Tuesday, November 1, 2016

Quick observation from Hong Kong

UpClose, from far away


I realize Hong Kong is hardly watching the election from up close.   This isn't a US battleground state.   But I have some quick observations on the state of politics in the world.

1.   I am in an international hotel, moderately priced for business people around the world, in the central district of Hong Kong.   The TV has 20 channels, two in English: BBC World and Fox News.    Not CNN.

2.   It has lightning fast internet.   If any American sites are blocked I have not seen them.   I go immediately to the political sites I monitor.

I ran across this bridge in the Hong Kong marathon. 
3.   The road and bridge infrastructure of bridges and tunnels between the airport and downtown is superior to all but the best and newest in the USA.   It is equivalent to the new Bay Bridge in San Francisco.   The bridge takes you high over the harbor filled with ships moving in and out and rows of what appears to be a huge modern port  lined for miles with cranes that lift containers up out of ships and onto trains and trucks.  

4.   The large Starbucks is closed until 7:00 a.m. local time.   Say, what???!!!

5.  A political crisis in underway here in Hong Kong.  Two people elected to the local Hong Kong governing body refused to take the normal oath of allegiance.   They revised it to pledge allegiance to an Independent Hong Kong.  The local majority party here understands this to be a form of treason--open succession from China, so they voided seating the members.  A significant body of people in Hong Kong want more independence from China.   Hong Kong is a useful transition place between regular-China and  the outside world.  It is a special administrative district, with its own currency and its own semi-British/international standards, and more internet freedom.   The Chinese government has a carefully measured level of freedom; enough freedom that market systems work and there is growing prosperity but not so much freedom that the ruling party's control is threatened.   China understands, though, that they need safety valves.   If control is too strict then hostility will build up and perhaps become a mass movement.   Hong Kong is the safety valve.   More freedom.

rt
From the LA Times.   Port of Long Beach is America's busiest container port

6.  A comment on world trade, from the Chinese perspective, from the China Daily, which is an English language approved newspaper of the Chinese government.   The burden of the argument is that Americans should rejoice that China produces things so inexpensively.  This does not hurt America, it benefits us.   And Americans get nearly all the advantages of it.    Here is the example they cited:

A Barbie Doll sells for about $10 in the USA in a Walmart.   The doll is manufactured in China for 46 cents.   Or to be more precise, it is manufactured, packaged in it s point of sale package, and those packages are packed in cardboard boxes holding 100 dolls for 46 cents.    Could America compete with China at that price?   No.   So the jobs for creating that doll went off shore to China.   That is bad, right?  Those are jobs lost.

Wall Street Journal
But think about it.   The doll sold for $10.   Fully $9.54 out of the $10 went to various Americans.  Walmart got the retail markup.  Getting the rest of it was Barbie's owner, Mattel, plus American advertising firms, American design firms, American shipping and warehousing companies, American trucking or railroads to get them from the port of Long Beach to the store in Omaha and Fort Lauderdale and everywhere.   The American share of the pie is 95.4% and the Chinese share is 4.6%, from which they deduct their costs of the plastic, the fabric for Barbie's prom dress, and the labor.   Americans get a cheap doll and they get 95.4% of the pie and they are complaining!   Do Americans really want to scramble for that 4.6%?  Don't we really get both the biggest part of the pie and the part with the best margins?  The cheap manufacture at the China end meant the product stayed inexpensive enough that the high margin part of the whole $10 sale stayed in place and Americans got all of that.   Nice.
This is no help for Hillary
7.  No one in America--not Hillary Clinton, not the US Chamber of Commerce, not Republicans who have traditionally supported free trade, not professional/academic economists no one is publicly making the case that, all in all, free trade between the US and China is a positive good.   Trump defined free trade as "a bad deal" for America and the opposition folded.   For decades the political case was made that free trade was generally a very good thing.  Problems have emerged and grown.   One set of political accommodations to deal with the problems of free trade would be to acknowledge that generally trade between the US and China is good but that there are problems to be solved, and then to propose solutions to those problems.   This is not happening.   The solution on the political table is trade war and tariffs, not safety net and educational solutions to deal with areas of dislocation and hurt.    Trump says he will put a 35% tariff on Carrier air conditioning units exported in from Mexico.   He has threatened Ford with a similar tariff.   He proposes 1 45% tariff with China.   

One final note on trade.   It is good to have prosperous neighbors rather than poor and angry ones.  China and Mexico being prosperous is not a bad thing for America.  Mexican prosperity means we have a politically and culturally safe and happy neighbor.   I am not injured if a large Chinese middle class grows larger and China is politically safe and happy.   I have far more to fear from a China in turmoil.  Americans are safer when China thinks of itself as a proud nation that has a successful niche in the world rather than an oppressed nation fighting trade wars with countries attempting to hold them back.   

One of the reasons trade is a big issue for Trump is that the advocates of free--or mostly free--trade are quiet.   The US Chamber of Commerce understands that their own constituency is mostly Republican--Republican of the Ryan-Romney establishment kind.   Still, they do not want to criticize a Republican candidate for President.   Hillary Clinton has no credibility in saying she is against the TPP or generally free trade.   She is the better candidate for the Chamber of Commerce on this issue--to her detriment among Sanders-style Democrats--but she is a Democrat.

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Podcast:  We predicted the growing difficulty for Hillary:

Peter Sage and Thad Guyer go back and forth on whether the polls are merely a worrisome trend for Hillary, or a real disaster. Peter says that Trump's Hotel ribbon cutting was a triumph: early and below budget. Thad talks about the models that predicted this was likely to be a good year for the party out of power. And preview of coming attractions: what the losing party needs to do to remake its party.



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