We’ve all heard the term “No Blood For Oil” – a popular protest slogan carried during the 2003 anti-Iraq war demonstrations.

I’m afraid the next one could very well be “No Blood For Exports,” and carried in the streets of Washington and Beijing in translation by those Americans and Chinese who oppose their countries going to war over trade disputes.

I’m neither economist nor war strategist, but it seems to me that logically, China and the United States are on a path toward brinkmanship.

Both nations’ GDP growth has been or is in the process of getting flushed down the proverbial toilet.

Meanwhile, some, like Michael Pettis, professor of Peking University’s Guanghua School of Management, have been saying that China is putting measures in place that look akin to the Smoot Hawley Tariff Act, which in its day, drastically raised tariffs on imports. Smoot Hawley was an attempt to reduce overcapacity – China’s problem today - but ended up causing international trade chaos, prompting foreign governments to retaliate with raising their own tariffs – and then some.

World trade declined by 66 percent between 1929 and 1934 for starters.

Wikipedia also notes, “Fallout from the collapse of the United States economy following the 1929 Stock Market Crash reverberated throughout the world. European countries, especially Germany, were hit hard by the Great Depression, which led to high rates of unemployment, poverty, civil unrest, and an overall feeling of despair that led to the rise of Adolf Hitler and other militaristic fascists.”

At this point, there seems to be no better country than China to experiment with a Smoot Hawley with Chinese characteristics.

Mr. Pettis writes: “And if their exports drop quickly, for the obvious domestic politics reasons there may be significant pressure for current-account-surplus countries [i.e., China] to engineer moves to support their export industries…Raising export subsidies, raising import tariffs, and depreciating the currency all have the same trade effect. They are ways of boosting domestic growth by boosting exports.” China already is doing some of this.

Meanwhile, after suffering a trade imbalance for years with China, losing important jobs to outsourcing, and in need of economic salvation – not to mention its struggle to maintain world superpowerdom - the United States would be an excellent candidate to make the Cuban Missile Crisis look Cuba small.

In an article in the Atlantic in 2005, called “How We Would Fight China,” Robert D. Kaplan suggested this:

For some time now no navy or air force has posed a threat to the United States. Our only competition has been armies, whether conventional forces or guerilla insurgencies. This will soon change. The Chinese navy is poised to push out into the Pacific—and when it does, it will very quickly encounter a U.S. Navy and Air Force unwilling to budge from the coastal shelf of the Asian mainland. It’s not hard to imagine the result: a replay of the decades-long Cold War.

In fact, the Chinese navy isn’t just poised to push out into the Pacific. It is in the process of pushing out into the Indian Ocean.

Three Chinese warships are departing Friday for the Indian Ocean. This time their mission is to protect their country’s vessels and crews from pirate attacks off Somalia. They’re armed with special forces and helicopters.

That’s why it’s not just a cold war Mr. Kaplan worries about, noting:

“Getting into a war with China is easy,” says Michael Vickers, a former Green Beret who developed the weapons strategy for the Afghan resistance in the 1980s as a CIA officer and is now at the Center for Strategic and Budgetary Assessments, in Washington. “You can see many scenarios, not just Taiwan—especially as the Chinese develop a submarine and missile capability throughout the Pacific.”

Getting into war also could be easy enough because it helps the economy, stupid.

“War, so the conventional wisdom goes, is good for the economy. It certainly boosts demand and pushes any spare capacity back to work,” notes The Independent.

I’m not one for pushing conspiracy theories, but it is interesting to note that the Great Depression ended only with America’s entry into World War II.

Already, Asia Times Online is making comparisons between depression and war:

If protectionist steps are taken, then we may look forward to spending the three last quarters of the 21st century wondering how the resulting “Second World Depression” spiraled out of control, much as diplomats and scholars after them spent decades in the 20th century trying to understand how the Great War (or World War I, before its successor erupted to challenge its uniqueness) broke out and continued for so long a time, when all the foreign offices in Europe expected it to be over in a few months at most.

Asia Times, however, is missing the forest for the trees, and the potential war for the potential depression.

    Channel: Vital News     |