Apparel Sourcing Intelligence - Worldwide

For most of our lifetimes – foreign trade will matter far more to China than to the US

In this week’s Sourcing Journal Online Op-Ed, I’ve looked at the contrast between US attitudes to foreign trade infrastructure (“If we must, fine. As long as it doesn’t cost”) and China’s (“the more preposterously overengineered, the better”) That contrast explains today’s lead story.

The article was provoked by the bizarre story of how the US finally agreed to another bridge at the busiest crossing with its biggest trading partner (which, BTW, is neither China nor Mexico) – as long as Canada paid for the US Customs post. And the comparison between that and the long sequence of close to absurd schemes China keeps suggesting for making sure it can get its goods to foreign markets without giving its enemies a chance. 

Some people would see that comparison as implying a criticism of American “declinism.” That’s absolutely not my point of view.

Indeed, only a couple of weeks ago, I had great fun deflating  silly examples of Chinese triumphalism.

Claiming “The Chinese are willing to jump at an opportunity, not study it at length from outside like in Europe,” a former actuary called Hai Yu has developed a reputation for making lavish, unfulfilled predictions – like she’d be“employing  more than 30,000 in the next 5 years” on a Rwanda garment project she appears to have no interest in.

I believe China’s system has created many impressive things – but it’s also bred a strain of pseudo-entrepreneurialism. Fed by the possibility of almost limitless access to oodles of cash no-one’s accountable for (because it belongs to 1.3 billion people with no real say in how the country’s managed), those pseudo-entrepreneurs’ prime skills lie not in reading markets or controlling costs, but in developing the right relationships with those who can unlock the cash.

In plain English, it’s called cronyism – and it almost destroyed much of emerging Asia twenty years ago. But underneath the foolishness cronyism nurtures, China’s system also encourages some hard-nosed realism. Among the realities few Chinese fail to be aware of are:

  • China’s extraordinary achievement over the past 20 years of enriching almost the whole population without serious social unrest is based on foreign trade
  • It’s almost impossible to imagine a scenario where China goes from one-fifth the income per head of the US or Europe to roughly the same income without China’s foreign trade growing still further. Which has to mean trade mainly with North America and Europe, for the same reason bank robber Willie Sutton said he was always breaking into banks. That’s where the money is.
  • However diplomatic China tries to be with its neighbours (and, right now, it’s either not trying or just not very good at that), it’s highly likely to see a significant proportion of its trade lanes disrupted by one squabble or another at some point. Since foreign trade matters so much, that really does risk China’s highly vulnerable social harmony.
  • So almost no price can be so high that China wouldn’t pay it if it meant greater peace of mind it could get its goods to market.

That’s why China’s seriously contemplating spending fortunes (because it’s not their own money the Chinese transport entrepreneurs in that op-ed are being bold with) on more, faster, less congested trade routes.

And it’s why China’s sudden openness to trade deals contrasts with America’s extraordinary difficulty getting national consensus over the TPP. No-one needs to persuade most people in China that trade’s essential. No-one’s succeeded in persuading Americans the same applies to them – and, if I’m being honest, I’m not sure I think it’s that important either.

My views don’t matter. But the fact that most of America’s 300 million more or less agree with me ought to matter to anyone trying to get the American people to back the TPP. Right now, they seem about as skilled at that as China’s rulers are at getting on with their neighbours.