June 12, 2007
Mandelson on China and Trade
Peter Mandelson, the EU trade commissioner, has accused China of abusing the world trading system, warning in the bluntest language to date that Europe will not sit idly back while its exporters are blocked from the Chinese market.
Typical mercantilism. Measuring the good or not of trade by how high our exports are.
The outburst came as China's trade surplus ballooned to $22.45bn
(£11.4bn) in April, an increase of 73pc over the year before. The
surplus has risen almost tenfold in three years, much of it at the
expense of Europe.
"Europe's trade deficit with China is growing at €15 (£10) an hour. It could reach €170bn in 2007 on the current trend," said Mr Mandelson.
"This is not tolerable. The current trade balance is artificially inflated. It is a product of politics, as well as economics. China must take concrete steps to address the problem," he told a small group of reporters yesterday, on the eve of the EU's annual trade summit with China.
Seeing the imports as something bad.
"If things do not change, if EU member states are not persuaded that this partnership is a genuine two-way street and is fully based on reciprocity, the policy of dialogue and cooperation can be 'challenged'," he said, using the Brussels code-word for retaliation.
And what in buggery do "states" have to do with this, or reciprocity? We should never be concerned with bilateral trade, whether it's deficits or surpluses. China ain't the sort of place that buys much that we Europeans make but it does buy lots of commodities to manufacture what we buy....and those places selling the commodities do buy what we do make. That's why it's called trade, d'ye see? We all do what we're best at and swap the results.
Further, the thing we actually want, the thing that makes us richer, is those imports. We're getting things cheaper than we can make them at home. This is the good part of trade: exports are simply those dreary things we send away to pay for them. If the Chinese are manipulating their currency, holding it artificially low, then they are impoverishing themselves (they get less for their exports than they would do, pay more for their imports than they would do) while making us richer (we pay less for our imports and get more for our exports). So why anyone would complain about such an obvious bargain is entirely beyond me.
Opps, sorry, yes, I forgot. Mandelson's a complete tit, isn't he?
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Sorry to be frightfully ignorant, but what are the consequences of having a pronounced trade deficit? Does it have negative repercussions or is it just one of those rather meaningless statistics?
Tim adds: Depends which economist you ask. In my view, (and I'm not an economist) doesn't matter a damn.
Posted by: Ian Deans | Jun 12, 2007 1:18:55 PM
I think you might be about to find out the answer to that last question over the next few years if you keep one eye on the US.
Posted by: Barry Bethel | Jun 12, 2007 5:57:28 PM
To answer your question, here are some examples of bad deficits that you might not ever hear of from Tim - probably because he's quaffed rather too much of Cobden's Olde Peculiar over the course.
In 1914 the UK's chemical industry had been so decimated by free trade that the Royal Navy was importing blue dye for uniforms...from Germany...
And again in 1914, the UK's light engineering sector had been so decimated by free trade that we had no capacity to make either bomb timers or fuses - the sort of thing you can make pretty easily if you make clockwork toys. But no, we had imported so many GERMAN clockwork toys that we didn't make any of our own.
We had to bring in Swiss technology - and Swiss technicians...
Similarly in 1914 we had chronic deficits in the productions of both machine tools and virtually every other aspect of heavy manufacturing - even down to the ball bearings. We had imported so many GERMAN machine tools that, you guessed it, we had great difficulty supplying our own needs.
So we ended up importing them from the USA, Sweden and Switzerland.
You think we'd learn our lessons...but no.
The Spitfires that won the Battle of Britain contained largely American instrumentation, because we couldn't develop them - our instrument makers had gone down the tubes in the face of, you guessed it, free trade.
Free trade is usually argued for by people who say they keep gibbets around to use on people who dare tell an Englishman what to do, but who probably haven't expanded their readings of either economics or history much beyond the recommended reading list. Free trade is a nation killer. Period.
Incidentally, all of the examples cited above come from Corelli Barnett's 'The Collapse of British Power'. Plenty more good stuff where that came from.
I recommend it.
Posted by: Martin | Jun 12, 2007 9:41:39 PM
Thankyou for answering!
Posted by: Ian Deans | Jun 13, 2007 9:14:42 AM