To Catherine Rampell (Washington Post, 5/21/18), the idea that the US’s $337 billion trade deficit with China is problematic is a “fairy tale.”
It’s rare that you get a more explicitly classist piece in a major newspaper than Catherine Rampell’s column (Washington Post, 5/21/18) on Donald Trump’s trade war with China. While its assessment of the Trump administration’s blustery rhetoric and confused actions seems very much on the money, its assertions about the country’s actual interests are not.
It tells readers:
So rather than taking the time to learn about our actual complaints regarding China’s trade policy (primarily, intellectual property theft), or how we could deal with them (through multilateral pressure, such as the Trans-Pacific Partnership that Trump killed), Trump fixated on deficits. The part of the story that sold with the public.
OK, so Rampell tells us that we should not be concerned about a trade deficit that costs in the neighborhood of 2 million manufacturing jobs. Instead, we should be concerned that China is not as protectionist as she wants it to be when it comes to the intellectual property claims of our software and pharmaceutical companies.
And why exactly should those of us who don’t own lots of stock in Microsoft and Pfizer care if China doesn’t pay them licensing fees and royalties? If we think through the economics here, this means that other things being equal, lower payments to these companies mean a lower-valued dollar, which would improve our trade balance on manufactured goods. What’s the problem here?
Actually, the story gets even better. Suppose that China doesn’t honor the patents of Pfizer and other drug companies, so that it produces generic version of new drugs that sell for hundreds of dollars for a course of treatment, instead of the hundreds of thousands of dollars that these companies demand for the patent-protected product (equivalent to tariffs of tens of thousands of percent). Suppose it sells these generic versions to people in the United States, or just lets them come to China for their treatment.
This would save patients in the United States enormous amounts of money, and possibly save lives. This is what free trade is all about.
Sure, it means that Microsoft and Pfizer will not be as profitable, and their shareholders will be less rich. It probably also means that some of the highly skilled workers whose pay depends largely on these forms of protectionism will get smaller paychecks. But as I recall, we are all supposed to be concerned about income inequality, so why should the country be pursuing a trade policy intended to give us more of it?
Yes, we do need a mechanism for financing innovation and research. But we can do better than extending a relics of the feudal guild system, even if most of the folks in policy debates are too lazy to bother thinking about the issue. (See my book Rigged, chapter 5. It’s free.)
Dean Baker is senior economist at the Center for Economic and Policy Research in Washington, DC. A version of this post originally appeared on CEPR’s blog Beat the Press (5/21/18).
Messages can be sent to the Washington Post at letters@washpost.com, or via Twitter @washingtonpost. Please remember that respectful communication is the most effective.
The picture says it all. Do I have to read the article? One might ask themself where Mnuchin was on May 15, 2018. And why he spells his name like he does as if we’re not already confused. And why Drumpf attacked Hitlery campaign 2016 on her ties to Golden Sachs. And then no sooner buying the office than the Orange Horned Toad gave the cabinet away to Golden Sacks. 6 spots if I recall. Including the mass-murdering Mnuchin. Don’t worry. With Trump’s hand on the nuclear trigger there’s always another pancake tomorrow. That was a massacre in Palestine on May 15 that the US corporate media reported as “clashes.” 56 Palestinian dead, 11,000 wounded. Israeli casualties, 0. Some clash.
By promoting the end of income inequality do you mean to say that an individual with a high school education hired by a pharmaceutical company to work in an assembly line role should be paid the same amount as a scientist with a master’s degree or a PhD who is actually inventing new drugs? Even you describe the latter as “highly skilled.” Where do you think they got those skills from? A Black Friday sale as Walmart?
There’s no doubt that pharmaceutical companies and software behemoths such as Microsoft greedily inflate prices in order to shamelessly stuff executive and shareholder pockets, but why are you picking on the employees? Specifically the “highly skilled” employees? And I’ve always thought of fixing income inequality as meaning to pay all people, regardless of gender, race, ethnicity, age, etc., the same amount of money for the SAME JOB, not just any job. I would never think to pay an administrative assistant the same as an executive. Even if the admin may work harder for his/her paycheck, the exec takes on a lot more responsibility and has a lot more to loses a career if they screw up, not just a low-paying job easily replaced by another low-paying job.
Do you think a kid who just graduated from college with a degree in journalism and untested skills beyond their college paper should make the same as you?
The US should both fight for both balanced trade AND intellectual property protection. I’m disappointed that you so cavalierly discard the latter as though it’s some sort of pretentious leachate. You seem to have a simple black-and-white view of the world in which all corporations are evil empires run by hand-wringing masterminds like Mrs. Burns of The Simpsons. I hate defending them, actually, because all too often that is exactly how they act. But you can’t simply dismiss the fact that they spend millions of dollars and years researching medications and new technologies and they really do deserve to be able to recoup that money and profit from their efforts. Where you and I disagree with the pharmaceuticals and their congressional whores in DC is how much they should be able to charge for their drugs before their exclusivity runs out and generic pharmaceutical companies can use their recipe.
