its obligations
to multinational trade organizations and agreements.
There are many, many idiotic complaints put forward about
Chinese trade practices (“dumping,” etc.), but complaints about IP theft are
not among those. Chinese IP theft is (almost) hilariously relentless. You have
to kind of love that the Chinese had the market-bestriding chutzpah to very
publicly rip off the Huntsman Corporation while Jon Huntsman Jr. was serving as
U.S. ambassador to China. Say what you will about the tenets of Maoist
socialism, at least it’s
an ethos.
You know that story? From the
Wall Street Journal:
Regulatory panels, packed with
industry experts, must approve many chemicals before they can be produced in
China and require detailed information on formulas and production processes,
say U.S. trade groups and chemical firms. “Enough information to duplicate the
product,” is how the American Chemical Council trade group put it in a filing
to the U.S. government.
For Huntsman, these panels have
drilled down on specialized knowledge, such as how it makes plastics with high
transparency and elasticity—the kind of material often used for making sports
shoes—people close to Huntsman say. Soon after those experts conducted their
evaluations, local competitors used the same kind of technology in their own
products, they say.
Huntsman is battling over a crown
jewel of its business, a black dye used in textiles that is less polluting to
make. It filed a lawsuit in Shanghai against a Chinese company for infringing a
patent on the dye in 2007. Huntsman then found a court-appointed review panel
stacked against it, it said in a 2011 complaint it filed with the U.S. Commerce
Department.
The three panel members included an
engineer from the company Huntsman was suing, another from a local dye-research
group and a third who once worked at a local dye firm, according to the
complaint and people with knowledge of the matter.
Those “review panels” were doing their work while the
U.S. ambassador to China was Jon Huntsman Jr., brother of Peter Huntsman,
chairman and CEO of the Huntsman Corporation.
If you would like a small catalog of egregious cases of
Chinese theft of American intellectual property, then here
is a list from the House Foreign Affairs Committee, helpfully titled
“Egregious Cases of Chinese Theft of American Intellectual Property.”
It isn’t just the high-tech stuff—and it isn’t just in China.
In 2013, a group of Chinese nationals was arrested running a covert operation
in an Iowa cornfield—they were working in the shadows to steal experimental
seeds, presumably for the purpose of replicating them. As I wrote
about the case: “The cell targeted products from Monsanto, Dupont Pioneer,
and LG Seeds. The leader of the group was employed by Beijing Dabeinong
Technology Group, a private firm that received funding from the Chinese
government for ‘science and technology’ research.”
The difference between the smarter trade hawks and the …
less smart … trade hawks is that the smarter ones understand that you can’t
stop that kind of thing with tariffs or by retreating from the world. You deal
with that by intensifying
your involvement in multinational trade organizations such as WIPO (the
World Intellectual Property Organization), with which the U.S. government has
begun an expanded partnership on “standard essential patents,” meaning patents
that are necessary to all sorts of technological products and services that
require mutual compatibility, from video compression to automotive components
to mobile phones.
And you don’t have to be a superpower to prevail: Scotch
whisky makers, for example, have spent
years fighting for their intellectual-property rights in China, with a
great deal of success. In 2023, 15 Chinese counterfeiters were sentenced to
terms ranging from six months to six years by a Chinese court for violating
Rolex’s trademarks. Swiss watchmakers run what amounts to a very discreet
international detective bureau to protect their brands and their IP—which costs
money, but securing your rights always does. If the U.S. government wants to
help with that, it can help by fortifying, reforming, and improving the institutions
through which U.S. firms secure their intellectual property and other
rights—vis-à-vis China, certainly, but not only China.
American firms can compete with their Chinese rivals.
Except for the ones that can’t—and that’s fine, too: That’s the market’s way of
giving companies the bad news about for whom the bell tolls. Contrary to the science-fiction
trope, corporations are flimsy things—they come and go: Two cheers for
creative destruction.
