Why China Should Remove All Trade Tariffs

Authored by Alasdair Macleod via GoldMoney.com,

I am a Tariff Man. When people or countries come in to raid the great wealth of our Nation, I want them to pay for the privilege of doing so. It will always be the best way to max out our economic power. We are right now taking in $billions in tariffs. MAKE AMERICA RICH AGAIN

@realDonaldTrump tweet 10:04EST, 4 December 2018

It is widely understood by economists of most theoretical persuasions that trade tariffs are a bad idea, but President Trump has laid out his stall. The political class, prodded usually by the vested interests of crony capitalists, always fall for trade protectionism. President Trump’s tariff war is just the latest example that coincidently stretches back to the introduction of central banks. I shall address this coincidence later in this article.

It also surprising that the Chinese leadership enters a tariff war when it professes to defend free trade. Perhaps it doesn’t fully understand why tariff-free trade matters, and like Trump, thinks that a trade surplus is simply a function of cheaper prices. This misconception confuses how trade balances arise with the profitability from lower costs in foreign jurisdictions. That is a different issue. China would be far better to respond to Trump’s tariffs by removing all theirs, and in effect challenging American corporations to see if they can capture market share in China against local manufacturers and service providers.

What if they can? Well, China’s economy will benefit from obtaining goods and services someone else can provide better, freeing up economic resources for more efficient, appropriate and productive use. The underlying point is tariffs are a tax on both consumption and production inputs which impedes economic development. Tariffs are self-harm. We condemn teenagers self-harming, but not when governments do it.

This article explains why China would benefit enormously from the abolition of its own tariffs, as would any country following tariff-free trade policies. The other side of this coin, escalating tariffs, is the highway to economic ruin. The first step in developing this argument is to remind us of the empirical evidence, the awful damage tariffs did to the global economy following the First World War, and the appalling financial and economic consequences when they culminated in America’s Smoot-Hawley Tariff Act of 1930.

The histories of monetary inflation and tariffs are closely linked

Expansion of both bank credit and the commercial bills market in America in the 1920s were an addition to the monetary and price inflation during the First World War. Despite cumulative monetary expansion, America managed to adhere to an exchangeable gold standard until 1933. Similarly, other countries that returned to a post-war gold standard (such as the United Kingdom) did so at pre-war rates of convertibility on massively expanded bases of circulating money. All had to eventually devalue. Other European currencies had simply collapsed by 1924.

Money supply in the US increased 73% between 1913-1919, and wholesale prices doubled. In the UK, money supply increased by 144% and wholesale prices rose by 157%. It was from these elevated bases that the expansion of circulating money continued through the 1920s. While we tend to recall the economic advances from the spread of electric power and the manufacture of automobiles, we gloss over the substantial monetary imbalances. Monetary imbalances result in price imbalances, leading to politically unwelcome trade and capital flows. Governments and central banks attempt to smother the symptoms, which was the underlying reason behind the cooperation between Benjamin Strong at the Fed and Montague Norman at the Bank of England during that decade.

In the First World War, production output was commandeered by governments, which had the effect of eliminating foreign competition. As international trade resumed in the post-war years, this was no longer the case, and businessmen were faced with foreign competitors whose cost bases were in rapidly depreciating currencies. Naturally, they agitated for tariffs to ring-fence their domestic markets. This led to the Emergency Tariff Act of 1921 in America, consolidated in the Fordney-McCumber Tariff of 1922. Foreign nations responded by increasing their own tariffs, and the contraction in international trade was a significant factor behind the currency collapses suffered by the beginning of 1924 in Austria, Bulgaria, Germany, Greece, Russia and Poland. And because the contraction of trade made it virtually impossible for these countries to pay off war debts to America, the supposed benefits of trade protection came at an enormous capital cost to America itself.

