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skipping a meeting last weekend of the International Monetary Fund and the World Bank in Washington, D.C. The reason? Bush administration officials had hoped to use the confab to pressure Beijing to revise the value of its currency.
China's currency, the yuan, has been linked to the U.S. dollar at a ratio of 8.3 to 1 since 1995. As the dollar has fallen in the last few years, American products have become cheaper for consumers holding currencies such as the euro or yen. But the yuan-dollar connection means shoppers can still buy relatively inexpensive Chinese goods at Wal-Mart--and are therefore less likely to buy American.
That's what prompted the unexpected Senate vote on April 6. "This is a shot across your bow," warned Sen. Chuck Schumer, a New York Democrat and one of the measure's sponsors. "Reform--because, if you don't, there are going to be dramatic consequences throughout the world, in our country, and in your country as well."
Perhaps Schumer means well, but his prescription would be worse than the disease. A primary reason for the government's external deficit is that Americans simply are saving less and spending more. China and other governments feed our appetite for consumption by lending us money--Beijing alone holds nearly $200 billion in greenbacks.
Were Schumer's tariff to be enacted, the United States would still be running a deficit. So we'd still be borrowing money from some other nation, but paying more for the privilege. It would amount to a whopping tax hike on Americans.
If Schumer and his allies in Congress were serious about repairing the U.S.-China trade imbalance, they'd keep federal spending under control by not adding to the national debt, and they'd encourage the Federal Reserve to raise interest rates to encourage saving over spending. But they're not.
Congressional worrywarts might be better served by taking a long-term view. It wasn't too long ago that Japan was viewed as an "imperialist menace" because of its purported economic prowess, and the Nikkei 225 Index reached an astounding 38,915 points at the end of 1989. Since then, the Nikkei index has fallen to 11,370, Japan's economy has stagnated and protectionists have found something new to complain about.
Biography
Declan McCullagh is CNET News.com's chief political correspondent. He spent more than a decade in Washington, D.C., chronicling the busy intersection between technology and politics. Previously, he was the Washington bureau chief for Wired News, and a reporter for Time.com, Time magazine and HotWired. McCullagh has taught journalism at American University and been an adjunct professor at Case Western University.
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India has ? with the support of the US government ? exploited its ludicrous rate of exchange to transfer the software industry from the US and EC to India. The US government has overtly subverted the laws it created to protect American workers? interest in order to facilitate the training of Indians in the US so that they could return to India taking their new-found expertise with them.
Now contrast all that with the US government?s attitude towards China. China is primarily driven by domestic concerns, increasing its markets (into which we all sell) as well as its manufacturing sector. It?s being treated as an enemy state, like Iraq.
Snubbing China, subsidizing India, and bombing Iraq sounds like a combination taken from The Fools? Opera.
The vote did not pass. So we will not impose those tarriffs.
There we 67 NAYs. It did not pass.
http://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=109&session=1&vote=00086
Vote Result: Motion to Table Failed
It means something that the legislation came up, but it means more that it did not pass.
We DO NOT want to deviate from free-market path and enforce tariffs. It will merely allow us to be lazy and not compete - ignoring quality and "beating" China because of a faux-pricehike.
Mr. Roboto thought he could make better, cheaper cars than us. If we respond the same way we did to Japan in the 80s with good-ole American Can-do and know-how, we will prevail. If we decide we can legislate our way out of this and turn a blind eye towards the prominence of China, we will be eclipsed as the premiere country of the world.
But it is not inevitable.
As you should know from high school civics, there's more to a bill becoming law than one chamber approving it. In this case the parliamentary mechanics are a bit more complex but the bottom line is you have a large number of politicians who are very upset, which is what this article is all about.
If the "Indian" worker cannot earn sufficiently how will he/she be able to raise his/her standard of living and satisfy his/her American and European tastes which will no doubt safeguard and enhance other American job prospects. It cuts both ways, all in all - the value of "reciprocal" trade... There are two sides to the coin!
spent on schools. We must have standards.
