1. Here’s what happens when the West turns away from globalization:
While the United States has free-trade agreements with 11 Latin American countries, it shows no appetite for more. Uruguay’s centre-right government is negotiating an accord with China after its requests for one with the United States were rebuffed. France and others are blocking the ratification of a trade pact between the European Union (eu) and Mercosur (a five-country bloc including Brazil and Argentina) which took more than 20 years to negotiate.
2. Remember when trade barriers with China were going to reduce America’s trade deficit? As I predicted, it never happened. Here is just one of the reasons why:
The two-step is a way in which some retailers make use of a loophole in American trade rules known as the “de minimis” exemption, which means “too small to be trifled with” and allows packages worth less than $800 to enter America without facing duties. . . .
Trade through the exemption—mostly the regular import of small packages rather than any trickery—is now so large it distorts national data. Seven in ten de minimis parcels arrive from China. Shein and Temu, two large online retailers with Chinese supply chains, alone account for three in ten. Our calculations, based on China’s share of de minimis imports, suggest that America’s trade deficit in goods is 13% larger with China, and 5% larger with the world, than official numbers indicate. This may help explain a growing puzzle in Sino-American trade statistics. China says that it exports about $73bn more than America thinks it receives, and some economists believe the true gap may be more than $150bn.
3. The Economist says China is becoming a scientific superpower, but that nationalism is an issue:
Chinese collaborations are common for Western researchers. Roughly a third of papers on telecommunications by American authors involve Chinese collaborators. In imaging science, remote sensing, applied chemistry and geological engineering, the figures are between 25% and 30%. . . .
In America and Europe, political pressure is limiting collaborations with China. . . .
There are also concerns among scientists that China is turning inwards. The country has explicit aims to become self-reliant in many areas of science and technology and also shift away from international publications as a way of measuring research output. Many researchers cannot talk to the press—finding sources in China for this story was challenging. One Chinese plant scientist, who asked to remain anonymous, said that she had to seek permission a year in advance to attend overseas conferences. “It’s contradictory—on the one hand, they set restrictions so that scientists don’t have freedoms like being able to go abroad to communicate with their colleagues. But on the other hand, they don’t want China to fall behind.”
This is a central paradox of nationalism. Do you want to be strong? Or isolated from globalization?
4. But cHiNa iS the rEaL tHReaT:
Oh, and Russian TV news people are now claiming that Russia is the rightful owner of Alaska.
5. A good essay on the parallels between the pre-WWI period and today’s US/China tensions.
6. A new estimate says China’s population decline will be even worse than feared, with Pakistan likely to overtake China in less than 100 years (by extrapolation.)
7. On a more optimistic note, China is moving from being a copycat to becoming major innovator in technology:
Western R&D centres in China have been re-engineered, from places to learn about the domestic market into hotbeds of innovation whose fruits can be found in products sold everywhere.
Foreign chief executives now believe that China’s brainpower and its innovation-curious regulatory regime are crucial ingredients of their companies’ global success. Nowhere else in the world can newfangled technologies, from novel drugs to flying taxis, be tested as quickly as in China, marvels a foreign diplomat. So even as the Chinese economy slows—it grew by a surprisingly tepid 4.7% in the second quarter, year on year—and multinational businesses try to reduce their reliance on Chinese supply chains amid mounting geopolitical tension, global CEOs are desperate to protect this critical third function of their Chinese operations.
Unfortunately, every silver lining has its clouds:
Western companies would understandably hate to be shut out of this r&d paradise. Some are nonetheless bracing for such an eventuality. In June America’s Treasury department issued draft rules that would ban American firms from investing in ai, semiconductors, microelectronics and quantum computing in China. These could come into force later this year. . . .
At the same time, Mr Xi’s paranoid security apparatus is making it harder to move some intellectual property (ip) generated in China outside its borders, ignoring economically minded officials’ concomitant efforts to attract foreign investment. Exports of some ais, such as speech- and text-recognition software or even TikTok’s recommendation algorithm, now need permission from the commerce ministry. So far this has not stopped most ip from leaving the country. But this may change at any moment, says Alex Roberts of Linklaters, a law firm. “We are at a tipping point.”
8. On a lighter note, Tim Walz and I have one thing in common. We both spent our honeymoons in China, and in both cases during the first part of June, 1994.