"Vandalism" screams the cover of the Economist, depicting Obama leaving an ice pick in the tire of free trade. (No racial overtones there; after all, as the president explained, he was black before he was elected.) When the president imposed tariffs on Chinese tire imports, following the ruling of the independent International Trade Commission, the free trade establishment went ballistic. David Rockefeller took to the op-ed pages to warn of the threat of surrendering to the protectionist instincts of his union allies. Editorialists from the Washington Post to the New York Times sternly rebuked the president for deviating from the free trade gospel. Surely, the heavens will tremble; trade wars impend; the apocalypse of Depression era Smoot Hawley tariffs are about to descend upon us.
Nonsense. Obama isn't descending into the old trade debate. Remarkably, he has added another explosive issue to his already crowded agenda: that of transforming America's global economic strategy. At the G-20 meetings in Pittsburgh, he succeeded in gaining international approval - including that of the Chinese - for a continuing review of the unsustainable imbalances in the global economy. The decision on Chinese tires may just be the president suggesting that he may put some teeth into digesting that change.
Like health care, climate change, and financial reform, the challenge is inescapable. America can't go back to borrowing $2 billion a day from abroad to act as the world's consumer. Americans can't go back to spending more than they make, maxing out credit cards, treating their homes as an ATM machine. Those days are over.
That means, as the president has said, the US must spend less and invest more. We must produce more at home, and export more. If that is the case, then inevitably the surplus countries, the mercantilist nations that have used export-led growth to drive their economies -- China, Germany, Japan and others -- also have to change course. They have to save less and spend more, import more and export less. If they don't generate increased demand while the US cuts back, then the recession will return with a vengeance. This entails wrenching changes in public policy and private attitudes. But what's clear is that the old imbalances were and are a constant peril, supplying the kerosene for the contagion that laid waste to the global economy.
At Pittsburgh, President Obama insisted that the leaders of the world's major economies make this a centerpiece of their agenda. He exacted an agreement -- despite the stated skepticism of Germany's Chancellor Angela Merkel and China's leaders -- on a framework for "strong, sustainable and balanced growth." The G-20 countries agreed to set priorities, report annually on their own domestic policies, and monitor one another, with the IMF serving as an independent goad.
Cynics dismissed the agreement as toothless. There's no enforcement mechanism except naming and shaming (which hasn't exactly proved effective in dealing with China). The IMF has been warning about these imbalances for years to no effect. China and Germany vigorously resist any external questioning of their national economic policies. Merkel dismissed global imbalances as an "ersatz" issue. Tu Jianhua, director general for international trade in the Chinese commerce ministry, tweaked the West, noting that "I'm not sure that one country's leader calling another to import more represents market practices." The G-20 couldn't even get a murmur concerning currency manipulation (a central Chinese strategy) in the document.
The cynicism may be deserved. But here's where the Obama decision on tire tariffs has bite. As the free trade zealots admit, tire imports barely register on US-China trade accounts. The decision is important for its symbolism, not its substance. That's why the free trade lobby howls about protectionism.
But the president may well have moved beyond the screamers to an adult discussion. He's telling the Chinese, these staggering imbalances can't continue. We should both adjust, preferably in a coordinated fashion. But the US is serious about changing the game. If we can't do that cooperatively, then we'll find a way to do it independently.
Now, this is a dance that makes the tango look demure. The US is the world's largest debtor. We're telling our leading banker that we're changing our wastrel ways, so they'll need to find a different way to prosper. But the US is hardly in a position to dictate policy to the Chinese. They've already sent tremors through the bond market by raising doubts about the US finances.
Will Obama succeed? It's hard to know, for this transformation will require major reconstructive surgery to economies at home and abroad, compared to which health care reform is a mere face lift. In the short term, consumers, sobered by their losses in the Great Recession, are tightening their belts on their own. Savings by US households have soared to four times the rate of 2008 before the financial collapse. Chinese exports are down 23% from last August. But once the economy recovers and people go back to work, Americans may well go back to borrowing and spending. And we know that Wall Street has already reopened the casino.
One thing is clear. As in health care, energy, and financial reform, Obama has once more addressed an inescapable challenge that his predecessors ignored. He has once more aroused the ire of one of the most powerful lobbies -- in this case, the global corporations and the free trade zealots that have dug this country into a deep hole. Once more, he has done so cautiously, in small steps, ready to compromise, hoping not to offend. Once more, he's invited Americans -- and the world -- into an adult conversation about what is to be done. And once more, he's likely to be greeted by hysteria and insult, graphically illustrated by the Economist's disreputable cover.
Gilbert B. Kaplan: There Will Be No Trade War
If you were going to start a trade war against the United States, it is unlikely that your first salvo would be on chicken parts, or as the Chinese rather charmingly first announced, on dorkings.