In 1922 US import tariffs ranged from 7% to 68%, averaging 38%. While much of Europe was depressed following the War, by 1926 their economies and employment had recovered despite these tariffs, which had become insufficient protection for American businesses. In 1930, the Smoot-Hawley Tariff Act increased import tariffs across the board to an average of 60%.

Given the history of American businessmen working with politicians towards trade protection, we should not be surprised to see Donald Trump, a businessman-president, reintroduce tariffs to protect American business. His tweeting says everything. His economic illiteracy and political motivation faithfully replicate those of Senator Smoot and Representative Hawley. Furthermore, the unwillingness to learn from history is depressingly familiar, and the outcome has become dismally predictable.

In 1930, the reactions of the US’s trade partners, who followed Smoot-Hawley by increasing their protectionist tariffs as well, were equally predictable and economically illogical. Commodity prices had begun to fall in anticipation of the collapse in trade. This had a devastating effect on US farmers, who had been a core reason behind tariffs in all the debates on trade in Congress, even before the First World War.

The US stockmarket crashed in late-1929 ahead of the first major vote on the Smoot-Hawley Act on 31 October. Traders could see which way it was going, and correctly anticipated the economic effects. Bizarrely, politicians put the stock market collapse down to a lack of business confidence that would be cured by a swift introduction of the Smoot-Hawley Act.

Optimists might argue that the lessons of the 1920-1930s were the first time the negative effects of tariffs became obvious to politicians and the wider public, and therefore are unlikely to be repeated. Not so. In May 1930, a month after Smoot-Hawley was passed by Congress, a petition signed by over a thousand economists asked President Hoover to veto it. Today’s economic establishment is similarly united against tariffs, but if anything, President Trump is less open to persuasion on trade than was President Hoover.

Today, stock markets seem poised on a cliff-edge while America targets China with tariffs. On Monday, there was a one-day relief rally in stockmarkets, reflecting the ninety-day postponement of new US tariffs against China. But stock prices did not hold and have begun what could turn out into a devastating financial panic, replicating the value-destruction on Wall Street in October 1929.

The history of political inanity from ninety years ago suggests the love of tariffs is so deeply imbedded in the political class’s psyche that empirical evidence will be ignored. It insinuates that we are early in a continuing tariff war rather than nearing a settlement, and the economic consequences of trade policy are in danger of tipping us into a repeat of the Great Depression.

We still have the tariff battle between the US and the EU ahead of us. That was put on ice while China was dealt with, and we can be certain that Trump will return to that subject in due course. The EU is itself highly protectionist, and therefore a red rag to Trump’s bull. We can only hope that escalating threats never materialise as action. But that is the hope born from despair. If it is left to politicians, tariffs will more likely only ratchet upwards.

Farming and the money are different this time

There were two significant differences between the 1920-1930 period and now which should be mentioned.

The first was grain and farmland prices were further undermined by overproduction, due to the rapid adoption of mechanisation and new pesticides. The prices of all agricultural produce collapsed, impoverishing farmers around the world. The dust-bowl conditions of the 1930s did the rest to finish off farmers in North America.

The second difference is in the money. The slump in demand for raw materials in the Great Depression led to a collapse in commodity prices, measured in dollars. At the time, so far as the public was concerned, dollars were gold substitutes, being exchangeable for gold at $20.67 to the ounce. Therefore, the collapse in prices reflected an increased purchasing power for gold, and the eventual policy response was to rescind dollar convertibility in 1933 and then to devalue it by 40% the following January.

If we suffer a repeat of the trade-driven slump of the 1930s, it will be measured in the fiat currencies of today. At the least, we know central banks will offset any tendency for falling prices by inflating the money supply. That is already official policy. Monetary inflation will not resolve the underlying problems, only serving to conceal them. Central banks will attempt to achieve a Blondin-like wire-walking balance between the money quantity and price stability. This cannot be managed without raising both interest rates and the cost of borrowing for governments, and we must therefore conclude that a tariff-driven economic slump will threaten to undermine the dollar and all fiat currencies linked to it.

