China. Friend Or Foe? Opportunity Or Challenge? Or, Why Can't We All Just Get Along?
I got an email today from a client touting his success at sourcing wind energy components from China. My client's description of this project nicely sets forth why trade with China should not be oversimplified.
Speaking of oversimplification, today is also the day before the final episode of this season's Dr. Drew's Sober House. And here's the connection: Rodney King is one of the residents of Sober House and he is also the person who so famously asked the very simple question as to "why can't we all just get along." If one really delves into the many layers involved in that question, it is not so simple after all.
I see the US trade relationship with China the same way; the questions arising from it are not susceptible to easy answers.
What I like so much about my client's wind energy email is that its very simplicity (especially because all I have to work from is the one email) makes it so easy to take his micro story to a macro level and to make concrete the benefits of free trade. My client has been conducting extensive business with China for nearly 10 years and here is his email:
I have been consumed by my recent wind energy project and just completed the first unit in record time from the first quotation to shipping a unit in 4 weeks, two of which was manufacturing. I knew it would a small miracle if it was accomplished but we did it. I am leading up to my idea for the article.
A lot of people want to blame China for the US's own sloppy business practices. China has been around for 20+ years, through good times and bad. Imports into China are increasing and exports from China are decreasing at an amazing pace. You can buy most things cheaper in the United States today than you could 10 years ago and this has been good for the everyday consumer. China didn’t cause this problem.
My wind power project is a great case study that shows how US companies doing business with China can truly be a win-win situation. The work I did was for a fairly small Midwestern employee owned company that was in trouble earlier this decade but instead of "crying foul," they embraced the idea of turning themselves into a firm that sources from and sells to foreign countries.
On this last project, we accomplished something just short of remarkable. We were able to quickly put together a rather complicated piece of equipment at a competitive price. Some of the components come from China and some come from the US. We put this project together and this US company is now taking orders from all over the world. Without China, this would not have been possible and many US jobs no doubt would have been lost.
So we can sit here and bemoan how this company had to secure some components from outside the United States, but I prefer to celebrate how procuring those parts enabled them to put together in an demand product quickly and at a price that can sell. The good old days of everything being made in America are long gone and we can either sit around and complain about that or we can do what we can to move forward in producing and marketing in such a way as to both include places like China and to retain and create American jobs.
In all this time of doom and gloom there needs to be a good story told. In this case, this US company would never have been able to compete globally in this high margin business without its ability to outsourcing a portion of its project to China. I think it important to get stories like this out there, as so many of the people who I meet up with in my day to day life have no idea about how China trade can actually help. You have a much better flair and vehicle to tell this story so I hope this is a good one to write."
It does frustrate me to read or hear of people who think trade with China is always "either-or." Though there are times when China outsourcing means direct job losses in the United States, there are also times where outsourcing to China means companies in the United States stay open another day.
I know my client's story is all rather vague, but it is a good story and I figure bringing in a reality TV show constitutes the expected "flair." So to quote Rodney King (again), why can't we all just get along?
What do you think? Is trade with China a cause of the US's economic problems, a potential solution, or both?
Comments (10)
Read through and enter the discussion by using the form at the endAimee Barnes - March 8, 2009 8:34 PM
The US has simultaneously embraced globalization in its consumption habits and business practices while eschewing it in politics and media. If we continue to purchase our socks at Wal-Mart for the “everyday low price,” it seems contradictory to get upset when those sock manufacturers relocate to countries that can support the “everyday low price” model. The brilliant Amy Chua had conveyed in her book, World On Fire, that while globalization produces opportunities, it also generates fear, insecurity… Like an ultra-wealthy, acne prone teenager who cannot get a date to prom, America is extremely fragile at this stage in the game. If we want to partake in the global dance, we’re going to have to learn how to fit in. FAST.
China did not cause the US’s economic problems- the US caused the US’s problems… Overspending, reliance on credit cards, cost of the war, and Wall Street’s gross mismanagement. Our financial interdependence on China was a US-based policy decision and should not reflect poorly on China’s global reputation.
