These are my random musings. Hopefully they will be witty, insightful, and frequently updated.
What does the EU's and China's rise spell for the US?
Published on January 31, 2008 By singrdave In World Trade Issues
If by 2050 the Chinese and European economies are indeed larger than America’s, then this is no need for concern. The United States (US) has been the recipient of decades of economic supremacy, as it escaped World War II (WWII) with its economy largely intact. This was in opposition to Europe, whose land saw lots of fighting -- the economies of the nations of Europe suffered for it. Half of Europe was under the yoke of Communism. The destruction of Western Europe’s infrastructure took decades to restore, mostly through American largesse. Europe was bolstered from both economic and political expediency: America needed strong, robust Western European economies to counter the growing threat of the Soviet Union (USSR) and its Eastern European satellites.

Though China did take some licks during WWII, their slow development was not caused by war but rather by their Communist Party’s reluctant embrace of capitalism. Their transition from a planned to a market economy has been relatively smooth and certainly quite extraordinary. China has become an economic powerhouse, with more than one billion producers and consumers, along with a rapidly rising standard of living.

During the 1990s, America and China became stalwart trading partners. Under US President Bill Clinton, China became the primary off-shore, low-cost manufacturing hub for American products. Since then, the trade deficit with China has ballooned, in that America imports far more from China than they do from the US. This fact can be quite worrying, except that this is an arrangement that brings low-cost products to American shelves. Wal-Mart imports the majority of its merchandise from Chinese factories, and by itself provides thousands of jobs to Chinese workers. Author Thomas Friedman chronicled this interdependence in his book The World Is Flat, stating that without Chinese products the global economy would grind quickly to a halt. This trading arrangement -- raw materials to China and finished merchandise to America -- has sewn the Chinese and American economies together for mutual benefit.

Through trade, European nations are also heavily invested in American success. Microsoft maintains a programming hub in Dublin, Ireland. While Dubliners have traditionally left Ireland for work, now they are able to stay in their home nation and command the same pay without uprooting their families to London or Seattle. This is a benefit to the Irish economy as well as Microsoft’s bottom line, as Irish computer programmers pay higher taxes and spend their money in-country. Microsoft and its Dublin employees are engaged in a mutually beneficial arrangement.

Direct foreign investment is helping both China and the EU prosper. With the fall of the Soviet Union, many former Communist nations have joined the EU. By opening factories and markets in these former Soviet bloc nations to capitalism, these nations have also become the recipients of foreign direct investment. Always seeking another source of income, investors have flocked to Eastern European nations like Romania, Estonia, and Poland. The foreign money develops their infrastructure for mutual benefit. The city of Tallinn, Estonia, has become a manufacturing and trading hub for central and northern Europe. The added political stability afforded by Estonia’s EU membership makes investment in Estonia a much surer investment. All of Europe is on the rise, thanks to foreign direct investment.
China has been as successful as Europe in using other people’s money. Investors salivate at the opportunity to break into a sales market more than a billion strong. Foreign investment firms invest heavily in China. From cellular phones to paper products, China is seeing the benefit of cheaper, more reliable products and services for its people, raising their living standards to where the Chinese people will demand better cars, furniture, and personal electronics. This increases demand for foreign products, bringing more parity to the trade deficit between America and China.

China and the European Union (EU) are on the rise. This does not mean that the United States (US) is on the decline. Quite the contrary: this rising tide will raise all boats. All three political units have benefited from this economic development. Europe and China enjoy cultures of prosperity. Success brings peace; economic interdependence will reduce China’s potential to wage war with America. In addition to receiving millions of dollars in revenue from American product manufacturing, China holds the majority of American debt. China is confidently invested in America’s future. This prevents conflict with the US -- why would China shoot its golden goose? America’s future is brighter because of the economic rise of Europe and China.

Comments (Page 1)
on Jan 31, 2008
A haiku:

EU is secure
China's exports are vital
All countries prosper.
on Jan 31, 2008

China and the European Union (EU) are on the rise.

China is certainly on the rise.  But Europe isn't.  Its falling further and further behind.