Why trade imbalances have nothing to do with prices

It is time to address the theory behind trade imbalances. We have seen the empirical evidence, that politicians are easily persuaded the excess of imports over exports is due to unfair competition. Even American corporations tend to locate their manufacturing in the cheapest locations to maximise their profits, and they will often close their operations in more expensive locations to reduce costs. This has riled President Trump when he complains about trade deficits. But the reason for trade imbalances has nothing to do with unpatriotic behaviour or price competition. It is endemic to fiat currencies.

We can deduce that in a sound-money regime, that is to say one where payments are accepted in gold or fully-backed gold substitutes, trade imbalances can only be minor and temporary, because imports have to be paid for with inflexible real money, earned so it can be subsequently spent. Money and credit cannot be produced out of thin air to pay for imports. If a deficit on trade does arise, gold flows out and consequently domestic prices for goods will fall. Communities with higher prices will tend to buy from communities with the lower prices, and manufacturers will tend to sell to communities with higher prices.

In this way, gold flowing between communities evens out each community’s preferences for gold relative to goods, and therefore both trade and prices self-adjust towards a common level.

Armed with this certain knowledge, we can proceed to describe how trade imbalances arise in a fiat money regime. They depend on the relative rates of expansion of money and credit between one currency and another, because trade imbalances still have to be paid for, but always in today’s flexible, fiat money. This leads to the following identity in national income accounting:

(Imports – Exports) @ (Investment – Savings) + (Government Spending – Taxes)

In other words, a trade deficit is the net result of a shortfall in the combination of savings and budget deficits. More correctly it applies to both capital and goods without distinction and is captured in balance of payments (BOP) statistics. This is an important point, given the large quantities of money circulating within the global financial system that are not associated with trade settlements.

Assuming we are considering a country with a BOP deficit, a shortfall of savings for investment is always made up by an expansion of money and bank credit. If capital inflows from abroad are involved, they will result in either the currency being provided by the central bank, or by an origination through prior or active expansion of bank credit. In any event, the central bank stands ready to ensure there is no net drain on money-markets through its management of both interest rates and its own balance sheet.

Therefore, it is clear that under all circumstances the savings shortfall in the national accounting identity above must be made up by monetary expansion.

Similarly, a budget shortfall can only lead to an expansion of money supply, usually involving the issuance of treasury bills or similar short-term instruments. When government bonds are issued, banks subscribe utilising their balance sheets. When non-financial entities and savers buy government bonds, they either divert net savings from private-sector investment (which is made good by monetary expansion as described above), or they increase their savings by reducing consumption. Reducing personal consumption in favour of saving requires higher interest rates, which are prevented by liquidity injections by the central bank.

Furthermore, having raised funds, the government spends it, putting money back in public circulation. If it has drawn on savings, those savings are turned into government spending. If not, purchasers of government bonds have only one recourse, and that is to draw on monetary or credit expansion. Therefore, whichever way you look at it, a budget deficit expands the money quantity.

A similar analysis applies to a nation with a BOP surplus. In this case, monetary expansion is less than the increase in savings, which is then reflected in a BOP surplus. Therefore, when considering trade imbalances, prices have nothing to do with it. Prices will only influence the source of supply, not the demand for it.

Defining the origin of trade imbalances through the framework of national accounting is confirmed by looking at it from a different aspect. The division of labour tells us we make things and provide services in order to earn the money to buy the other things we need and to accumulate some savings. This is still true when we are the breadwinners in a family of others who do not work for money. It is also true of money earned and passed to others through charities and the agency of government. Unemployment benefits and welfare payments have to be earned by someone.

This describes an economy where sound money is the temporary agent for converting production into consumption. Now let us assume that more money is introduced into the economy, not earned by anyone as described above, but produced out of thin air. Consequently, more money begins to chase the same quantity of goods.

