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Friday, 11 November 2016

Donald Trump wants to protect American IP in China

Donald Trump is now the President-Elect of the United States of America

He is not yet the President of the United States of America, but that will happen soon. Until that time, Barack Obama will be a caretaker of the government until his handover of power to Donald Trump is completed.

Congratulations Mr Trump. I never knew you had it in you. You were truly the underdog. To be honest, I thought that Mrs Clinton would win. But that's life, it throws you a curveball when you least expect it.

To Mrs Clinton, you were the Hillary Clinton. The Iron Lady who stood firmly behind her man when the whole world called him "kelentong" (that's a Malay world meaning "bullshit"). 

So what would Mr Trump do after being elected as President? It goes back to his election promises. One of those is the instituting of a special prosecutor's position to investigate Mrs Clinton's lapse of judgement in her e-mail habits. I think that it's a rather petty issue, and he should look at other things. Which brings us to....

Mr Trump's Promises Regarding American IP in China

China, as many people know, is the world's second largest economy -- after the USA. Not surprisingly, in the run-up to the elections, Mr Trump took aim at China in his election promises. 

Here are some of the election promises from Mr Trump's website regarding his foreign policy:

  1. He pledged to withdraw from the Trans-Pacific Partnership (TPPA), which had not been ratified by the USA;
  2. He would direct the Secretary of Commerce to identify violations of trade agreements by foreign countries which harm American workers (i.e. putting them out of jobs), and use both American and international law to end these violations;
  3. He would instruct the Treasury Secretary to label China a currency manipulator;
  4. He would bring trade cases against China in the USA and the WTO due to its alleged subsidy of exports;
  5. Use all Presidential powers to remedy trade disputes if China does not end its allegedly illegal activities, including imposing tariffs.

Among other things, Mr Trump based these promises on the following:
  1. Since China joined the WTO, nearly one-third of manufacturing jobs since NAFTA and 50,000 factories have been lost (seriously? 50,000?);
  2. Almost half of the USA manufacturing trade deficit is the result of trading with China;
  3. The U.S. International Trade Commission predicted that more than 2 million jobs could be saved in the USA if American IP in China was better protected.

So will he really do it?

That is a good question. There are things which sound good during an election, and of course, Donald Trump the candidate could say things which sounded outrageous, because he needed the vote. He also didn't know then whether he would become Donald Trump the President (which he has). 

Donald Trump has mentioned imposing 45% tariffs on goods from China.

China is estimated to contribute between 25% to 30% of the world's growth -- but it's allegedly taking away jobs from the USA. Which is strange, since, 25% to 30% of world economy growth also implies growth of the American economy, no?

Donald Trump, in his nomination acceptance speech on 21st July 2016, said: "We are going to enforce all trade violations against any country that cheats. This includes stopping China's outrageous theft of intellectual property, along with their illegal product dumping, and their devastating currency manipulation." 

At the Republican platform in July 2016, Donald Trump said, "Today, the worst offenses against intellectual property rights come from abroad, especially in China. We call for strong action by Congress and a new Republican president to enforce intellectual property laws against all infringers, whether foreign or domestic." Later, in the same speech, he alleged that "our technology is stolen, and intellectual property and copyrights are mocked in an economy based on piracy." said that the problem with using Presidential power to impose tariffs on Chinese goods is that China could react in the same way: imposing tariffs on American goods. That would be devastating for many American companies. 

Zhang Shaozhang, a CCTV (news portal) contributor and military professor in China, wrote: "Trump doesn't play by the rules and he's hard to predict, but there's one thing I'm certain of: He'll turn the world's number-one economy into number two. Yes he can!"

Investopedia wrote: "Many U.S.-based corporations manufacture much of their products in China, including Apple Inc. (AAPL) which produces all of its iPhones, Macs and iPads in the country (of course, China has also become Apple's second-largest consumer market). That means that Chinese-made iPhones sold in China produce sales and profits than enrich American workers and shareholders. Many large auto makers such as General Motors Co (GM) and Ford Motor Co (F) are increasingly reliant on sales to the Chinese market, and Hollywood is seeing China more and more as a profit center for its movies and entertainment."

TIME magazine noted that Mr Trump did not take a harsh look at China's human rights records, and his focus is on trade and jobs. Which is seen as a good thing for China's pundits. They see Mr Trump's isolationist policies as an opportunity. TIME magazine also noted the recent Chinese "charm offensive" in South East Asia. 

Xinhua, a China news agency, wrote in an opinion that the isolationist policies of the USA during the Great Depression worsened the economic crisis. A second commentary opined that America and China should "jointly build a new model of major power relations."

What I Think

China obviously represents a large consumer market, and American products have many fans in that part of the world. There are many things that the Chinese buy from the Americans: airplanes, cars, technology, consumer products, movies, songs, and other stuff. Many of those generate profits for American companies. 

At the same time, Chinese factories are churning out products for American companies. It's not unfair to say that outsourcing work to Chinese factories does, in fact, benefit American companies, and the American economy by extension. However, the types of jobs that are now in demand are shifting away from manual labour, especially the type in factories, because those jobs have moved to China. That's why America's labour force is now free to "upskill" and pursue more value-added jobs. This is something that they are not doing, either because they want to do what they've always done (not feasible) or they are unaware that the market forces are changing. 

Maybe Mr Trump can create jobs for Americans through his large corporate empire. 

Maybe American companies have to start moving to India and Vietnam and Bangladesh, which Chinese companies are already doing. 

Maybe America should emulate China and woo the leaders of South East Asian countries. (That includes Malaysia, too.)

An isolationist policy would be positive for America if its digital economy (which sells to the whole world) continues to expand. But a digital economy must also be backed by real goods and real jobs, in order for real people to spend real money. 

An isolationist policy in America would send undocumented immigrants back to their countries of origin and force business owners to employ fellow Americans, thus jump-starting the American economy. America certainly has the population to support that kind of economy.

And under Mr Trump, possibly, immigration and green cards would slow down to a small trickle, so that the local yokels don't have to compete with the creme de la creme from foreign lands. 

Mr Trump could do something better, by pushing forward the TPP which promised to stimulate growth and trade. Mr Trump could try initiating dialogue with existing partners, before taking the helm, so that he could have an objective view of things.

Election promises are sometimes "puffery", which aren't supposed to be included in the final product description. And a President of the world's largest economy should know better than to be reckless in a way that affects millions of people.
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