In 50 years, at the rate its going, it will have a much smaller population and a much poorer one relative to the rest of the world.

on Feb 01, 2008

China is certainly on the rise. But Europe isn't. Its falling further and further behind.

I think in the short term Europe is rising.  But not for any of the reasons most think.  With the fall of the Iron curtain, the capacity of Europe was greatly increased, and for a long time, that will be the driving engine of europe as it does expand and compete.  Eventually, the old Warsaw Pact nations will reach a level of parity with the Western part of Europe and the stagnation that started before the fall of the Berlin wall will become apparent again.  This is not to say that they will be a foot note.  A community that large will have an impact long into the future.  But their current ascendency is just a result of tapping the huge latent resource that lay dormant under communism.  Once that fuel is gone, Europe will again start a decline into irrelevancy.

The real danger is if the US does not read the writing on the European wall, and continues down the road to irrelevancy as well.  Time will tell on that point.

on Feb 02, 2008

By what standard is Europe rising?

If the EU were a US state, it would be one of the poorest US states.

And the gap is growing. Not shrinking.

on Feb 02, 2008
Unfortunately, Europe is falling behind in terms of GDP, there's no denying that our economic growth over the years is somewhat lagging behind that of the US. Also, Europe has no longer a natural population growth, and afaik the USA still have some of that.

In order of GDP per capita, the United States are going to remain among the top for a very long time yet, but in total GDP China and later India will overtake them sometime in this century.

As a logical consequence, the USA have to come to terms with the fact that eventually, they will have to cede the position as strongest military power to China. I think that might be one of the primary reason why China never made a move on Taiwan yet, because the longer they wait, the more the balance of power is going to tilt to them
on Feb 03, 2008

As a logical consequence, the USA have to come to terms with the fact that eventually, they will have to cede the position as strongest military power to China. I think that might be one of the primary reason why China never made a move on Taiwan yet, because the longer they wait, the more the balance of power is going to tilt to them

That's actually not likely. Not this century anyway.

First of all, it's not likely that China's GDP will dwarf the US's by the end of the century.  By 2100, US population will be about half of China's.  I would be surprised if China's GDP per capita is more than half that of the US.  So if China overtakes the US in total GDP, it will be by the skin of its teeth.

Secondly, military power by 2100 will be measured more so in technological might. The army of the 22nd century will be drone-centric. That is, remote controlled robotic warriors on the ground and in the air.  It's extremely unlikely that China will be able to take the lead technologically by the 22nd century if ever.

As for Taiwan's fate, by that rationale, the US should have conquered the rest of North America by now since the US could easily done so by now.

on Feb 03, 2008
I was thinking this myself the other day, how the media is reporting the "Doom" of the American Economy because we are having a lower percentage of the world's wealth. Even as the world's wealth increases with the poorer countries prospering, that because the United States will have a decreasing the dominance that the United States is losing out. Overall if you have the world's economy increasing in value, you are going to increase the amount of money available to spend in the overall economies. This will cause people to have more money to spend on more goods. This will cause in the future more prosperity for everyone.
on Feb 03, 2008

I agree. This is one of the reasons why it's frustrating when you hear things like "the rich get richer and the poor get poorer" when in reality all parts of American society are getting richer -- just not at the same rate.

The whole world is becoming more prosperous and that's a good thing.

But China is just the latest bogeyman in economics. I remember when Japan was going to eclipse the US. 

Even today, Japan's per capita GDP is much less than the US's.  To beat the US, these countries are going to have to get their per capita GDP pretty far up there.  Right now, the US doesn't just have 300+ million people but it has the world's highest per capita GDP of any country with a population larger than a major American city.

And like I said, Europe is well on its way to having a standard of living that most Americans would find shocking.  Imagine if you had a household income of $40,000. Now, imagine how you'd live if suddenly you had to live on $28,000. And do this with food, gas, and housing costing substantially more than it does in the US.  That's life in the EU today. 

