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Posts Tagged ‘China’

David Archibald – The China Trade

Posted by archibaldperth on July 2, 2018

The No 1 panda-hugger/lapdog of the Chinese communist dictatorship is Henry Kissinger, who was born in Germany and arrived on these shores in 1938. In his declining years Mr Kissinger has decided to trade on his reputation as a former Secretary of State and sell his services to an enemy of the Republic that gave him refuge 80 years ago. There is a thing called the Kissinger Institute on China and the United States within another institute that takes exception to US exceptionalism, the Wilson Center, named after the first do-gooder president. The way that Chinese political corruption around the world works is that a Chinese businessman connected with a state-owned company pays out funds so there is no direct connection with the Chinese Government, all coordinated by their United Front Work Department. Now it is possible, but highly unlikely, that Mr Kissinger’s efforts in deepening understanding with China are completely altruistic and he is funding his pro-China institute from his own pocket.

Another thing that happened in 1938 was the passage of the Foreign Agents Registration Act that requires agents representing the interests of foreign powers in a “political or quasi-political capacity” to disclose their relationship with the foreign government. If he already hasn’t done so and he is receiving funds originating in the Middle Kingdom, Mr Kissinger should be as honourable as he can be and register as required under that act. There is a good chance that he hasn’t as he is quoted as having said “The illegal we do immediately. The unconstitutional takes a little longer.” His philosophy recently reached full flower in the FBI.

The problem for China is that Kissinger’s utterances are so blatantly pro-China that nobody gives them any credence. Whether or not they are getting their money’s worth with Kissinger, there are other intellects who are attracted by the notion of centralised decision-making and sing China’s praises, seemingly without need for payment, in the same way that Nazi Germany had many ardent admirers.

Thus the erudite Spengler has an output of columns praising Chinese accomplishments, the latest of which argues that China should continue to have unfettered access to the US market. To back up his argument Spengler provides three graphs, the first of which is Chinese exports to the US:

His graphs are useful but not as he intended – they show how little we have to lose by ceasing trade with China. In the first graph, the biggest Chinese import category is cell phones which are assembled in China and include high-value parts made in the arc of countries to the east of it – Taiwan, Korea and Japan. They could just as easily be assembled somewhere else – Malaysia, Thailand, Vietnam, Philippines. As China is going to attack Vietnam, shifting such assembly work to Vietnam from China should be done as quickly as possible. The best thing that Apple could do for world peace is to shift its operations from China to Vietnam. This is the cheapest foreign aid we can give an ally in the coming war with China.

The next biggest category is computers. We definitely do not want those things imported from China. As soon as they are plugged in they will be doing an ET and phoning home. Perhaps not always, but why find out after the event? From then on it is just Ikea/Walmart-type stuff that could be made in Mexico – screws and glues and plywood. As soon as the 200% tariffs come on the factories will move elsewhere in the blink of an eye.

Let’s turn our attention to Spengler’s second graph – US exports to China:

Aircraft is a big one but not permanent. Boeing has built a plant in China which will make one hundred 737s a year. Airbus has built a plant which will make six A320s a month. The jobs are going to China as a condition no doubt of maintaining access to the Chinese market. Japan attempted to enter the passenger aircraft market back in the 1970s and failed. In the end China is likely to do a Maersk on Boeing and Airbus and refuse to renew visas on the Americans and Europeans running their plants, effectively nationalising them without having to pay for them. Anyway, there are only a couple of years left of selling American-made aircraft to China.

Then comes the No 2 export to China, which is soybeans. China is not going to import any fewer soybeans because they now provide 20% of their protein intake. The Chinese public will become upset if pork disappeared from their diet. The only place China can get soybeans in that quantity is Brazil. We will sell to the countries currently taking soybeans from South America. Brazilian soybean production has topped out over the last three years at about 117 million tonnes per annum so there will be less competition from here as per this USDA article. This graph shows how the market has evolved:

Next comes cars which are $10 billion a year. That is 0.05% of the $20 trillion US economy. That is not enough to be worth providing comfort and succour to the enemy. As with the aircraft, cars as an export to China are at the whim of the regime. Next are semiconductors and industrial machines at $6 billion and $5 billion respectively, which combined is less than the cost of the Gerald Ford at $13 billion. If we didn’t have to fight a war with China, then we wouldn’t have to build such expensive aircraft carriers.