Put another way: The problem of IP theft is no more an
indictment of trade than the problem of highwaymen was an argument against
travel. Trade is trade, and thievery is thievery. And where trade creates
opportunities for thievery, it is the thievery that is the problem, not the
trade.
And Furthermore …
Really, corporations are flimsy things. If you’ll forgive
my quoting myself on the subject of corporations in science fiction, this is
from a
piece written around the time of Occupy Wall Street, which means the gist
of the thing remains correct but some of the figures will have changed:
You would not know it from reading
fiction, speaking with Occupy types, or listening to the speeches at the
Democratic National Convention, but the corporation as we know it is in
decline: The average size of a corporation as measured by personnel has been
diminishing since 1975. In 1955 the largest U.S. company, General Motors,
employed 576,000 people out of a U.S. population of 166 million; today Exxon
Mobil, the largest U.S. company, employs only 82,000 people. Microsoft employs
fewer than 100,000 people worldwide; Google employs about 54,000, and Facebook
fewer than 6,000.
More significant, the economic
footprint of the biggest corporations is contracting. At one point, the market
value of U.S. Steel was about 4.5 percent of the U.S. GDP; Exxon Mobil is worth
barely half that today. GM’s world market share was about 50 percent in 1960,
and its profit was about $8 billion in inflation-adjusted dollars. Today no
single automaker has a market share of more than 20 percent in the United
States or Europe, and in 2012 there was not one firm in the world with
manufacturing profits exceeding GM’s $8 billion level of 1960. The biggest
manufacturing-oriented firm in 2011 was General Electric, but half of its
profit came from financial services, and at about $5 billion, its manufacturing
profit was far less than GM’s was in 1960. In fact, there were only about 20
firms worldwide with larger profits than GM’s 1960 benchmark, most of them
technology firms (Google, Apple) and financial groups (JPMorgan, Goldman
Sachs).
Only 67 of the firms in the Fortune
500 in 1955 remained there by 2011. And the rate of corporate extinction is
accelerating. Corporations are shorter-lived now: In the early 1960s, the
average lifespan of a Fortune 500 company was about 75 years; today it is 15
years and declining.
Words About Words
There is no such thing as “Asian cuisine,” in spite of
this dopey
Salon headline: “Once branded as ‘cheap eats,’ Asian cuisine is
finally getting the awards it deserves.” Russia is in Asia. Israel is in Asia.
Kazakhstan is in Asia. So is Turkey, mostly. India is in Asia, even if the
University of Texas Asian Students Association once told an Indian friend of
mine that the club wasn’t really meant for him. We sometimes talk about “Asia”
as though it were Japan, China, the Koreas, Vietnam, and maybe Singapore—and
never mind, you know, Saudi Arabia or Russia. (Russia is 75 percent Asian by
land mass, 80 percent European by population.) And whatever you have to say
about the great Arab-Israeli hummus controversy, we can probably all agree that
hummus did not originate anywhere near Cape Chelyuskin.
There is no “Native American spirituality” and there are
no “African proverbs,” contra Hillary
Rodham Clinton. There is no such thing as “European cuisine” or “South American
literature.” Human beings are pretty specific in a lot of ways, profoundly
influenced by time and place at a scale much smaller and richer than the
continental one.
Economics for English Majors
I know that I sometimes sound like I think the answer to
all of our economic challenges is free trade and nuclear power, but … free
trade and nuclear power are, or would be, really, really useful! As the Wall
Street Journal reports, Century Aluminum of Chicago wants to do
something that hasn’t been done since the last days of the Carter
administration: build a new aluminum smelter, one that would roughly double the
aluminum output of the domestic metals industry. But there is a challenge:
paying what promises to be a gargantuan electricity bill. Electricity,
according to the Journal, accounts for about 40 percent of the
expense of operating an aluminum smelter. The good news for Century—perhaps not
great news for taxpayers—is that there are subsidies available. The bad
news?
