Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: Hello and welcome to another episode of the Odd Lots podcast.
Speaker 2: I'm Joe Wisenthal and I'm Tracy Alloway. Tracy, needless to say,
Speaker 2: always a lot of anxiety about the US China trade
Speaker 2: relationship these days. I feel like there are new tariffs
Speaker 2: and new developments or new conversations about overcapacity and evs,
Speaker 2: and new headlines about planes and stuff basically every day
Speaker 2: right now.
Speaker 3: Yeah, there were new headlines this morning, weren't there from
Speaker 3: one of Trump's economic advisors, right, I can't remember what
Speaker 3: it was. Oh, that's why God created tariffs. Oh yeah,
Speaker 3: but you're absolutely right. I mean it's been years, if
Speaker 3: not decades now where China manufacturing has been this sort
Speaker 3: of thing that looms large over the US economy. And
Speaker 3: I think what's interesting about the US China economic relationship
Speaker 3: is the way we think about it, or the way
Speaker 3: we talk about it. It seems almost like it was
Speaker 3: an inevitability, Like it was inevitable that the two biggest
Speaker 3: economies in the world were going to have, you know,
Speaker 3: some sort of trade relationship, and maybe because of specific
Speaker 3: decisions undertaken by the Chinese leadership, like Deng Chaoping or
Speaker 3: whoever to build out the Chinese economy in a certain
Speaker 3: way led to a lot of the increased tension. But
Speaker 3: you know, in advance of this discussion, I was kind
Speaker 3: of thinking about it like there was no inevitability, right,
Speaker 3: Like India could have been our biggest trade partner.
Speaker 2: Yeah, that's a really great point, or we might not
Speaker 2: have like a big trade relationship at all. Or China
Speaker 2: could have been more like Russia, in which trade is
Speaker 2: very modest. Right, Like this idea is like, Okay, the
Speaker 2: US is rich and we do services and stuff like that.
Speaker 2: Here in China is poor. Their comparative advantage is cheap labor. Therefore,
Speaker 2: China produces everything or produces a lot. That's how we talk.
Speaker 2: And it just sort of seems, as you say, like
Speaker 2: like yeah, inevitable, this is the natural order of things.
Speaker 2: But there are lots of countries that have big populations
Speaker 2: that aren't particularly rich or that aren't manufacturing powerhouses the
Speaker 2: way China has. So I think it's interesting as you say,
Speaker 2: like there's this conversation like it's sort of inevitable, and
Speaker 2: we talk about it now like Okay, this is the
Speaker 2: state of things. Do we want to change it, et cetera,
Speaker 2: but really not much conversation about like how we got
Speaker 2: here or how we built this relationship in the first place.
Speaker 3: Yeah, I think there's going back to that inevitability point.
Speaker 3: There's usually an underlying tone of like, well, the market's
Speaker 3: gonna market. Yeah, market's gonna market, market's gonna market.
Speaker 2: And in visible hand's gonna invisible hands.
Speaker 3: That's try and that's how we ended up with, you know,
Speaker 3: lots of stuff being built in China where there is
Speaker 3: cheap labor. By the way, Joe, I'm old enough to
Speaker 3: remember when I was living in the both, but go on, Yeah,
Speaker 3: when I was living in Japan in the nineteen eighties,
Speaker 3: I distinctly remember that most of my toys, like my
Speaker 3: cheap little plastic toys, they all came from Taiwan, right,
Speaker 3: And I remember when I was like six years old,
Speaker 3: not really understanding where Taiwan was or what it was
Speaker 3: at that point, but I distinctly remember like thinking that
Speaker 3: it was this magical land where all the toys were made.
Speaker 3: But you know, like in the nineteen eighties, I guess
Speaker 3: we were in that transition point from moving from Taiwan
Speaker 3: being a massive manufacturing base into China, but even as
Speaker 3: late as like the early nineteen eighties, Taiwan was still
Speaker 3: making a lot of stuff for me.
Speaker 2: When I was ten years old, I lived in Malaysia
Speaker 2: for a year, and then I have this memory of
Speaker 2: like visiting a friend's house when I was eleven back
Speaker 2: in the US, and I noticed that one of his
Speaker 2: hot wheels was made in Malaysia, and I was like, Oh,
Speaker 2: that's so cool. I didn't even know, like anyone that
Speaker 2: else had heard of Malaysia, and so the idea like
Speaker 2: that this company had gone to Malaysia to manufacture the
Speaker 2: hot way, I just thought it was like so cool.
Speaker 2: It was like, oh, I've been to that country. I
Speaker 2: didn't know anyone else knew about it, let alone going
Speaker 2: up to setting up a toy manufacturing operation. I guess
Speaker 2: there's a little bit of a diversion, but it does
Speaker 2: remain true that a lot of the countries that are
Speaker 2: powerhouses of advanced manufacturing or one time powerhouses and still
Speaker 2: are of low end manufacturing.
Speaker 3: Absolutely, so I think it's worth digging into how we
Speaker 3: actually ended up in this now contentious trade relationship with
Speaker 3: China and why it is that, you know, instead of
Speaker 3: maybe selling a bunch of American made goods into that market.
Speaker 3: We ended up buying a bunch of Chinese made goods.
Speaker 2: And this is the other thing, the other key point here,
Speaker 2: which is that for a long time, and even still
Speaker 2: to some extent, you hear like the dream of selling
Speaker 2: it to China. Oh, if we could sell one you know,
Speaker 2: box of tissue to every one billion or more than
Speaker 2: one billion now citizens of China, that'd be billions of dollars,
Speaker 2: et cetera. And I think a few companies have done that.
Speaker 2: You know, Starbucks sells a lot in China, and Nike
Speaker 2: sells a lot in China, et cetera. But by and large,
Speaker 2: the idea of China is this huge consumer market for
Speaker 2: American made brands. It exists to some extent, but probably
Speaker 2: not exists to the full dream that people have imagined.
Speaker 3: Yeah, I think that's right.
