[Animats]

This is where China achieves victory. All the PRC has to do is give priority to domestic manufacturers for small parts. Exports of finished items are preferred over exporting raw materials and parts. That was part of the Made In China 2025 plan.

If some other country starts to develop an in-house supply chain for some specific item, exports for that specific item are turned back on and possibly sold at a loss until the threat ceases. That's what happened with rare earths. Remember rare earth shortages. China cranked up the price, Molycorp got the Mountain Pass CA mine going again, China dropped the price, Molycorp went bankrupt. Same strategy Amazon uses with Amazon Basics.[1]

This is an explicit national strategy of the PRC. There's no secret about it.

[1] https://www.mining.com/caught-between-rare-earths-and-chines...

[roenxi]

I'm standing in opposition without disagreeing - lets just compare this to the US strategy.

The US has been pushing all its externalities onto 3rd world countries for decades so it can enjoy a high standard of living while pretending that it doesn't have an environmental cost. China & Africa have endured some very dodgy waterways and extremely questionable air so that America gets iPhones and other electronic gizmos.

Several American administrations and a couple of powerful political lobby groups have been everything short of openly hostile to the mining industry. Although the worst of the ire was directed at coal, the thumbscrew tightening approach to regulation affected everyone.

China's strategy is to get a lock on rare earth production. The US's strategy has been for someone else to have a lock on rare earth production. The States has not been a prime destination for mining investment in the last 30 years, and their market for consumption hasn't been growing all that much. The only thing in their favour is that with the rule of law the mine probably won't be nationalised.

China isn't acting unilaterally here. It is illegal in the US to do what China does to get ahead.

[hliyan]

Is this a consciously executed strategy on the part of the US, or just an emergent outcome of the economic and policy climate? I used to think the US was able to orchestrate such multi-decade strategies, but observing the country during the last few years, I've become skeptical.

[lumost]

Arguably the U.S. operates on persistent "consensus" e.g. containment, free-trade, isolationism etc. These aren't so much orchestrated strategies as they are operating principals.

The business consensus for the last 3 decades was to outsource the supply chain to the cheapest bidder. That the cheapest bidder had no environmental regulations was an ignored outcome. That the cheapest bidders were all closely related and existed within a new competing network of suppliers was likewise ignored.

I suspect the lack of direction that's been apparent for the last ~8 years is partially due to a general view that one or more of free-trade, free-enterprise, environmental protection, or national security/international posture needs to change.

[banannaise]

The United States is really only a political mess where capital holders and workers have opposing interests. Exploitation of other countries benefits both, at least from a myopic view, so the US can prepare and implement long-term plans to do so despite the frequent changes in regime.

[Ericson2314]

Perhaps more emergent-ish, but people have been commenting on this for ages, and the process continued. So post-hoc planned too.

[AnthonyMouse]

> The US's strategy has been for someone else to have a lock on rare earth production.

Not quite though. The US's strategy has been for someone else to do the mining. That strategy works pretty well when it's two dozen other countries in competition with one another, because then you're not reliant on any one of them and there is no single point of failure.

The failure is in failing to prevent it from all being consolidated into a single authoritarian country.

[economusty]

This exactly. The idea that we want to become beholden to a single country is preposterous. The comment you replied to made it seem like because US doesn't want our landscape torn up we are OK with an anti-competitive trading partner, the reality couldn't be further from the truth. Americans are fine with rising cost of goods but ideally we don't want those extra profits to go to a single country. Globisation in the Krugman sense was supposed to pull people out of poverty all over the world, not just in China.

[imtringued]

This hits the nail on the head. The problem with the DRC (Congo) is that it is basically the only viable source for certain resources on the planet. It is very easy for private entities to take control over the entire world's supply through a private military force. If there was a second country that could extract the same resources for a similar cost, the lack of stability would cause the DRC to fall behind in production which would dry up the revenue stream for the private military force.

The interesting fact about competition on the world market is that the easiest way to compete is by making the private and public sector work together. People complain about China subsidizing exports for unsustainable prices, sometimes below the cost of production, however this is only possible because the government is ensuring there is enough stability in the country for those companies to continue to exist and because the government is actively supporting these growing industries even if there is some inefficiency.

