This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.
I've been focusing on the Chinese currency manipulation problem because the Obama administration is supposed to make its twice-a-year declaration on this on April 15. But even if this problem is addressed as it needs to be, keep in mind that it is just one piece of the larger problem of Chinese trade policies.
In a post the other day I listed the main unfair advantages China uses to its advantage:
1) Currency manipulation. China "pegs" its currency at a very low, or "weak" rate, so goods from China cost up to 40% less than they otherwise should.
2) Labor-rights suppression has lowered manufacturing wages of Chinese workers by 47% to 86%.
3) There is massive direct government subsidization of export production in many key industries.
4) China allows environmental degradation that ends up affecting all of us.
5) Intellectual property theft and piracy mean that American products that could be sold are stolen instead.
6) China has a number of policies that block U.S. firms from market access.
It is necessary to bring their currency to market rates, but this is not all that must be done to bring trade into balance. It helps, it doesn't fix it.
All of these things that China is doing are collectively called a national industrial policy. China has one. We don't. China's share of the world's business has grown exponentially because they have and follow a national industrial policy. Ours has declined dramatically because we don't. I'm trying to drop a hint here, but for those in Washington who aren't following let me spell it out more clearly: America needs to develop and follow a national industrial policy.
One more thing, Senators Graham and Schumer have introduced a bill, S. 295, that will "level the playing field" with China.
Specifically, the amendment allows for a 180 day negotiation period between the US and China to revalue its currency, if the negotiations are not successful, a temporary across the board tariff of 27.5% will be applied to all Chinese products entering the United States - a penalty that corresponds to their estimated currency advantage.
It's time to call the President and your member of Congress, and tell them to let the Treasury Department know that they need to declare China a currency manipulator. And ask them to support the Graham-Schumer bill.
When you call, you can use info from this report by The Alliance for American Manufacturing and Economic Policy Institute titled, "Unfair China Trade Costs Local Jobs." Accompanying the report is a website with an interactive map that shows job losses to by state and Congressional District:
Also, look at CAF's breakout page on the China trade problem: On Jobs, China Has Us In The Red
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This isn’t a jobs issue. What remains of US manufacturing doesn’t compete with Japanese-Korean-Taiwanese-Hong Kong-European-American manufacturing in China in any significant way. Sure, there are a few T-shirt weavers and bunk-bed builders left in North Carolina, but why punish less well-off American consumers because those producers didn’t upgrade their productivity?
Then there’s the totally unsubstantiated claim of a “47% to 86%” (which is it?) reduction in Chinese manufacturing wages . . . which, by the way, have been rising very sharply in the real world. Don’t bother going back to his earlier post, since the numbers aren’t documented there, either. Pure fiction.
It isn’t a currency manipulation issue, either. The US dollar bought 6.85 renminbi in Jan-Feb 2009, and 6.84 in Jan-Feb 2010. That 0.16% appreciation in the renminbi occurred as US exports to China rose 17.8% this year, and imports from China rose 9.3% (both numbers are US data).
For reality-based observers, the reason China has a large trade surplus with the US is because the US has been moving out of manufacturing for over 65 years, mainly through under-investment; and most of North-east Asia’s trade 1980s and 1990s surpluses with the US have been relocated to China in this decade.
http://business.rediff.com/report/2010/apr/02/india-plugs-cash-and-carry-policy-loopholes.htm
Here are the facts:
US manufacturing output was twice as high in 2007 as in 1980;
The share of the workforce employed in manufacturing peaked in the mid-1920s (when it was around one quarter, meaning that even then around three-quarters of the workforce was employed in services and agriculture);
Manufacturing peaked as a share of the entire economy in 1953, when it was less than 30% of the economy, meaning that even then around 70% of the economy was services and agriculture;
The share of US imports that come from East Asia (including China) was smaller in 2007 than it was in 1994 (when China fixed its currency). China has simply partially replaced other East Asian countries as a place of final assembly;
The middle class (household income between $35,000 and $75,000 in real 2007 dollars) shrunk from 1970 to 2007 (from just over 40% of households to just over 30% of households). So did the lower class (household income below $35,000). The upper class (household income over $75,000) rose from less than 20% of households to over 30%.