Speaker 2: Okay, Well, I'm really excited. We do have the perfect
Speaker 2: guest to talk about how the US China trade relationship
Speaker 2: was really born. We're going to be speaking to doctor
Speaker 2: Elizabeth Ingleson. She's an assistant professor at the London School
Speaker 2: of Economics and the author of a new book that
Speaker 2: came out this year called Made in China when US
Speaker 2: China interests converged to transform global trades. So doctor ingleson,
Speaker 2: thank you so much for coming on out.
Speaker 4: Lots Hi, Joe, Hey, Tracy, it's great to be here.
Speaker 2: Thank you so much for coming on. Why don't we
Speaker 2: start with why this book? What was it about this
Speaker 2: topic made in China that in your view, was important
Speaker 2: enough that this is a focus for a book.
Speaker 4: Huh. Well, it's interesting hearing the two of you recollect
Speaker 4: your own engagements with Made in Taiwan or Made in Malaysia,
Speaker 4: because in many ways I didn't start off thinking I
Speaker 4: want to write this book. I started off as a
Speaker 4: history undergraduate and actually a major in literature, even more
Speaker 4: in history, and was really as an Australian growing up
Speaker 4: just as the Cold War was ending and into the
Speaker 4: nineteen nineties and two thousands, the US and China were
Speaker 4: always the two biggest hours in the region. They still
Speaker 4: are today. And it was the early twenty tens and
Speaker 4: at that period of time, political scientists, policymakers, they were
Speaker 4: talking about the US China relationship in terms of its
Speaker 4: economic interdependence. They were saying, there's so much at stake
Speaker 4: in the relationship, especially economically, that the US and China
Speaker 4: aren't going to risk what they have for some kind
Speaker 4: of geopolitical conflict or diplomatic tens all worse right, or war,
Speaker 4: that the interdependence itself is enough to mitigate that. And
Speaker 4: I wanted to learn more about this. I wanted to
Speaker 4: think through where did this interdependence come from? How did
Speaker 4: we get to a state in the twenty tens where
Speaker 4: the United States and China did have such an entwined
Speaker 4: economic relationship. And that really took me down this path
Speaker 4: of research and thinking and going to archives all over
Speaker 4: the world, but particularly the United States. And here we
Speaker 4: are today with the book.
Speaker 3: So when I think of the way a lot of
Speaker 3: people talk and write about China's economic history, I feel
Speaker 3: like so much of the focus is on China's opening
Speaker 3: up right and caveat here. Right before I cracked open
Speaker 3: your book, I was reading another book on China called
Speaker 3: wild Ride, A Short History of the Opening and Closing
Speaker 3: of the Chinese Economy. And I mean the clue is
Speaker 3: in the title there, right. The emphasis is very much
Speaker 3: on the decisions that are being made by China. So
Speaker 3: I'm curious why you decided to comment it from a
Speaker 3: slightly different way, and from maybe some of the decisions,
Speaker 3: both diplomatic and economic, being made by the US and
Speaker 3: the rest of the world.
Speaker 4: I think one of the things that you are trained
Speaker 4: to do as a historian is to denaturalize things, to
Speaker 4: look at a moment in time, and you seek to
Speaker 4: question the assumptions of the people operating in that period
Speaker 4: of time. And so, as I mentioned, I wanted to
Speaker 4: sort of historicize a workout where this interdependent relationship came from,
Speaker 4: and it led me to the nineteen seventies. It led
Speaker 4: me to this period when the US and China were
Speaker 4: rebuilding a trade relationship after over twenty years of Cold
Speaker 4: War isolation. So throughout the nineteen fifties and nineteen sixties,
Speaker 4: both countries had very little, in fact none at all
Speaker 4: economic contact and very little social and political contact at all.
Speaker 4: It was a very strict Cold War embargo. It was
Speaker 4: a consequence of the Korean War, but it was also
Speaker 4: a consequence of mal declaring the People's Republic of China.
Speaker 4: So it's this height of the Cold War tensions. And
Speaker 4: then in the nineteen seventies you have the famous Nixon
Speaker 4: Mao meeting, the opening up of relations and the softening
Speaker 4: of these tensions. And it's in that period in the
Speaker 4: nineteen seventies that the two countries rebuilt a trade relationship.
Speaker 4: And you've really got to sort of think about what
Speaker 4: it is that these people seeking to rebuild a trade
Speaker 4: relationship were assuming, and rather than accepting those assumptions, critiquing them.
Speaker 4: And so that led me then to not just look
Speaker 4: at the business people within the United States and within China,
Speaker 4: but a whole range of other actors who were part
Speaker 4: of this interdependence that was being built. So I look
Speaker 4: at diplomats in both countries, I look at labor unions,
Speaker 4: I look at consumers, particularly within the United States. I
Speaker 4: look at retailers within the US. And one of the
Speaker 4: things that I found as I was doing this research
Speaker 4: was that understanding how this relationship was rebuilt was really
Speaker 4: a story not only about rebuilding a trade relationship, but
Speaker 4: a much bigger question of how does China, the world's
Speaker 4: largest communist nation, how did it converge with global capitalism. And,
Speaker 4: as you've mentioned, Tracy, when people think about the history
Speaker 4: of China's engagement with the capitalist world, Dung Xiaoping's reforms
Speaker 4: loom very large and rightly so, the very very significant
Speaker 4: moment in the history of China's political economy. But in
Speaker 4: looking at this nineteen seventies period, started to see well,
Speaker 4: actually a lot of the experimentation and a lot of
Speaker 4: the groundwork for what led to Dung's reforms in the
Speaker 4: very late nineteen seventies and really the nineteen eighties. A
Speaker 4: lot of those experimentations within China were already happening in
Speaker 4: the nineteen seventies. And even more than that, I realized
Speaker 4: that one of the major assumptions that needed to be
Speaker 4: critiqued was that China wasn't just converging with a static capitalism.