Naturally, the introduction of extra money will push up domestic prices. For a period of time imported goods will remain available at the old prices. The supply of these goods must come from countries less affected by inflation-fuelled demand. In practice, other countries inflate their currencies as well, so price differentials become a relative matter. Furthermore, some nations’ citizens habitually save more than others, and so long as the volume of their savings increases relative to their money supply, there will be goods and services available for export to other communities.

Ignoring the true source of trade imbalances was a major flaw in Keynesian economics, leading to a myriad of other problems. The adoption of unsound money to cover budget and savings deficits is at the heart of it all. It is therefore no coincidence that these imbalances have increased hand-in-hand with the power of central banks. It seems extraordinary that despite some basic incontestable economic theory, Keynes envisaged doing away with savers altogether and for the state to provide the entrepreneurs with cheap capital. In this, Keynes was clearly a mathematician without a fundamental grasp of his own subject, otherwise he would not have denied the truth in the mathematical identity above. Instead, he decided to rubbish Say’s law, which defined the division of labour, and then ignore the consequences of the state management of economic outcomes with unsound money.

The benefits of free trade

It must be obvious in the light of reasoned economic theory that China is making a bad mistake by responding to Trump’s self-harm by self-harming as well. It’s not even worth getting into a dialog with madness, because all it encourages is more madness. Instead, China should remove all tariffs and let her consumers and businesses compete freely with foreigners.

It was perhaps a radical idea, first promoted in Britain by David Ricardo, who demonstrated the benefits of comparative advantage (1817), then taken up by the Anti-Corn Law League with Richard Cobden and John Bright (1836-38). They persuaded Robert Peel, the Prime Minister at the time, of the merits of free trade. The result was the repeal of the Corn Laws (1846) making tariff-free trade the national policy in Britain thereafter.

Consequently, Britain became the most powerful nation on the planet, despite its small size. Before the First World War, fully 80% of all shipping afloat had been built in Britain, with the Clyde, Belfast and the Tyne major shipbuilding centres. Britain did benefit from assembling an Empire with which to trade, but at the heart of this success was free trade.

The Chinese should take note. They will have also witnessed the remarkable successes of Hong Kong and Singapore, following the Japanese surrender in 1945. Their success was entirely due to free markets enjoying tariff-free trade driven by their own diasporas, while governments declined to intervene. It is therefore illogical for China to play Trump at his game.

Far better to let him destroy America’s potential through wrong-headed tariffs, exemplified by Trump’s tweet at the head of this article.

After all, in the great game of geopolitics, through the destruction her enemies visit on themselves and by avoiding the same mistakes lies China’s quickest and most certain route to rapidly raising the living standards and wealth of her own people.

Jeff Bezos Earns More In 30 Seconds Than The Average Worker Makes In A Year

Have you ever wondered how long it takes for the world’s wealthiest captains of industry to earn what you make in a year? For many, the reality is too depressing to fathom.

But for any curious parties eager to learn the painful truth, ABC Finance has created a series of infographics that break down how much the world’s wealthiest people earn – and how it compares to the average salary for regular non-billionaire workers.

While millions of Americans no doubt enjoyed some degree of schadenfreude watching the correction in FAANG stocks wipe out nearly $1 trillion of value from the largest US tech firms: Mark Zuckerberg alone has lost nearly $100 billion of his personal wealth since the beginning of 2018, and Amazon CEO Jeff Bezos has lost as much as $13 billion or more in a single day. But that doesn’t change the fact that the world’s billionaires enjoyed their highest-earning year on record in 2017 as their wealth increased by a combined $9 trillion.

Facebook

Helped by the asset-friendly policies of the world’s largest central banks, the wealthiest 1% of the world now owns nearly half the wealth. The 54 billionaires living in the 54 UK alone have an aggregate $160 billion in wealth, equivalent to over 6% of Britain’s GDP. Meanwhile, the average worker earns about $37,000 a year. Virgin CEO Richard Branson earns that amount in roughly 25 minutes.

Branson

Even more galling, Facebook CEO earns the same sum every 60 seconds. Bezos earns the same sum every 28 seconds.

