GET REAL N.Y.T. EDITORIAL BOARD
The Paper of Record Should Know the Facts
Last Saturday, the editorial board of the New York Times, the storied American newspaper of record, published a recommendation on trade with China that a sophomore would have been embarrassed to submit on an exam.
The article opened by emphasizing how much trade with China benefits America. It noted that the U.S. sold $16.4 billion of soybeans to China last year and argued that Intel sells “low end chips” in China and uses the profits to invest in R&D for development of high end chips in the United States. Nowhere was there a mention of the fact that America accumulated a record trade deficit with China last year of nearly $400 billion, a larger bi-lateral trade deficit than the United States has ever had in the past. If America sold all the soybeans it could grow to China, it would not come close to amounting to $400 billion. Could U.S. soybean farmers survive on what they sell to China? Not on your life Red Ryder.
Let’s look at the Intel chip situation. The Times says Intel sells “low end” chips to China. Let’s see, the NY Times is a newspaper. It probably has a few telephones around. Probably some of the reporters even know how to use the phones. Did anyone bother to call Intel to find out for sure what kind of chips Intel was selling to China? No. I can guarantee you that no one called, because if someone had done so, they would not have made such a huge reporting mistake. Intel sells a lot of Guadi 2 chips, which are 7 nanometer OAM modules, in China. Seven nanometer is what Huawei is now boasting of having achieved with the introduction of its new 5g smartphone in efforts to get around U.S. restrictions on sales of advanced chips to China. In other words, Intel is selling the most advanced chips it possibly can in China.
The Times says that Cummins Engines has 21 factories in China churning out big truck engines and making one fifth of its total profits in China. That sounds dandy, but Cummins records indicate that it has only five factories in China. In any case, I have been around for a long time. I remember when Cummins made engines in America where it also employed thousands of Americans. Why is Cummins making engines in China instead of making them in America and exporting them to China. After all, China makes most of the world’s solar panels in China and exports them to America and elsewhere. Why isn’t turnabout fair play when it comes to engines?
The editorial board says that the tariffs on imports from China first introduced by President Trump and then maintained in order by President Biden have been far too costly to American households. I guess the board assumes that imposition of tariffs on imports from China automatically results in increased prices to American consumers. In fact, this is not the case as recent econometric modeling by Jeff Ferry of the Coalition for a Prosperous America has concretely demonstrated. In truth, the tariffs have been positive for ordinary Americans because they have led to new investment and job creation in the United States while not imposing any very substantial costs.
Finally, the Times editorial board argues that China’s production of smart phones is no threat to U.S. national security. Hmmm. Let's see, why does the United States and its allies ban or limit the market penetration of Huawei phones? Why has the U.S. banned sale of advanced semiconductor chips to Huawei? Or, to turn the argument around, why is Xi Jinping banning the use of Apple’s latest phones by Chinese officials?
I know that the Times has some excellent, hard headed reporters like Keith Bradsher and Ana Swanson. Does the editorial board bother to speak to them? It would be a good idea to do so,
The deficit I cited is for goods and services. U.S. services trade surpluses are not actually nearly as large as are our goods deficits.
I agree with your general premise but would caution against using a $400 billion trade deficit figure based solely or mainly on trade in goods. The US has long had gigantic trade surpluses with China in services and intellectual property which cuts the products deficit by as much as 50 percent, if not more. For example, even though Chinese enrollment in US postsecondary and secondary schools has shrunk since Covid it still generates a surplus of about $US 20 billion even without the additional dollars spent by Chinese parents who visit their parent student sons and daughters. Chinese real estate investments in the US swamp US real investments in China. Trade numbers should reflect all trade, not merely goods.
I also suspect the New York Times editorial board is taking an olive branch approach to China because many of its investors and advertisers who are heavily invested there are terrified of the billions they will lose in a trade war, even though the US as a country will win much more economically than it loses if there is one. I for one don't favor a China trade war because as a student and teacher of history, trade wars and tit-for-tat tariffs helped cause the global depression and World War II when Germany and Japan responded with military action. Tough trade approaches are another matter altogether.