Semiconductors have China in a bind. If they stopped buying US semiconductors then they would have to buy more from Taiwan, Japan and Korea. Korea is the only one of those three that China may not be going to war with. Spengler’s article tells us that China imports $220 billion a year of semiconductors of which the US provides less than 3%. That is another market which could disappear overnight.

From then on the list of top 20 US exports to China gets scrappy at about $2 to $3 billion per annum for each item. The 20th largest Chinese export to the US is $5 billion a year of camping goods. Our 20th largest export to China is $2 billion worth of cell phones and miscellaneous.

From Spengler’s charts of exports and imports, if the US were completely closed out of access to the Chinese market, the effect would be a rounding error on the US economy. If China were completely closed out of the US market, the effect would be at least a 4% shrinkage of the Chinese economy. Just as importantly, that industrial activity would be transferred to countries that are aligned with the US or at least not setting out to kill us. That is a win-win outcome.

Another effect that China-worshippers like Kissinger and Spengler neglect is that the Chinese economy is being recentralised under President Xi. Just as President Erdogan of Turkey said that democracy is like a tram you get off when you get to the stop you want, China’s brief experience of capitalism is being abandoned now that their economy is about as large as it can be. But workers in state-run factories have only one third the productivity of workers in private industry so this will hobble Chinese competitiveness. The most recent example of this effect in the US was the launch of the Falcon Heavy at one tenth of the cost of NASA’s efforts in getting large objects into space. The landing of the Falcon Heavy boosters, like a scene from a 1950s science fiction movie, was dispiriting to China’s Han supremacists. Democracies such as the US may be too messy for the likes of Kissinger and Spengler but they are far more creative and productive.

The biggest benefit of Trump’s opening to North Korea is that he can no longer be painted as a warmonger and that has given him considerable freedom of action on China. Bring on the 200% tariffs. Chuck China out of the World Trade Organisation. Make China the pariah state it needs to be seen as. That won’t stop China from going to war with the civilised world but there will be fewer deaths, destruction, maiming and disfigurement on our side.

David Archibald is the author of American Gripen: The Solution to the F-35 Nightmare

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Rounding Up The Chicoms

Posted by Picard578 on August 10, 2016

Rounding Up The Chicoms by David Archibald, author of Australia’s Defence (Connor Court) and Twilight of Abundance (Regnery) 2 August 2016   We study history so as to not repeat it. If your ad…

Source: Rounding Up The Chicoms

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On US defense budget

Posted by Picard578 on December 1, 2012

While Chinese and Russian defense budgets are incomplete, so is the US defense budget. In reality, US defense sprending is between 1 and 1,4 trillion USD a year, that is 6,3 to 8,8 % of US GDP of 15,974 trillion USD as opposed to the base budget of 711 billion USD in 2012 (or 4,5 % of GDP; to compare, Croatian defense budget accounts for 1,7% of GDP). 2012 defense-related budget request was between 1,09 and 1,42 trillion USD, depending on variables.

For another comparision, base UK defense budget was 62,7 billion USD, around 2,6% of GDP, and that of China was 143 billion USD, or 2% of GDP. When adjusted for Purchasing Power Parity, base defense budget of China was 228 billion USD, or 32% of US one, while China’s GDP is 48,4% of US one. While it is indeed correct that China’s total defense spending is higher than these figures – up to 250 billion USD, not accounting for PPP – that is, as I have shown above, also true of the US defensu spending, so the ratio remains similar.

