Nations Built on Lies - How the US Became Rich: Part 6c (1 of 3)
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Bill Totten
Jan 19, 2022, 9:59:35 PM1/19/22
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Nations Built on Lies - How the US Became Rich: Part 6c (1 of 3)
by Larry Romanoff
https://www.bluemoonofshanghai.com (January 13 2021)
http://dxczjjuegupb.cloudfront.net/wp-content/uploads/2021/10/MilIndComplex-680x496_c.jpg
Part 6c (1 of 3) - Protecting One's Way to Prosperity
This is yet another major factor contributing to US economic domination, a process it still heavily indulges in today while condemning other nations for sins that are infinitely smaller. Protectionism is the policy of using the power of government regulations to discourage imports and prevent foreign take-overs of domestic markets and companies, using duties and taxes on imported goods, import quotas, as well as clever trade policies, bureaucracy, political pressure, and a host of other methods. It is true there are occasions when a nation may have good and valid reasons to protect its industries and markets from predatory behavior by foreign governments and corporations, but it is primarily the predator nations, most notably the US, who are also the most protectionist. When the fox goes out to steal your chickens, it is careful to protect those chickens it already has from being stolen by someone else. Protectionism is a talent with which America appears to have been unfairly and exceptionally well-endowed and for more than 200 years these commercial policies have been rampant in America, initiated by the US government to provide every advantage to its domestic industries.
Protectionism in its native state consists of little more than corporate welfare programs, classic examples of special interest groups using the force of government to obtain private benefits at the expense of the population. US industry groups like steel, auto manufacturing, textile, electronics, and agriculture gain hugely from the help of their government in restricting foreign competition. This is almost always damaging and expensive to domestic consumers who inevitably lose from these measures. But in the US, with the media on the same page as the government and the large multinationals, American consumers are usually unaware of what is being done to them. A typical example would be a tariff on foreign garments, which not only makes foreign goods more expensive but also permits domestic companies to substantially raise their prices now that they are free from competition. With high tariffs to protect domestic manufacturers from lower-cost Chinese imports, 300 million Americans were paying $20 more for a pair of blue jeans so that two or three influential domestic companies could earn an extra billion dollars in profits.
In recent decades the US government maintained a constant media assault on China with complaints about low wages, an undervalued currency, product dumping, accusations of unfair subsidisation, and other unspecified "cheating" by the Chinese, that produced China's low costs and which necessitated protectionist retaliation by the US. But magically, when American multinationals moved their production to China to take direct advantage of those same low costs, the US government immediately dropped its textile tariffs and began to praise low costs. The obvious conclusion is that when Chinese firms export inexpensive blue jeans from China to the US, they do it because they are cheating and their currency is undervalued, but when American firms export inexpensive blue jeans from China into the US, the credit is due to American efficiency and ingenuity and the greatness of democracy. It should be apparent to readers that the costs and currency are the same in both cases.
According to Patrick Buchanan:
Behind a tariff wall ... the United States had gone from an agrarian coastal republic to become the greatest industrial power the world had ever seen - in a single century. Such was the success of the policy called protectionism that is so disparaged today. {45}
Buchanan is at least partly correct in his statement. Certainly, US industrial success has been assisted immeasurably from the constant and pervasive protectionist measures the US government has inflicted on foreign goods from the very beginning of the Republic. Once industrialization started, the US quickly learned the benefits of protectionism and experimented with various forms and rationales, including the necessity to "protect US manufacturers from the low wages of Europe". Does that sound familiar? By the early 1800s, US import duties averaged more than 50%, and by 1900 trade tariffs had reached gigantic proportions, and the US more or less abandoned any pretense that tariffs were to protect infant industries.
