Enough already!
Prior to the G-20 meeting in Toronto in late June, the Obama administration decided that the 20 leaders would mostly focus on Europe because "China had announced plans to allow the yuan to rise". Having personally railed against China's unfair trade practices for the better part of the last four years, including its outrageous 40% or so undervaluation of the yuan or renminbi, as I said back then, this was like being told to forget about a very bad hangover.
The proof that this particular hangover continues, however, is that since China's promise to President Obama to let the renminbi float to its 'natural level', despite a pitifully low 0.8% rise against the dollar within the first two weeks after the promise was made, China has recently purposely pushed the yuan exchange rate back to its June level. At this rate, China will take longer to remedy its currency manipulation than it takes for Hell to freeze over.
When it comes to speaking at once from the heart and the gut on behalf of American workers, there's no one better than Senator Sherrod Brown (D-OH), who said back in June and several times since, that China is great at gaming the system on trade and thus the President "shouldn't just check the box and view China's currency abuse and its numerous other trade abuses closed". Even more pointedly, the Senator and ten of his colleagues, in a recent letter to the President, have elaborated on their views of China's persistent trade abuses by saying that the administration's focus on growing gross exports should instead have been on net exports (i.e., our trade balance) and in any event it "must not and cannot come at the expense of ensuring a fair playing field for our manufacturers."
The eleven Senators, I should add, also decried "the Department of Commerce's unwillingness to use the trade enforcement authorities and tools it has readily available to defend American manufacturers and workers against unfairly subsidized imports." I and many others have made this point for years, and it is especially nettlesome that it is now being made against the non-actions of the Obama administration. I would go even one step further, however, and move trade enforcement to a fully enabled and funded office in the Justice Department -- trade negotiation and the enforcement of agreements are distinct activities requiring very different skills, and enforcement best belongs with 'enforcers', not with those who negotiated the trade agreements.
President Obama's current hide-the-pea approach regarding China trade is of course in complete contradiction to Candidate Obama's promises throughout the '08 campaign, which he most notably advanced in a speech he gave to the United Steelworkers on July 2, 2008. In that speech he said: "Change is knowing that for trade to work for America, it has to work for all Americans; that we have to stand up to countries that are manipulating their currency or flooding our markets with subsidized goods; that it's wrong to have a "one-size fits all" trade policy that treats countries as different as China and Mexico as if they were the same; and that our job ends not when a trade deal is signed, but when it's enforced." Mr. Obama's tolerance today of China's trade abuses also contradicts the assertion of Tim Geithner in his January 2009 confirmation hearing to become Secretary of Treasury that China is a trade cheat and a "currency manipulator".
The President's views also run counter to the views of nearly two-thirds of Americans who, according to the latest polls, are only somewhat or not at all confident that the administration has the right domestic and trade policies to improve the economy and believe that:
It's important to look at what's happened since the Toronto meeting in June to understand the absurdity of the administration's continued aversion to confronting China:
When China wins in trade, as it now does every day, it's really only the U.S. which loses. In fact, for the last several years the correlation has been almost dollar for dollar. In June, for example, the overall U.S. trade deficit in goods and services surged 19% to a 21-month high of $50 billion, and of this figure, 53% or $26 billion was with China, which matches, almost to the dollar, China's own overall trade surplus during the month of $28 billion.
Obviously, China is not our only problematic trading partner. With our neighbor Mexico, for example, the U.S. has an expanding trade deficit of around $6.0 to $6.5 billion per month, while in June our deficit with the European Union ballooned by 26% to $8 billion. Yet China's enormous positive trade balance with the U.S. alone reduces each year our country's GDP by more than $400 billion or nearly three percent. When the U.S. reorders and reforms this relationship, we will be sending a strong message to all nations that it's finally, really time for them to trade fairly with America. No more unbridled 'free trade' with anyone - now only 'fair free trade' with everyone.
Oil imports and consumer goods from China account for nearly 100% of America's trade deficit, and while Congress still has to decide what it has in mind for energy reform, the solutions related to trade are simple and obvious, so obvious in fact that Candidate Obama pretty much laid their principals out when he addressed the Steelworkers on that sweltering day in July 2008. Going forward, it is imperative - for financial, employment, competitiveness and national security reasons -- that the administration and Congress:
These policies aren't protectionist, anti-globalization or un-American -- they are simply good, necessary, balanced and reciprocal. Absent them and related actions, however, including securing that "fair playing field for our manufacturers" which the eleven Senators just demanded, China's massive foreign reserves (mostly of U.S. dollars) and its pervasive global mercantilist agenda will have even more dire repercussions for America's competitiveness in the world, our overall economic well being, and our national and military security.