Speaker 4: China was converging with a system that itself was undergoing
Speaker 4: significant transformations in the nineteen seventies, and the biggest capitalist
Speaker 4: power at the time, the United States, was at the
Speaker 4: heart of many of these transformations occurring within the capitalist system.
Speaker 4: And so what I trace in the book, and what
Speaker 4: I realized needed to be historicized and understood, was a
Speaker 4: way that these two different spaces experimentations within China but
Speaker 4: also the United States and its economic turbulence during the
Speaker 4: nineteen seventies, The way that those two different spaces intersected
Speaker 4: and ultimately, through the decisions and actions of certain groups
Speaker 4: within those two places, ultimately converged. And so it's a
Speaker 4: story of change within the capitalist system as much it
Speaker 4: is a story of change within China. And I was
Speaker 4: particularly struck by the way that those two factors began
Speaker 4: to converge in particular ways.
Speaker 2: It would be an easy story if the story were
Speaker 2: simply just Mao dies. There's a little bit of turmal
Speaker 2: trying to spend a couple of years figuring out who's
Speaker 2: going to replace him. Don't show pen comes into power,
Speaker 2: opens up suddenly their capitalist or someone. But obviously that's
Speaker 2: not the story. Let's talk about some of these specifics
Speaker 2: in the early part of the nineteen seventies, who were
Speaker 2: the first movers in the US who sort of sensed
Speaker 2: an opportunity to trade with China in some form or another,
Speaker 2: And then how did they do it? Because still I
Speaker 2: guess maybe I just my mind is in sort of
Speaker 2: the standard narrative where it's like, oh, trade with China
Speaker 2: is impossible. It's a communist country where there's no free
Speaker 2: enterprise or anything like that under mile. But talk to
Speaker 2: us about like the first people who sort of sensed
Speaker 2: an opportunity and sort of operationally what they were able
Speaker 2: to do under the existing environment.
Speaker 4: Yeah. Well, there are a couple of different groups of
Speaker 4: individuals or groups of business people that I particularly focus on.
Speaker 4: It was very important to my own analytics unpacking was
Speaker 4: to think about which kinds of business people and which
Speaker 4: kinds of American actors were beginning to trade with China.
Speaker 4: So on one level, there were the big companies, the Boeings,
Speaker 4: the Westinghouses, etc. So they were these very significant and
Speaker 4: large titans of American industrial capital who were looking to
Speaker 4: China really from the get go and saying we want
Speaker 4: to sell our planes, or we want to sell fertilizer
Speaker 4: factories or what have you to China, and sort of
Speaker 4: result of those attempts were far more murky, and I
Speaker 4: can get into that in a minute. But some of
Speaker 4: the more surprising groups, in addition to perhaps the more
Speaker 4: standard or expected groups of American business people, were these
Speaker 4: very maverick, entrepreneurial American business people, some of them with
Speaker 4: very little prior business expertise, who saw in China opportunities
Speaker 4: to really take a gamboll. And so one of the
Speaker 4: people that I look at who really was at the
Speaker 4: forefront in opening up the trade relationship with China was
Speaker 4: this woman named Veronica Yap. She was an architect in
Speaker 4: the early nineteen seventies who was born in Shanghai, had
Speaker 4: family in Hong Kong, but had grown up in the
Speaker 4: United States, and she when she sort of heard that
Speaker 4: Nixon was easing trade restrictions, saw an opportunity to import
Speaker 4: from China, and so she began, through her connections in
Speaker 4: Hong Kong to import a whole range of different kinds
Speaker 4: of goods. So she was importing cheap pals and now
Speaker 4: coats and a whole range of things that were overtly Chinese,
Speaker 4: and she very quickly made enough money that she was
Speaker 4: able to quit her day job. And she was one
Speaker 4: of a group of these small scale importers who really
Speaker 4: led the way in not only importing from China, but
Speaker 4: the result was that they were selling China to American consumers.
Speaker 4: They were helping the larger diplomatic thaw by easing American
Speaker 4: consumers and therefore American voters into engaging with China in
Speaker 4: a very new way. And so in the early nineteen seventies,
Speaker 4: one of the really important results of these importers was
Speaker 4: not only in the diplomatic and economic realms, but in
Speaker 4: the cultural shift in sort of allowing for an acceptance
Speaker 4: of engagement with China, and that I think has a
Speaker 4: really important longer term impact on the way that the
Speaker 4: trade relationship unfolded. So I traced the story of Veronica
Speaker 4: Yap and a few other importers who by the mid
Speaker 4: nineteen seventies, while they continued to import malcoats and continue
Speaker 4: to import things that were overtly Chinese, also began to
Speaker 4: import things that had no real connection to China at all.
Speaker 4: So Veronica Yap, for example, imported these really amazing nineteen
Speaker 4: seventies high heeled men's shoes and my really seventies stuff
Speaker 4: that had no connection to China other than the label
Speaker 4: saying made in China. And in order for that acceptance
Speaker 4: of engagement on everyday granular level with China, in order
Speaker 4: for that to occur, it necessitated the large scale, celebratory
Speaker 4: cultural transformation of engagement with China that was certainly there
Speaker 4: from the start of the nineteen seventies and very much
Speaker 4: continued throughout the seventies as well. So there's this real
Speaker 4: dynamic occurring whereby American importers and retailers, those selling Chinese
Speaker 4: goods begin this much larger transformation in what it means
Speaker 4: to even trade with China, because, as you mentioned at
Speaker 4: the beginning of the segment, for centuries, not just American
Speaker 4: traders but foreign traders had looked to China and seen
Speaker 4: in the China market a promise of selling to China.
Speaker 4: You know, in the early twentieth century, a very well
Speaker 4: known American ad man, his name's Carl Crow, a Maverick
Speaker 4: businessman of his own with his own fantastic story. He
Speaker 4: wrote a best selling book in the United States called
Speaker 4: four hundred Million Customers. It won the National Book Award.