But it gets worse. Because that's the average.  If you're an American living in say California or New York, it's like being at $45k.  And France, Germany -- the "nicer" places in Europe, are at $28k.  Imagine the changes in your lifestyle (and living in CA or NY, as expensive as it is, is a lot like France or Germany in terms of costs).

That's why you can usually tell a European who has never been to the United States on a forum. They have no idea how much poorer they are over there until they come over here and see how much more stuff Americans tend to have.

Of course, that has nothing to do with quality of life. That's a different topic. But the point is, the EU and China have nothing in common economically.  China is up and coming. The EU is slowly descending into third-world status.  By the next foreign incident, the EU will be degraded from "Chattering class" down to "What are they whining about now?" class. People will care about continental Europe about as much as people care about what's happening in Argentina (which isn't fair since Argentina is already doing better than most EU members -- twice as much as whiney Belgium. ).

on Feb 04, 2008
Of course, that has nothing to do with quality of life. That's a different topic. But the point is, the EU and China have nothing in common economically. China is up and coming. The EU is slowly descending into third-world status. By the next foreign incident, the EU will be degraded from "Chattering class" down to "What are they whining about now?" class.


I doubt that. Europe may never reach the top in terms of per capita GDP, but it is a peaceful, politically stable and well educated region. While there is little doubt that we are going to fall back economically, third-world status would mean a struggle for the very survival. Sorry, I simply can't imagine how that could possibly happen.

By the way, I don't get that accusation of us being "whiney". I don't define my quality of life by how much stuff I have, and if the Americans are richer, well, good for you.

Secondly, military power by 2100 will be measured more so in technological might. The army of the 22nd century will be drone-centric. That is, remote controlled robotic warriors on the ground and in the air. It's extremely unlikely that China will be able to take the lead technologically by the 22nd century if ever.

As for Taiwan's fate, by that rationale, the US should have conquered the rest of North America by now since the US could easily done so by now.


China taking the technological lead is a long shot, agreed. But their industrial power is going to develop to such a level that the US won't be able to be confident about a conflict with China forever.

The USA could indeed conquer the rest of North America. They just don't because they live in peace and on good relations with Canada and Mexico, and the American people thankfully have changed their attitude of which land is rightfully theirs since the 19th century (see fate of the Native Americans and the US-Mexican War). The difference is that China believes it has a historical claim to Taiwan, and once they think they can get it at a reasonable cost, I suspect they will go for it.

Another thing: China actually doesn't need to match the military might of the US to successfully invade Taiwan. It just needs a creditable nuclear deterrence (with Russian assistance), the element of surprise, and a somewhat stronger navy than now. The Russian supersonic cruise missiles are a significant threat to American carrier groups, and Taiwan is on China's doorstep, but a long way from the USA. I believe that if China wanted Taiwan badly enough, they could conquer it even today, they are just afraid that the political fallout would hurt their country much more than the reunion would be worth.
on Feb 04, 2008
I believe that if China wanted Taiwan badly enough, they could conquer it even today, they are just afraid that the political fallout would hurt their country much more than the reunion would be worth.


They could have 50 years ago too. But as you correctly note, the cost is just too high. It always has been and more so today than when the Mao was making a shambles of their economy.

China will always be china, but they have not been an ongoing culture for 6000 years because they are stupid. They may not rule the world, but they are smart enough they will enjoy their slice of it.
on Feb 04, 2008
Another thing: China actually doesn't need to match the military might of the US to successfully invade Taiwan. It just needs a creditable nuclear deterrence (with Russian assistance), the element of surprise, and a somewhat stronger navy than now. The Russian supersonic cruise missiles are a significant threat to American carrier groups, and Taiwan is on China's doorstep, but a long way from the USA. I believe that if China wanted Taiwan badly enough, they could conquer it even today, they are just afraid that the political fallout would hurt their country much more than the reunion would be worth.


Take a look at last week's The Economist. There is an article about orbital warfare, and the total dependance of America on its fragile satellite network.

