The Spark

“The emancipation of the working class will only be achieved by the working class itself.” — Karl Marx

What’s Behind the U.S. Trade War with China?

Apr 26, 2021

The following is taken from a SPARK presentation given on April 18th:

In 1949, China made its own nationalist revolution against the various powers dominating, controlling and strangling its national economy, the most notable of which were powers like the U.S., Japan, Great Britain and France. So, the U.S. and the other big imperialist powers tried to strangle the Chinese revolution and economy by cutting it off from most world trade and investment.

To survive, the Chinese state nationalized big parts of the economy and invested heavily in building up its basic industrial infrastructure. Instead of profits going to shareholders, they poured back into developing more industry. In a period of less than 40 years, China went from being primarily a peasant country, to a country with a very large working class of hundreds of millions in huge factories, mainly in the coastal zone that extends from Hong Kong to Beijing. At the same time, the rest of China remained agricultural, farmed essentially by peasants using little technology. All during this time, U.S., Japanese and European companies were blocked by their own governments from coming in to make profits in China.

By the early 1970s, the U.S. government began to change its policy toward China. This opening was symbolized by U.S. president Richard Nixon’s trip to China in 1972. China’s huge population of 554 million, the largest in the world, in 1949 was nearly 4 times larger than that of the U.S., which stood at 149 million then. For the U.S. capitalists, the aim was first of all to exploit and profit from China’s enormous working class, as well as gain entry into the Chinese domestic market.

Gradually, the U.S. and other big imperialist powers got China to open up its economy to foreign investment, that is, to Western (and Japanese) capital investment—including to U.S. companies like GM, Ford, Motorola, Procter and Gamble, GE, Apple, etc.

China Becomes Imperialism’s Workshop

As a result of opening up that door, China developed primarily as the workshop of the world in the 1990s and 2000s, especially for imperialist countries like the U.S. The U.S. localized some of its production of goods in China with its low wages and nearly inexhaustible workforce, the largest in the world. Today the industrial workforce alone stands at 260 million workers, out of a total workforce of close to 800 million.

U.S. businesses have made comfortable profits by subcontracting their work to China or by integrating Chinese-made products into the U.S.’s own products. Companies like Walmart import goods made in China. Companies like Apple use the Chinese working class to assemble components produced all over the world. When Apple sells iPhones that are “Made in China,” the profits don’t go to China, but primarily to capitalists in the West, mainly in the U.S., who hold controlling shares in Apple.

We are told that foreign competition with China and other countries has undercut U.S. manufacturing, when the reality is that the manufacturing process in China is dominated by U.S., Japanese and European companies—but above all, the U.S. U.S. capitalism has spread its tentacles all over the world—all through other parts of Asia, especially China. U.S. companies dominate the global supply chain and global assembly line.

Yes, Apple iPhones that are sold all over the world might be stamped with a “Made in China” label. But their design, development, marketing and software are all carried out in the U.S. And some of its most expensive parts, such as the processors, are also made in the U.S. Most of the revenue and profits stay in the U.S. with U.S. capitalists. “Made in China” just means that is where final assembly took place, the least profitable part of the operation.

Even cell phones made by Chinese companies, such as ZTE and Huawei, also use the same U.S.-made processors, the guts of the cell phone. So, U.S. companies still grab a big part of the profits from many products that are made by Chinese workers at Chinese companies as well.

U.S. Policy: Integrate and Contain China

During the 1990s, United States policy consisted of integrating China into international institutions the U.S. controlled—like the World Trade Organization. George W. Bush codified U.S. policy toward China as something called “congagement,” a strategy combining containment and engagement. That meant the U.S. was going to invest in China, that is, “engage,” but it was also going to limit what China could do and how much value it could take from production carried out in China, and above all, that China should be “contained” under terms that continue to benefit U.S. capitalists.

The Obama administration in fact toughened the “containment” part of this double aim under the name of a “strategic pivot to Asia,” notably through the Trans-Pacific Partnership (TPP). This “pivot” continued to recognize China as a relatively powerful state, all the while reinforcing the United States’s weight in the region through trade and military partnerships with China’s neighbors and economic rivals, including Japan, Vietnam and India. It was a way to ring China, to build a wall, so to speak, around China—not preventing its development, from which U.S. companies were first to profit, but to set boundaries for it.

The U.S. has not only set up trade pacts with China’s neighbors and rivals. It has also sent in warships, part of the Seventh Fleet, into the South China Sea and near Taiwan, as demonstrations of force, under the guise of keeping shipping lanes open and upholding international law. These U.S. naval vessels are within 12 nautical miles of some of China’s territories.

In response to the U.S. military show of force, every so often the Chinese state has sent its naval vessels and fighter jets into the zone. But for us in the U.S., there are banner headlines and pronouncements on national news that it is China threatening OUR national security! They make it sound as if Chinese warships were 12 miles off the coast of Key West—when, in fact, its ships are eight thousand miles away.

Under Trump, with the economic crisis and general slowdown of the economy, the U.S. stepped up its pressure against China, making a point not only of engaging in a trade war, but by making a big show of announcing it in order to force the Chinese government to make certain concessions. Trump began his campaign in January of 2018 with the rise of import taxes on over 1000 Chinese products, from steel and aluminum, that is, the basic building blocks of basic industry, to consumer items like washing machines, solar panels and LED lighting.