Speaker 4: It was this really big moment in thinking through what
Speaker 4: the China market represented, and so he sort of crystallized
Speaker 4: this idea that China represented four hundred million customers. And
Speaker 4: yet thirty odd years are after Carl Crow's book. In
Speaker 4: this nineteen seventies moment, I began to see that, yes,
Speaker 4: you have your Boeings and your Westinghouses wanting to sell
Speaker 4: to China, sort of treading the path of the Carl
Speaker 4: Crow vision of selling your goods to China. But I
Speaker 4: began to see also the actions of people like Veronica
Speaker 4: Yap and other importers and retailers began to reconfigure what
Speaker 4: it means to speak of the China market and what
Speaker 4: it means to speak of US China trade.
Speaker 3: So you just laid out the sort of cultural diplomacy
Speaker 3: via textile imports very well, but it still sort of
Speaker 3: leaves a little bit of tension between diplomacy and geopolitical
Speaker 3: aims versus economic ambitions. And one of the things I
Speaker 3: thought was interesting in your book is you sort of
Speaker 3: lay out a difference in mindset between the US and China,
Speaker 3: which is very often Chinese leaders are sort of putting
Speaker 3: diplomacy or geopolitical goals before business. So if you agreed
Speaker 3: to do what we want in terms of politics, then
Speaker 3: we'll trade more with you. But for the US, it's
Speaker 3: very much business before diplomacy. So let's build up our
Speaker 3: economic relationship and then we'll see how all the other
Speaker 3: stuff goes. How were they sort of able to surmount
Speaker 3: that difference of perspective in order to get the economic
Speaker 3: relationship really going.
Speaker 4: Yeah, well, this was one of the things that was
Speaker 4: so surprising to me about how I make sense of
Speaker 4: the diplomacy of this trade relationship, and I had assumed
Speaker 4: that the trade relationship would, from the US perspective, be
Speaker 4: understood as something that would assist the larger diplomatic aim
Speaker 4: because in this period, the diplomacy of the period is
Speaker 4: really what was driving the relationship, and it's certainly what
Speaker 4: has driven scholarship on the topic. So it's a period
Speaker 4: where the two countries sought to re work how they
Speaker 4: can have full diplomatic normalization. And the big sticking point
Speaker 4: was Taiwan's So how can the United States and China
Speaker 4: have embassies and a full diplomatic relationship and what did
Speaker 4: that mean for Taiwan? So that was the big question,
Speaker 4: and that's usually how people think about nineteen seventies US
Speaker 4: China relations. They don't focus on the trade relationship. And
Speaker 4: a very significant reason for that is that the trade
Speaker 4: numbers were really low. But precisely because the trade numbers
Speaker 4: were low is why it's really important, because when we
Speaker 4: look at the trade not in terms of sort of
Speaker 4: the quantity of trade or the level of trade, but
Speaker 4: in terms of qualitative changes, that's where it matters. And
Speaker 4: so if I come back to this point that I
Speaker 4: made earlier about unpacking the assumptions of your actors at
Speaker 4: the time, the US actors that I look at the
Speaker 4: US diplomats and at the executive level, so Nixon, Ford, Kater,
Speaker 4: they all assumed that the trade relationship that they had
Speaker 4: reopened with China, that that would assist the larger diplomatic
Speaker 4: aims that they had, which is full normalization with China.
Speaker 4: And so because trade was understood as a tool to
Speaker 4: assist this larger diplomatic imperative, it was sort of seen
Speaker 4: as a secondary thing that would ease What really mattered
Speaker 4: to them was this normalization, and that therefore coincided with
Speaker 4: very different, as if outlined Tracy, a very different assumption
Speaker 4: on the part of Chinese policymakers, who, as the archival
Speaker 4: documents reveal, who took a very overt and very different
Speaker 4: approach towards the relationship between trade and diplomacy. They said, no,
Speaker 4: we're working towards normalization with you United States, but you
Speaker 4: only get trade benefits with US after we have improvements
Speaker 4: in those diplomatic conversations, So only after we can have
Speaker 4: concrete steps towards normalization. But where the sticking point lay
Speaker 4: was in Chinese sales of goods to the United States,
Speaker 4: because even though Chinese leaders said no, we're going to
Speaker 4: take a very different approach, trade comes after improvements, not before.
Speaker 4: There was a distinction where they said, okay, we'll allow
Speaker 4: for our sales of our goods to the United States.
Speaker 4: That wasn't the sticky point. That was eased partly because
Speaker 4: it gave them cash to buy other things from other
Speaker 4: countries and so, in other words, imports to the United
Speaker 4: States of Chinese goods became a space that was within
Speaker 4: Chinese leaders political interests, but it also became one within
Speaker 4: the US policymakers interests too, because of that assumption that
Speaker 4: they had, which is, let's use trade to help the
Speaker 4: larger diplomatic situation, and because the numbers were so low,
Speaker 4: it didn't seem to nutter that, you know, helping China
Speaker 4: sell some of its textiles to the United States that
Speaker 4: wouldn't have a big or was perceived to not have,
Speaker 4: you know, a particularly negative consequence. Of course, the story
Speaker 4: is far different to that, but the political assumption was
Speaker 4: something that I myself really wanted to denormalize and denaturalize
Speaker 4: and unpack.
Speaker 2: So when people think about the history, there's the male era,
Speaker 2: there's the dung era opening up. Okay, so maybe that
Speaker 2: was an important shift, but there was more to it.
Speaker 2: But the other thing you said, which I thought I
Speaker 2: wanted to go back to, is that capitalism in the
Speaker 2: United States was not some fixed, permanent state. That the
Speaker 2: US was also undergoing a transition. And there was the
Speaker 2: inflation of the nineteen seventies, and there were the wars,
Speaker 2: and there was the fact that Nixon went off the
Speaker 2: gold standard in nineteen seventy one, and that was a
Speaker 2: big deal. Talk to us about the state of flux
Speaker 2: that America found itself in the nineteen seventies, such that
Speaker 2: both for diplomatic and I guess trade or sort of
Speaker 2: commercial reasons, there was this impulse to figure out more
Speaker 2: about what could be done with the China market.
