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  • One Step Closer to Trade Sanctions Against China

    Tick, tick, tick — the sound of a Congressional trade bomb. By its own, not very exacting standards, Congress has patiently waited for change in Chinese currency policy. The single most likely time for that was the G-20 finance minister’s over the weekend in South Korea. But nothing meaningful from Beijing. Again. From now until summer recess, Congress likely will be working toward punishing China.

    The frustration is understandable. The U.S. has played the indispensable role in rapid Chinese economic development, if for our own reasons. We’ve received cheaper goods and a check on inflation and China has received millions of its best jobs. The combined Sino-American trade deficit over the past 30 years is roughly $2 trillion. Most of that is held in U.S. bonds, but it’s still China’s money — money that could be earned from American consumers and no one else.

    In return, the PRC is uncooperative on North Korea, Iran, military-to-military contact and a host of other security issues. This is not surprising. What’s surprising is Beijing won’t even throw the U.S. a bone on most economic issues. The yuan has become a symbol of Beijing’s willingness to cooperate.

    Behind closed doors, and sometimes in hearings, senior members of Congress show understanding that the value of the yuan doesn’t matter much. By far the most important factor in our long-term trade deficit is our own consumption. The most important factor in our short-term trade deficit is our budget deficit. Further, there is foreign money pouring into the U.S. that could build facilities and create jobs. Instead, it finances the deficit, which does almost nothing for jobs. Beijing costs far less in the way of American jobs than Washington does.

    The PRC is hardly blameless. The entire world, led by Chinese families, is penalized in order to enlarge Chinese state firms. Regulatory, financial, land, energy, and other subsidies reserve most of the China market for perhaps one hundred centrally controlled state firms and a few hundred provincially controlled state firms. Chinese households see a very low return on their savings, land becomes wildly expensive, foreign firms cannot win Chinese customers, global energy and commodities prices rise more than they should, and so on.

    As Chinese officials never tire of saying, it will take a long time for the Chinese economy to change. It will take an especially long time if one is unwilling to start. The value of the yuan is a symbol that China is serious when it talks of rebalancing, of playing a responsible role as the world’s second-largest economy.

    There are still a few months for a new currency policy or, far better, meaningful changes in other Chinese policies that distort the world economy. But the Congressional clock is now ticking. Protectionist measures will not create American jobs or help the U.S. economy. They will only be an expression of exasperation, exasperation which got noticeably worse over the weekend.

    Posted in International [slideshow_deploy]

    10 Responses to One Step Closer to Trade Sanctions Against China

    1. West Texan says:

      Allow me to share the Allegory of the engine: an oil crisis of a different kind. The players are DC's power brokers AKA car salesmen, taxpayers AKA consumers, free markets AKA mechanics and the economy AKA the engine.

      Consumers' confidence was shaken when their engine began to belch smoke. They took it to their salesman who explained it'll take the mechanics time to repair the problem. "No way" shouted the consumers. "We demand instant satisfaction". "The new guy down the block promises us hope." So down the road they go. "No problem" exclaims the new salesman. "We'll just pour in more oil to keep things running". "Ah!" says the consumers. "But are you fixing the problem?" The salesman tells them, "Don't worry! it will work." As he scratched his head he continued "But we'll have to add the cost of all that oil to your bill." "What?" decried the consumers. "We don't want to waste money on cases of oil. Can't you just fix the problem?" The salesman suddenly becomes irritated declaring "You're going to do it my way now that I have your car." And there you have it. A shady salesman who doesn't know what he's doing. And a leaky economy that will ultimately grind to a halt if mechanics are not brought in on the problem.

    2. Randall Holland, Ari says:

      I think we need to boycott Chinese products. This is the only power we have over the Chinese and this is the only way we can force them to comply with sanctions against Iran.

      If the Chinese want to hold us hostage to our debt with them, then we can hold their economy hostage with a boycott.

    3. Lynn Bryant DeSpain says:

      As Americans, we do not have to rely on our government to do anything, fore they usually do not, or they are too slow. We can however check all the lables of the products we buy at the stores. if they are made in China, or the PRC, don't buy them, be it Mandarin oranges, or noodles, or toys or clothes. Buy Canadian Products.

      It is amazing how much these small items, when added up by the millions per day, will effect the Nation of China, and their stock purchasers here in the United States.

      This we can do, without Federal mandates, or interference.

    4. Ben Gee, Canada says:

      American are all talk and little action. They talk about boycotting Chinese goods, yet they buy Chinese goods in record number. Like a smoker want to stop smoking or a alcohalic trying to stop drinking. Lets face it, spending is an addiction and you are hooked.

    5. Gerald H. Treffinger says:

      we''ll just beg…….the USA………we'll just beg.WAKE UP!!! The whole IDEA of America is slipping through our hands as we wring them and WISH, some how ,someway WE WON'T HAVE TO ACT, that someone else will pick up our slack. Being an American is a RESPONSIBILTY, to Generations past ,who bled for us ,and Generations future for whom we must bleed Freedom from coercion is but a generation away from extinction. Will it be on OUR heads? Will WE be the generation that couldn't be roused to defend our Heritage? It's MY job ,and it is YOURS ,for if WE don't ,WHO will????.GHT

    6. Don Harper, Lubbock, says:

      The link below takes you to Paul Ryan’s Roadmap for America, a very detailed plan with a lot of interesting ideas. We won’t have to pass it to find out what’s in it. We can study it now and determine its pros and cons.

      http://www.roadmap.republicans.budget.house.gov/

    7. West Texan says:

      As I shared with a friend " … it’s China ’s dime backing Obama’s ever growing credit deficit. Not only has he not begun to turn this fiscal insanity around his first year in office, he has added greatly to uncontrolled spending on federal programming overreach into states’ domestic affairs. All of this while our perpetual campaigner-in-chief forever blames his predecessor. … Use celebrity status to grab power. Create scapegoats. Then aggressively force delusional ideological policies down everyone’s throat."

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