No sane person can ever want a war, but sometimes they simply have to be fought. However, in the current liberal globalized economic consensus, trade wars, in which rivals fight it out with tariffs and subsidies, should never be fought. The prevailing view is that free trade is a universal good and the more it becomes a reality the more prosperous will the world become.
But in fact trade has never been free. States need revenues from customs duties and sales taxes. Large companies that enjoy near monopoly positions in certain markets will sell at higher prices there than they do in markets where they have competition. Research and development is not simply undertaken by the corporate sector. Universities and government-funded laboratories around the world benefit from state support for scientific projects which are hoped to produce breakthroughs that can then be commercialized.
As any export manager will attest, there is a mare’s nest of different rules and regulations that need to be addressed in order to sell into every market. And once those have been negotiated, a foreign company may find itself in competition with a local firm that enjoys open or covert subsidies by way of tax breaks or support grants.
Business is tough and often cutthroat. New Paris fashions are stolen and copied sometimes even before the haute couture designer’s models step out onto the catwalk. Industrial espionage is little spoken of but exists. Successful companies will find their computer systems penetrated and rifled by cyber-agents hired by rival companies. The Russians and Chinese are regularly accused of such theft of commercial secrets from businesses in the West. But there is strong evidence that US and European companies are also busy spying on each other, at the very least hiring key executives who are privy to their former employers’ secrets, but often also hacking rivals’ systems.
China has become the world’s manufacturer of virtually everything including high technology. It began as a contractor building to the designs of foreign firms. But hardly surprisingly, despite virtually meaningless confidentially agreements, electronics, software, pharmaceuticals and engineering plans have all found their way to Chinese manufacturers. As happened in post-war Japan and later in South Korea, Chinese companies moved from low value, high volume goods to higher value premium products. Beijing is now pouring state funds into substantial research programs, undoubtedly based in part on technology that has been appropriated, without license or the payment of royalty fees for intellectual property.
It is this filching of American corporate secrets that has been the main motive for President Donald Trump’s imposition of tariffs on Chinese goods. They began with steel, some of which was being delivered and sold in the US more cheaply than American mills could make. The Chinese have retaliated, so Trump has produced a new list of tariff targets and Beijing is about to reciprocate. The president is delivering on one of his key campaign policies, to protect and recreate US jobs. Aides say that China sells America goods worth $462 billion, roughly four times what America sells to China. Therefore Beijing will be the big loser in a trade war. But this is only partly true. Chinese industry now has an increasingly wealthy domestic market. With $3 trillion of foreign currency reserves China can now well afford to focus on its own people to sustain its strong economic growth.