China could blow easily a lot of the satellites, and the remaining debris would make it almost impossible for any country keep satellites in low-orbits. They would have to rely on more expensive, farther-away satellites. In China Vs USA war simulation over Taiwan, the U.S. military strategist think China could overcome the USA easily, since America's strenght is also it's Achilee's Heel.

The sole motivator of "China is not a treath" is it's reliance on U.S.'s consummation of China's exports to boost it's economic development. Off course, if a recession is afoot, China will have to do without the USA buying it's exports.

But on the other hand, Taiwan's internal politic recently developped, and I think they are heading toward a potential warming up of the relations, making USA's protectorate status obsolete within 20 years.
on Aug 14, 2008

If by 2050 the Chinese and European economies are indeed larger than America’s, then this is no need for concern. The United States (US) has been the recipient of decades of economic supremacy, as it escaped World War II (WWII) with its economy largely intact. This was in opposition to Europe, whose land saw lots of fighting -- the economies of the nations of Europe suffered for it. Half of Europe was under the yoke of Communism. The destruction of Western Europe’s infrastructure took decades to restore, mostly through American largesse. Europe was bolstered from both economic and political expediency: America needed strong, robust Western European economies to counter the growing threat of the Soviet Union (USSR) and its Eastern European satellites. Though China did take some licks during WWII, their slow development was not caused by war but rather by their Communist Party’s reluctant embrace of capitalism. Their transition from a planned to a market economy has been relatively smooth and certainly quite extraordinary. China has become an economic powerhouse, with more than one billion producers and consumers, along with a rapidly rising standard of living.During the 1990s, America and China became stalwart trading partners. Under US President Bill Clinton, China became the primary off-shore, low-cost manufacturing hub for American products. Since then, the trade deficit with China has ballooned, in that America imports far more from China than they do from the US. This fact can be quite worrying, except that this is an arrangement that brings low-cost products to American shelves. Wal-Mart imports the majority of its merchandise from Chinese factories, and by itself provides thousands of jobs to Chinese workers. Author Thomas Friedman chronicled this interdependence in his book The World Is Flat, stating that without Chinese products the global economy would grind quickly to a halt. This trading arrangement -- raw materials to China and finished merchandise to America -- has sewn the Chinese and American economies together for mutual benefit.Through trade, European nations are also heavily invested in American success. Microsoft maintains a programming hub in Dublin, Ireland. While Dubliners have traditionally left Ireland for work, now they are able to stay in their home nation and command the same pay without uprooting their families to London or Seattle. This is a benefit to the Irish economy as well as Microsoft’s bottom line, as Irish computer programmers pay higher taxes and spend their money in-country. Microsoft and its Dublin employees are engaged in a mutually beneficial arrangement.Direct foreign investment is helping both China and the EU prosper. With the fall of the Soviet Union, many former Communist nations have joined the EU. By opening factories and markets in these former Soviet bloc nations to capitalism, these nations have also become the recipients of foreign direct investment. Always seeking another source of income, investors have flocked to Eastern European nations like Romania, Estonia, and Poland. The foreign money develops their infrastructure for mutual benefit. The city of Tallinn, Estonia, has become a manufacturing and trading hub for central and northern Europe. The added political stability afforded by Estonia’s EU membership makes investment in Estonia a much surer investment. All of Europe is on the rise, thanks to foreign direct investment.China has been as successful as Europe in using other people’s money. Investors salivate at the opportunity to break into a sales market more than a billion strong. Foreign investment firms invest heavily in China. From cellular phones to paper products, China is seeing the benefit of cheaper, more reliable products and services for its people, raising their living standards to where the Chinese people will demand better cars, furniture, and personal electronics. This increases demand for foreign products, bringing more parity to the trade deficit between America and China.China and the European Union (EU) are on the rise. This does not mean that the United States (US) is on the decline. Quite the contrary: this rising tide will raise all boats. All three political units have benefited from this economic development. Europe and China enjoy cultures of prosperity. Success brings peace; economic interdependence will reduce China’s potential to wage war with America. In addition to receiving millions of dollars in revenue from American product manufacturing, China holds the majority of American debt. China is confidently invested in America’s future. This prevents conflict with the US -- why would China shoot its golden goose? America’s future is brighter because of the economic rise of Europe and China.

