China should never have been accepted into the WTO in 2001. China should have been disqualified for acceptance because it’s a communist country. No communist country should be allowed to be a member of the WTO. Why? Communism by definition is government owned corporations that are heavily subsidized.
Communism is a society in which all property is publicly owned. Capitalism is a society in which property is privately owned.
As a capitalistic society, we view China as “cheating” because it subsidizes its State owned corporations.
Check out this shocking list of how China has been draining wealth from the US for the last 17 years.
How China Cheats In International Trade
Forced Technology/Patent Transfer
In a broad range of industries—from aerospace to semiconductors—Chinese government policies require U.S. and other foreign firms to transfer technology, move manufacturing and assembly facilities to China, and collaborate with their future competitors (often as minority joint-venture partners) as the price of market entry, impacting U.S. firms’ profitability, operations, and future competitiveness. More recently, China has been leveraging the openness of the United States and other market-based economies to gain access to advanced research and data, recruit a globally talented workforce, acquire and invest in leading-edge firms through Chinese state financing, and freely sell their products and services abroad. The scale and volume of government resources directed toward these sectors severely limits the ability of foreign firms to compete fairly in China’s market, and creates distorted global and domestic market conditions. The forced transfer of technology is how the communists eventually gain control of the means of production inside China.
Within its industrial plans, the Chinese government sets targets for domestic and international market share that should be held by local technology and production, such as increasing Chinese companies’ share of the domestic industrial robot market to 70 percent by 2025. The Chinese government has effectively weaponized expanding market share.
The central government provides national investment funds, subsidies, tax breaks, preferential loans, export subsidies and guarantees, and other forms of financial support to develop national champions in strategic sectors. For example, in the solar sector, China’s Ministry of Finance subsidized 50 to 60 percent of production costs of select solar companies, and 50 to 70 percent of installation costs for solar generation and distribution systems. Local governments, which account for the largest share of financial aid, provide additional support to local champions. At least 21 cities and five provinces have pledged a combined $6 billion in subsidies for robotics. These subsidies account for an estimated 10 percent of total operation revenue for Chinese robotics firms Siasun and Estun. Local governments are also subsidizing between 15 and 30 percent of the purchase price of robotics to encourage greater usage. Designated national champions also received advantageous capital terms from state-owned banks and investment funds (e.g., wind turbine manufacturer Goldwind received a $5.5 billion loan from the state-owned China Development Bank). China can make most products cheaper than the US because the government subsidies businesses which is something we do not do in the US.
Government R&D Funding
The Chinese government provides significant R&D funding to strategic sectors. From 2005 to 2015, total government R&D spending grew more than 350 percent to reach $44.5 billion. China’s R&D expenditures are rapidly catching up to the United States, with China’s total R&D spending (public and private) increasing from 26.5 percent of total U.S. R&D expenditures in 2005 to 75.1 percent in 2015. The development of new technologies and new products are funded by the Chinese government. In the US, the burden of R&D costs fall on the private sector and the individual business itself. This gives an unfair cost reduction advantage to Chinese companies.
The Chinese government leverages its large central and local government procurement markets to benefit domestic firms in strategic sectors. For example, in 2012, the central government mandated its agencies to purchase only Chinese automobile brands, leading several municipal and provincial governments to follow suit. The Chinese government has weaponized competition inside China so that for most countries, it’s a losing proposition to compete there.
The Chinese government has repeatedly created China-specific standards to raise the costs of market entry for foreign firms. For example, the People’s Bank of China announced a new technical encryption standard for bank cards—incompatible with existing international standards and only used by the state-owned China UnionPay—effectively cutting foreign electronic payment firms such as Visa and MasterCard out of the market and forcing them to spend additional money to redesign their cards to meet the standard.
The Chinese government advantages domestic firms by setting high regulatory thresholds for market entry and creating vague regulations that allow for discretionary enforcement and interpretation to favor domestic firms. In the automobile sector, for instance, the government requires foreign firms to form joint ventures with state-owned firms as the price of market entry.
Foreign Investment Restrictions and Import Guidance
Through its Catalogue on Guiding Foreign Investment and Catalogue on Encouraged Imported Technology and Products, the Chinese government directs foreign investment and technology imports toward strategic sectors by designating industries as either “encouraged,” “permitted,” or “restricted” to foreign investment. Foreign investment in targeted sectors is first welcomed to build domestic capacity, but after domestic firms become competitive, the government gradually restricts this investment to provide a protected market for domestic firms. For example, the automobile industry shifted from “encouraged” in 1994–2010 to “permitted” in 2011–2014 to “restricted” in 2015.
The Chinese government is recruiting overseas Chinese and foreign academics, experts and entrepreneurs in strategic sectors to come teach and work in China, most notably through its Thousand Talents Program and Project 111. The Thousand Talents Program was launched in December 2008 and has brought more than 4,000 foreigners to China’s scientific laboratories, companies, and research centers. The Chinese government also uses research and startup funding to incentivize foreign experts and entrepreneurs to split time between their positions overseas and in China. Project 111 was launched in 2006 to recruit 1,000 foreign experts in strategic sectors from the world’s top 100 universities and research institutes. Tesla and Google are just a few of the US companies who are spending lots of money in China opening up production facilities because the Chinese government is paying for much of the cost.
