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  • What Won’t Work With China, And What Might

    The New York Times, Washington Post, and others today ran front-page stories on economic and political disagreements the U.S. has with China. The headlines mostly distract from the real issue.

    China is nowhere close to a global military power but it is becoming a global economic power. It is therefore almost inevitable that the U.S. and PRC will clash more often over economic matters. The goal in managing those disputes must always be more open international markets, or the result will be that both sides lose.

    The next month in particular is going to be a loud one for Sino-American economic relations. On the front end we have a press conference today by Premier Wen Jiabao, number three in the Communist Party hierarchy. Among other things, Wen repeated what are now standard Chinese accusations of American trade protectionism.

    On the back end, exactly a month from now a report is due from the Department of the Treasury determining whether any American trading partner is manipulating its currency. The likelihood that the PRC will be cited is the highest in over a decade.

    Wen’s remarks in Beijing were tired and often hypocritical. Chinese diplomacy seems to have degenerated into finding new excuses for harmful policies. China’s trade surplus with the U.S. last year again topped $200 billion. If the U.S. is being protectionist, it is doing a remarkably poor job.

    At the other end, the Treasury decision is being granted far too much importance. The value of the Chinese currency, the yuan, is just a symptom. The illness is broad Chinese government intervention in the market, led by subsidies for state firms. From mid-2005 to mid-2008, the yuan appreciated 20 percent against the dollar and the bilateral trade deficit still rose 50 percent. Forcing a yuan revaluation will likely yield nothing at all.

    Nonetheless, it is true that China’s broad state-led development often hurts its economic partners. What is not true is that American protectionism is a solution.

    A hefty tariff on Chinese goods will not create American jobs. Instead, production will just move out of China to Vietnam, Mexico, Bangladesh and elsewhere. With less Chinese competition due to the tariff, other producers can safely raise prices, making goods more expensive here. Protectionism is just households paying more than they should in order to subsidize companies. Seems like we’ve had enough of that the past 18 months.

    A much better alternative is to use the June meetings of the Strategic and Economic Dialogue with the PRC. The U.S. should put forward a few, very explicit American demands for less Chinese government intervention in the market. By then, the U.S. would do well to have demonstrated resolve on its runaway budget deficits, something that legitimately concerns the Chinese and much of the rest of the world. This could increase American access to the Chinese market while strengthening the domestic American economy. Not as satisfying as sticking it to Beijing, but far better for the United States.

    Posted in International [slideshow_deploy]

    6 Responses to What Won’t Work With China, And What Might

    1. Pingback: What natural products can be used to get rid of nail fungus?

    2. John Power (Carville says:

      The Kingdom of God is near at hand. The PRC will dissolve along with all national governments and become subject to the Creator and His laws.

      All nations will be protected from each other. Fair and balanced trade will

      flurish with growth in all sectors of the ecomomy of a one world government

      administered from Jerusalem by Jesus Christ. Problem solve!

      In the mean time, THINK, how would Jesus resolve this.

    3. Kicker says:

      The US needs to not only bring it's spending under control, it also has to adjust it's business environment to reduce manufacturing overhead. Currently, American companies face double taxation on exports (US and foreign), and have to compete domestically with goods from which foreign taxes, usually as VATs, have been removed.

      Instead of pursuing policies that structurally distort trade, but do nothing to address underlying cost factors, the US should fix the problem.

      The solution is the FairTax. The FairTax eliminates all income, payroll, and business based taxes, and replaces them with a single retail sales tax. This makes US good and services cheaper for overseas markets, and places foreign goods sold domestically on a more equal footing. In addition, it encourages investments in innovation and productivity.

      We understand the problem, and know the answer. The only question is whether we are willing to implement it, or would rather play charades until the fiscal shoe drops and smashes us under a mountain of debt impossible to redeem.

    4. Pingback: House and Senate Cloakroom: March 22 – 26, 2010 | The Foundry: Conservative Policy News.

    5. elenore,michigan says:

      Goods produced in Mexico,Bangladesh,etc…Are better markets,Mexico buy a lot of goods from the U.S.,Companies saving money in China don’t pass the savings to consumers but to shareholders,Who are you kidding!! China buys next to nothing they are communist ,the people have little money and little ownership of land or companies.The rich(Communist Leaders) there have already bought what they are going to buy fool.You can’t own much in China as a citizen or a foreign investor.They are not a free market.They are less free than even Japan,South Korea,or Europe who all impose limits on the U.S.And the goods that China wants from us is because they want to steal technology,that simple,China is home to 80% of pirated goods.Again your foolish.Why should we pay for R&D for them to get for free and mass produce for less.Try looking at the big picture.And why don’t you try not only looking out for your own citizens for once but the nations who are willing to really trade on a level playing field.Not like China using rare earth elements and there short lived monopoly to blackmail U.S. and European manufacturing Companies into moving production to there country.By the way right now China is over producing,over spending with Social handouts,a booming real estate bubble,and under valued currency which is going to be a problem soon.If China has no middle class,than they have no one to buy anything.And if you want to give so much of our technology,money,etc.. to China why don’t you and the other cheerleaders willing to exploit slavery move there.I would rather get goods from Haiti,Mexico,India,Honduras,than China at least the people and companies there are free to spend money on things from the US,and foreign investors are more free to invest and own Companies there.In fact it’s better for companies like Walmart who can have complete control over production and a market to sell goods to.

    6. Broc Smith, Shenzhen says:

      American Architect Writes Book About Working in China for Over a Decade

      “The Tragic Kingdom or; Prisoner in a Chinese Theme Park”, (found on most book dealer websites; Amazon, Barnes and Noble etc), is a behind-the-scenes look into the field of design and build in China. The book is a profile of the personalities, culture, and psychology of the world’s most massive looming superpower as seen through the eyes of an ex-pat American.

      “I have lived and worked in China for over 14 years, competing within their system, making my way as everything from a freelance artist in small operations to a senior designer for large corporations. I have witnessed a formidable decade in which China has commanded a modern presence on the world stage. I have participated in the planning, designing, and building of mega-theme parks in Beijing, world-class aquariums in Shanghai, gigantic malls in the Pearl Delta, resorts in Tibet, and panda relocation projects in the foothills of the Himalayas”.

      The true stories and themes found in The Tragic Kingdom, spring from one man’s journey. At the same time they disclose truths about a globalization that eventually will impact every economy, lifestyle, and person on the planet.

      For more information please log-on to my site; http://www.dnbasia.net
      Also available at:
      http://www.amazon.com – The Tragic Kingdom or; Prisoner in a Chinese Theme Park
      http://www.barnesandnoble.com – The Tragic Kingdom or; Prisoner in a Chinese Theme Park


      Broc Smith

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