Facebook

Here’s how the distribution of billionaires breaks down for every continent:

Rich

Curious to see how your own earnings stack up? ABC Finance has developed a comparison tool that can help determine how your wealth stacks up against the mega-rich.

Is Diplomacy A Waste Of Time With Washington?

Authored by Stephen Lendman,

The US is a serial lawbreaker, operating by its own rules, no others.

Time and again, it flagrantly breaches international treaties, Security Council resolutions, and other rule of law principles, including its own Constitution.

Diplomacy with Republicans and undemocratic Dems is an exercise in futility.

Trump’s JCPOA pullout and threatened INF Treaty withdrawal show Washington can never be trusted.

Russian Foreign Ministry spokeswoman Maria Zakharova’s proposed US outreach to discuss INF Treaty bilateral differences is well intended – despite knowing nothing is accomplished when talks with Washington are held, so why bother.

It’s just a matter of time before the US breaches another promise. They’re hollow when made. Kremlin good intentions aren’t enough to overcome US duplicity and implacable hostility toward Russia.

“We are ready to continue the dialogue in appropriate formats on the entire range of problems related to this document on the basis of professionalism and mutual respect, without putting forward unsubstantiated accusations and ultimatums. Our proposals are well known and remain on the negotiating table,” said Zakharova, adding:

“We have admitted (US) documents for further consideration. This text again includes accusations in the form of unfounded and unsubstantiated information about Russia’s alleged violations of this deal.

Comments to Washington like the above and similar remarks are like talking to a wall. The US demands all countries bend to its will, offering nothing in return but betrayal – especially in dealings with Russia, China, Iran, and other sovereign independent governments it seeks to replace with pro-Western puppet ones.

Not a shred of evidence suggests Russia violated its INF Treaty obligations. The accusation is baseless like all others against the Kremlin.

“No one has officially or by any other means handed over to Russia any files or facts, confirming that Russia breaches or does not comply with this deal,” Zakharova stressed, adding:

“We again confirm our consistent position that the INF Treaty is one of the key pillars of strategic stability and international security.”

It’s why the Trump regime intends abolishing it by pulling out. Strategic stability and international security defeat its agenda. Endless wars and chaos serve it.

The US, UK, France, Israel, and their imperial partners get away with repeated international law breaches because the EU, UN, and rest of the world community lack backbone enough to challenge them. 

It’s how it is no matter how egregious their actions, notably their endless wars of aggression, supporting the world’s worst tinpot pot despots, and failing to back the rights of persecuted Palestinians and other long-suffering people. 

The only language Republicans and Dems understand is toughness. Putin pretends a Russian/US partnership exists to his discredit – a show of weakness, not strength and responsible leadership.

In response to the Trump regime’s intention to withdraw from the INF Treaty, he said Russia will “react accordingly” – precisely what, he didn’t say.

A few suggestions, Mr. President.

  • Recall your ambassador to Washington. Expel the Trump regime’s envoy from Moscow and other key embassy personnel.

  • Arrest US spies in Russia you long ago identified. Imprison them until the US releases all Russian political prisoners. Agree to swap US detainees for all of them, no exceptions.

  • Install enough S-400 air defense systems to cover all Syrian airspace. Warn Washington, Britain, France and Israel that their aircraft, missiles and other aerial activities in its airspace will be destroyed in flight unless permission from Damascus is gotten – clearly not forthcoming.

  • Publicly and repeatedly accuse the above countries of supporting the scourge of ISIS and likeminded terrorists they pretend to oppose.

  • Warn them in no uncertain terms that their aggression against the Syrian Arab Republic no longer will be tolerated. Tell them the same goes if they dare attack Iran.

  • Stop pretending Mohammad bin Salman didn’t order Jamal Khashoggi’s murder, along with ignoring the kingdom’s horrendous human rights abuses domestically and abroad – including support for ISIS and other terrorists.