Perhaps in no other place were American protectionist measures so obviously predatory as in their military colonisation and plundering of undeveloped nations. When US firms extracted resources or raw materials from poorer countries, these products always entered the US duty-free. However, if any domestic companies of those nations attempted to export either raw materials or finished goods to the US, tariffs would be set at levels to preclude market entry, often reaching 50% to 80% and sometimes several hundred percent. However, the US used these colonies not only as a raw materials source but as finished goods markets, in which case no country was permitted to levy import duties of more than perhaps 5% against American goods, the countries being forced to sign treaties to this effect. Once again, the American version of fair play and a level playing field. All US Administrations have followed the predatory philosophy best stated by President Wilson when he said the doors of other countries would be battered down "even if the sovereignty of unwilling nations be outraged in the process".
Protectionism quickly became a permanent feature of US trade policy. When the Americans negotiated the Free Trade Agreements of GATT, the WTO, and NAFTA, this was not done from a lack of protectionist sentiment but rather from a perceived advantage and a powerful negotiating position compared to its trade partners. It was always clear that American intention in creating these so-called "Free Trade" agreements was primarily to force open other markets to US firms and products. The US never reduced its own trade barriers unless it gained far more in return, and even then much of the original protectionist measures remained. The US had the strength and negotiating power to force agreements worded primarily to benefit American corporations and were done with the expectation that the US would win on all fronts. And of course, on the occasions when this advantage didn't materialise as planned, the US was immediately whining about unfair trade and wanting 'a level playing field'. The American position on trade represents hypocrisy at its finest. The US preaches free trade only when it is winning and profiting from it, but whenever it finds itself falling behind due to the lack of competitiveness of American firms, the free-market theory is quickly abandoned in favor of unfair trade. In the context of the world's free trade agreements, much of the world remains bitter at the extent of US control over not only bodies like the World Trade Organization (WTO) but also of their arbitration and other committees which rather too often arrive at surprising decisions that favor the US. Without this unfair influence, the US would have won almost no trade disputes and would be much poorer for it.
There are two currents in the protectionist river. One is mercantilist - a perhaps rational pursuit of profit for domestic manufacturers at the expense of foreign producers. The second is ideological and political, therefore often irrational and more difficult to combat. A major part of US mercantilist ideology is the excessively patriotic belief infused into Americans by incessant foolish propaganda that American corporations are the most efficient and produce the highest quality goods in the world, the natural conclusion from this set of beliefs being that any nation surpassing the US must be cheating. The ideological current is also strongly infused with American exceptionalism and white supremacy. Americans whine when any nation acts to protect local industry sectors from destruction by the invasion of US multinationals because they deem it their God-given right to enter and plunder freely, regardless of the domestic destruction inflicted.
Also stemming from ideology, and understandably distraught over its general lack of competitiveness in anything other than weapons of war, the US has increasingly politicised its trade conflicts, not only using trade policies as tools of colonisation, but encouraging the European Market and other nations to erect trade barriers to China in a concentrated and multi-pronged effort to "open" China in ways most advantageous to US hegemony, and to close it in every other way. In particular, the US government persists in its determination to destroy China's state-owned enterprises (SOEs), since it cannot compete with them, attacking them not on commercial but on moral and religious grounds, foolishly claiming government shareholding as prima facie evidence of foul play. At the same time, both the US and European countries heavily subsidise many of their exports to China, sometimes doing substantial harm to China's domestic producers. The hypocrisy in these measures is really quite astonishing.
The political and ideological side of US protectionist actions follow a typical pattern. First, the US government launches an inflammatory media blitz condemning China for multiple violations of WTO rules and all manner of illegal and unfair trade activities, invariably consisting of claims with no substance. The rhetoric is often extreme, with exaggerated and unsupportable claims of hundreds of thousands or millions of American jobs lost. After thus fanning the protectionist fires, the US arbitrarily levies punitive import duties meant to crush Chinese industries, and which are simply political extortion maneuvers meant to pressure China into admitting American firms into sensitive or national security sectors where China doesn't want them. These include financial areas, telecommunication services, and energy. But mostly what they want is to punish China for maintaining its SOEs which the Americans so bitterly hate because every thief dreams of robbing the biggest banks.
