Edouard Prisse's original idea

 

Author: Edouard Prisse of the Netherlands.

Chapter 4 of my soon to come out book ‘Sleeping with the Enemy’ holds the most important message of the book, my suggestion how to successfully stop free trade with China, a unique view on what the White House could – and in hmy opinion should - do. I call it

 

“The Prisse reinvestment Moratorium”,

and it consists of the White House announcing a six months moratorium, during which the US industry can invest in production capacity for all those products that are now still sourced in China but that will have to be nade here again, when borders close to Chinese products, with high tariffs.  The White House astivity will consist of

1.    The Speech

In a major speech, the President apologizes publicly for the mistake that, in 2001, made the US take the initiative to sign the well-known free trade agreement with cheap-producing China, explains in a few sentences why that disrupts the previous world trade equilibrium, announces the US’s intention to bring trade with China back on a more normal footing and on the same day, politely informs China about this decision as well.

 

Legally, since this would alter the terms the U.S. agreed to in 2001 at the WTO, the US will  send a formal notice to Geneva, informing the organization that the U.S. is terminating that agreement. This information will be accompanied by the explanation that it consists of an effort to create a more balanced and fair global trade system, and to correct the appalling WTO failings in the year 2000 and after, when it did not correct the US trade error.

 

On the same date, in that speech, and after careful previous preparation, the White House announces which sectors of our own industry will be banned from buying from China after a six-month transition period, starting from that date as well. Should banned goods from China arrive at US air and seaports after that six-month period, they will not be unloaded. This six months period is the central proposition of this book in lieu of the unprepared tariffs POTUS has been putting up and down a few times.

In the speech, POTUS will state  that the present open free trade will be replaced by 'Equal Trade', i.e., the United States will be happy to allow China to export a lot to the United States, but measured in money, only roughly in equal quantities with what the US exports to China, not more. The more trade the better, as long as it will be roughly equal.

Next, in this speech, the industrial sectors that will not anymore be allowed to buy in China  after six months will clearly be indicated, and products that will still be allowed to buy from China after the announced six months period will be indicated too. The sectors that  continue to buy from China will be chosen so as not to become strategically dependent on them.

An extensive document giving these details, prepared beforehand, will be issued on that same day.

To take a simple example, imports from China of clothing, t-shirts, jeans, and the like would be allowed to continue. But many other industries, including, of course the military industry, will have to make 100 % of their purchases in the United States. What will have to be regulated in detail is that some of the other industries that are no longer allowed to import from China will also no longer be allowed to import from other cheap outside countries such as Vietnam, Indonesia, and India, at least not suddenly in larger volumes than they have been importing these goods so far. That, too, will have to be clearly regulated. Complicated it will be, a lot of careful and detailed work will have to be done in preparation, but entirely possible it certainly is.

 

2.    A New Im- and Export Trade Bureau

To get all this right, the United States will already have set up a new Im- and Export Trade Bureau. This new government agency will set the rules, organizing control, noting what goes wrong, and – once the six months period will have started – will refine the rules and permissions as needed. The White House will appoint a capable official with staff to head this trade bureau. This official will certainly have a difficult task that will cost him and his large staff a lot of work. High level professionalism is needed here.

 

3.     Assurance to the US business Community

The entire American business community will have to be assured it can trust this regulation and therefore, in the course of the said six months, will feel able to decide on investments in what will be needed to produce stuff here, after the end of the six months, when our borders will close to that same stuff from China.

A predictable but short-lived lobbying  effort that the US business community may come up trying to block this unusual presidential initiative. This lobbyiong effort must be strictly regulated so that the new Im- and Export Trade Bureau (maybe to be called the ‘IETB’),  will be able to do its job relatively undisturbed.

From day one, all companies in the industrial sectors that have only six months left before they are banned from importing from China, will know that they will have to move their sourcing to the US itself. Per industrial sector, these quantities will be regulated. A delaying factor will be that some firms will have to invest quickly in new production capacity outside China, mostly in the United States itself. After all, the goods that are no longer coming from China will have to be made elsewhere. Therefore, for some industrial sectors, the said six-month period may turn out to be too short and may have to be extended. Let it remain clear, importing in itself is not very harmful. It is the enrichment of China that is harmful and must stop. So it is the import from China that has to be curtailed. When the industry will thus be forced by clear government rules to relocate its sourcing, it will undoubtedly respond with a very high efficiency.

 

4.    Survivalism is in our Businesses’ DNA

After all, survivalism is at the core of our American industries’ thinking.

Protecting our industry will be the result, but it should not be the overall goal as it is now.
The overall goal is to end the disequilibrium in  trade with China, that is both harming the US an enriching China too much.

What the above simply boils down to is that the government will finally correct what it did wrong in the year 2000 under Bill Clinton.

 

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^[1] Mr. Welling was President of the Dutch National Bank, (The Dutch ‘Fed’) from 1997 to 2011. He then started to work for the largest  Chinese banks and became fully convinced China would become more powerful than te US and would soon dominate the world.

^[1] Mr. Welling was President of the Dutch National Bank, (The Dutch ‘Fed’) from 1997 to 2011. He then started to work for the largest  Chinese banks and became fully convinced China would become more powerful than te US and would soon dominate the world.