President Obama needs to listen to the American people and treat this entire issue more urgently. If he does not, then his relationship with workers and voters will be even more challenged than it is now. The United States must be as aggressive in defending its economic interests as China is in advancing its own, and if the administration won't act, then it is time - perhaps already past time -- for Congress to hold hearings this fall and provide badly needed legislation and oversight.
With the exception in the short term of large-scale investing in infrastructure, nothing would be as helpful in putting millions of Americans back to work as meaningful China-related trade reform.
Leo Hindery, Jr. is Chairman of the US Economy/Smart Globalization Initiative at the New America Foundation and a member of the Council on Foreign Relations. Currently an investor in media companies, he is the former CEO of Tele-Communications, Inc. (TCI), Liberty Media and their successor AT&T Broadband. He also serves on the Board of the Huffington Post Investigative Fund.
Zhu's back! See his hanranguring, harrassing comments on another great China trade post
http://www.huffingtonpost.com/usha-haley/the-pandoras-box-of-trade_b_695662.html
Or is it 66 - which alias are you spotting today? Thank you for the unsolicited endorsement !!
I think how these open forums work is that you present facts and exercise your persuasive powers, and hopefully get that imperceptible nod or two once in a while. It never occurs to me how these comments can get to the level of "hanranguring , harassing".
There is no doubt that the American economy and jobs are the most important topics on everyone's mind today, and rightfully so. But it is also clear that trying to beggar thy neighbor is not the way to move ahead: (a) it does not work, and will not bring back jobs to America; and (b) protectionism begets same, and will block America and Americans from profits and opportunities in the best performing economy in the world today.
On the other hand, cumulated Chinese direct investments in the U.S., due to the hostility shown by the American Congress, has been only US$3.1 Billion by June 2009.
If the hostility continues, the climate for American companies operating in or selling to China will also deteriorate.
Having just lost your $50.000 a year job to someone able to perform the same task from another region of the world for only $5.000 (remember "comparative advantage"?) let us assume that you
are now sweeping the splendid streets of New York at $10 per hour.
You're lucky - I don't think some giant robotic "broom-equipped arm" reaching into New York from Asia will be trying to put you out of business at $2 an hour...
Shocking news from India - I'm told that my $5.000 per year contractor has just sacked his $3.000 per year sub-contractor and replaced him with a Nigerian economics graduate who is happy to do the same job for only $4 per day! Ehmmm?
Guess what - the Nigerian guy is bright as a button... He could run circles around you with basic phrases like "it's not a zero sum game", "comparative advantage", "that's capitalism", "free trade multiplies the world's wealth", "let's lift the millions out of poverty" etc...etc... Unbelievable!
As for the poor $3.000 per year Indian sub-contractor who has lost out to someone doing the same job at $4 per day - well, he can start sweeping the streets of a major city... Just like you.
Sincerely,
Mark Gendala
Melbourne, Australia
www.ssotu.com
Free trade, or basically letting Red China, etc. take our manufacturing, is ruining the US !
While the Dem's have some responsibility for this it is mostly the GOP like Bush and those
in Congress, like nasty John Boehner, that have pushed this foolish policy.
Manufacturing is important in so many ways, and you'd think the right wing would know
it's critical for defense if we ever need it against China or other nuts.
Call or write Congress and demand real FAIR TRADE .....
Even though the trade numbers are $300B vs. $70B (Imports/Exports w/ China), more profits are made on those exports by American companies than China's exports to the U.S. Also, since a large portion of the "exports" from China are actually done by AMERICAN companies that happen to be producing in China, if you add in those profits also, the relationship is clearly ONE SIDED, with the American side making more than 80% of ALL profits in the trade relationship.
So the first thing is to balance that more FAIRLY?
no, I'm not right wing, I'm left, but anyone can see their goal is domination.....look how they treat Chinese who just want to organize for exercise.....it's seen as "political" and they get jail and torture !!
Where we get to stop any imports we don't like and they have to take everything we make.
Prior to the recession (which had nothing to do with China), US manufacturing output was at an all time high. Twice as high as 1980. Three times as high as 1970. Check out http://research.stlouisfed.org/fred2/series/OUTMS.
http://www.nytimes.com/2010/08/26/world/asia/26kabul.html?_r=2&emc=na
To quote from the above article:
"An American official said the practice of paying government officials was sensible, even if they turn out to be corrupt or unsavory. "
My question is where can I go to get my share of this "sensible" money?
