President Obama seems determined to make China's trade policies a major theme of his reelection campaign, and if so, I say bring it on. China's predatory trade policies have been a key factor in the weakness of our overall economy.
In the space of one generation, the Chinese have leapfrogged from an economic backwater into the front rank of world economic powers in large measure by taking advantage of our ideological naivety and propensity to self-indulgence. On an equal purchasing power basis, China's GDP in 2010 was $10.1 trillion, compared to our $14.6 trillion, and well ahead of Japan's $5.4 trillion. Of course, many countries have reason to complain about the Chinese, but most of their gains have come at our expense.
By naivety, I refer to our childlike adherence to free market economics even when it is abundantly clear our trading partners are taking advantage of us. We afford the Chinese full access to our domestic market even as they closely limit our access to theirs. We turn a blind eye as they subsidize their own industries, engage in wholesale piracy of our intellectual property and manipulate the value of their currency to gain competitive advantage for their exports. All of this may seem good and natural to the academic writers who contribute op-eds to The Wall Street Journal, but it has had a devastating impact on our manufacturing infrastructure.
By self-indulgence, I refer to our childlike insistence of living at a higher standard of living than we can afford, even as we push the national debt to unheard of levels. The Chinese invest vast sums in U.S. currency and credit instruments which serves both to depress the value of their currency and also to encourage our fiscal profligacy. Year in and year out, we dare not brand China a currency violator lest the Chinese stop funding our self-indulgence.
Lately, China has been pushing the value of its currency down even further, and expanding its predatory trade practices by curtailing exports of rare earth minerals so vital to modern technologies. By an accident of nature, China has a major share of the earth's rare minerals (97 percent) and is not shy about using them as a bargaining chip to further its economic interests.
It is high time we recognized the China challenge and rose to meet it. We should begin with no-nonsense economic policies based, not on free market ideology, but rather whatever it takes to grow our exports overseas - just like China does to such great effect. And we have to bring out deficit spending machine under control, beginning with serious reforms of entitlement programs, to reduce our need to borrow vast sums from the Chinese.
I would like to see the Presidential candidates champion a coherent trade strategy that includes an aggressive campaign against China's currency manipulation, piracy of intellectual property and discrimination against U.S. exports. That campaign would be both interesting and worthwhile.
Jerry Jasinowski, an economist and author, served as President of the National Association of Manufacturers for 14 years and later The Manufacturing Institute. Jerry is available for speaking engagements.