In fact, using PPP values, total defense budgets of largest NATO spenders (US, UK, France, Germany, Italy, Canada, Turkey) combined add up to 932,6 billion USD. When major non-NATO allies (Japan, Australia) are thrown in, value goes up to 993,9 billion USD in PPP, with United States accounting for 71,5 % of total value. Thus, United States outspend China 5:1, or 3:1 when PPP is taken into account. However, unless United States are going to attack China first, they will have support of NATO, as well as Japan and Australia. Thus, spending ratio will be – even with PPP – in 4,4:1 neighbourhood. For comparision, take a look at the graph below.

defense spending comparision

defense spending comparision

US major allies alone spend more than China on defense, while United States alone spend more than four times as much as China does. Yet, China has populace of 1,347 billion people, compared to the US 314 million.

In 2011, there have been many developmental programmes. Low-performance bomber F-35 was the most costly at 11,4 billion USD. By cutting it, and other programmes of very questionable usefulness (LCS, UAVs), 16,6 billion USD could have been saved.

Fact is that large US defense budget does not produce military capability that is in line with size of the budget. Reasons for that have to be looked for in how weapons procurement works: contractors in armaments industry are free to work with almost no oversight, and lessons from past wars are ignored. In fact, armament manufacturers are inclined to increase complexity and cost of every single weapons system, as it means that they spend less on raw materials and work force, while receiveing large sums of money on both production and drawn-out R&D. Such complexity increases do not, however, mean that weapon is really more capable. Due to that, we get to the paradox where less defense spending could result in more capable military.

Many spending-defenders argue that defense spending saves jobs. That is not true even when looking only at the defense industry. In fact, Lockheed Martin and Boeing have fired thousands of workers at the same time they were receiveing very lucrative contracts.

While increase in defense spending can indeed create jobs when done right, it is terrible job creator even then. For example, only 1,5% of F-35 program costs goes on workers’ pays. In fact, same amount of defense spending creates 25% fewer jobs than a tax cut; one and one-half times fewer jobs than spending on clean energy production; and two and one-half times fewer jobs than spending on education. It also creates less jobs than public works. For exact figures, consider that every 100 billion USD of a military budget (not spending) creates, approximately, 830 000 jobs in military and military industry. When same amount of money is spent for education, both the number of jobs and the average pay are going to be higher. If it is spent on health care or infrastructure, average pay will be less, but total pay compensation will be more than with military industry, and number of jobs created will be far more (for the same amount of money, health care 151%, education 207%, mass transit 231% and construction of infrastructure 150% as much jobs as defense establishment. All of them have additional benefits: more capable work force, reduced pollution, etc. Also, US infrastructure is currently in very poor shape). Total compensation to economy is also larger than that of defense, at 23 – 124% more.

In fact, “Converting the American Economy” study from 1990s has found that a gradual reduction in military spending, starting with $35 billion in 1990 and reaching $105 billion in 1994, would have produced a net gain of 477,000 jobs within the U.S. Economy.

Yet, only 75 billion USD were spent on education in 2007, and military spending accounts for 50% of total Federal spending.

Tax cuts, however, are the worst option for helping the economy, possibly even worse than defense spending. One of reasons is the fact that tax cuts primarly target the wealthy part of the populace, who accumlate money. As economy is all about flow of money, not its accumulation, result is economy slowdown. Tax evasion has similar effect, however – and major armaments companies are spending large sums on lawyers so as to evade taxes.

Important thing about the defense budget is that it must not be governed by GDP, but by military realities. One reality is that United States should not, as it is doing now, fixate on China as a threat. China does seem to be impatient and agressive, but question remains how much of blame for that goes to the United States themselves. While United States should be able to defend itself, military solution of its issues with China should be the last option. However, there are more powers on work here, such as US military contractors, who need a dangerous opponent so as to justify further defense spending increases, and maintain their influence as well as their peace of the budget cake. As such, realistic assessment of situation cannot be expected, at least from the US Government and weapons contractors.

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