Century is counting on the aggressive
build-out of solar- and wind-powered generating capacity now under way
to start yielding excess power after 2030, and the company hopes to lock down
supply in exchange for a decade’s worth of steady electricity demand from a new
smelter.
Much of that renewable-energy
capacity isn’t yet connected to power grids, making it difficult for industrial
users to access it. Grid-connected renewable energy is expected to attract high
demand, said Greg Wittbecker, an aluminum-industry analyst.
That’s right: The big plan is to run massive aluminum
smelters off of fairy dust and unicorn juice that isn’t even hooked up to the
grid yet. Many of the subsidies that are available to firms such as Century are
conditioned on using fashionable forms of energy.
If only there were some kind of reliable, low-cost,
zero-emissions source of electricity basically tailor-made for ravenous
industrial users such as aluminum plants! There is, of course—our old friend
nuclear power, the only practical, dependable source of electricity that
produces no meaningful greenhouse-gas emissions while it works (we can talk
about “embedded carbon” another time)—but, in spite of some
halting steps toward reform and liberalization, there isn’t a ton of new
nuclear power coming online.
The case against nuclear power has always been mostly
moralistic and aesthetic: all those people walking around with their copies
of The Population Bomb as though the book were holy writ,
insisting that the only way to save the planet was to get rid of most of the
people and all of the capitalism. Of course, there are environmental impacts
from nuclear power, just as there are from any power source. There’s the real,
if exaggerated, waste-disposal issue, but also the fact that the mines that
produce the fuel aren’t especially nice places for a picnic. There isn’t any
zero-impact power. But taken as a grown-up matter of calculating trade-offs,
nuclear power is such an obvious win when it comes to electricity that only ideologues,
religious fanatics, and politicians could oppose it.
And the thing about abundant power is this: There is more
at stake than the bottom line on your monthly utility bill. Consumer utility
prices are far from being the whole ballgame. Abundant, affordable, sustainable
power means that you can run things like aluminum smelters in relatively
high-cost countries such as the United States, and that you can do all sorts of
other cool, useful, and profitable industrial stuff in a much more economically
effective way. Three cheers for lower utility bills, for sure, but this is
about shipyards and airplane factories and steel mills, along with data centers
and other power-hungry facilities.
Elsewhere …
“Fashion Advice from Kevin D. Williamson” may sound like
an essay nobody ever asked for, but—someone asked. Over at the Wall
Street Journal, some thoughts on seersucker and related subjects:
Capitalism is even trying to help
us with the problem of summer. Ralph Lauren’s pricey “Purple Label” line now
includes trousers that look like tweed but are 50% linen and 13% silk. From the
catalog: “Inspired by traditional English tweeds … the fabric was specially
developed to offer the same look and sensibility but with lightweight fibers.”
With waist sizes up to 42 and running $595 a pair, it’s pretty clear who those pants
are made for. Not for 22-year-olds with chiseled abs and regrets about last
night’s $72 bar tab at Connolly’s. Those are the trousers you wear to
Thanksgiving dinner in Dallas when it’s 81 degrees outside and you’re the kind
of guy who sometimes calls your pants “trousers.”
Brioni is offering silk summer
suits at $7,300, and Paul Stuart will sell you a beautiful shawl-collared linen
dinner jacket for $2,695 for when you have a formal event you don’t want to
sweat through. (Who is the worst person in your life? The person who schedules
the trifecta wedding: summer, outdoors, and black-tie.)
In Conclusion
Joe Biden says
that he’ll step aside from the Democratic nomination as soon as “the
Lord Almighty” comes down from heaven and tells him to. I do not want to try to
read Joe Biden’s mind, much less whatever it is that passes for his soul, but
my experience is that that is the sort of thing people say when they don’t
really believe that there is a Lord Almighty who does such things. But God is
not mocked, and a man of Biden’s age and infirmity should be very careful about
what he demands of the Author of the Universe. God has a funny way of answering
prayers, at times.
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