A great deal of the extreme pressure applied to China on the RMB exchange rate had a similar goal, that of forcing China to further open its markets to US multi-national corporations (MNCs). All of the rhetoric about the RMB was nonsense, although if China could have been forced to revalue, then so much the better for the Americans. But failing that, they hoped to at least break into new markets and plunder yet more Chinese bank accounts. The US trade cases taken to the WTO are of the same intent, not vital in themselves but useful as pressure negotiating tools. And of course, the WTO is largely controlled by the US. The Americans aren't so stupid as to create a worldwide trade body and actually give it authority over them. The WTO is no different than the International Court of Justice or the IMF; it's just another tool of imperial conquest and needs to be seen as such. And all of the foolish comments like "China has to decide whether to conform and adapt to the norms of international trade or continue to be an outlier", are just American propaganda and hypocrisy with that special Christian moral flavor: "We don't want you to commit economic suicide for us. We want you to do it because it's God's will."
Since the US financial meltdown in 2007, and its beleaguered economy still showing no signs of recovery after nearly a decade, the US dramatically escalated its protectionist attitudes, with hundreds of trade complaints against China, almost all unjustified. The list of targeted products grew larger by the week, with the US government even levying double tariffs in dozens of cases, against its own commitment to international trade rules and agreements, and all declared illegal by the WTO. China does of course protest and challenge all of these American protectionist measures, but these defenses are time-consuming and expensive even when China eventually wins the cases. In many instances, American law does not authorise the government to take trade actions, but the US has repeatedly ignored its own laws to launch dozens of so-called trade 'investigations' against China during the past few years. When a US court ruled that the US government did not have the right to impose higher tariffs on goods from China, the Americans found a creative way to legalise their illegal actions. The US Congress passed new laws and backdated them four years, then levied the tariffs anyway. One has to admire the flexibility of American law enforcement and legislation, to say nothing of the apparent flexibility in the American concept of 'rule of law'. And of course, making 'a level playing field'. It should be noted the Western media play an active supporting role in this vast hypocrisy by first launching their demonisation blitz then publishing exaggerated articles about the necessity for the US to file yet another trade complaint against China. They then go silent, with the public never realising those filed trade complaints almost inevitably come to nothing.
The US government has cleverly enacted some trade laws that have become the world's most efficient and vicious non-tariff trade barrier. The US International Trade Commission can launch what it calls Section 337 investigations {46} {47} against foreign companies for any purpose, with US companies regularly abusing this legislation for protectionist purposes that are clearly illegal. These investigations are a quasi-judicial trade measure the United States uses to protect its local companies from competition from imported products. Once a Section 337 investigation is initiated, the products in question and even similar products may be banned from the US market forever, even though the entire process is unlawful by international trade standards. In recent years, US companies have become increasingly fond of claiming alleged patent or IP infringements and used these Section 337 investigations simply as a business strategy to drive out Chinese competitors and grab a larger market share. When Chinese companies must face these charges levied against them by American firms, they will necessarily suffer heavy losses whether or not they win the case. If a Chinese company does not respond immediately, its products will by US law be automatically excluded from the US market. But to defend such cases, a Chinese firm may have to pay many tens of millions of dollars for various charges, legal fees, and many other costs. This is a truly vicious piece of US protectionist legislation, and is only one such weapon in the US armory against foreign competition - invariably used whenever the US cannot compete. {48} Due to these new laws, it is a simple and painless matter for a US company not only to obtain government assistance against foreign competitors but often to permanently cripple them. For these investigations, the US government supplies all the lawyers and pays most of the costs, while the foreign companies spend millions of dollars and months of time to defend themselves against accusations that are almost always groundless.