Face reality.
Imagine I am employing you to send out your exquisite emails as part of my $2 million world-wide contract to promote globalization and free trade.
I'm paying you around $50.000 a year as we operate from the US, where the cost of supporting an average family is say $600 per week...
But you've got a problem - it's me, your employer...
See, one day a fellow from India tells me that he is familiar with your work, has memorized all your excellent arguments and can now send the same anti-protectionist, free trade, globalization emails throughout the world for only $5.000 per year - a lot of money in some parts of India.
So, you're fired - after all I want to save that $45.000 per year... Soon you've lost your house, perhaps even your family had left and you end-up on a park bench. Why?
Were you turning-up for work drunk? No...On drugs? No... Late? No... Were you insubordinate or lazy?
Never... In fact, I sense you would have been quite a model employee.
See, your problem was that living in a country with an average cost of living of $600 per week, you
could not compete with a person doing the SAME WORK from a country with an average cost of
living of $60 per week. Nobody can - I suggest nobody should have to.
Sincerely,
Mark Gendala
Melbourne, Australia
Digging and processing dirt in general, and also building the infrastructure for exporting said dirt, cannot be outsourced, and could be a very good and long term source of jobs creation.
Mining's gross value add (around 7% of GDP) is smaller than that of manufacturing (around 9% of GDP) and is absolutely dwarfed by services.
Australia has had 17+ years if uninterrupted economic growth and did not suffer a recession during the global financial crisis.
Unemployment is around 5.5%.
Australia also has a current account deficit to rival the US. But they don't lose much sleep over it.
http://www.businessweek.com/magazine/content/10_37/b4194044972388.htm
It looks like the Aussies are very upset about Chinese investment.
Sound familiar?!?!
It is not the zero sum game you think it is.
China and India can rise at the same time as the US remains the richest country in the history of the world.
The current bad times were caused by the recession, which was completely homegrown and had nothing to do with China or India.
Americans should have to compete against everybody in the world. That's capitalism. That's the free market. If another country has a comparative advantage in something then they should do it. We should buy the product off them and use our resources to produce those things in which we have a comparative advantage. That is basic economics. It's the same thing that happens between New York and California.
And, by the way, the reasons why Indians and the Chinese get paid low wages is because they are not as productive as Americans.
In 2009, total spending in the US by consumers, businesses and governments was around $14,600bn - http://www.bea.gov/national/nipaweb/TableView.asp?SelectedTable=5&ViewSeries=NO&Java=no&Request3Place=N&3Place=N&FromView=YES&Freq=Year&FirstYear=2007&LastYear=2009&3Place=N&Update=Update&JavaBox=no
So, about 2% of US spending was on products from China.
Why on earth does Leo get so worked about about a lousy two pennies in the dollar?
The trade deficit reflects the difference between domestic savings and investment. No more and no less. In the recession, savings went up and investment went down. The savings/investment gap narrowed and so did the trade deficit. Unemployment went through the roof. Now things are picking up so the savings/investment gap is widening. So too goes the trade deficit. And unemployment is coming down.
It's basic economics that Leo seems incapable of understanding.
Nouriel Roubini puts the odds of a double-dip recession at 40%.
http://www.bls.gov/news.release/empsit.nr0.htm
"Both the number of unemployed persons, at 14.6 million, and the unemployment
rate, at 9.5 percent, were unchanged in July. "
http://www.gallup.com/poll/142169/Underemployment-Mid-August.aspx
"Underemployment, as measured by Gallup, is 18.3% in mid-August, essentially unchanged since the end of June. Underemployment peaked at 20.4% in April but has not been able to break below its current level this year."
45.25% of the U.S. goods deficit comes from its trade deficit with China.
That is money that leaves the U.S. economy.
When they lend that money back to us, we pay interest on it and even more ends up leaving the U.S. economy.
http://www.census.gov/foreign-trade/statistics/highlights/annual.html
The 2009 goods deficit ($501.2 billion) was the lowest since 2002 ($468.3 billion).
The 2009 deficit with China ($226.8 billion) was the lowest since 2005 ($202.3 billion).
http://www.census.gov/foreign-trade/top/dst/2009/12/deficit.html
In any event, the recession (which caused the unemployment) has nothing to do with spending two pennies in the dollar on stuff from China.
As I stated, the trade deficit reflects the imbalance between domestic savings and investment. Nothing more. Nothing less. If you want to bring down the trade deficit then increase US savings rates, starting with the federal budget deficit.