DRC basically has none of that, if anything the private sector may have an unreasonable degree of control over the government but the government has no control over the private sector.

[AnthonyMouse]

> If some other country starts to develop an in-house supply chain for some specific item, exports for that specific item are turned back on and possibly sold at a loss until the threat ceases.

Notice that this is not a new thing. It's the classic strategy used by 19th century robber barons before there were antitrust laws. Have a large conglomerate, if anyone tries to compete with you in any industry, use profits from other markets to sell below cost until they go out of business and you have a monopoly again.

The question now is how to effectively enforce "antitrust laws" against a government.

[gregable]

Tariffs usually

[mensetmanusman]

Smart people in America have known about this for decades, the problem is that politicians benefit financially by doing nothing about this.

I don’t see a solution in sight.

[chrisweekly]

This seems like a straightforward description of the problem; what potential solutions / mitigations are available?

[icegreentea2]

Decide on what industries or areas are strategic, and subsidize the crap out of it, and be ready to deal with all the negatives (see farming and oil and gas subsidies) that come with that.

If it's important enough, then it's worth negotiating the pitfalls.

[fiddlerwoaroof]

Yeah, as far as I can tell we only really have three options when dealing with a trading partner that will subsidize exports: either we ban importing from that country until they drop the subsidies or we levy duties and other taxes to offset the subsidies or we subsidize ourselves. “Free market” thinking won’t work because the market already has been interfered with by a foreign government.

[jkepler]

Wait - wasn't it relatively free-markets and rule-of-law property rights that enabled the west to outcompete the USSR, spending just a small fraction of GDP on defense compared to the Soviet defense percentage of GDP? And didn't relatively free markets succeed while soviet communism collapsed under its own economic weight?

[magicsmoke]

You could model economic systems as alternating layers of centralized and decentralized decision making. Individual teams in a company make decentralized decisions about how products should be made, but the centralized decision about what the company's strategic direction should be is made by company executives. Likewise, individual firms compete in a decentralized economy, but the government makes centralized decisions about what sectors are crucial to national security and are subsidized.

The USSR had no decentralized layer of decision making at the firm level, all firms produced according to quotas made by the central government, and were ultimately less efficient than the US's decentralized layer of competing firms. This does not mean that centralized layers aren't necessary. Both the US and the USSR had a layer of centralized decision making at the government level subsidizing key national industries during the cold war. Both kinds of layers are necessary, but after the cold war the US saw that their decentralized layer of firms made them more economically successful than the USSR, thought that was the whole formula, and tossed national economic strategy out the window to let the firms do whatever they liked. Now the pendulum's swinging back to correct this misconception with China growing quickly using a layer of centralized national economic strategy that the US discarded.

[Ericson2314]

Not really.

a) It's amazing Russia went from just out of feudalism to as industrial as it did.

b) If there even was a mistake, it is probably that more demand and nicely flexible demand (as the consumer economy can provide) would have helped. But that's not about free trade per se.

Pretty sure West-East trade was already pretty limited from both sides, and I don't think there were many intra-USSR limitations to trade. For example, the border between Russia and Ukraine has caused many economic issues in the years since.

[SuoDuanDao]

it might be more accurate to say free-er markets won. The US has been subsidising some industries for a long time.

[AnthonyMouse]

> Wait - wasn't it relatively free-markets and rule-of-law property rights that enabled the west to outcompete the USSR, spending just a small fraction of GDP on defense compared to the Soviet defense percentage of GDP?

This worked when the US and USSR had approximately the same population size and the USSR was trying to keep up with US military spending. Probably not as well when China has three times the population of the US and doesn't care to install the number of troops in Cuba that we pay to maintain in Japan and South Korea.

> And didn't relatively free markets succeed while soviet communism collapsed under its own economic weight?

The USSR and China are both described as "communism" but they're not using the same system at all.

The USSR was a democracy and so its government was plagued by all the corruption and principal agent problems inherent in government spending by a large centralized elected government, except that in their case it was the whole economy.