Speaker 4: Yeah, I mean, this is such an import a part
Speaker 4: of the story. Right as you say, Joe Nixon ending
Speaker 4: a gold standard, the end of Breton Woods. It occurred,
Speaker 4: you know, within a month of Nixon's announcement of his
Speaker 4: about to go to China. And so they're often paired
Speaker 4: as these two Nixon shocks are prepaired because they were
Speaker 4: shocks because of their style rather than the substance underpinning them.
Speaker 4: But when you look at American business people and American corporations,
Speaker 4: these two Nixon shocks actually worked together, and so they're
Speaker 4: how I begin the book is with these two shocks
Speaker 4: and their lasting and very unintended consequences. So something like
Speaker 4: the ending of the Breton Woods system, but also by
Speaker 4: sort of the mid nineteen seventies, US Congress passes the
Speaker 4: nineteen seventy four Trade Act, and some of these key
Speaker 4: legislative changes are crucial to the ways that American policy
Speaker 4: makers sought to encourage the development of American manufacturing and
Speaker 4: finance and the relationship between those two things. So we
Speaker 4: speak today of sort of neoliberalism or of globalization, but
Speaker 4: these are very much processes that were the products of
Speaker 4: deliberate decisions, and in the book, I suddainly try and
Speaker 4: pull out some of those core decisions that had these
Speaker 4: long lasting repercussions. So the end of Breton Woods and
Speaker 4: the sort of the freeing up therefore of capital was
Speaker 4: crucial to the capacity eventually of US corporations to invest
Speaker 4: their money overseas and have offshore manufacturing. It's hard to
Speaker 4: imagine today, and I always stress it is, you know,
Speaker 4: in twenty twenty four. We take for granted the fact
Speaker 4: that we have sort of outsourced manufacturing and supply chain
Speaker 4: networks and all the rest of it. But in the
Speaker 4: nineteen seventies, these dynamics were very much only developing. There's
Speaker 4: nothing about that that was certain American businesses, as you mentioned, Joe,
Speaker 4: there's new signify inflation, they very much felt like they
Speaker 4: were under attack from a whole range of different spaces.
Speaker 4: Labor unions were very very active in this period, and
Speaker 4: so there was nothing guaranteed in the world that we
Speaker 4: live today, but there were certain steps, both legislative as
Speaker 4: well as within the corporate world that did lead to
Speaker 4: what we now have of of sort of offshore manufacturing
Speaker 4: and other things. So just to give you an example,
Speaker 4: j C. Penny is one of the big sort of
Speaker 4: retailing companies that I look at in the book, and
Speaker 4: they had in sort of the early nineteen seventies nineteen
Speaker 4: seventy three, only about ten percent of their entire stock
Speaker 4: was goods that were made not in the United States.
Speaker 4: And jac Penny, I mean, it's big now, but it
Speaker 4: was it was really, really, really dominant in the market
Speaker 4: in the nineteen seventies. I think it was the second
Speaker 4: largest retailer in the period, and you're having gone through
Speaker 4: their company archives and their records.
Speaker 3: And j C.
Speaker 4: Penny's company plan outlined in nineteen seventy three what their
Speaker 4: goals were going to be for the next five years.
Speaker 4: And one of the key goals in response, and it
Speaker 4: was very much in response to Nixon's ending of the
Speaker 4: Bred and Wood system, and the gold standard was to say, Okay,
Speaker 4: we're in flux right now. Things are challenging right now,
Speaker 4: but our five year plan is to increase the amount
Speaker 4: of goods that we sell in our stores that's manufactured overseas. So,
Speaker 4: in other words, we want to strategically and deliberately choose
Speaker 4: to turn to outsourced manufacturing. And within that company plan,
Speaker 4: they listed a range of countries that they thought would
Speaker 4: be good to get cheap labor from, and China was
Speaker 4: listed amongst those spaces. And this is very early days
Speaker 4: right nineteen seventy three. Like China, they've only been trading
Speaker 4: with each other for about eighteen months, stuff to twenty
Speaker 4: odd years of isolation, and jcpenny is listing China. It's
Speaker 4: a potential space with which they could engage, and that
Speaker 4: really tells you something about the very deliberate and overt
Speaker 4: but also encouraged ways in which outsourced manufacturing was a
Speaker 4: product of decisions. Similarly, if we turned to the Trade
Speaker 4: Act of nineteen seventy four, just briefly, is this really
Speaker 4: important again legislative moment where Congress said, after a number
Speaker 4: of years in which Congress had introduced legislation that would
Speaker 4: have limited the roles of manufacturing corporations and limited the
Speaker 4: capacity of manufacturing multinational corporations to invest overseas a range
Speaker 4: of bills, including the Mills Bills and the Burt Hark
Speaker 4: Bill in the early nineteen seventies, by nineteen seventy four,
Speaker 4: Congress passed this Trade Act of nineteen seventy four, in
Speaker 4: which they chose to limit their own legislative powers after
Speaker 4: the early seventies, where their own members had tried to
Speaker 4: sort of curtail of what they saw as a liberal
Speaker 4: international order. With the Trade Act of nineteen seventy four,
Speaker 4: one of the consequences of it was to decrease Congresses
Speaker 4: powers in making trade decisions, in imposing tariffs and other things.