With this imaginative American process, it often isn't necessary to actually impose the tariffs or other duties. These trade investigations are sufficient in themselves to destroy foreign competitors since the investigating body can, and frequently does, demand unlimited quantities of documents with short turnaround time and will impose crushing penalties for failure to comply. America's so-called 'International Trade Commission' has on many occasions been irresponsibly ruthless, and even vicious, in applying these prosecutions to protect American industries. Here are two examples:
"In one case, Matsushita [now Panasonic] withdrew from an antidumping case and abandoned more than $50 million in export sales because the US Commerce Department demanded on a Friday that it translate 3,000 pages of Japanese financial documents into English by the following Monday morning. {49} In another case, the Commerce Department demanded that the management of a small Taiwan company supply it with more than 200,000 pieces of information and reply to a 100-page questionnaire that was written in English. But the management of the company consisted of only a husband and wife, and they were unable to respond. Using this lack of immediate response as an excuse, the Commerce Department levied an "anti-dumping" duty of almost 60% on Taiwanese sweaters, making it impossible for these firms to survive. Within a year from the time this so-called "investigation" started, more than two-thirds of the companies that produced acrylic sweaters in Taiwan went out of business". This is one way the US "levels the playing field" for its own multinationals.
In a classic protectionist maneuver, the US created a historic episode known as "The Chicken War". France and Germany had placed tariffs of 2% or 3% on imports of US chicken, to which the US objected and responded by imposing a punitive tax of 25% on a huge range of European products, including the Volkswagen minibus. {50} {51} {52} {53} {54} Declassified documents later revealed that the minibus was included because the US auto unions were proposing a strike just prior to a Presidential election, and US President Johnson made a deal with the unions to punish Volkswagen's success in America in return for abandoning the strike. Johnson therefore had the US Commerce Department re-classify the VW minibus as a truck to qualify it for the duty. The result was devastating: German truck exports to the US plunged by 35%, and the beloved minibus disappeared from the US market, never to be seen again. As of today, that "chicken tax" on the VW minibus still exists. This is the only reason the US automakers are so successful in selling light trucks in their home market; the competition has been obliterated by protectionism in the name of creating the "level playing field" that the Americans claim to venerate.
Notes:
{45} https://www.cato.org/commentary/truth-about-trade-history
{46} https://www.usitc.gov/intellectual_property/about_section_337.htm
{47} https://www.globaltimes.cn/page/202101/1213959.shtml
{48} https://www.huaxiao-ss.com/china-won-the-337-investigation-lawsuit.html
{49} Investigation No. 337-TA-392 usitc.gov>publications/337/pub3418.pdf
https://www.mintz.com/sites/default/files/media/documents/2019-03-04/Certain%20Multimedia%20Display%20and%20Navigation%20Devices%20and%20Systems%2C%20Components%20Thereof%2C%20and%20Products%20Containing%20Same%2C%20337-TA-694%20Comm%27n%20Op..pdf
{50} https://www.businessinsider.com/american-trucks-chicken-tax-explains-domination-2018-6#:~:text=%20%20%201%20A%201960s%20%27Chicken%20War%27,Albert%20Edwards%2C%20a%20strategist%20at%20Soci%C3%A9t%C3%A9...%20More%20
{51} https://www.nytimes.com/1964/01/10/archives/the-chicken-war-a-battle-guide.html
{52} https://www.nytimes.com/1964/06/11/archives/poultry-dispute-hits-volkswagen-truck-sales-may-be-halved-by-us.html
{53} https://en.wikipedia.org/wiki/Chicken_tax
{54} https://fee.org/articles/chicken-tax-makes-trucks-expensive-and-unavailable/
Image credit: https://www.chinadaily.com.cn/a/202109/17/WS6143dbbda310e0e3a6822281.html
Mr Romanoff's writing has been translated into 32 languages and his articles posted on more than 150 foreign-language news and politics websites in more than 30 countries, as well as more than 100 English language platforms. Larry Romanoff is a retired management consultant and businessman. He has held senior executive positions in international consulting firms and owned an international import-export business. He has been a visiting professor at Shanghai's Fudan University, presenting case studies in international affairs to senior EMBA classes. Mr Romanoff lives in Shanghai and is currently writing a series of ten books generally related to China and the West. He is one of the contributing authors to Cynthia McKinney's new anthology When China Sneezes (2020). His full archive can be seen at https://www.moonofshanghai.com/ and http://www.bluemoonofshanghai.com/. He can be contacted at: 21866...@qq.com
Copyright (c) Larry Romanoff, Moon of Shanghai, Blue Moon of Shanghai, 2021
https://www.bluemoonofshanghai.com/politics/5268/
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https://www.bluemoonofshanghai.com (January 13 2021)
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Part 6c (1 of 3) - Protecting One's Way to Prosperity
This is yet another major factor contributing to US economic domination, a process it still heavily indulges in today while condemning other nations for sins that are infinitely smaller. Protectionism is the policy of using the power of government regulations to discourage imports and prevent foreign take-overs of domestic markets and companies, using duties and taxes on imported goods, import quotas, as well as clever trade policies, bureaucracy, political pressure, and a host of other methods. It is true there are occasions when a nation may have good and valid reasons to protect its industries and markets from predatory behavior by foreign governments and corporations, but it is primarily the predator nations, most notably the US, who are also the most protectionist. When the fox goes out to steal your chickens, it is careful to protect those chickens it already has from being stolen by someone else. Protectionism is a talent with which America appears to have been unfairly and exceptionally well-endowed and for more than 200 years these commercial policies have been rampant in America, initiated by the US government to provide every advantage to its domestic industries.