If you are flunking algerbra,
you should be taking shop.
We do not need more MBAs that cannot produce
any tangible goods.
Stop exporting capital to China and send over
some AFL-CIO union reps. That will shut them
down.
When the next war starts, the communist masters
of China will take ownership of the factories.
If your shoes say "China", you are part of the
problem.
So if the government enforces a command economy again, it will be its downfall.
Fact is, the Chinese Government massively supports dumping of technological products onto the U.S. economy and while consumers in the U.S. do benefit, the peril to the larger economy and to technology companies is huge.
Bush, et al., have been very slow to act; and its a good thing that they are getting their arses in gear now.
The last straw in the Chinese retaining their pegged currency to the U.S. dollar despite steep declines in the dollar around the world.
Present Chinese prosperity is the result that investment from the foreign countries was invited. They depend on foreign currency. Intervention to the money rate and rise in the trade customs duty will be made to fall their economy. 1300000000 people in china; the government who supports 1300000000 people must ignore G7. Each country shouldn't impose a customs duty at the present in favor of each country. A problem is; only government knows those conditions. Their people don't know.
Asking Coutries to take a significate loss is
foolish. But more significatntly the losses such a exchange rate would have on the Asian suppliers in the softening Semiconductor/ computer/ telecomunications markets.
While linking an economy's currency to the dollar is not necessarily a bad thing, what Argentinean history tells us is that the system with the linked currency must keep local costs in control. While China is becoming more efficient with time, not less, the need to import food, water and raw materials with the growing economy imply that costs will very likely rise, and that will probably lead to a recession in some years, probably less than two decades unless they become so efficient in the mean time that they can compensate for the growing costs.
himself, his understanding of macroeconomics is a little shaky
as well. Take the following quote:
"Perhaps Schumer means well, but his prescription (of enforcing
tariffs against China) would be worse than the disease. A
primary reason for the government's external deficit is that
Americans simply are saving less and spending more. China and
other governments feed our appetite for consumption by
lending us money--Beijing alone holds nearly $200 billion in
greenbacks."
This is not true. First, American's spending more and saving less
is primarily impacting our ability to invest in infrastructure at
home - via bank loans, etc ... Our trade deficit has nothing to do
with that. If interest rates were low and there was no China, we
would still be 'spenders' as opposed to 'savers'. So while the two
things can have an influence on each other, in fact they are not
related by 'cause and effect' - you can have either one alone
without the other.
Second, while the governments he mentions (and private
investors he doesn't) do indeed feed our deficit - by buying T-
bills and other US government securities - this also has nothing
directly to do with American consumption habits. Assuming US
current income levels and interest rates, if our federal
government wasn't constantly running in the 'red', and our
domestic industry were still making the things we wish to buy
(DVD players, computers, iPods, etc ...) then we would again still
be 'spenders'.
The reason why governments and people buy the securities we
sell to finance our reckless fiscal policies, is because a] they
believe that, despite the risks, it is still a relatively safe place to
put their money and get a decent return, and b] the last thing
that the governments that depend on our spending want is for
our economy to meltdown. That is, their own domestic
manufacturing is so heavily leveraged toward selling stuff to us,
that they do what they can to keep us solvent so that they can
continue selling us stuff. Its pretty simple self-interested
behavior on their part.
It's the latter that holds the key to this debate really. As much as
a trade war would cause American consumers some pain - up
until the point that US companies would start building factories
in other low wage countries, or perhaps even here again (more
on that in a minute) - the real hurt would be put on those
countries economies that are almost completely dependent on
US citizens consuming their product output.
IF we were to change that pattern - via legislation or longer
acting (and highly unlikely) economic processes - the fact is
these countries' own domestic markets would be much too small
to absorb the loss. That's even true for China right now. Despite
it's huge numbers, the people there don't earn very much on
average, and thus the domestic market for Chinese produced
goods is no where near the size of the market they have with us.