  • Put observance of rule of law principles and honor above dirty business as usual with the kingdom and other despotic regimes for profits.

  • Do the right things at all times and damn the short-term consequences – including toughness on Washington, the UK, Israel, and their imperial partners in high crimes of war and against humanity.

China’s Mass Detentions And Indoctrination Of Muslims Will Backfire Spectacularly

In shocking testimony the State Department informed senators earlier this week that China has detained at least 800,000 Muslim minorities in internment camps, especially located in the north-western province of Xinjiang, which we’ve documented multiple times before. 

Government social media post in April 2017 shows detainees in a camp in Hotan Prefecture, via Al-Jazeera/HRW

“The U.S. government assesses that since April 2017, Chinese authorities have indefinitely detained at least 800,000 and possibly more than 2 million Uighurs, ethnic Khazakhs, and other members of Muslim minorities in internment camps,” Scott Busby, the deputy assistant secretary of State for democracy, human rights and labor, told a Senate Foreign Relations subcommittee on Tuesday. 

Based on the sheer magnitude of the allegation — that China has “disappeared” people in numbers in the millions — one would think the headline would elicit wall-to-wall media coverage, but it hasn’t. “Reports suggest that most of those detained are not being charged with crimes and their families have little to no information about their whereabouts,” Busby testified.

“Former detainees who have reached safety have spoken of relentless indoctrination and harsh conditions,” Busby told the committee. “For example, praying and other religious practices are forbidden.” He noted: “The apparent goal is to force detainees to renounce Islam and embrace the Chinese communist party.”

But here’s the essential question no one is asking… could this backfire in spectacular fashion?

Could China one day face even if years or decades from now  an uncontrollable and swelling militant Islamic insurgency seeking revenge on Communist Beijing? Could China’s brutal and unprecedented crackdown fuel the future rise of an Islamic State of Xinjiang?

Chinese Muslim Uighurs, via Al-Jazeera

East Asian affairs and Middle East expert Dr. James Dorsey previously argued in an investigative report issued once mass detention allegations became increasingly proven that China is perilously ignoring the lessons of history, which “risks letting a genie out of the bottle.” His full report is below. 

* * * 

A Chinese campaign to forcibly assimilate ethnic Uyghurs in its north-western province of Xinjiang in a bid to erase nationalist sentiment, counter militancy, and create an ‘Uyghur Islam with Chinese characteristics’ ignores lessons learnt not only from recent Chinese history but also the experience of others.

The campaign, reminiscent of failed attempts to undermine Uyghur culture during the Cultural Revolution, involves the creation of a surveillance state of the future and the forced re-education of large numbers of Turkic Muslims. In what amounts to an attempt to square a circle, China is trying to reconcile the free flow of ideas inherent to open borders, trade and travel with an effort to fully control the hearts and minds of it population.

In doing so, it is ignoring lessons of recent history, including the fallout of selective support for militants and of religion to neutralize nationalism that risks letting a genie out of the bottle. Recent history is littered with Chinese, US and Middle Eastern examples of the backfiring of government support of Islamists and/or militants.

No example is more glaring than US, Saudi, Pakistani and Chinese support in the 1980s for militant Islamists who fought and ultimately forced the Soviet Union to withdraw from Afghanistan. The consequences of that support have reverberated across the globe ever since. Some analysts suggest that China at the time was aware of the radicalization of Uyghurs involved in the Afghan jihad and may have even condoned it.

Thousands of Chinese Muslim extremists are currently in Idlib, Syria… what happens when they return? 

Journalist John Cooley reported that China, in fact, had in cooperation with Pakistan trained and armed Uyghurs in Xinjiang as well as Pakistan to fight the Soviets in Afghanistan. The notion that Islam and/or Islamists could help governments counter their detractors was the flavour of the era of the 1970s and 1980s.

