The vote by the U.S. Senate to proceed with sanctions to "punish" China for its currency policy is hypocritical and is a further sign of Washington's inability to deal with U.S. economic problems. It is the tendency of our politicians to blame foreign countries for corporate America's inability to compete in the global arena. The endorsement of that thesis by Fed Chairman Bernanke is one more sign that the Federal Reserve is in the wrong hands. At least the US Senate can be partisan when it comes to sanctioning foreign countries.
We have been witnessing a massive relocation of the Western world's production capacity (not just the U.S.) in the direction of emerging markets. It is the result of, and motivated by, the search for profit by Western global companies. They intentionally decided to produce outside of their home market for cost reasons. Blaming China for the ensuing substantial balance of payment surplus is hypocritical.
Are we willing to pay the price for even a limited relocation? Could Apple sell its iPad if it was not partly produced by Foxconn who runs a modern version of a labor camp in China, where 300,000 Chinese workers are cramped on one single location?
We are now seeing a trend towards the reduction of exports by China. However, this is not translated into a drop in imports into China. The only explanation is that, quite naturally, China is at last producing for its domestic market. It is in fact good news both for us and for China. Are we witnessing the first signs that Chinese households are saving less and will join the consumption society? It is too early to draw that conclusion.
With $3,200 billion of foreign exchange reserves, China is the world's largest lender. Not only does the US Government depend on it to finance its deficit, but Europe, more than ever, needs China to invest in Euro denominated assets.
The Yuan increased by 7% this year. Asking for more is not reasonable, especially since the United States have once again neglected the value of the dollar and systematically weakened it. China is losing that 7% every year on its US Treasuries! It is an annual loss of $80 billion! A debtor cannot request a weakening of its debt from its creditors.
We should expect globalization to level off substantial economic differences. The Chinese live on $4,000 per inhabitant. The number for the United States is $ 45,000. This is not an entitlement.
It is perfectly legitimate for China to care about its population. I urge everyone to read Wen Jiabao's speech at the WEF in Dalian last month. The Chinese have chosen to prioritize the welfare of their population. Who can argue with that?
Blaming China is everybody's game. It is a repeat of the United States' Japan bashing. The decision of the US Senate yesterday to "punish China" completely ignores our responsibility in the current situation. It is of course more convenient politically to blame China than to confront corporate America.
We need to get our house in order. Blaming others for our own fiscal indiscipline will not reduce our debt. The West is cruising for slow growth and needs emerging markets to prosper. From the Arab world to the Wall Street protesters, we are seeing a generation who resent our lifestyle based on debt. Our pension problems are insurmountable.
We are at the beginning of a new sharing of power in the global world. We should accept it with seriousness and a sense of responsibility. The alternative is protectionism and war. We are also at the dawn of a new definition of the financial planet.
China is not the problem, but a symptom of the difficulty of corporate America to compete globally. We must invite China to become part of the solution. It is in both of our best interest. And ultimately, it is the right thing to do. As The Economist put it in its front page, until politicians actually do something about the world economy BE AFRAID. Washington has become frightening: whatever the issues are between the US and China, the Senate's move will only exacerbate the situation and produce no results.
Follow Georges Ugeux on Twitter: www.twitter.com/Ugeux
What is killing the US diplomatically is its military stance. To support it, the cost of the war machine has already ruined the economy. The US is heading for the same trash bin that welcomed the USSR.
And yet another version of the US worker should be happy with a bunch of imported junk and a reduced standard of living so the chinese can improve their std of living at the expence of the hard work of our own and our forebears
globalism is a manufactured phenomenon brought to us by bad economic and trade ideology
Did you really claim that our corporations need to compete better? They are making lots of money employing non-Americans...and as long as play by the rules they should. The problem is the rules, our trade policies, need to be changed.
Blaming the trade deficit on fiscal deficit is 180 degrees wrong. It's the other way around.
