Michael Kidron

Trade with China: Facts and Phantasy

(October 1954)

From Socialist Review, Vol. 4 No. 2, October 1954, pp. 4–5.
Transcribed by Ian Birchall, Nina Kidron & Richard Kuper.
Marked up by Einde O’Callaghan for the Marxists’ Internet Archive.

The Tory government can think of no way out of the economic difficulties presented it by capitalism but war and preparation for war. Faced with overproduction at home and unable to absorb the surplus by raising wages for fear of competition in international markets, unable to cut down production for fear of unemployment, unable to invest overseas on a large scale for fear of the anti-imperialist movement in the colonies, the Tory government sees no way out but an ever-increasing arms budget.

The £1,640 million a year they spend on arms is their only insurance for the coming years. And if it is arms, there can be no East-West trade on an appreciable scale.

But if the Tories cannot solve Britain’s problems of overproduction except by war, what solutions are there? The right-wing Labour leadership offers nothing but a rehash of the Tory policy. Nothing to be got from there. The so-called left-wing leadership, with the approval of the Communist Party, offers us East-West trade, and now that the Labour Party delegation to China has returned, the stress is laid on trade with China.

Is trade with China, or with the Eastern bloc as a whole, a solution to Britain’s problem of over-production ? What are the possibilities of such trade?

China cannot pay: The size of a country’s foreign trade does not depend on the size of the country nor on the size of its population, but on the standard of living of that population. China, with 12 times the population of Great Britain, has a total foreign trade (exports and imports combined) of only 13% of that of Britain (£800 million and £6,031 million respectively in 1952). These figures mean that China is terribly poor. If she is to trade with us, what is she going to pay with?

The British Council for the Promotion of International Trade, which grew out of the Moscow Economic Conference of Businessmen held in 1952 recently published a pamphlet (China’s Foreign Trade) dealing with the subject. It concludes (p. 29) that “on the basis of her present economic programme she (China) could, within a comparatively short space of time, begin to absorb anything from £40 million to £75 million worth a year of British exports.” These exports – only 1½–2½% of British exports at 1952 and 1953 levels – are to be paid for by selling Britain eggs and egg powder, vegetable oils and Tung oil, soya beans and other raw materials like pig bristles – China’s main exports before the war.

For almost twenty years now these exports have been severely curtailed if not stopped altogether and the Western capitalist has became independent of Chinese products in the interval. One Hong Kong businessman put the case succinctly: “the world has gone along without China’s products for years now. Alternative sources have been developed”. (News Chronicle, 24/8/54) If only because of the lack of markets for China’s traditional products a jump in her present exports to Britain of £4½ million a year to the proposed £40–75 million seems unlikely, and without exports there can be no payment for imports. How unlikely this is can be seen by going into the politics of East-West trade.

East is East and West is West: With American capitalism forced into the war market in order to dispose of her surplus goods and stave off unemployment and with the Russian bureaucracy compelled to rob the productive resources of the world in order to fulfil her programs of industrialisation and satisfy China’s peremptory demands for machines, with each bloc having to “defend ” itself from the other, there can be no doubt that each will tend to become, as independent economically as possible. The American Marshall Plan, which enforced an embargo on exports to Russia and Eastern Europe, the later Battle Act, which extended this embargo to include China on the one hand and all American satellites on the other, show which way the wind is blowing on this side of the iron curtain. The tendency on the other side can be seen from the fact that in 1938, trade among Russia’s Eastern European satellites and with Russia was only 17% of their total foreign trade while their trade with other countries was 83%; by 1948 these percentages were 46.3 and 53.7 respectively (Y. Gluckstein, Stalin’s Satellites in Europe, 1952, p. 63). The trend has continued so that to-day more than half Eastern Europe’s international trade is among its own countries and with Russia.

The shorter history of China’s foreign trade shows the same pattern. Both before the Sino-Japanese war of 1937 and under Chiang’s regime from 1945 to 1949; the Eastern bloc accounted for less than 1% of China’s foreign trade; by 1950 the proportion rose to 26% and in the three following years jumped to 61%, 72% and 75% respectively (China’s Foreign Trade, p. 12). The odds are that the drive towards economic self-sufficiency in the Eastern Bloc will continue.

Some people will say that autarky, as an economic policy in the Eastern bloc, is a result of the American-led blockade. This is true, but only to a small extent. During the slump of the “thirties,” when there was no question of an economic embargo and the Western capitalists were willing to trade with the Devil himself if only he would relieve them of their stocks, Russian imports and exports showed a steady decline: in 1927/8 Russia imported 945.5 million (pre-1914 gold) rubles’ worth of goods, in 1932 her imports were 704.0 million (pre-1914 gold) rubles and by 1937 they had slumped to 294.2 million, or less than ¼ of the 1913 figure (Y. Gluckstein, op. cit., p. 62).

The threat of world war is the outcome of competition between the two autarkic economies; the existence of the threat drives them ever more insistently towards autarky. The American ruling class, already poised for war but waiting for some indication of popular support, makes no bones about it and brandishes the Battle Act. The Russian ruling class, preparing for war but fighting for time to strengthen their weaker economy, are not so clear about self-sufficiency. On the one hand, they would like to buy machines from the West if the West would sell them and if the Russians could pay; on the other hand, East-West trade is a useful propaganda weapon in an attempt to foster squabbles between the American capitalists and their weaker European allies who are competing with them for markets. That the importance of East-West trade as a slogan is greater than its intrinsic importance for the Russian economy can be seen from the economic blockade imposed by the Eastern bloc on Yugoslavia after her defection.

Trade – A Political Weapon: In 1947 Russia and the “People’s Democracies” supplied 51.8% of Yugoslavia’s imports and took 49.1% of her exports. On June 28th, 1948, the Cominform opened up its campaign against the rebellious Satellite. Trade started declining in 1948 and by 1949 it had almost ceased altogether: in the first quarter of 1949, the Russian bloc accounted for 26.1% of Yugoslavia’s imports and 23.8% of her exports, in the second and third quarters these figures dropped to 14.8 and 22.2% and 3.2 and 7.7% respectively.

Since then trade has been negligible (Gluckstein, p. 238). By flourishing the big economic stick over her rebellious satellite, Russia successfully ensconced her in the American camp, and showed at the same time that in the sweet and sour of Russia’s international relations, the prosecution of “peaceful” trade or the witholding of trade is a main ingredient.

Britain and China: Assuming optimum conditions – that Britain leaves the trade channels she has used for the last twenty years and reverts to the Chinese supplier, that China’s economic integration with the Eastern bloc progresses no further and that Britain’s strong export markets for the goods that China will be willing to buy wither away – British trade with China cannot be more than 1½–2½% of Britain’s total foreign trade.

Unfortunately, even this drop in the ocean (if it ever materialises) could be a very dangerous medicine for the industries that will benefit, as the Yugoslav ruling class can tell their new-found British friends.

Capitalist Trade and Socialist Trade: As long as the world is divided into two competing centres of capital, two separate markets, two rival ruling classes, and as long as the two ruling classes can resolve their difficulties only by resorting to barbaric wars, trade between them will always serve the interests of war between them; mutual economic support will always give pride of place to mutual destruction.

East-West trade, by itself a negation of war, is being raped and used as a slogan in the “cold” fight between the power blocs.

Of course, we must support East-West trade. But let us not bluff ourselves. As long as East-West trade is the business of the ruling classes of East and West the workers in both camps will gain nothing.

Last updated on 16 February 2017