Protectionism in its native state consists of little more than corporate welfare programs, classic examples of special interest groups using the force of government to obtain private benefits at the expense of the population. US industry groups like steel, auto manufacturing, textile, electronics, and agriculture gain hugely from the help of their government in restricting foreign competition. This is almost always damaging and expensive to domestic consumers who inevitably lose from these measures. But in the US, with the media on the same page as the government and the large multinationals, American consumers are usually unaware of what is being done to them. A typical example would be a tariff on foreign garments, which not only makes foreign goods more expensive but also permits domestic companies to substantially raise their prices now that they are free from competition. With high tariffs to protect domestic manufacturers from lower-cost Chinese imports, 300 million Americans were paying $20 more for a pair of blue jeans so that two or three influential domestic companies could earn an extra billion dollars in profits.
In recent decades the US government maintained a constant media assault on China with complaints about low wages, an undervalued currency, product dumping, accusations of unfair subsidisation, and other unspecified "cheating" by the Chinese, that produced China's low costs and which necessitated protectionist retaliation by the US. But magically, when American multinationals moved their production to China to take direct advantage of those same low costs, the US government immediately dropped its textile tariffs and began to praise low costs. The obvious conclusion is that when Chinese firms export inexpensive blue jeans from China to the US, they do it because they are cheating and their currency is undervalued, but when American firms export inexpensive blue jeans from China into the US, the credit is due to American efficiency and ingenuity and the greatness of democracy. It should be apparent to readers that the costs and currency are the same in both cases.
According to Patrick Buchanan:
Behind a tariff wall ... the United States had gone from an agrarian coastal republic to become the greatest industrial power the world had ever seen - in a single century. Such was the success of the policy called protectionism that is so disparaged today. {45}
Buchanan is at least partly correct in his statement. Certainly, US industrial success has been assisted immeasurably from the constant and pervasive protectionist measures the US government has inflicted on foreign goods from the very beginning of the Republic. Once industrialization started, the US quickly learned the benefits of protectionism and experimented with various forms and rationales, including the necessity to "protect US manufacturers from the low wages of Europe". Does that sound familiar? By the early 1800s, US import duties averaged more than 50%, and by 1900 trade tariffs had reached gigantic proportions, and the US more or less abandoned any pretense that tariffs were to protect infant industries.
Perhaps in no other place were American protectionist measures so obviously predatory as in their military colonisation and plundering of undeveloped nations. When US firms extracted resources or raw materials from poorer countries, these products always entered the US duty-free. However, if any domestic companies of those nations attempted to export either raw materials or finished goods to the US, tariffs would be set at levels to preclude market entry, often reaching 50% to 80% and sometimes several hundred percent. However, the US used these colonies not only as a raw materials source but as finished goods markets, in which case no country was permitted to levy import duties of more than perhaps 5% against American goods, the countries being forced to sign treaties to this effect. Once again, the American version of fair play and a level playing field. All US Administrations have followed the predatory philosophy best stated by President Wilson when he said the doors of other countries would be battered down "even if the sovereignty of unwilling nations be outraged in the process".