on Aug 14, 2008

If by 2050 the Chinese and European economies are indeed larger than America’s, then this is no need for concern. The United States (US) has been the recipient of decades of economic supremacy, as it escaped World War II (WWII) with its economy largely intact. This was in opposition to Europe, whose land saw lots of fighting -- the economies of the nations of Europe suffered for it. Half of Europe was under the yoke of Communism. The destruction of Western Europe’s infrastructure took decades to restore, mostly through American largesse. Europe was bolstered from both economic and political expediency: America needed strong, robust Western European economies to counter the growing threat of the Soviet Union (USSR) and its Eastern European satellites. Though China did take some licks during WWII, their slow development was not caused by war but rather by their Communist Party’s reluctant embrace of capitalism. Their transition from a planned to a market economy has been relatively smooth and certainly quite extraordinary. China has become an economic powerhouse, with more than one billion producers and consumers, along with a rapidly rising standard of living.During the 1990s, America and China became stalwart trading partners. Under US President Bill Clinton, China became the primary off-shore, low-cost manufacturing hub for American products. Since then, the trade deficit with China has ballooned, in that America imports far more from China than they do from the US. This fact can be quite worrying, except that this is an arrangement that brings low-cost products to American shelves. Wal-Mart imports the majority of its merchandise from Chinese factories, and by itself provides thousands of jobs to Chinese workers. Author Thomas Friedman chronicled this interdependence in his book The World Is Flat, stating that without Chinese products the global economy would grind quickly to a halt. This trading arrangement -- raw materials to China and finished merchandise to America -- has sewn the Chinese and American economies together for mutual benefit.Through trade, European nations are also heavily invested in American success. Microsoft maintains a programming hub in Dublin, Ireland. While Dubliners have traditionally left Ireland for work, now they are able to stay in their home nation and command the same pay without uprooting their families to London or Seattle. This is a benefit to the Irish economy as well as Microsoft’s bottom line, as Irish computer programmers pay higher taxes and spend their money in-country. Microsoft and its Dublin employees are engaged in a mutually beneficial arrangement.Direct foreign investment is helping both China and the EU prosper. With the fall of the Soviet Union, many former Communist nations have joined the EU. By opening factories and markets in these former Soviet bloc nations to capitalism, these nations have also become the recipients of foreign direct investment. Always seeking another source of income, investors have flocked to Eastern European nations like Romania, Estonia, and Poland. The foreign money develops their infrastructure for mutual benefit. The city of Tallinn, Estonia, has become a manufacturing and trading hub for central and northern Europe. The added political stability afforded by Estonia’s EU membership makes investment in Estonia a much surer investment. All of Europe is on the rise, thanks to foreign direct investment.China has been as successful as Europe in using other people’s money. Investors salivate at the opportunity to break into a sales market more than a billion strong. Foreign investment firms invest heavily in China. From cellular phones to paper products, China is seeing the benefit of cheaper, more reliable products and services for its people, raising their living standards to where the Chinese people will demand better cars, furniture, and personal electronics. This increases demand for foreign products, bringing more parity to the trade deficit between America and China.China and the European Union (EU) are on the rise. This does not mean that the United States (US) is on the decline. Quite the contrary: this rising tide will raise all boats. All three political units have benefited from this economic development. Europe and China enjoy cultures of prosperity. Success brings peace; economic interdependence will reduce China’s potential to wage war with America. In addition to receiving millions of dollars in revenue from American product manufacturing, China holds the majority of American debt. China is confidently invested in America’s future. This prevents conflict with the US -- why would China shoot its golden goose? America’s future is brighter because of the economic rise of Europe and China.

on Aug 14, 2008

except that this is an arrangement that brings low-cost products to American shelves. Wal-Mart imports the majority of its merchandise from Chinese factories, and by itself provides thousands of jobs to Chinese workers. [/quote]

on Aug 14, 2008

With funds from which jobs are Americans to buy these products from China?