US/China Engaging in Nationalist Policies
Opposition to globalization has expanded and energized in the U.S. by both the Bernie Sanders and Donald Trump campaigns. “Globalization” sounds unappealing, like throwing goods and traditions from around the world in a blender and chopping them up. Consumers appreciate lower prices but worry about factories closing and “jobs being shipped overseas” to lower-paid workers in Mexico, China, Vietnam, or India.
Globalization, multilateral trade agreements, and “the international order” are regularly attacked by populists and nationalists in the US and Europe. And also in China.
China leadership has shifted nationalist in recent years, as discussed in “China Protection Writ Large,” (Wall Street Journal, January 31, 2017, online title “With Pen Plan, China Etches Nationalist Economic Policy“):
Studies rank China’s economy, the world’s second largest, among the most closed. From cars to wind turbines, Beijing limits foreign participation in domestic production. Citing “food safety,” Beijing insists that almost all grains consumed in China are domestically grown, and sets artificially high prices to support bumper harvests. State media touts locally made consumer products including bidets and rice cookers.
The WSJ story begins with a discussion of Chinese state initiatives to fund Chinese steel firms to produce higher-grade steel, such as needed for the tip or point in ballpoint pens. (The WSJ article offers a nice video overview telling the story.) China’s Ministry of Science and Technology funded this “meaningful breakthrough”:
The ministry provided $8.7 million for the research, which Beifa undertook with state-owned Taiyuan Iron & Steel Group Co., China’s largest stainless-steel mill. By September, the mill produced its first fully-domestic ballpoint pen.
Fortune also runs a story “China Couldn’t Make Its Own Ballpoint Pens—Until Now” (Jan. 10, 2017), noting Chinese firms produce 38 billion ballpoint pens each year but import ballpoint pen tips from Japan, at a cost of $17.3 million a year.
A key problem with nationalist policies follows from politicians supporting domestic “champions”– state-funded or subsidized firms state officials hope will succeed in the global economy. But governments have a poor track record choosing the best firms to support. Japan’s MITI tried for years to stop Honda from expanding from manufacturing motorcycles to cars, in part due to influence by successful and established Toyota and Nissan.