Personally, I have nothing against a person in China making a
living, even if that living is made by selling things to us. The
Chinese people are warm and intelligent, and they deserve to
have some success after years of suffering under Mao. One
problem I do have is that the Chinese government is a still a
direct descendant of Mao - it is a totalitarian system - and is
simply using the largess, gained from capitalism and this
imbalanced trading system we have in place now, to bulk up
their economy/military for the purposes of making the Asian
world march to their tune. For better or for worse, that is their
only goal for the moment.
The second problem is that we ourselves are at risk of becoming
the next Spanish Empire. Like them, we make money hand over
fist yet do nothing productive with it - like investing in domestic
industry, effective social services for our people
(eductaion, health care, retirement), more efficient use of energy
and resources, , improving infrastructure ... I could go on. Spain
made their cash by mining the Americas for gold and living the
high consumption lifestyle - we do the same, just by 'mining'
financial and currency markets for all their worth. And, just as
the Spanish had some good times for a while under that
economic regime, but in fact were allowing themselves to be
'hollowed out' from within, the US today uses much the same
trade and fiscal practices and seem to be running that same risk
as a result. The Spanish were eventually kicked hard to second
class status by the much more industrious British. My fear is
that, thanks to our multinational companies' greed, our
government's abdication of actually protecting our national
intrests, and our citizen's complacency about all of the above, all
are combining in a perfect-storm-scenario that will lead to the
US repeating that well-understood historical pattern.
How about this for a prescription: A trade policy favoring
democracies over totalitarian regimes (by tariffs if necessary), a
fiscal policy that gets back to a Clinton Era balancing-of-the-
books, and government action in improving our human capital,
our infrastructure, and inducing business to invest in plant here
- all of this should be combined into one comprehensive policy.
As for 'free trade'; it should be conducted with free societies and
free governments, if it is to be conducted at all. We don't owe
the Chinese politburo anything, but policy actions of the type
I've just described may in fact help the Chinese PEOPLE aspire to
more representative government, or at least stimulate their own
domestic economy since ours won't be there as a substitute.
And it should do nothing but provide the American people with
a much sounder economic base as well.
What kind of research and data collection have you done over the years to support your claim "China Benefits More From Free Trade Than US Does"?
quote: "How about this for a prescription: A trade policy favoring
democracies over totalitarian regimes (by tariffs if necessary)"
You obviously and desperately need a dose of reality check if not a trip back to high school.
(1) The U.S. is NOT a democracy in the true sense of the word. (one needs a really sharp mind plus serious training in history and philosophy to understand that)
(2) Democracy (in its pure form or otherwise) is NOT necessarily superior to other forms of government. (Hitler was democratically elected. In fact, percentagewise he had far more support from the population than GW Bush has ever had here in the U.S.) Your sense of moral high ground in democracy is not only naive and unwarranted, but dangerous as well.
(3) Free trade, as a practice established by countries around the world, is a commercial endeavor. You are mixing up politics and commerce like GW Bush's mixing up college drinking and getting an education.
(4) There isn't free trade between China and the U.S. YET. OK? You are embarrassing yourself.
http://news.ft.com/cms/s/d653a6aa-b062-11d9-ab98-00000e2511c8.html
"China yesterday ignored demands from finance ministers of the Group of Seven industrialised countries that it immediately adopt a more flexible currency regime."
below: The Chinese government has no incentive to crack down
on piracy, as the practice presently does nothing harmful to
them. In fact it confers the advantage of easily helping build
their economic base (particularly in technology and
manufacturing).
http://www.slate.com/id/2116629/
-JDM
- Long story short...
- by culture_of_one April 20, 2005 2:40 PM PDT
- Trade barriers don't work!
- Like this Reply to this comment
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(22 Comments)-JDM