And why should you be concerned about Pfizer and Microsoft losing money in China? Well, guess whose drug and software prices they’re going to hike to make up for that loss? Pharmaceutical companies can’t bilk Europeans, either, thanks to price ceilings there, so they charge you and me even more. (Actually, what we need here in the US are European-type pricing regulations that prevent drug companies from gouging consumers for life-saving medications. Good luck with that; both Republicans AND Democrats have sold out to the pharmaceutical companies and tech giants. Facebook’s stocks soared while Zuckerberg was still testifying in Congress when it became clear the DC pussies weren’t planning to do their job and regulate FB to protect American consumers.)
And what about the intellectual property of writers such as yourself? Do you not value your copyright on your own material? You really wouldn’t mind if some Chinese publisher translated your book into Mandarin and it became a best-seller in China? And you didn’t see a yen of the millions it made? Naturally you’d feel screwed–because that’s what you’d be.
I don’t get where you’re coming from, that the US government should ONLY care about trade imbalance and not waste time with greedy money-grubbers’ intellectual property rights. First because not everyone who owns intellectual property is a greedy money-grubber, and secondly, whether you like it or not, even greedy money-grubbers have rights.
Mr. Sellers, the drug companies get the government and the universities to do their R&D discovery of drugs, not them. They make the profits while the public subsidies their losses: https://abcnews.go.com/WNT/YourMoney/story?id=129651
http://www.latimes.com/opinion/op-ed/la-oe-1027-mazzucato-big-pharma-prices-20151027-story.html
CEO takes the risk? Wrong, Nowadays, it is the taxpayers that subsidies the CEO’s losses, not the company. Furthermore, the CEOs always seem to manage to get their pensions and stock options intact and lands another job while the employees lose their pensions are scrambling to get another job. Sorry, but your viewpoint of the CEOs is completely outdated.
Was it your intention to muddy the water or is it just a natural byproduct of your bullshit?
Hi Frank…. you don’t understand what income inequality is? O.K. read this:
it’s an unequal distribution of household and individual incomes of all the various humans in any economy. Apparently life was more equal after WW 2 because corporations paid like 90% in taxes——-Wow, and get this, they were still rich. When most of a nations income is controlled by a few, we get, the Gilded Age, or like today ——–Gilded Age 2.
Of course you’re being silly saying the 1st time ever job for an employee will make the same $ as a CEO, BUT when wages rise only to the top, then the majority of workers end up spending a huge chunk of money on basic necessities, and rent now is expanding beyond many citizens incomes. States often try to keep up, as CA ‘s rate rose and will rise every year from $12, I think now .to $15 in 2023…except even $15 now makes it hard to pay rent for many people.
Also when companies invest in buying back their own stock instead of putting money back into their companies—-people suffer again . When laws are written so that companies pay fewer and lower taxes——–only the people at the top prosper.For example, America is investing in war and maybe 60% of our money goes to Boeing, Raytheon…Haliburton ( remember them? : ) Booz Alle—–n wow they lived up to their ( Booz) name in spending! : 0
Oh yeah, BIG Pharma now seem to be using the public as guinea pigs—–which can make US, the People really angry…..anyway, when things get so bad that the PEOPLE can’t take it anymore—things happen——–like The French Revolution……but I don’t think it will happen that way this time——the revolution will be totally individualized, probably not televised, and we can already see the lone gun person being really INDIVIDUALLY angry…
Oh and it’s not low skills that kill a nation————–it’s when companies diss their own workers…..it’s like DISNEY cheats??? The land of Mickey and Minnie???? Oh yeah, because in Florida, Disney told their tech people that they had to train incoming visa workers for the Florida workers OWN jobs….and they were told that they could NOT talk to the media, AND the workers had to train others for their very own jobs, BUT if they told———– they would lose their pensions… well someone told anyway, : ) So you see, when DISNEY lies, we all trusted them–and this happens with lots of big corporations——— DIDN’T we used to trust them????? Hey AT&T what happened to the $4,000 gift to your employees——into thin air I guess ………SIGH————–we do really need to look out for each other and fix things—- America right now is like a beautiful hand knit sweater, but it’s got a few pulls here and there————–and if we don’t take care of those pulls——-then the entire sweater can unravel. AND as the sweater goes, so goes the nation. I hope this helps , Frank…….because if we can’t do this, like Shakespeare said, we will be “…. sans hope, sans everything. I am Wondering a lot Frank”- Best Wishes to the planet too, because without Gaia, we are all stardust ——-without a home.
The US hasn’t got a clue what to do about China, they and other nations outsource crazily to them, then get all upset that a large country like that beats them at their own game in capitalism rather then just be prostitutes to Western businesses like Indonesia, Vietnam, Thailand, The Philippines, or elsewhere. That’s what’s scary about the Pivot to Asia and people should watch John Pilger’s new movie ‘The Coming War on China’ to be more afraid.