Speaker 4: So what the Trade Act did was it it gave
Speaker 4: the powers some powers of tariff making and other sort
Speaker 4: of conditions on trade. They gave those powers to the president,
Speaker 4: to the executive branch. And this is really really significant
Speaker 4: for a number of reasons, not least of which is
Speaker 4: that this is happening right at the heart or of
Speaker 4: the Watergate scandal. So faith and trust in the executive
Speaker 4: office and in the president is at its lowest. And
Speaker 4: yet Congress voted and passed this trade legislation that increased
Speaker 4: the capacity of the president to impose restrictions and whatever
Speaker 4: else on trade, precisely because of the assumption that the
Speaker 4: capacity to uphold the liberal international trading order would be
Speaker 4: far more protected and far more guaranteed with the office
Speaker 4: of the executive the president than it was with this
Speaker 4: sort of unruly Congress, which was sort of introducing labor
Speaker 4: backed policies and introducing sort of early, sort of in
Speaker 4: the early seventies sort of legislation that might have been
Speaker 4: a threat to this movement to offshore manufacturing. And it's
Speaker 4: precisely that increase in power that Donald Trump has been
Speaker 4: able to impose the tariffs that he has. It's precisely
Speaker 4: that change from the Trade Act of nineteen seventy four
Speaker 4: that Joe Biden, too has been able to continue that,
Speaker 4: and so in the seventies, the assumption was the president
Speaker 4: is going to uphold and protect free trade and liberal
Speaker 4: international trade, and that certainly was the case for a
Speaker 4: number of decades, but as we're living through today, that
Speaker 4: assumption is no longer something to be guaranteed.
Speaker 3: I'm glad you brought up Trump and Biden because I
Speaker 3: wanted to ask you about the current state of affairs.
Speaker 3: Do you think there's any path to maybe going back
Speaker 3: to that sort of time in the nineteen thirties or
Speaker 3: even earlier where China was regarded as a potential market
Speaker 3: for consumers. And one of the reasons I ask is
Speaker 3: because I think you mentioned in your book, but when
Speaker 3: China joined the World Trade Organization in I guess it
Speaker 3: was two thousand and one or something like that, I
Speaker 3: think part of the narrative then was this idea that
Speaker 3: they could be customers for Western goods. And of course,
Speaker 3: in the years since then, that idea has sort of
Speaker 3: fallen away again, and we are very much used to
Speaker 3: talking about China as a competitor for manufactured goods and
Speaker 3: a cheap source of labor and all that stuff you've
Speaker 3: been discussing is there any way we could go back
Speaker 3: to a place where maybe it's regarded as more of
Speaker 3: a market to sell things into.
Speaker 4: There are a couple of things I want to say
Speaker 4: that The first is first and fomust. China is a
Speaker 4: major consumer market. It consumes products that many of its
Speaker 4: own workers make. But the bigger question that you're asking
Speaker 4: right a sort of how can we is there a
Speaker 4: possibility of going back to a different kind of trade order.
Speaker 4: I think one of the major problems that we're living
Speaker 4: with and through is that in many ways we're not
Speaker 4: so much as going back as remaining, at least rhetorically
Speaker 4: back in the early twentieth century when it comes to
Speaker 4: US political conversations about trade. So even to this day,
Speaker 4: Biden speaks in terms of his tariffs protecting American jobs,
Speaker 4: and Donald Trump even more so in terms of sort
Speaker 4: of China is stealing American jobs and we've got to
Speaker 4: protect them. The problem with that thinking, and it ties
Speaker 4: back to seeing China as a space to sell to it,
Speaker 4: is that it doesn't take into account the very profound
Speaker 4: transformations in how manufacturing and finance and trade more broadly
Speaker 4: operate and have operated since the nineteen seventy that the
Speaker 4: ways that corporations operate and the ways that a good
Speaker 4: that is labeled made in China operates, we know, contains
Speaker 4: a really significant set of other dynamics underpinning it. That
Speaker 4: a good labeled made in China has involved many other
Speaker 4: countries along the way. So in the age of COVID
Speaker 4: and all the rest of it, we're familiar right with
Speaker 4: this idea of made in China as representing a very
Speaker 4: sort of intertwined global system. And yet politically and rhetorically,
Speaker 4: the conversations about trade and the conversations about China remain
Speaker 4: very bound by the nation state. They remain bound by
Speaker 4: very early twentieth century notions of made in China represents China,
Speaker 4: and that's a threat, and made in the USA is
Speaker 4: the solution, and that's going to support American jobs, when
Speaker 4: really the reality of trade is such that the central
Speaker 4: power and the central space of profit moves far more
Speaker 4: fluidly between and among nation states. That it's not just
Speaker 4: made in China anymore, but that a corporation made it,
Speaker 4: that it's Apple, or it's Gap, or it's any of
Speaker 4: any of the brands. That they are the ones who
Speaker 4: need to be understood as central to these dynamic It's
Speaker 4: not just anymore about a nation state, but the kinds
Speaker 4: of labels that we're familiar with that say made in
Speaker 4: X place. They are a product of late nineteenth century trade.
Speaker 4: There are a product in fact of the UK of
Speaker 4: Britain in the very late nineteenth century looking out at
Speaker 4: the world and seeing a threat from the industrial power
Speaker 4: or the industrialization of Germany. And so in the late
Speaker 4: nineteenth century, the UK introduced legislation that would say, we
Speaker 4: want to limit goods coming from Germany because of its
Speaker 4: industrial might, and we're going to do so by labeling
Speaker 4: products from Germany with made in Germany. And the idea was, well,
Speaker 4: if you know, British consumers see made in Germany, they're
Speaker 4: not going to want to buy it, and that's gonna
Speaker 4: be good for us, because we want to serve stymy
Speaker 4: their powers. But what's really really important, right, So there's
Speaker 4: a very common thread here, and that is nationalism, and
Speaker 4: that is sort of wanting to create this sort of
Speaker 4: this threat. But really, really importantly, when I looked into
Speaker 4: this history, I was like, Okay, that's really interesting. But
Speaker 4: then I looked at the legislation and I looked at
Speaker 4: what it was that the British had passed and they
Speaker 4: in the law said we're going to know if it's
Speaker 4: coming from Germany because of where the ship left. This
Speaker 4: is in the law they said, if the ship leaves Germany,
Speaker 4: then we're going to know that all the stuff on
Speaker 4: that ship was made in Germany. And that's how we
Speaker 4: will know to put the label made in Germany. And
Speaker 4: that reflects a very very different way in which trade
Speaker 4: operated compared to today. We know that trade operates differently. We
Speaker 4: know that we can't don't make an economic decision or
Speaker 4: a trade based decision based on sort of the ship
Speaker 4: that the goods are left from. We know that things
Speaker 4: operate very differently, and yet the labeling itself and the
Speaker 4: politics around these labels has remained very static. In many ways,
Speaker 4: we're still in the late nineteenth century way of thinking
Speaker 4: about trade and manufacturing and goods. It's the same reason
Speaker 4: that we're still seeing tarots as being wheeled out as
Speaker 4: the one way which Biden as much as Trump is
Speaker 4: seeking to sort of control trade. It's very very nineteenth
Speaker 4: century way of thinking, despite the fact that we know
Speaker 4: it operates very very differently.