Protectionism quickly became a permanent feature of US trade policy. When the Americans negotiated the Free Trade Agreements of GATT, the WTO, and NAFTA, this was not done from a lack of protectionist sentiment but rather from a perceived advantage and a powerful negotiating position compared to its trade partners. It was always clear that American intention in creating these so-called "Free Trade" agreements was primarily to force open other markets to US firms and products. The US never reduced its own trade barriers unless it gained far more in return, and even then much of the original protectionist measures remained. The US had the strength and negotiating power to force agreements worded primarily to benefit American corporations and were done with the expectation that the US would win on all fronts. And of course, on the occasions when this advantage didn't materialise as planned, the US was immediately whining about unfair trade and wanting 'a level playing field'. The American position on trade represents hypocrisy at its finest. The US preaches free trade only when it is winning and profiting from it, but whenever it finds itself falling behind due to the lack of competitiveness of American firms, the free-market theory is quickly abandoned in favor of unfair trade. In the context of the world's free trade agreements, much of the world remains bitter at the extent of US control over not only bodies like the World Trade Organization (WTO) but also of their arbitration and other committees which rather too often arrive at surprising decisions that favor the US. Without this unfair influence, the US would have won almost no trade disputes and would be much poorer for it.
There are two currents in the protectionist river. One is mercantilist - a perhaps rational pursuit of profit for domestic manufacturers at the expense of foreign producers. The second is ideological and political, therefore often irrational and more difficult to combat. A major part of US mercantilist ideology is the excessively patriotic belief infused into Americans by incessant foolish propaganda that American corporations are the most efficient and produce the highest quality goods in the world, the natural conclusion from this set of beliefs being that any nation surpassing the US must be cheating. The ideological current is also strongly infused with American exceptionalism and white supremacy. Americans whine when any nation acts to protect local industry sectors from destruction by the invasion of US multinationals because they deem it their God-given right to enter and plunder freely, regardless of the domestic destruction inflicted.
Also stemming from ideology, and understandably distraught over its general lack of competitiveness in anything other than weapons of war, the US has increasingly politicised its trade conflicts, not only using trade policies as tools of colonisation, but encouraging the European Market and other nations to erect trade barriers to China in a concentrated and multi-pronged effort to "open" China in ways most advantageous to US hegemony, and to close it in every other way. In particular, the US government persists in its determination to destroy China's state-owned enterprises (SOEs), since it cannot compete with them, attacking them not on commercial but on moral and religious grounds, foolishly claiming government shareholding as prima facie evidence of foul play. At the same time, both the US and European countries heavily subsidise many of their exports to China, sometimes doing substantial harm to China's domestic producers. The hypocrisy in these measures is really quite astonishing.
The political and ideological side of US protectionist actions follow a typical pattern. First, the US government launches an inflammatory media blitz condemning China for multiple violations of WTO rules and all manner of illegal and unfair trade activities, invariably consisting of claims with no substance. The rhetoric is often extreme, with exaggerated and unsupportable claims of hundreds of thousands or millions of American jobs lost. After thus fanning the protectionist fires, the US arbitrarily levies punitive import duties meant to crush Chinese industries, and which are simply political extortion maneuvers meant to pressure China into admitting American firms into sensitive or national security sectors where China doesn't want them. These include financial areas, telecommunication services, and energy. But mostly what they want is to punish China for maintaining its SOEs which the Americans so bitterly hate because every thief dreams of robbing the biggest banks.