The other option is to plunge the economy into a deep recession, choking off investment. Oh, we already tried that. That's why the goods deficit and the deficit with China were low in 2009. When the trade deficit fell by 40% in 2009, did that indicate good or bad economic times? What happened to unemployment? See http://www.census.gov/foreign-trade/statistics/historical/goods.pdf
See http://italy.usembassy.gov/pdf/other/RL31032.pdf for a good explanation of what causes the trade deficit and what can be done about it.
Hey, thanks.
“Before you enter, would you mind answering a couple of questions?â€
Um, OK, why not?
“Great. Would you support buying locally made products, even if they cost a bit more?â€
Uh, sure.
“Hmm. Do you try to avoid imports whenever possible, and buy things that are Made in America?â€
Yep.
“Oh. Well, I’m sorry but I'm going to have to ask you to leave. We at Mal-Wart have a policy of not doing business with protectionists. May I suggest you try Saks Fifth Avenue or Macy’s, instead?â€
Huh?
We suggest the best immediate use of your obvious energy would be to focus on contacting your political representatives that our free society allows. Using http://www.congress.org/ makes it easy as all you need is your zip code and all their contact information is there.
Tell them your views on Communist China's negative influence on American society & economy .... and demand they take action to stop it. Assure your representative that you & a large number of your local family and friends will be following their actions as well.
Again, don't waste your energy ... your time is too valuable.
The so called fair trade with China is not working for America at all and everyone knows that.
Our trade agreements were done in good faith that it would be somewhat fair and balanced for America and that is not the case .
We are loosing manufacturing jobs in the millions and are being overwhelmed to the point we everyone is understanding most of these millions of jobs will never come back.
This trade agreement does not work we tried and China does know that.
It is time to change the agreement NOW before unjust hate and negative conversations becomes the norm for many Americans against China.
Republicans and Democrats must sit down and start a discussion with economist here and globally and seek a better solution.
There are many answers but we must move forward ignorance prevails and spews the foolishness we want NO part of directed at China.
Now it is up to all of you to E-mail and call the White House and your Representatives and let them know you want them to begin discussions now about the unfair trade with China.
China has done nothing wrong they are living by the laws we are fools now because it is not working.
GET INVOLVED NOW !
I sone how doubt that they are going to personally sacrifice millions of dollars a year, because Americans are out of work. Really, the onlything left to us is the boycott. But people just keep buying that Toyota and driving to WalMart. Others, go to WalMart when they get off work for half pay at the Toyota factory, or the Changyung factory, or the Seimens factory, or the Rantasori factory, or the...
We are a colony again.
http://money.cnn.com/galleries/2010/autos/1006/gallery.american_made/index.html
10 'most American' cars - 1. Toyota Camry (1) - CNNMoney.com
The American workers of Toyota, et.a. don't get paid what UAW workers get, or used to get, but they make more than the Mexican workers building Ford Fusions, about $ 25/day.
As far as Wal-mart, most of the people who shop there cannot afford to buy American even if they wanted to.
I'm still finding people who have never heard of offshoring, relocation of manufacturing, or forces destroying jobs, thanks to the mainstream media.
We who know about job destruction need to be modern-day Paul Reveres.
China has been America's biggest BENEFACTOR for the last 20 years, bar none. Year after year, China ships over hundreds of billions of dollars' worth of life's little luxuries, 99% of which are of great quality and AFFORDABLE. As a direct result, America enjoyed two decades of almost no inflation, greatly improved living standards (especially for the lower income folks), and rising asset prices all around. There are of course product defects in some products - no different from America's sending chemicals laden corn and rot infested wheat, and even mad cow implicated beef products to China. Unlike the American exports to China (which much higher margins such as the Boeing airplanes) - Chinese goods sold to American typically has very low single digit margins. Despite the so called trade imbalance, America made more profits from the trade than China did.
More, China provided most of that meager profits back to America in low interest loans. As a result, Americans had money to spend, and life was good. You should note that for most of that 20 years there was no unemployment problems in America - you just can't blame the jobs problem on China.
Despite this largess from the Chinese people, we hear the bellyache of the ingrates. You know, you may just get what you wish for - imagine a consumer market for you WITHOUT affordable, good quality Made in China goods.
As long as Americans get fatter
As long as Americans get dumber
As long as the GOP sells out the middle class
As long as 20% of the population believes Moses rode a dinosaur
What did you expect... we have been entrenched in regression since Reagan. Of course we will wind up as someone's doormat