Egyptian President Anwar Sadat saw the outlawed Muslim Brotherhood as an anti-dote to the left that was critical of both his economic liberalization and outreach to Israel that resulted in the first peace treaty with an Arab state. Saudi Arabia funded a four-decade long effort to promote ultra-conservative Sunni Muslim Islam and backed the Brotherhood and other Islamist forces that helped create the breeding ground for jihadism and wreaked havoc in countries like Pakistan.

China’s experience with selective support of militancy and the use of religion to counter nationalist and/or other political forces is no different. China’s shielding from designation by the United Nations as a global terrorist of Masood Azhar complicates Pakistani efforts to counter militancy at home and evade blacklisting by an international anti-money laundering and terrorism finance watchdog.

Mr. Azhar, a fighter in Afghanistan and an Islamic scholar who graduated from a Deobandi madrassah, Darul Uloom Islamia Binori Town in Karachi, the alma mater of numerous Pakistani militants, is believed to have been responsible for a 2016 attack on India’s Pathankot Air Force Station.

Back in the 1980s, then Chinese leader Deng Xiaoping saw his belief that what China expert Justin Jon Rudelson called a “controlled revival” of religion would foster economic development and counter anti-government sentiment boomerang. The revival that enabled an ever larger number of Uyghurs to travel to Mecca via Pakistan for the haj made Saudi Arabia and the South Asian state influential players in Uyghur Islam. Uyghurs, wanting to perform the haj, frequently needed Pakistani contacts to act as their hosts to be able to obtain a Chinese exit visa.

The opening, moreover, allowed Muslim donors to provide financial assistance to Xinjiang. Saudi Arabia capitalized on the opportunity as part of its global promotion of Sunni Muslim ultra-conservatism to put money into the building of mosques and establishment of madrassas.

via CNN

Receptivity for more conservatives forms of Islam, particularly in southern parts of Xinjiang that were closest to Central and South Asia, suggested that the closure of Xinjiang’s borders during the Sino-Soviet split in the 1950s and 1960s and the cultural revolution in the 1960s and 1970s had done little to persuade Uyghurs to focus their identity more on China than on Central Asia.

In fact, the collapse of the Soviet Union and the emergence of independent states in Central Asia coupled with rising inequality rekindled Uyghur nationalism. The rise of militant Islamist and jihadist Uyghurs constituted in many ways a fusion of Soviet and Western-inspired secular nationalist ideas that originated in Central Asia with religious trends more popular in South Asia and the Gulf in an environment in which religious and ethnic identity were already inextricably interlinked.

The juxtaposition, moreover, of exposure to more orthodox forms of Islam and enhanced communication also facilitated the introduction of Soviet concepts of national liberation, which China had similarly adhered to with its support for various liberation movements in the developing world. The exposure put Xinjiang Uyghurs in touch with nationalist Uyghur groups in Kazakhstan and Kyrgyzstan that fed on what political science PhD candidate Joshua Tschantret terms “ideology-feeding grievances.”

Nationalists, dubbed ‘identity entrepreneurs’ by Gulf scholar Toby Matthiesen, built on the presence of some 100,000 Uyghurs who had fled to Central Asia in the late 1950s and early 1960 during Mao Zedong’s social and economic Great Leap Forward campaign that brutally sought to introduce industrialization and collectivization and the descendants of earlier migrations.

With Pakistan’s political, economic and religious elite, ultimately seduced by Chinese economic opportunity and willing to turn a blind eye to developments in Xinjiang, Uyghurs in the South Asian country had little alternative but to drift towards the country’s militants. Militant madrassas yielded, however, to Pakistani government pressure to stop enrolling Uyghurs. The militants were eager to preserve tacit Chinese support for anti-Indian militants operating in Kashmir.

A “re-education camp” near Kashgar, China from August 2018. Image source: Wall Street Journal

Pakistan’s foremost Islamist party, Jamaat-e-Islami, went as far as signing in 2009 a memorandum of understanding with the Chinese communist party that pledged support for Beijing’s policy in Xinjiang. Despite eagerness to address Chinese concerns, Pakistan and China’s selective support of militants is likely to continue to offer radicalized Uyghurs opportunity.