Acquisition of Foreign Technology
The Chinese government encourages Chinese companies in strategic sectors to expand their global market access and gain ownership of key foreign technology, intellectual property, and assets. Under the 13th Five-Year Plan (2016–2020), hundreds of government-controlled venture capital funds with combined endowments worth at least $325 billion support Chinese companies in these strategic industries and enable them to pursue foreign acquisitions. For example, the National Integrated Circuit Industry Investment Fund (with at least $17.9 billion in endowment) has been instrumental in providing financing for the rapid increase in domestic capacity and acquisitions abroad. In 2015–2016, Chinese firms attempted or completed at least 21 acquisitions of U.S. semiconductor companies. The Chinese government has weaponized acquisitions by funding them. In the US, acquisition costs must be paid for by the acquiring private businesses. The Chinese government is spending billions acquiring US firms, using Chinese companies as the shell by which to do it.
The Chinese government continues to conduct pervasive industrial espionage against U.S. companies, universities, and the government, and to direct efforts to circumvent U.S. export controls to gain access to cutting-edge technologies and intellectual property in strategic sectors.
Is China Cheating Or Is This Just Communism
China may be “cheating” from a capitalist perspective but it’s really just communism. Every item listed above is what you would expect a communist society to do. Communism’s economic ideology is a socioeconomic order structured upon the government’s ownership of the means of production and the absence of social classes. In order for China to own the means of production, it must force US corporations to turn over their IP and trade secrets to the government. The government then uses that information to create Chinese businesses in which they control the means of production. In essence, China is converting private foreign corporations into government owned enterprises because it’s a communist country and that’s what communists do. For communism to work, the government must own the means of production. Eventually, once a foreign company operating inside China has its IP and trade secrets taken, the Chinese government ratchets up regulations against that foreign company and forces them out of the country.
China Needs To Be Kicked Out of the WTO Immediately
A communist country should never be allowed into the WTO, ever. The communist ideology is a violation of WTO rules. Under Article 1 of the WTO Agreement on Subsidies and Countervailing Measures, it reads:
A subsidy shall be deemed to exist if: there is a financial contribution by a government or any public body where a government provides goods or services other than general infrastructure, or purchases goods. A Member shall neither grant nor maintain subsidies.
Communism by definition is about the government’s ownership of the means of production which by necessity is subsidies! Therefore, China should never have been allowed into the WTO.
China was allowed into the WTO under the condition that it would open up its economy to foreign investment and competition. However, that, by definition, would mean private ownership which is the antithesis of communism. Communism can not flourish when the government does not own the means of production. China grudgingly accepted this condition to the glee of US businesses. However, a secret plan was put in place by the communist government to gradually take control of the foreign businesses operating inside China. The Chinese government could steal the secrets behind their means of production, then create State owned enterprises to out-compete those foreign businesses with little regard for IP or patent rights. The Chinese government would do everything in its power to eventually control the means of production and force the foreign corporations out of their country. The Chinese government would then claim no violation of the WTO condition because it did allow foreign competition but the individual company itself chose to leave because they couldn’t effectively compete in China’s market.
After nearly 20 years of chronic trade deficits with China and the complete destruction of the manufacturing sector inside the U.S., it’s clear that China has violated the spirit of reciprocal trade and opening its markets to foreign investment and competition. China is also in violation of Article 1 and its use of subsidies under its communist system of rule.
China should be kicked out of the WTO immediately. Anything less is a complete corruption of the WTO and its reciprocal trade principles.
If China Isn’t Kicked Out of the WTO, the US Should Leave
If China isn’t kicked out of the WTO, the U.S. should leave immediately. Obviously, the WTO has failed in its obligation to uphold free reciprocal trade and by extension, to protect American workers from the unfair trade practices of China. This is why President Trump said, “The WTO has treated the United States very badly, and I hope they change their ways… If they don’t treat us properly, we will be doing something.” Source: Trump threatens to leave the WTO if ‘they don’t treat us properly’.
President Trump would need congressional approval to pull the US out of the WTO, something he is unlikely to receive. Congress has been corrupted by the rich and powerful with the working class having little say. Imagine all the big multinational corporations that gave money to get certain congressmen elected calling in those favors to block congressional approval to pull the US out of the WTO. China understands how a capitalist society is structured and they’ve given billions of dollars to the rich and ruling class in this country to abandon the voiceless American worker which is why the income inequality gap continues to widen.
The rich and powerful who have benefited under the China outsourcing/offshoring scam on the American populace are not going to go down without a fight. Seismic shifts in economic policy seldom occur without battles and strife.
Please share this article with your family members and friends. We need the U.S. populace to understand what is happening and the ramifications this has on the US economy and our stock market, so that they can make informed decisions when voting. The fake news mainstream media has done the bidding of the rich and powerful by keeping a critical view of China’s practices out of the press for decades as the manufacturing sector in the US was completely destroyed. Those same mainstream media groups and technology firms are now banning sites like InfoWars in an attempt to regulate free speech over the internet. I’ve had my own web traffic plunge as a result of Google pushing my site down in their search engine after President Trump won the White House so please share this article with your family members and friends. I don’t really like spending my time being an activist on issues, but I think this issue will have a huge financial impact on our children and the next generation of stock traders and investors so we have to get this right. Nothing less than our entire economy and way of life is at stake. An informed electorate is really our only hope.