China is basically operating a country like Rockefeller operated a monopolistic corporation. It's less centrally planned than the USSR. They use internal competition. The principle difference from the US economy is that it's not an elected constitutional government. There is no takings clause, no EPA or FTC, no National Association of Realtors, no free press. They call themselves communists but they're really fascists -- the merger of state and corporate power. What the robber barons would be if they were also kings.

That doesn't collapse like the USSR.

[havernator]

> They call themselves communists but they're really fascists -- the merger of state and corporate power.

The “corporate” in Mussolini’s famous quote re: fascism meant something else.

https://en.m.wikipedia.org/wiki/Corporatism

[mycologos]

Alternatively, we can work inside the current political constraints on subsidies and try really hard to figure out how to make cutting-edge electronics out of corn.

[SuoDuanDao]

you jest, but there's some interest in making graphene and nanotubes out of hemp. So maybe someday?..

[Guthur]

You can add market constraints without subsidies.

Tariffs and anti foreign investment, just like China. If that's what you want. But there will be consequences, potentially violent ones.

[WJW]

That's just a subsidy with a couple of extra steps.

[jollybean]

You can't have trade deals and subsidize industries like that. Won't work with USMC and probably not with EU etc.. So it's complicated, even thought it's probably the right thing to do in certain areas.

[icegreentea2]

Oh, it's hard work, but you can totally have trade deals and subsidize industries - you "just need to" get your trade partners to agree - Canada still has its dairy management system more or less intact for example.

Like ya, it'd be a lot of work (probably take years!) to get these deals going, but let's not lie to ourselves about what these subsidies are about - they're about trying to setup a more or less sustainable system in important industries that is supposed to last for decades. After years of "paperwork" it'll take years (maybe over a decade!) to actually come up to steam in production.

At least for the USMCA and EU, I think a lot of American interests are more or less aligned with partner interests. The obvious common ground is "let's work out ways to reduce our reliance in certain strategic areas from sources concentrated in China's sphere of influence". I think there's sufficient political AND popular backing of that that something could probably be figured out. Notably this might require that America itself "settle" for bringing back "western manufacturing" not "American manufacturing". That might be the hardest sell in this whole deal.

[lumost]

Would a USMCA/EU/JP/SK/AUS manufacturing partnership be that difficult politically? naively it seems that all parties have rough parity in standard of living, and each has leadership in a few industries and all share roughly the same environmental regulations/strategies.

The only rough patch that I could see would be in autos and aircraft which are both relatively stable industries with a history of comebacks. I would imagine that there would need to be provisions for national protection of these types of industries.

[jollybean]

Donald Trump put Bombardier basically out of business with the stroke of the pen.

The EU is trying hard to legislate FAANGS for anti-competitive issues and more money.

I don't see a lot of goodwill on these things.

Unless there is a clear and obvious path for some specific kind of industry ... I can see everyone getting along on a specific issue, but I don't see what that is.

[jollybean]

It's not so straight forward because China is not a centrally planned economy, and very few products prices are as priced in a straightforward way as are 'rare earths'.

Imagine telling Huawei to stop selling a massively profitable product overseas for example.

I don't really see this strategy being carried out other than in the most general sense. Where are these supply chains popping up and getting swamped?

And remember, this is very costly to China as well - selling at a loss, so they can then sell 'very cheaply'?

The problem with the above thesis is that all of this is a 'secondary economy strategy' i.e. it's good for catching up, it's not very good for surpassing. You need domestic consumption, and the ability to export goods at the highest end of the value chain, both things China will struggle with.

[Animats]

The problem with the above thesis is that all of this is a 'secondary economy strategy' i.e. it's good for catching up, it's not very good for surpassing.

China is past the "catching up stage" in the industrialized areas. Median income in Shenzhen is comparable to US median income. Current policy is to increase domestic consumption and have an internal economy which is less dependent on exports, while still dominating key international markets. This is called "Dual Circulation".

