Monday, October 11, 2004
*UPDATE*More on France, China and public policy
Recent trade agreements between France and China will have long lasting effects on public policy and foreign policy as we know it.
I will post more fully on the subject later. In the meantime, here are a few definitions and realities we will face in the upcoming short and medium term.
Short and medium term have different meanings for different people.
In the US, short term can mean anything from 1 month to 1 year.
In China, short term can mean 25 years and long term can mean 100 years or more.
In Europe, nothwithstanding US market influences, short to long term can vary from 5 to 25 years.
For the sake of this post, I will use the terms as defined by European measures, because as far as we are concerned, it is that amount of time that will be dictaed to us.
There is nothing we can do at this point to counter the deals that China and France have agreed to. In other words, we have lost round one in the upcoming trade wars with the EU and China. These deals will have many ramifications to our future economy and trade status.
This will affect public policy.
In an economy in which we are dependent not only on free markets, but price controls of resources as well, we will see a decline in the economy. That China will control the flow of natural resources from Canads and elsewhere, is a given.
It is in their best interest to grow and expand their own economy. It is also in China's best interest to maintain a favorable relationship with the EU, and France in particular. Just signed trade agreements will give China access to Western technology-- essentially, our technology, legally bought and paid for by the French.
Despite technology embargoes, this will happen. It happened in Iraq and throughout the Arab world. The French have had no qualms in the past about embargo busting and their is no reason to think they would now. In fact, the French will have a greater incentive to circumvent any technology embargo in order to ensure a stable supply and reserve of resource inventory and flow. This in turn, will guarantee strong long term growth for French/EU countries while at the same time, destabilize American prospects for industrial growth.
As with any downturn, there will be fewer public dollars and thus, public policy. Here are a few examples. I will discuss them each in future posts.
This will affect Social Security. The amounts paid, retirement age, etc will have to be renegotiated. These problem are in addition to the Social Security solvency problems.
Health care too, as we know, is at risk. Government programs such as Medicare will have to be reduced. In addition, with rising unemployment, there will be fewer insured. As health costs rise, there will have to be a policy addressing the allocation of health care dollars. For example, are tight dollars expended on children or the middle aged? For that matter, how much can we allocate to the elderly andtheir care?
Government heath insurance will accelerate the disaster, to be sure. Canada's experiment has failed miserably. The system there will implode and collapse on itself.
There are welfare issues that can be extrapolated from all this as well.
While I will discuss all this at greater length later on, think about this.
The GATT treaties, IMF and World Bank regulations will be subject to renogotiation.
Currently, active membership is refused to countries that engage in active and official boycotts. Thus, much of the Arab world has been excluded because of their boycott of Israel.
China is actively pursuing trade and arms deals in the region. With China calling the economic shots in Europe, rule changes are inevitable. There is a large amount of pressure that can be brought to virtually every country to ensure that. Oil supply, too, is a potent tool
Despite China's poor record on Human Rights, the French have publicly called for the eliminations of the arms trade embargo on that country.
China wants to see arms, new technology and expand trade in the region. All that wil require are access to resouces, trade deals and energy.
Do you really think we're going to be a priority for the Saudis?
Monsieur le President, Jacques Chirac is taking some heat for publicly berating les maudits Americaines, while in China.
No doubt, this will reassure many in America-- until French jobs and industry are on the line. The French trade deals are strategic and long term-- and we need to see and deal with them that way.
We will only compound the problem if we ignore the issue.