U.S. export growth to China looks impressive in isolation. But this is a biased and one-sided view -- exports have been overwhelmed by the growth of U.S. imports from China and the bilateral trade deficit, as shown in the graph below.
The idea of "fair" trade is very appealing, whether confronting the plight of autoworkers in Michigan or farmers in the Third World. Unfortunately, it will be only a small part of any trade solution for the U.S. and the world as a whole.
In the absence of any realistic alternative to replace the supremacy of the dollar, it is likely to remain the dominant global currency for many years to come. No other currency is more widely accepted or used.
If we follow current global economic trends to the logical conclusion, most of the money in the world will soon be held by a small group of investors who will hold no allegiance to any nation or ideology.
The world's biggest exporters, led by China, are ganging up on the United States in advance of the G20 meeting against quantitative easing. Free trade and globalization are grand ideas when the playing field is level, but it isn't.
Voters know that punishing currency manipulators, dealing boldly with violations of international trade rules, and ending tax incentives to outsource jobs would help reverse the decline of American manufacturing.
The artificially low Yuan is forcing emerging economies to competitively devalue their currencies and impose damaging protectionist measures. World Bank chief Zoellick knows where this leads -- to a Great Depression.
Robert Gates agreed to hold talks with China next year. Cybersecurity, oil politics, and China's expanding role in Latin America will all be on the agenda. And if Liu Xiaobo doesn't have his 'get out of jail' card by then, he might be too.
Why would China so brazenly challenge the world's economic powers? Because the country's leaders know what our leaders are only beginning to understand -- that China would probably win a global trade war.
Whether a flat tariff is ultimately the best trade policy for America is an open question, but it is worth considering the possibility simply because it sets a baseline, the "least we can do," for a solution.