A great deal of the extreme pressure applied to China on the RMB exchange rate had a similar goal, that of forcing China to further open its markets to US multi-national corporations (MNCs). All of the rhetoric about the RMB was nonsense, although if China could have been forced to revalue, then so much the better for the Americans. But failing that, they hoped to at least break into new markets and plunder yet more Chinese bank accounts. The US trade cases taken to the WTO are of the same intent, not vital in themselves but useful as pressure negotiating tools. And of course, the WTO is largely controlled by the US. The Americans aren't so stupid as to create a worldwide trade body and actually give it authority over them. The WTO is no different than the International Court of Justice or the IMF; it's just another tool of imperial conquest and needs to be seen as such. And all of the foolish comments like "China has to decide whether to conform and adapt to the norms of international trade or continue to be an outlier", are just American propaganda and hypocrisy with that special Christian moral flavor: "We don't want you to commit economic suicide for us. We want you to do it because it's God's will."
Since the US financial meltdown in 2007, and its beleaguered economy still showing no signs of recovery after nearly a decade, the US dramatically escalated its protectionist attitudes, with hundreds of trade complaints against China, almost all unjustified. The list of targeted products grew larger by the week, with the US government even levying double tariffs in dozens of cases, against its own commitment to international trade rules and agreements, and all declared illegal by the WTO. China does of course protest and challenge all of these American protectionist measures, but these defenses are time-consuming and expensive even when China eventually wins the cases. In many instances, American law does not authorise the government to take trade actions, but the US has repeatedly ignored its own laws to launch dozens of so-called trade 'investigations' against China during the past few years. When a US court ruled that the US government did not have the right to impose higher tariffs on goods from China, the Americans found a creative way to legalise their illegal actions. The US Congress passed new laws and backdated them four years, then levied the tariffs anyway. One has to admire the flexibility of American law enforcement and legislation, to say nothing of the apparent flexibility in the American concept of 'rule of law'. And of course, making 'a level playing field'. It should be noted the Western media play an active supporting role in this vast hypocrisy by first launching their demonisation blitz then publishing exaggerated articles about the necessity for the US to file yet another trade complaint against China. They then go silent, with the public never realising those filed trade complaints almost inevitably come to nothing.
The US government has cleverly enacted some trade laws that have become the world's most efficient and vicious non-tariff trade barrier. The US International Trade Commission can launch what it calls Section 337 investigations {46} {47} against foreign companies for any purpose, with US companies regularly abusing this legislation for protectionist purposes that are clearly illegal. These investigations are a quasi-judicial trade measure the United States uses to protect its local companies from competition from imported products. Once a Section 337 investigation is initiated, the products in question and even similar products may be banned from the US market forever, even though the entire process is unlawful by international trade standards. In recent years, US companies have become increasingly fond of claiming alleged patent or IP infringements and used these Section 337 investigations simply as a business strategy to drive out Chinese competitors and grab a larger market share. When Chinese companies must face these charges levied against them by American firms, they will necessarily suffer heavy losses whether or not they win the case. If a Chinese company does not respond immediately, its products will by US law be automatically excluded from the US market. But to defend such cases, a Chinese firm may have to pay many tens of millions of dollars for various charges, legal fees, and many other costs. This is a truly vicious piece of US protectionist legislation, and is only one such weapon in the US armory against foreign competition - invariably used whenever the US cannot compete. {48} Due to these new laws, it is a simple and painless matter for a US company not only to obtain government assistance against foreign competitors but often to permanently cripple them. For these investigations, the US government supplies all the lawyers and pays most of the costs, while the foreign companies spend millions of dollars and months of time to defend themselves against accusations that are almost always groundless.
With this imaginative American process, it often isn't necessary to actually impose the tariffs or other duties. These trade investigations are sufficient in themselves to destroy foreign competitors since the investigating body can, and frequently does, demand unlimited quantities of documents with short turnaround time and will impose crushing penalties for failure to comply. America's so-called 'International Trade Commission' has on many occasions been irresponsibly ruthless, and even vicious, in applying these prosecutions to protect American industries. Here are two examples:
"In one case, Matsushita [now Panasonic] withdrew from an antidumping case and abandoned more than $50 million in export sales because the US Commerce Department demanded on a Friday that it translate 3,000 pages of Japanese financial documents into English by the following Monday morning. {49} In another case, the Commerce Department demanded that the management of a small Taiwan company supply it with more than 200,000 pieces of information and reply to a 100-page questionnaire that was written in English. But the management of the company consisted of only a husband and wife, and they were unable to respond. Using this lack of immediate response as an excuse, the Commerce Department levied an "anti-dumping" duty of almost 60% on Taiwanese sweaters, making it impossible for these firms to survive. Within a year from the time this so-called "investigation" started, more than two-thirds of the companies that produced acrylic sweaters in Taiwan went out of business". This is one way the US "levels the playing field" for its own multinationals.