Speaker 2: Yeah, the idea of like, oh, it comes from X place,
Speaker 2: therefore it's from X is. It seems like we sort
Speaker 2: of understand the flaws and then we try to, like, well,
Speaker 2: as it's sixty percent, this was it forty percent?
Speaker 4: This?
Speaker 2: Where's the value add? And obviously very difficult. I just
Speaker 2: have one last question. You know, it's funny I'm reading.
Speaker 2: I pulled up a story while you're talking nineteen seventy
Speaker 2: two by The New York Times fashion writer Bernardine Morris
Speaker 2: about Veronica Yap and her introduction of these various Chinese
Speaker 2: styles and they're sold at sax Fifth Avenue and Bloomingdale's.
Speaker 2: But he uses in the article uses the word China hand.
Speaker 2: So Veronica Yap is referred to as a China hand.
Speaker 2: And you hear about that today, someone with a lot
Speaker 2: of familiarity, who knows both countries very well and could
Speaker 2: sort of facilitate trade and dialogue, et cetera. Can you
Speaker 2: talk a little bit about that first generation of traders
Speaker 2: identifying goods made in China that might appeal to the
Speaker 2: US fashion market. But then the next level is, okay,
Speaker 2: not just stereotypically or typically Chinese goods, but just any
Speaker 2: good You mentioned shoes that could theoretically be made in
Speaker 2: China more cheaply or more efficiently than somewhere else. And
Speaker 2: that's sort of like the beginning of the huge boom,
Speaker 2: which is anything can theoretically be made in China. What
Speaker 2: was the role of the Veronica Yapps of the world
Speaker 2: is that time of setting the stage for the next
Speaker 2: generation that wasn't just selling sort of Chinese style jackets
Speaker 2: and so forth, but in sort of identifying China as
Speaker 2: this huge potential production market for more and more and
Speaker 2: more and more advanced goods that type, eventually getting to
Speaker 2: the point where we are today where there significant concerns
Speaker 2: about China being at the technological frontier of manufacturing.
Speaker 4: Yeah. I mean, so it operated in multiple ways. So
Speaker 4: it operated in terms, as I mentioned earlier, of the
Speaker 4: cultural transformation of accepting regular everyday goods that were made
Speaker 4: in China bah exactly with that label. But it also
Speaker 4: operated at as you mentioned, an expertise level. This is
Speaker 4: a new generation of American business people who have been
Speaker 4: shut out of the China market. They're competing with the
Speaker 4: Brits and with the West Germans and the Japanese who
Speaker 4: had been trading with China much longer throughout the nineteen
Speaker 4: sixties because of their governments that have ended the trade
Speaker 4: embargo that the United States continued to uphold. And so
Speaker 4: the Americans were late comers to the China market, and
Speaker 4: so the importers began to create a set of conversations
Speaker 4: and expertise amongst themselves. This sort of cultivated China hand,
Speaker 4: if you will, in which they explained to one another,
Speaker 4: here's how you trade with China, and in this phrase,
Speaker 4: doing business with China was ubiquitous. It's a real trope
Speaker 4: within the literature, and I began to see it, and
Speaker 4: perhaps this is the consequence of my earlier stage of
Speaker 4: being a literature undergraduate. I saw this as itself a
Speaker 4: body of literature, as a genre of writing, because it
Speaker 4: was a huge number of hamphlets and books and what
Speaker 4: have you about how to trade with China, and in
Speaker 4: providing that expertise, it actually created a set of expectations
Speaker 4: and ideas about what China represents and what American business
Speaker 4: people wanting to get involved should expect. And one of
Speaker 4: the key and most striking things was the advice which
Speaker 4: said you might lose money. In fact, you probably will
Speaker 4: lose money. Very very few business people and corporations made
Speaker 4: much of a profit from trade with China in this period.
Speaker 4: Some of the larger companies were so big that they
Speaker 4: could absorb the loss. JC Penny absorbed the loss, for example.
Speaker 4: But part of the advice was to companies like Ford
Speaker 4: Motors or to Philip Morris, a cigarette company, and their
Speaker 4: advice that they were given was, Okay, you want to
Speaker 4: sell to China. You want to sell your cigarettes, or
Speaker 4: you want to sell your cars. Sure, but in order
Speaker 4: to get there, you need to buy from China first.
