[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

[AnthonyMouse]

Not exactly. Mussolini's "corporatism" was more encompassing -- not just industry but also guilds, clans, the military. But what hasn't been merged with the power of the state in China?

[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.