“Jihadis and other religious extremists will continue to benefit from the unwillingness of the military and the judiciary to target them as well as the temptation of politicians to benefit from their support,” said former Pakistani ambassador to the United States Husain Haqqani, discussing overall Pakistani policy rather than official attitudes towards the Uyghurs.

Cultural anthropologist Sean R. Roberts noted that Central and South Asia became with the reopening of the borders in the second half of the 1980s “critical links between the inhabitants of Xinjiang and both the Islamic and Western worlds; and politically, they have become pivotal but contentious areas of support for the independence movement of Uyghurs.”

The 1979 inauguration of the of the 1,300-kilometre-long Karakoram highway linking Kashgar in Xinjiang to Abbottabad in Pakistan, one of the highest paved roads in the world, served as a conduit for Saudi-inspired religious ultra-conservatism, particularly in southern Xinjiang as large numbers of Pakistanis and Uyghurs traversed the border.

Pakistani traders doubled as laymen missionaries adding Islamic artefacts, including pictures of holy places, Qurans and other religious literature to their palette of goods at a time that Islamist fighters were riding high with their defeat of the Soviets in Afghanistan and the emergence of the Taliban. Increased religiosity became apparent in Xinjiang.

Women donned veils in what was traditionally a more liberal land. Students of religion made their way to madrassas or religious seminaries in Pakistan where they came into contact with often Saudi-inspired Pakistani and Afghan militants – trends that China is trying to reverse with the construction of an Orwellian type surveillance state coupled with stepped-up repression and intimidation.

“The cross-border linkages established by the Uyghurs through access provided by the highway, Beijing’s tacit consent to expand Uyghur travel and economic links with Pakistan through Reform Era policies, and Beijing’s explicit consent in supporting anti-Soviet operations – all prompted the radicalization of a portion of Xinjiang’s Uyghurs,” concluded China scholar Ziad Haider more than a decade ago.

The process was fueled by the recruitment in the 1990s of Uyghur students in Pakistani madrassas by the Taliban and the Islamic Movement of Uzbekistan, both of which were linked to Al Qaeda. Some 22 Uyghurs captured by US forces in Afghanistan ended up in Guantanamo Bay.

The eruption of protests in Xinjiang in the late 1990s and late 2000s against rising income differences and the influx of Han Chinese put an end to official endorsement of a religious revival that was increasingly seen by authorities as fueling nationalism and facilitating Islamists.

Seemingly stubborn insistence on a Turkic and Muslim identity is likely one reason that China’s current assimilation drive comes as Xinjiang’s doors to its neighbors are being swung open even wider with the construction of new road and rail links as part of the People’s Republic’s infrastructure-centred Belt and Road initiative.

Forced assimilation is designed to bolster China’s expectation that increased economic ties to South and Central Asia will contribute to development of its north-western province, giving Uyghurs a stake that they will not want to put at risk by adhering to nationalist or militant religious sentiment.

The crackdown and forced assimilation is further intended to reduce the risk of a flow of ideas and influences through open borders needed for economic development and cementing Xinjiang into the framework of China’s infrastructure-driven Belt and Road initiatives that spans Eurasia

The assimilation effort is enabled by China’s Great Fire Wall designed to wall the country off of free access to the Internet. In doing so, China hoped in Xinjiang to halt cultural exchanges with Central Asia such as political satire that could reinforce Uyghurs’ Turkic and Central Asian identity.

The breadth of the more recent crackdown has complicated but not halted the underground flow of cultural products enabled by trade networks. Mr. Roberts noted as early as 2004 that Chinese efforts aiming to regulate rather than reshape or suppress Islam were backfiring.

“Interest in the idea of establishing a Muslim state in Xinjiang has only increased with recent Chinese policies that serve to regulate the practice of Islam in the region,” Mr. Roberts said at the time.