In a classic protectionist maneuver, the US created a historic episode known as "The Chicken War". France and Germany had placed tariffs of 2% or 3% on imports of US chicken, to which the US objected and responded by imposing a punitive tax of 25% on a huge range of European products, including the Volkswagen minibus. {50} {51} {52} {53} {54} Declassified documents later revealed that the minibus was included because the US auto unions were proposing a strike just prior to a Presidential election, and US President Johnson made a deal with the unions to punish Volkswagen's success in America in return for abandoning the strike. Johnson therefore had the US Commerce Department re-classify the VW minibus as a truck to qualify it for the duty. The result was devastating: German truck exports to the US plunged by 35%, and the beloved minibus disappeared from the US market, never to be seen again. As of today, that "chicken tax" on the VW minibus still exists. This is the only reason the US automakers are so successful in selling light trucks in their home market; the competition has been obliterated by protectionism in the name of creating the "level playing field" that the Americans claim to venerate.
Notes:
{45} https://www.cato.org/commentary/truth-about-trade-history
{46} https://www.usitc.gov/intellectual_property/about_section_337.htm
{47} https://www.globaltimes.cn/page/202101/1213959.shtml
{48} https://www.huaxiao-ss.com/china-won-the-337-investigation-lawsuit.html
{49} Investigation No. 337-TA-392 usitc.gov>publications/337/pub3418.pdf
https://www.mintz.com/sites/default/files/media/documents/2019-03-04/Certain%20Multimedia%20Display%20and%20Navigation%20Devices%20and%20Systems%2C%20Components%20Thereof%2C%20and%20Products%20Containing%20Same%2C%20337-TA-694%20Comm%27n%20Op..pdf
{50} https://www.businessinsider.com/american-trucks-chicken-tax-explains-domination-2018-6#:~:text=%20%20%201%20A%201960s%20%27Chicken%20War%27,Albert%20Edwards%2C%20a%20strategist%20at%20Soci%C3%A9t%C3%A9...%20More%20
{51} https://www.nytimes.com/1964/01/10/archives/the-chicken-war-a-battle-guide.html
{52} https://www.nytimes.com/1964/06/11/archives/poultry-dispute-hits-volkswagen-truck-sales-may-be-halved-by-us.html
{53} https://en.wikipedia.org/wiki/Chicken_tax
{54} https://fee.org/articles/chicken-tax-makes-trucks-expensive-and-unavailable/
Image credit: https://www.chinadaily.com.cn/a/202109/17/WS6143dbbda310e0e3a6822281.html
Mr Romanoff's writing has been translated into 32 languages and his articles posted on more than 150 foreign-language news and politics websites in more than 30 countries, as well as more than 100 English language platforms. Larry Romanoff is a retired management consultant and businessman. He has held senior executive positions in international consulting firms and owned an international import-export business. He has been a visiting professor at Shanghai's Fudan University, presenting case studies in international affairs to senior EMBA classes. Mr Romanoff lives in Shanghai and is currently writing a series of ten books generally related to China and the West. He is one of the contributing authors to Cynthia McKinney's new anthology When China Sneezes (2020). His full archive can be seen at https://www.moonofshanghai.com/ and http://www.bluemoonofshanghai.com/. He can be contacted at: 21866...@qq.com
Copyright (c) Larry Romanoff, Moon of Shanghai, Blue Moon of Shanghai, 2021
https://www.bluemoonofshanghai.com/politics/5268/
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