In judging by this letter, your friend has great foresight in his business decisions. Survival depends on embracing a globalized food chain, seeking “borderless” opportunities, and thereby creating more jobs based on competitive advantage in an international playing field. By supporting the ‘Buy American’ rider and continuing to bash China in our newspapers, the US will find itself on its own tiny island of isolation and ridicule. I will be the first to admit that my current professional life and future success now relies on China. Additionally, my personal goal is to do everything I can to promote China in a positive light within US business and media circuits. The US-China business relationship still needs a lot of nurturing, counseling, and mutual respect.
Anonymous - March 9, 2009 5:22 AM
It is true that China amass a lot of foreign exchange including US currency through its export trade.But the hard cash went your way in exchange for money papers such as US Treasuries and others.
But instead of utilizing the money prudently by ,say, for building new infrastructures and upgrading and renovating other infrastructures your bankers in their greed loaned the money to subprime borrowers in violation of lending criteria.Or push multiple credit cards and raise lending limits on them to everybody including even an one who is unemployed or still in college.
Now you have to borrow more money for these very infrastructures and thus heaping more debts on yourselves,your children and your grand children...
Anyway that's your business. But had you been more circumspect you wouldn"t be causing so much pain on yourselves and everybody else.
A rider.The theory that the capitalist free market system is the sine qua non consumer/marshaller of the factors of production be it labour,capital or natural resources is indeed just a theory after all viz. it too requires somebody to look over its shoulders.
shenlawyer - March 9, 2009 5:52 AM
Before I become a lawyer, I also run a small trading company(Now I turned it to my wife and my son). We import what we called underpacking paper(from printing industry) from USA. This is business and it does nothing with politics. Their products are the best quality and competitive in price. That is why I import the paper from them. I don't care whether it will create job opportunity in USA or whether it will drive someone out of job in China. Don't link the business with politics.
Paul L. Silverman - March 9, 2009 7:55 AM
Dan - your question is much too esoteric for me. But I do want to make contact with the company in the email story to find out if they are sourcing other renewable energy products such as enhanced geothermal systems. Would you send me their contact info?
gregorylent - March 9, 2009 8:29 AM
link bait? pointless topic, dated
James - March 9, 2009 9:14 PM
'The collapse of America is unavoidable'
09 March, 2009, 10:57
America must work on starting a new economy and not restarting the old one or it will resemble the former Soviet Union, says author and blogger Dmitry Orlov.
http://www.russiatoday.com/Top_News/2009-03-09/_The_collapse_of_America_is_unavoidable_.html
Spencer - March 9, 2009 10:33 PM
Why can't we all just get along? Humans still have a genetic predisposition to tribalism that provided an evolutionary advantage back in the caveman era. These days it often lays dormant but is periodically roused by politicians trying to consolidate their own power. In other words it was once a feature but is now a bug.
brian - March 12, 2009 5:31 AM
In my view, trade in business is just another (though very complex) form of social communication. I believe this is generally mutually beneficial between nations, as long as both parties hold responsibility for the ultimate outcomes. How can we increase communication amongst different peoples? What good would that do in the long run? …what are the risks?
Inst - March 13, 2009 11:14 AM
Is it necessarily a good thing that we all get along? Competition is what drives capitalism; perhaps in the future there can be a planned socialist economy which can harmoniously and efficiently allocate resources, but would that be a good thing, for all people to exist in orthodoxy to that system?
But anyways, did anyone refute the comedian Colbert's Frenemy formulation yet? Yes, China as an ademocratic country that does not acknowledge American supremacy poses challenges to the United States, but at the same time their cheap goods and bond-buying improves the American living standard. That 1.3 to 1.4 billion people will enjoy improved standards of living is also a double-edged sword, their new wealth will become a strain on the environment and increase the prices of raw resources, but at the same time with improved infrastructure and education, who knows what new technologies will emerge?
H. Colburn - March 5, 2010 11:43 PM
Great article. I appreciate you asking the questions and not letting us all just rest on our assumptions. I tend to agree with you that we just don't know China's plans well enough yet and they may not know them either. At this point, I think we should just give it all some time and in the meantime we continue to engage in trade with China that benefits us both.