Here's a summary of the 14th Five Year Plan.[1] "President Xi called for building “independent, controllable, secure, and reliable supply chains to ensure industrial and national security with access to at least one alternative source for important products.” President Xi said China should “use existing global dependencies on China as a counterweight to pressures to shift manufacturing out of China” and “use the pull of China’s market to attract global resources and deepen global dependence on China.”"

The "Made in China 2025" plan, issued in 2015, listed 10 sectors where China wanted to be self-sufficient by 2025.

- New information technology

- High-end numerically controlled machine tools and robots

- Aerospace equipment

- Ocean engineering equipment and high-end vessels

- High-end rail transportation equipment

- Energy-saving cars and new energy cars

- Electrical equipment

- Farming machines

- New materials, such as polymers.

- Bio-medicine and high-end medical equipment.

Most of those goals have already been achieved.

Again, none of this is a secret. It's stated policy of the PRC.

[1] https://crsreports.congress.gov/product/pdf/IF/IF11684

[wmf]

Onshoring supply chains and keeping them working whether they're profitable or not.

[cortesoft]

I.E. subsidizing.

[sbierwagen]

You could try a WTO-style tit-for-tat sanctions on individual dumping cases.

Or you could ban all trade with China.

[slv77]

Tax foreign savings so that trade surpluses can’t be recycled into US assets. https://carnegieendowment.org/chinafinancialmarkets/83365

[Ericson2314]

See https://phenomenalworld.org/interviews/trade-wars-are-class-... for a very good explanation of another dimension.

Trying to convince the US government to do something about this seems quite difficult. I feel like the easier tactic perhaps is trying to get international trade to be less dollar-oriented. Indirect doesn't necessarily mean harder.

[pixl97]

The last person that tried to take trade off the petrodollar got killed.

[cutemonster]

What was his (her?) name?

[bildung]

They probably meant Muammar al-Gaddafi (Lybia).

[Mathnerd314]

If there are frequent shortages but it's a different part every time, then flexible manufacturing techniques like 3d printing that can adapt to the market and print expensive parts.

[jeffreygoesto]

3D printed parts lack stability and precision for like 99% of all use cases. Especially for expensive parts. Precision is mostly what makes them expensive.

[snowwrestler]

The market solves this problem. If China makes things too hard on intl businesses, the businesses will invest to go around China. That’s what the rare Earth mine example shows.

China needs big intl businesses. The Chinese domestic market is not big enough to support their current pace of economic growth, and the government relies on that growth for social stability.

[remarkEon]

>The market solves this problem. If China makes things too hard on intl businesses, the businesses will invest to go around China. That’s what the rare Earth mine example shows.

What the rare Earth mineral example shows is that China is willing to incur environmental and human rights costs that the West is not, in order to carve out a seat at the table for negotiating future power projection.

>China needs big intl businesses. The Chinese domestic market is not big enough to support their current pace of economic growth, and the government relies on that growth for social stability.

Really not following this point. If anything, this is evidence that elites in the west - who get rich off of the kinds of "market solves everything" solutions you may or may not be alluding to - will continue to ignore the problem as long as the stock market goes up. I also don't understand your point about the size of the domestic market in China. It's well over a billion people. International business looks at those demographics and see nothing but dollar signs. The difference here is that China's government will only let in that business insofar as they see it as enriching their country, and they make this point explicit. Size alone here is an advantage.

[snowwrestler]

In simple terms, the current growth of the Chinese economy is not yet economically self-sustaining in the absence of foreign investment. They have a lot of people, sure, but most of them are still poor.

So the Chinese government does not hold all the cards in their relationship with foreign investors. They need each other, which creates a balance that they both have to carefully negotiate.

[vimy]

> The World Bank Group suggests that the percentage of the population living below the international poverty line of $1.9 (2011 PPP) fall to 0.7 percent in 2015, and poverty line of $3.2 (2011 PPP) to 7% in 2015.[4] At the end of 2018, the number of people living below China's national poverty line of ￥2,300 (CNY) per year (in 2010 constant prices) was 16.6 million, which translated to 1.7% of the population at the time. https://en.wikipedia.org/wiki/Poverty_in_China

[goatinaboat]

The market solves this problem. If China makes things too hard on intl businesses, the businesses will invest to go around China

You’re forgetting the time aspect. A government can play a longer game than most private investors.