"since the U.S. uses regular arms sales to Taiwan as a strategic policy to contain China, each time it does so, China can retaliate on the basis of international law and support the U.S.’ sensitive rivals with cheap 'Made-in-China' weapons or related technology."
http://watchingamerica.com/News/125386/effective-weapons-against-arms-sales-to-taiwan/
Unfortunately your dribble hurts people and those people are my people. Americans. Guess what? I love my country "big time". So don't embarrass yourself. With that money in your pocket buy a flight to China and live amongst your beneficiaries who love this character flaw of yours.
The Chinese have been cheating heavily for over a decade and have gotten away with it. America has allowed it precisely because the companies you represent do not want access affected. However, those same companies do not give a damn about the affect their actions are having on America and the standard of living here - and the Chinese do not care either (as you say - they care about their people)... Comparing to Japan? Japan did the same thing back in the 80s - their run ended when we finally developed a backbone and forced them to play by the rules.
China.. Let's see.. currency manipulation... (30-40% advantage immediately in trade)... requiring domestic partnership and technology transfer (cheating at its worse)... and then protecting their market through tariffs and special preferable treatment by government.... no interest loans poured across the markets they are building... etc etc. They need to play by the rules and your bs is just trying to misrepresent the cause as a symptom. You should be ashamed.. our current troubles are caused by a combination of Chinese cheating... and Chinese easy lending... it is complex and you make it sound like China has no blame in this.. they have most of the blame.
China's actions on the world stage keeping it's currency low, workers undervalued and unprotected, since it's greatest resource is a human resource/labor and they can make up by volume what others have to make up for in output, seems deliberate. A corporation may be a person according to law but nobody is an island. China's actions don't appear to take their world partners into consideration. It is appropriate to issue sanctions until they bring their actions into alignment with their neighbors.
China is at a minimum a component of the problem.
Manufacturing of products for sale into the US is cheaper in China even if the currency is not manipulated and even if the wages are equalized. There are large costs associated with worker safety, environmental protection, product safety and countless other areas where it is more expensive in the US. We shouldn't have to allow the polluting of China just to get a cheaper pair of tennis shoes or a cheaper CD player.
Duties are not consistent with competitive markets. My company was founded in the US. My customer base was mostly in China. I enjoyed being an exporter of goods from the US to China. But China kept increasing the duties to a point where my customers demanded cost guarantees that could only be provided by manufacturing in China. Now I have a plant in China for the Chinese market.
I still have my US plant that services Central and South America. And I am opening a plant in Europe. Why do I need a plant in Europe? Duties. Again, the trade agreements allow for significant duties (20% for most European countries for my products) to protect their home manufacturers.
If we can't put fair trade agreements in place, America will never be competitive in the world market.
Also China is buying up resources around the world and rapidly building it's military's forward force projection capability. It's clear that China seeks a new hegemony in which China dictates to the world.
You can disagree about this. But you cannot deny that China is a brutal dictatorship that makes people disappear.
And for those who say it's not about the Chinese working harder.. well 10+hrs/day, 6 days/wk is a typical work week. You need only look at how well the majority of Chinese students from immigrant families perform in American schools to know that many do indeed work and study harder.
For those who argue that globalization is bad.. that US businesses shouldn't move abroad to expand their influence. You're ignorant of the fact that US households are "maxed out" from a consumption viewpoint compared to developing nations like China that have a growing middle class. How many cars and tvs does the typical American middle-class household own? How many more of these same goods do you think businesses can keep selling to Americans who already have 2 or 3 of each?
Will the reversal be true in the future for America? Will the majority of Americans wear Chinese national colors, listen to Chinese pop music, watch Chinese movies, and all desire to learn Chinese?? Heck no!! Even if and when China becomes the #1 largest world economy this scenario would be impossible to imagine.
A clear example is H-1b work visas. Under H-1b US corporations can import foreign workers into the US. So you have Microsoft crying to congress about labor shortages (while at the same time having layoffs), and then importing workers from China and India into the US to replace laid off middle aged Americans.
So enjoy the low prices because your wages are falling to meet those prices! Your wages will fall but the banks will keep getting bailed out and keep your mortgage exactly where it was before H-1b and before free trade. Your families debts are fixed but the government regulates your pay down. That is how it's working.