Professor Peter Navarro teaches economics at University of California, Irvine, and is a Democrat who ran for office in California three times in the 1990s and lost; and has published several books, one of which Death By China, became a documentary movie in a dramatic portrayal of the loss of American factory jobs through fearmongering and prejudice of foreign innovation. It could be easy to see that whilst the public and media at large are focused on the minutiae of President Trump's public persona, that behind the President of the United States (POTUS), Professor Navarro has been strategically devising plans for what could possibly begin a Trade War with China as the new Director of the White House National Trade Council.
I think everyone who grew up during President Bill Clinton's America, remembers that his administration was the primary driver that built closer ties with China, which lead to great economic growth. However, the beginning of the 1990s also marked the end of factory and manufacturing jobs as U.S. corporations shifted their production bases to nations like Mexico, China, Vietnam, South Korea, Thailand, and India. This outsourcing of jobs abroad lead to backlash against foreigners, and "China's taking all our jobs," became a popular finger-pointing motto that became deployed in the media as a red herring to what was really going on: that a new strategy of flatlining corporatism was emerging, and it was that in the bottom line, it was just simply more profitable for U.S. corporations to outsource these factory jobs whilst focusing on IP in what would become the Information Age that would eventually lead to the rise of social networks and companies like Google, Yahoo, Netscape and Facebook.
During the recent World Economic Forum, Jack Ma, chairman and founder of Alibaba, gave some interesting insights about this rather peculiar phenomenon of blaming China for all of America's problems:
Mr. Ma says that beginning 30 years ago, American corporations wanted to leave lower end jobs to others whilst they focused on contributing IP, technology and branding. These kind of lower end, blue collar factory jobs were outsourced to places like Mexico, India and China. As this transpired, U.S. corporations made billions of dollars in globalization. IBM, Cisco, Microsoft made more profit than 4 of the largest banks in China combined and their market cap grew more than 100x in the past 30 years.
But he asks, Where did the money go?
In the past 30 years, Mr. Ma, says, the United States engaged in nearly 30 wars and international conflicts and spent $14.2 trillion. The money that could've been used to help both white collar and blue collar workers was instead spent abroad instead of domestically. He also indirectly adds that there is a discriminatory kind of spending- in which more money is spent on wealthy children, and more funds go to places like Harvard, but his philosophy is that a nation should spend money on those people who aren't good at school, who need help in education, and those people who need to transition from factory jobs to white collar jobs, and this is something the American govt did not do because it was constantly involved in international conflicts.
He further adds that in 2008, and the events leading up to the increasing climate of deregulation of Wall Street, the financial crisis wiped out $19.2 trillion in the United States alone, and destroyed 34 million jobs globally. In conclusion, other countries did not steal jobs from America, the distribution of money was not spent on the American people. He also adds somberly that it is easy to launch a war, but nearly impossible to end it.
So what would it mean for U.S. corporations if Professor Navarro is able to lead the Trump administration towards a Trade War with China?
Currently, China is partnered with more than 100 nations in trade and although they might initially suffer a slower growth, it is more likely that American corporations will ultimately end up losing in the trade war, as nations will have to risk doing business with China or siding with U.S. politics. If Professor Navarro, under the Trump administration were to impose 45% tariffs on China, one thing China could do is to also impose restrictions on trade and investment in China, to prevent American companies from entering their market. Apple CEO Tim Cook said that in the future, most of its revenue will come from China as many other tech companies. Aside from technology companies being affected by a possible Trade War with China, the film industry will also most likely suffer as well.
One major driver of Hollywood is all the new investment being spent by Chinese investors, as China has become a major market for Hollywood film growth during a time when the film industry was entering a recession and funding for films was being dried up. China's investment in Hollywood films could also cease, and as the chairman of the Wanda Group, Wang Jianlin, said in December of last year, he has invested over $10 billion in the U.S., employing 20,000 people, and that "if something goes wrong, these 20K+ people might be out of jobs."
Another consequence of a Trade War with China is that the GDP of the United States might shrink dramatically, and gains in the stock market might be a long-gone memory of one of the legacies of the Obama administration. The yuan might also replace the U.S. dollar as a reserve currency, furthering the decline of the American economy.
China's relationship with the United States is like that of a rich aunt or uncle, who lends us money when we need it, and gives us funds to do cool things, like build new gadgets and make movies and often bails us out and invests in our late funding stages when our startups have long been overvalued and burning through investments, not churning a profit. However, we have wasted a majority of that money engaging in a power struggle and policing the global neighbourhood with our bullying, warmongering ways instead of creating innovative social programmes that benefit the population. As China is the second largest holder of U.S. debt, an aggressive, isolationist economic policy against China as Professor Navarro under the Trump Administration is proposing might not be the best way to deal with a nation who has often come to our aid.
Despite other criticisms of China, especially their building of artificial islands in the South China Seas, and currency manipulation, we have discovered as the LIBOR scandal revealed in 2012 in an ongoing investigation that China is not the only one manipulating their currency. The global financial institutions at large have been manipulating interest rates for their own gain for decades worth more than $300 trillion.
Although globalisation has often been compared to British imperialism at the turn of the century, and a new era of "enslavement" of people through factory work has taken the place of the black slaves that drove colonial America, one thing is very clear: factory and production jobs are not coming back to America nor to England. That is why it is essential that our political leaders create innovative social programmes that help our working class make a transition in the era of A.I. and automation.
Jack Ma asks, "imagine what would happen if the two largest economies went into a trade war? It would be disastrous for both nations."
By Sierra Choi