Speaker 4: And so the advice that was coming in to these
Speaker 4: huge titans of American capitalism was buy the rugs, buy
Speaker 4: the porcelain, buy the tea, and so you have Coca Cola,
Speaker 4: for example, buying tea from China, not selling folks or
Speaker 4: setting up its bottling plans that came later. And the
Speaker 4: advice and therefore actions that were being taken on an
Speaker 4: economic level were importing from China. It was to encourage
Speaker 4: a whole range of different stuff coming from China into
Speaker 4: the United States. And that's set in motion a dynamic
Speaker 4: in which with the exception of I think one year
Speaker 4: and nineteen mid nineteen eighties, and it was due to
Speaker 4: the recession. US imports of goods from China has continued
Speaker 4: to grow for the rest of the twentieth century. And
Speaker 4: that dynamic started in the nineteen seventies. And as I
Speaker 4: mentioned earlier, that was that dynamic that didn't really raise
Speaker 4: big question marks at a political level because of the
Speaker 4: assumption that trade would assist the diplomacy, but also because
Speaker 4: the numbers were low. But it's structural change that I
Speaker 4: think is really really important, and that structural change is
Speaker 4: what matters. There was one group who did see the
Speaker 4: repercussions of this. There was one group who said, we're
Speaker 4: looking at what's going on here, and we can see
Speaker 4: the writing on the wall, and that was American labor
Speaker 4: right from the get go, organized American labor. And it's
Speaker 4: a complex dynamic, and it's one that I sort of
Speaker 4: don't present as a simplistic story of workers versus corporations
Speaker 4: or workers versus the government. But it was a complex
Speaker 4: story in which there were concerns being raised right from
Speaker 4: the get go about what this might mean for ordinary Americans,
Speaker 4: but precisely because of political assumptions that labor was an
Speaker 4: impediment or sometimes an irritant to larger geopolitical concerns. It
Speaker 4: was not a central and in fact, one story that
Speaker 4: I tell it was suppressed as a consequence, and so
Speaker 4: this is a dynamic in which certain parts of the
Speaker 4: US economy were prioritized over others.
Speaker 2: That was fantastic. We could probably do a whole hour
Speaker 2: on labor. We have to run because they're going to
Speaker 2: kick us out of the studio. But Elizabeth, thank you
Speaker 2: so much for coming on. That was fantastic.
Speaker 4: It was a real pleasure to be here. Thanks for
Speaker 4: the opportunity.
Speaker 2: Tracy. I thought that was a really fascinating conversation. And
Speaker 2: I think the first thing that just sort of jumps
Speaker 2: out to me as being important is that, if nothing else,
Speaker 2: the story of Chinese development, in China's integration with the
Speaker 2: rest of the global economy is not some like switch
Speaker 2: that was flipped when Deng Chopeng took over after a moth.
Speaker 4: Yeah.
Speaker 3: Absolutely, I mean you have to have two participants to
Speaker 3: every trade relation, and I think it's very true that
Speaker 3: we tend to view China's economic opening as this sort
Speaker 3: of unilateral thing.
Speaker 4: Almost so.
Speaker 3: Yes, Kissinger was involved in the nineteen seventies on the
Speaker 3: political side, but very much so when it comes to
Speaker 3: the actual trade relationship. We think about the liberalization stemming
Speaker 3: from China, and I thought Elizabeth's point about, well, there
Speaker 3: are two sides to this, and a lot was going
Speaker 3: on in the US in the nineteen seventies in terms
Speaker 3: of economic development and the way the economy was sort
Speaker 3: of evolving, and that that played a huge role too.
Speaker 3: I also think the timeline is really interesting here, So
Speaker 3: the idea that in the nineteen thirties, you know, you
Speaker 3: had I think it was an ad executive shright writing
Speaker 3: a book about China and four hundred million customers, and
Speaker 3: then thirty years later or forty years later, it's more
Speaker 3: of a market for labor.
Speaker 2: That point is really wild to me too, because that
Speaker 2: book four hundred million customers, Like you could totally imagine
Speaker 2: some book having been written like nineteen ninety four right
Speaker 2: by some like Nike executive called like a billion customers
Speaker 2: that was like, oh, this is and I'm sure that
Speaker 2: book probably exists. I don't know who wrote it, but
Speaker 2: it is funny that there has always been literally basically
Speaker 2: for almost a century now, this dream of the huge
Speaker 2: Chinese consumer market, and yet that basically for the most part,
Speaker 2: and there are obviously exceptions, the big opportunities have been
Speaker 2: on the sort of supply and production side.
Speaker 3: Absolutely. The other thing that I thought was kind of
Speaker 3: funny was the discussion of the you know, made in
Speaker 3: whatever country labels and the idea of how we still
Speaker 3: have them today and yet they are not particularly well
Speaker 3: suited to global supply chains. And I was thinking back
Speaker 3: to in the midst of all these supply chain disruptions,
Speaker 3: I remember someone it might have been like an official
Speaker 3: branch of the US government, to just study where they
Speaker 3: looked at a bunch of different businesses as base cases
Speaker 3: for the global supply chain. And I remember they looked
Speaker 3: at this one company in particular, I think it made
Speaker 3: hot tubs or saunas or something, and the saunas or
Speaker 3: the hot tubs were always pitched as made in America,
Speaker 3: like they made a big deal of it in their marketing.
Speaker 3: But then this report had a diagram that showed how
Speaker 3: the hot tubs were actually put together and where all
Speaker 3: the components came from, and it was like everywhere you
Speaker 3: could imagine in the world, Vietnam, China, there was a
Speaker 3: piece coming from like all sides of the basically and
Speaker 3: then being assembled somewhere in Montana or something like that.
Speaker 2: Not surprising, but funny. I also thought like something that
Speaker 2: came up which I hadn't really appreciated it all before,
Speaker 2: but the idea of like fashion and style being sort
Speaker 2: of at the very forefront of that. And I you know,
Speaker 2: I mentioned it on the show, but like, you know,
Speaker 2: going back and reading about Veronika Yap and the idea
Speaker 2: that and it makes sense, right the first consumer excitement
Speaker 2: and you know, Elizabeth Tyled her book Made in China,
Speaker 2: was like this idea of like, oh, this is really exciting.
Speaker 2: This is a style of jacket, this is a style
Speaker 2: of baby carrier that they use in China that's made
Speaker 2: in China, and how like that was sort of along
Speaker 2: with the Nixon in China moments, like a key step
Speaker 2: in the opening and these first few business people that
Speaker 2: went over there and sort of discovered this opportunity and
Speaker 2: then taught other business people about that.
Speaker 3: Yeah, absolutely, shall we leave it there.
Speaker 2: Let's leave it there.
Speaker 3: This has been another episode of the All Thoughts podcast.
Speaker 3: I'm Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 2: And I'm Joe Wisenthal. You can follow me at The
Speaker 2: Stalwart Follow our guest Elizabeth Ingleson. She's at Liz Ingleson.
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