But Trump’s tariffs produced a huge mess. U.S. manufacturing companies that use imported steel and aluminum then flooded the U.S. Commerce Department with 20,000 applications for product exemptions from tariffs, claiming that they couldn’t get their specialty steel or aluminum from anywhere else.

Other large U.S. companies, from semiconductor chip makers to diesel engine manufacturers, also lodged complaints with the Commerce Department about suddenly having to pay tariffs on their own products.

Amping Up the Conflict

In all the conflicts so far, whether diplomatic, or military, or part of a trade war, announced or quiet, the U.S. has been careful, up to now, not to let it go to a shooting war. But this conflict continues.

The trade war against China may have amped up under Trump. But the trade war continues today under the Biden administration. You can hear it on nightly news, in daily newspapers, at White House press conferences, and in widely publicized cabinet meetings of the Biden administration. There has been unrelenting coverage painting China as the main threat to the U. S., and verbal threats from the U.S. In the words of Biden’s press secretary: “We won’t rule out any action.” Or his Secretary of State: “It’s never a good bet to bet against America.” When a country as powerful as the U.S., with its vast military, uses this kind of rhetoric, it’s an open threat.

Be careful, however. I am not predicting there is going to be a shooting war—I am certainly not saying tomorrow. But there’s a logic to this situation and the proof of it is the rhetoric/propaganda directed against China, and events can develop faster that we realize.

The U.S. government is already preparing us for the idea of a clash with China. For Trump, even the coronavirus was Chinese, and the pandemic was an act of war! Now, Biden’s readiness to sign on to the anti-Chinese policies of Trump, even if not all the extravagant language, shows that the talk about China was not only a way to hide Trump’s regime’s obvious inability to fight the spread of the virus, it’s also a way for us to blame other people for the loss of jobs here.

The Enemy Is Right Here

We are told, over and over again, the reasons for the tremendous gutting of jobs, especially in certain sectors of the economy, like manufacturing, is because of foreign competition. And in this time period, the enemy is supposed to be China. In an earlier period, it was Japan.

It’s true that 5.5 million manufacturing jobs were lost in the U.S. in last 30 years, from January 1989 to January 2018. But it is ludicrous to attribute this drastic drop in manufacturing jobs to foreign competition. In that same time period when jobs here were lost, industrial production in the U.S. increased by 60%, according to the U.S. Federal Reserve. With this kind of increase there should be more jobs, not fewer. But there aren’t. If workers had taken their share of this increased production, more people would be working many fewer hours for more pay—maybe 25 hours a week, and maybe $100,000 in wages. Enough value was created out of this extra production to allow this to happen.

But over this past 30 years, workers haven’t fought to keep the benefit of their increased labor for themselves.

Today there are millions fewer workers in the U.S., producing substantially more, creating much more wealth for U.S. companies and the capitalist class. That’s the problem. Not China.

Trump made a big deal about supposedly saving steel workers’ jobs, whose numbers dropped by 400,000, or 75% between 1962 and 2005. But what he covered up was that steel shipments did not decline, according to a study published in the American Economic Review in 2017. No, what changed was a new technology called the minimill, which allowed the steel companies to push one worker into doing the work done by 5 workers 43 years before. Other studies have shown that there have been similar increases in productivity in other sectors, such as computers and electronics manufacturing. Even textile manufacturing, which was also said to have migrated out of the country, has been transformed in the U.S. into a high tech industry producing enormous amounts of expensive, specialty fabrics with many fewer workers.

So it’s not foreign competition that is taking U.S. jobs, but U.S. companies right here in this country that are eliminating manufacturing jobs. And these same U. S. companies have further capitalized on these job losses by using them to threaten those still working with the loss of jobs, getting them to accept lower pay, less benefits, longer work hours, less security—just in order to keep a job. So rather than competing against foreign workers, workers here are really competing against themselves. This capitalist system does everything in its power to drive down wages and increase its profits.

And during this period of the economic crisis IT created, the capitalist class is using protectionism as a pretext to heighten workers’ exploitation and to lower wages and raise prices, all in the name of competitiveness—in this case its victims in the trade wars are workers in both China and the U.S.

The capitalist class here, and their politicians, want workers to be mad at workers in China, or Mexico, or Japan, or wherever, rather than understand it is our own U.S. capitalist bosses here—who extract every ounce of value they can, out of the labor of U.S. workers.

The Working Class Is International

U.S. capitalism is a part of an international capitalist system, where it sits on top, draining profit out of the productive forces, the working classes, around the world. But not only capitalism is international. There is a whole international working class in the world.

The Chinese working class is the largest one on the planet. Their class enemy is their own Chinese capitalist class, and their own dictatorial state, as well as all the capitalist classes of all the imperialist countries, like the U.S., that relegate the vast majority of China’s population to abject poverty, working for an annual income of $150 or less.

But despite their own repressive government, several years ago Chinese workers knew how to fight for higher wages, at least on a local level.

Fights that the working class makes there can come back and help the working class fight that can be made in this country—and vice versa. But it is the working class of this country that sits in the middle of the most powerful capitalist country in the world, the citadel of capitalism, that system which steals the value of workers’ labor all over the world. And the fact that we sit here gives the U.S. working class the possibility to free itself and the whole world.