Podcast Summary
US-China trade relationship: The US-China trade relationship wasn't inevitable, as other countries could have taken China's place as a dominant manufacturing powerhouse for the US.
The intricate relationship between the US and China's economies, particularly in manufacturing, didn't just happen by chance. It was shaped by a series of decisions and circumstances that led to China becoming a dominant manufacturing powerhouse. The US, with its focus on services and advanced manufacturing, found it more economical to import goods from China due to its cheap labor. However, this relationship didn't start with China; other countries like Taiwan and Malaysia held that position before. In the conversation between Joe and Tracy on the Odd Lots podcast, they discuss how the US-China trade relationship wasn't inevitable, as other countries could have taken its place. Dr. Elizabeth Ingleson, an assistant professor at the London School of Economics and author of "Made in China: When U.S.-China Interests Converged to Transform Global Trade," will join them to discuss the specifics of how this relationship came to be.
US-China trade relationship history: The US-China trade relationship has deep historical roots dating back to the 1970s, involving not just business people but also diplomats, labor unions, consumers, and retailers. China's convergence with global capitalism occurred during a time of significant transformations in the capitalist system, with the US playing a key role.
The interdependent relationship between the United States and China, which is a major focus of economic discussions today, didn't just materialize out of thin air. Instead, it has deep historical roots that can be traced back to the 1970s when the two countries rebuilt their trade relationship after decades of Cold War isolation. This process involved not only business people in both countries but also diplomats, labor unions, consumers, and retailers. Moreover, China's convergence with global capitalism wasn't with a static system. Instead, it was happening at a time when the capitalist system itself was undergoing significant transformations, with the United States being a key player in these changes. The book explores how these two different spaces intersected and ultimately converged, offering a fresh perspective on the history of China's engagement with the capitalist world.
US-China cultural exchange: Veronica Yap's import business paved the way for US consumers to accept engagement with China, leading to a more nuanced understanding of cultural exchange and mutual benefit in US-China trade.
The early 1970s marked the beginning of significant trade relationships between the US and China, which went beyond diplomatic and economic realms to influence cultural perceptions. Veronica Yap, an architect-turned-importer, was among the first to seize this opportunity, importing Chinese goods and eventually helping American consumers accept engagement with China. This shift was crucial in setting the stage for the transformation of US-China trade, as it moved beyond the traditional view of China as a market of four hundred million customers, to encompass a more nuanced understanding of cultural exchange and mutual benefit. However, it's important to note that the Chinese leaders' priorities often differed from the US business community, with diplomacy and geopolitical goals sometimes taking precedence over economic ambitions.
US-China trade relationship in the 1970s: Despite contrasting diplomatic perspectives, the US and China's trade relationship grew during the 1970s, benefiting both countries and contributing to the rise of neoliberalism and globalization
During the 1970s, the United States and China's diplomatic relationship was complex, with trade playing a more significant role than previously assumed. While US policymakers saw trade as a tool to aid diplomatic normalization with China, Chinese leaders held a different perspective, insisting that diplomatic improvements came first. This contrasting approach led to the growth of the US-China trade relationship, despite low numbers, which provided mutual benefits and paved the way for further diplomatic progress. Additionally, the United States was undergoing its own economic transitions during the 1970s, including the end of the Bretton Woods system and the passing of the 1974 Trade Act, which encouraged American manufacturing and finance to develop offshore. These deliberate decisions contributed to the rise of neoliberalism and globalization, shaping the economic landscape we know today.
Offshore manufacturing and trade in the 1970s: Companies and governments strategically shifted towards offshore manufacturing and international trade in response to economic and political circumstances, with China identified as a potential source of cheap labor, and the Trade Act of 1974 giving presidents more power to protect free trade.
The shift towards offshore manufacturing and international trade, including with China, was a deliberate and strategic decision made by corporations and governments in response to economic and political circumstances in the 1970s. JC Penney, for example, outlined in its company plan to increase the amount of goods manufactured overseas, and China was identified as a potential source of cheap labor. The Trade Act of 1974 also played a significant role by giving the president more power to make tariff decisions and impose trade restrictions, which was seen as a way to uphold and protect free trade during a time of distrust in Congress. While China is currently seen as a competitor in manufacturing and a source of cheap labor, it is also a major consumer market. However, it is unlikely that we will return to a time when China is primarily viewed as a market for Western goods, as the global economic landscape and geopolitical dynamics have changed significantly since then.
Outdated thinking on trade: Politicians continue to use outdated 19th century thinking on trade, framing it as a zero-sum game between nations, but the reality is more complex, with corporations and global systems playing significant roles.
The way we label and think about trade, particularly with regards to China, is rooted in outdated 19th century thinking. Politicians continue to use rhetoric that frames trade as a zero-sum game between nations, but the reality is that manufacturing and finance operate in a more fluid, interconnected global system. For instance, the concept of "Made in China" represents this complex web of global production, yet politically and rhetorically, conversations about trade remain bound by nation-state labels. This thinking can be traced back to the late 19th century when the UK introduced legislation to label goods based on their origin to limit competition from industrializing nations. However, the world has changed significantly since then, and it's crucial to recognize that corporations, not just nation-states, are central to these dynamic systems. The first generation of traders, like Veronica Yap, played a significant role in identifying Chinese goods that could appeal to the US market, paving the way for China to become a major production hub for a wide range of goods, including advanced technologies. It's essential to move beyond outdated notions of trade and manufacturing and embrace a more nuanced understanding of the global economy.
China's market challenges for American importers: In the 1970s, American businesses faced losses when importing from China but were advised to establish a foothold to increase US imports, leading to significant structural changes in the global economy
The opening up of China's economy to the world, particularly to the United States, was not a one-sided process. While political figures like Henry Kissinger played a role in establishing diplomatic relations, the actual trade relationship was shaped by a complex interplay of factors on both sides. In the 1970s, American importers faced significant challenges in navigating the Chinese market, with many incurring losses. However, they were advised to buy from China first as a way to establish a foothold. This import-driven dynamic led to a significant increase in US imports from China throughout the late 20th century. Despite concerns from American labor, this shift in the economy was largely seen as beneficial for diplomatic reasons and because the numbers were low. However, it set the stage for a structural change in the global economy that would have far-reaching consequences.
Made in America marketing: Misleading perception of 'Made in America' in marketing for consumer goods as components often come from various parts of the world before being assembled in America. Understanding global supply chains is crucial to know the true origins of products.
The idea of "Made in America" in marketing, particularly for consumer goods like saunas and hot tubs, can be misleading. The components of these products often come from various parts of the world before being assembled in America. This was highlighted in a report that showed a diagram of the global origins of these products' components. Another interesting point raised in the discussion was the role of fashion and style in the opening of US-China trade. In the 1970s, Chinese products were seen as exciting new styles, and the first businesspeople to discover this opportunity taught others about it, leading to a significant step in US-China trade relations. Overall, the discussion underscores the complexity of global supply chains and the importance of understanding the true origins of products.