The legislation for the proposed ban gives the game away by allowing companies that have been manufacturing cars in the U.S. for five years to keep doing so. Volvo would qualify. Lawmakers don’t have a problem with Chinese cars per se. They want to ban additional competition.
…..
China’s industrial policy is not a stroke of genius. Its auto subsidies are funded by massive domestic household savings held hostage by government capital controls. The country suffers from high unemployment and underemployment, even as its population declines. China is shedding factory jobs as automation and outsourcing become more widespread there.
Beijing has been rolling back its car subsidies for the past few years, leading to numerous bankruptcies. Top firms such as SAIC, BYD and Geely, however, are globally competitive and will have lots to offer U.S. buyers, even as Chinese citizens are left worse off by their government’s myopic focus on exports.
If Chinese cars were to break through with U.S. customers, Chinese automakers would likely build factories in America. That basic pattern has played out time and again with foreign manufacturers: Honda, Toyota, Nissan, Mazda, Subaru, Kia, Hyundai, Volkswagen, BMW and Mercedes-Benz all make cars for Americans in the U.S. They do so not because the government forces them to, but because it logistically makes the most sense.
The U.S. might believe it can weaken China by denying its automakers access to the U.S. market. But that’s delusional. These Chinese companies are selling in much of the rest of the world, and they’re not going to stop. American consumers are just missing out.
…..
It is not fair to perpetually ask American car buyers to pay higher prices and have fewer options just to protect American automakers. And ignoring the realities of the global market will not help these American companies in the long run, anyway. Banning additional competition from Chinese automakers is a drastic measure that ignores existing ways to ensure national security while lowering prices for American drivers.
Sam Gregg ponders how to put the protectionist genie back into the bottle where it belongs. A slice:
Trade policy, however, is never developed in a politics-free zone. Despite the animus against protectionism presently widespread among Americans, the likelihood of a new president – let alone a fractious House and Senate – embracing unilateralism is low, at best. Even many political leaders who firmly believe in free trade may balk at adopting this approach, not least because it would be all too easily demagogued to death by free trade critics and special interests as selling out American workers to foreigners.
The alternative to unilateralism is multilateral, plurilateral, or bilateral trade agreements. Each has different mechanics and its own pros and cons. Multilateral agreements, such as those negotiated through institutions like the WTO, generally lower trade and non-trade barriers across the global economy. However, they take years (and sometimes decades) to settle on account of the large number of participating nations, not to mention the various business, union, and NGO interests trying to influence the process. Even in a post-Trump world, the WTO’s sheer size, combined with the presence in its ranks of a China committed to neomercantilist policies and with a bad record of violating or ignoring WTO rules, makes successful multilateralism via such structures a long shot.
Bilateral agreements involve only two partners in the agreement and thus are, theoretically, easier to negotiate. But the proliferation of such agreements also creates confusing, mismatched trade rules across the global economy that end up complicating trade for everyone.
That leaves us with plurilateral free trade agreements. Broadly speaking, these involve a set of countries voluntarily agreeing to rules and policies that liberalize specific areas of trade, while leaving the door open for other countries to join the group if they agree to embrace the rules.
A contemporary example is the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). This arose out of the ruins of the Trans-Pacific Partnership (TPP), which was scuttled by the first Trump Administration in January 2017. Among other things, CPTPP has reduced barriers on nearly all goods traded between its one European and 11 Asia-Pacific members and moved toward clearer guidelines for digital trade, investments, and services.
John O. McGinnis writes wisely about data centers.
Vitor Melo documents some of the many amazing things that AI is doing for humanity. Two slices:
Begin with the labor market, where AI’s effect so far has been minimal. In a recent study, my colleagues and I compared the occupations most exposed to AI—software developers, financial clerks, administrative assistants—with those least exposed. Job postings and layoffs showed no statistically significant change across industries regardless of AI exposure.
Other studies confirm our findings: AI adoption has no detectable effect on employment, earnings or hours worked, with exceptions so far confined to some entry-level jobs in the most exposed fields. Employers added 162,000 jobs in August, beating expectations, with unemployment steady at 4.1%. Four years after ChatGPT’s launch, the mass layoffs that everyone feared haven’t shown up in the data.
Now consider what the jobs debate leaves out. In 2024, the Nobel Prize for Chemistry went to three scientists for work on protein structures enabled by AI. Many medications work by binding to the shape of proteins in the body, and for more than half a century, determining that shape could require years of lab work for a single protein. Now an AI platform called AlphaFold predicts it in hours. Its makers in 2022 released the structures of almost all 200 million proteins known to science, and more than three million researchers in 190 countries have used them, a third of them to better understand disease. Years of work that once stood between a patient and a cure could see a breakthrough in an afternoon.
New drugs are already arriving. In 2022 South Korea approved a Covid-19 vaccine built with a computer-designed protein, the first medication of its kind. Last year patients with a fatal lung disease who took a drug designed by generative AI saw their lung function improve in a randomized trial, while patients on a placebo declined. And as some bacteria resist antibiotics, AI has identified a new class that kills drug-resistant staph.
…..
Human flourishing has never been measured in job titles. It is determined in suffering avoided, time returned and problems solved that once seemed intractable. Ask whether AI will take our jobs, and the honest answer is: not yet. But ask whether it is helping people prosper, and the answer is an easy yes.
To be sure, what people care about is sensitive to social context, and we should applaud institutions that encourage people to care for each other. But telling people that they are required to tend someone else’s garden rather than their own does not encourage people to care for each other. It does the opposite. It encourages spite.
While economics as a theoretical science is necessarily neutral between the ultimate goals of economic policy, there is much that it has to say about the appropriateness of different courses of action once the ends to be achieved are given.