Might I suggest you read http://italy.usembassy.gov/pdf/other/RL31032.pdf, http://www.fas.org/sgp/crs/row/RS21625.pdf and http://www.fas.org/sgp/crs/row/RL32165.pdf.
Before you go calling the kettle black, perhaps it would be wise to consider the shenanigans of the various "pots" in the western financial world. I refer to the manipulation of a historical "currency", i.e. gold. And consider the in apparent involvement of the US government and the various big banks that seem to own said government. The link above gives an interesting outline of what GATA has been saying for years and now has a "whistleblower" to back it all up.
If the US label China as a currency manipulator, they WILL respond. They hold the T-bonds hostage and don't think that the Chinese won't use it. Anyone remember the Korean War? Everybody said, the Chinese wouldn't enter that war because it would be suicide to fight against the US.
Today, everyone is saying no way will the Chinese sell the T-bonds because it'll hurt them as much as it hurts us. The Chinese don't bluff, they will collapse the US economy if they feel they are being back into a corner. So show them a little respect and negotiate with them instead of threatening them.
The Chinese are manipulating their currency. If they were not, they could let it float and it would remain where it is. But they don't. They keep it pegged to keep it from rising vs. the dollar.
First of all, don't forget the old WW2 posters like Rosie the Riveter: 'We Can Do It!" Or the one of Uncle Sam stripping off his shirt to go into a fist-fight.
Secondly... no matter what else you do, you MUST produce goods. As in, "things." You may need to interpret data, yes, but even then you must have "things" to interpret your data _with_. (Right now, all that nifty electronic gadgetry is made in China.)
The problem, though, is not China ... it is "U.S."
It's a huge waste of time to be belly-aching in the general direction of one of the most ancient countries on this planet, whining that they are "unfair" to us when all that they've ever received from us is (lies, damned lies, and ...) bank notes. It's rather embarrassing for the leaders of the "We Can Do It!" nation to have lost their *CENSORED*s.
You have to ... have to ... roll up your shirt-sleeves and COMPETE. You have to rebuild your ability to "make things," and to do it (of course) better than anyone else on the planet has ever done. The whole world saw the price that China has paid when they had to shut down Beijing to have the Olympics there (and why some athletes still refused to breathe the air).
"We Can Do It!" And it's high time we got started.
Wow, wouldn't that be nifty?!
Problem is that the outflow from the chamber of commerce rest rooms would overwhelm the sewage treatment plants, because creating an industrial policy is 'p1nko,' 'commie,' and could jeopardize the world's wealthiest people's fortunes! It'd be worse than electing a non-white person President.
Imagine not letting economic Darwinism run rampant - how would we suppress wages and erode our standard of living? Just crazy talk... crazy.
Seriously, rich people can always be trusted to do the right thing and elected officials are mysterious and bad. We need to get back to the basics and return to Feudalism. Those were simpler times when the wealthy didn't need to work so hard to purchase and control governments. I'm sure the militias would like that approach, too.
OK, sorry.... any more sarcasm and I think I might pull a muscle. But sadly, we DO need a comprehensive policy (including corporate tax policy) - though I doubt this administration has the courage to take that on.
America is giving China 2 choices::
Either support strong Sanctions on Iran or you get the Graham-Shumer Bill....
With all of the excess dollars China has... if the did normalize their currency it would automatically be worth less by 40%. With a 27% tariff... it's almost the same thing.
But will Americans, who have grown accustomed to the China Cheap Chit in a Dollar Store near you ; accept the increases in prices and the sparked inflation.
The problem isn't even "free trade." It's that we have no "trade" at all. We import things but ship nothing of value in return ... only (some) raw materials and parts.
The root cause of the problem, as I see it, is that any real system of trade utterly depends upon redundancy. There MUST be alternative sources -- DOMESTIC sources -- of supply. Trade can only occur among equals.
Furthermore, trade can only take place in an environment of strict financial honesty.
We listened for too long to Rumpelstiltskin. When things began to go wrong, we began to lie. We're lying to other countries, lying to our own people, and lying to ourselves. But there is no substitute for truth.
It is insane to source something from 10,000 miles away when not too many years ago your supplier was across town. Don't talk to anyone about "homeland security" when you are totally reliant upon a foreign nation for ... ummm ... your underwear. (And by the way, you are!)