Markets: 0.25 years

Western govts: 4-5 years

Autocratic regimes: lifetime of dictator

[hliyan]

Agree about free markets and time. Adam Smith's invisible hand moves slowly. The free market might solve all our problems (including pollution) over time, but our generation (and maybe even the next) may not be alive to see it. And the human casualties may be high. Which is why regulation and subsidies are a practical necessity.

[snowwrestler]

The lifetime of an autocratic regime is limited by their ability to control their population—see my 2nd paragraph.

[Siira]

> their ability to control their population

Seeing the results of protests in recent years, this ability seems to be ever increasing.

[resonantjacket5]

wouldn't just having a small mineral stockpile alleviate much of the danger while turning back on the mine? while having a chip stockpile for too long isn't really too feasible because of how fast chips are deprecated.

Though I know it is a bit more complicated with refineries etc...

[Animats]

The US used to keep sizable stockpiles of raw materials in case of another WWII-style war. There are still stockpiles of oil and medical supplies.[1] DoD has some stockpiles, but only of stuff needed for a war.

[1] https://www.cfr.org/backgrounder/state-us-strategic-stockpil...

[remarkEon]

Minerals aren't evenly distributed on planet earth.

[redis_mlc]

I can't think of any mineral that the US doesn't have (in the ground.)

However, some are no longer mined in the US, like tin, since 1993.

(For people unfamiliar with "rare earth minerals", they're not rare. But today their mining and processing is mostly done in China.)

[remarkEon]

That isn't really the point, though. The US may have "all of the good minerals", but does it have enough? With the right purity and consistency? In areas where the minerals are extractable without major environmental implications?

[anoncow]

An absolute win strategy for the one who employs it (Amazon, countries). It appears to be a lose-lose srategy for everyone else. Is there anyway that Molycorp could have won? Better technology? Is there anything that companies selling stuff on Amazon can do to prevent Amazon Basics from killing them tomorrow?

[WJW]

For Molycorp: seek to become nationalized either de jure or de facto (by lobbying for massive subsidies or import tariffs). A private enterprise will have a very difficult time against a nation state with effectively unlimited cash and manpower.

For the SmallCo vs Amazon example: either superior branding&marketing or protection via patents. If you try to differentiate through pricing, Amazon can sell at a loss for too long for you to survive.

But tbh in either case it is like a third world dictator asking "how can I win" when the US is already invading. You can't, the best option now is to cut losses and retreat so you at least stay alive.

[mensetmanusman]

You know, I would support a law that requires everything on Amazon basic to be entirely vertically integrated in the country that it is being sold in. For example, consumer batteries, where everything is mined and manufactured in the specific country.

Because, if it is on Amazon basic, there is no new intellectual property protecting it, so it should be a commodity that is completely optimized. Companies need to move on and make better things, protect them with IP, and then Amazon can’t just copy it and make it a basic object.

[anoncow]

For the small fry then, the answer is IP.

[ojbyrne]

Fundamental argument against this: Victory? What exactly is that? Some particular nation state is advantaged over some other nation state. How exactly does that work for the individuals in that country? So many questions…

[foobar1962]

Victory means that in the Race to the Bottom, you look back and see nobody behind you. Now you can stop and start walking backwards, and still be competitive.

[elefanten]

For a time. Everything affects the global environment, which opens new possibility.

[wnevets]

and self-proclaimed capitalist love it because "free market" while blaming unions for those items not being manufactured in the US.

[roenxi]

In the US, government spending accounts for ~40% of GDP. It is difficult to say what the ratio is for China because I don't know how to reconcile their state owned businesses with a western public-private model. But Wikipedia's list claims that their direct spending is 24% of GDP [0].

The opinions of free market capitalists aren't in the driver's seat of the US economy. Since the 70s the US has been transitioning to some sort of mixed model.

[0] https://en.wikipedia.org/wiki/Government_spending