What the US government needs to do, I believe, are, (a) making sure that the Chinese market stays open to world goods (I believe, developed countries have tried to increase their market access to developing country markets through WTO negotiations over time); (b) correcting malfunctioning US domestic policies including financial markets and health care industries that increase US business costs / product prices and undermine the competitiveness of US goods in world markets; (c) correcting US consumers’ falsified perceptions of their purchasing power and over-blown consumption pattern through excessive credit card usages; and (d) US businesses working hard to improve the competitiveness of their products in world markets in terms of quality, design diversity, product performance, etc. (US products have huge market potential in foreign markets if they conduct proper market research and understand what foreign consumers want; why did US automakers fell near collapse, which have been decades-long trend ? They didn’t even understand their own domestic consumers ! Those manufactures just offered consumers what they liked offer; they do the same thing in world market !)......
China is not rich country yet. The majority are in poverty. Chinese imitating US lifestyle/consumption will be matter of time, when the majority are not poverty-driven or Chinese government adopts US financial policies, let Chinese live on credit cards.
Then what should we do? To heal the wound of devastatingly huge US trade deficit with China, we should drive Chinese consumer to be consumption-maniac, like Americans, and import US goods as much as possible.
But for world environmental and economic peace, we should educate Chinese, or hire international special interest lobbiests to manipulate China's public opinion that "Consumption is BAD."
Which one to choose?
It's as tough as "Health Insurance Reform." Save consumer and restrict health care business' ultra profit maximizing? Or let business go free for joy ride and let consumers go bankrupt?
This statement is not logically true, and probably false, and in any event ridiculous. Just because the US has to save more does not mean Germans need to save less; just because Americans need to make more does not mean the Chinese need to make less. Even calling them 'mercantilist' is an inaccurate insult - none of those nations view the world economy as fixed, and their records on tariffs and protectionism are no worse than that of the US.
Americans lived beyond their means, racking up debt and not saving. That was a mistake. It needs to be fixed. China's policies were not mistakes, they have been vindicated, and not only do they not 'need' to change, there is frankly no way we could make them change even if it were a good idea. So it's dumb and useless, because they don't need to change and we can't make them change.
We need to live within our means - and we need to NOT lecture the people who were doing it right while we were screwing it all up.
GET TO THE REAL AMERICA!
talk is Cheap . . but his and Congress' Spend Habit is Over the Top . just try to cut them off
All part of the plan to replace democracy with Plutocracy.
The EU parliament last night clubbed down the law providing Net-neutrality, mostly forwarded by former Soviet-satelites who still has autocratic beauraucrats running the old Party book in exchange for Euros in Brussel..freedom is a tortured mistress
The way of the peacemaker is usually quite as difficult if not more challenging as that of the transgressor.
On his way to China in November let him land in Tibet with the HH the Dali Lama in tow on air force one...
http://www.usgovernmentspending.com/downchart_gs.php?year=1950_2010&units=p&chart=F0-total
Even before the recent surge, our total government spending was 35% of GDP, compared to only 30% in China.
The $1.8 trillion surplus had to be borrowed, and it was certainly not borrowed from the savings of Americans.
Same old bankrupt the democracy till you can drowned it in a tub.
We are at war. The USA spend more on war that the rest of the world combined. Just like in 1943, that requires are huge federal expenditure.
We gave 24T$ to the banksters you conservative unleashed on the world.
I opposed the GOP spending programs of the last 8 years. I oppose the spending programs of the current administration.
But you can go ahead and pretend that you have only the choice between program D and program R, which share 99% of the same common DNA, if that makes it easier to enjoy burying your head in the sand.
Meanwhile, the adults among us are looking for real solutions which address the real problems. More and more deficit spending is NOT the answer to this crisis. Pretty soon the Chinese and Japanese will stop lending our government money. The Fed is already monetizing a substantial part of the deficit. That way leads to massive inflation.
Our previous guns-and-butter extravaganza led to double-digit inflation and high unemployment. Do we really want to go there again? History may not exactly repeat itself, but it sometimes rhymes, as Mark Twain once observed.
By all means, blame Bush for starting this mess - but don't be encouraging Obama to double down on the same mistakes!
Now that we have disposed of that chip on your shoulder, let's talk about real solutions - such as ending the war in the middle East and reducing government spending; ending the bailouts to the bankers.
To the others who feel the need to continue to blame Bush... please put your heads back in the sand...
If you want real solutions, you need to get rid of the blinders.
Oh dear. I think this is the first time I'm in an inescapable recursive double irony... or total gibber. Or both. Or neither. Oh well, I'm hungry... I'm going to eat a giant pizza and see how soon I can fit into a D-cup, despite not being female...
Especially with the claims that all US citizens are dumb, which is why companies offshore, the replacements are either dumber... or the issue isn't one of intellect at all. Not one bleepin' bit. It's about doing things cheap, which compel the hapless consumers to keep purchasing (and griping about products' quality...)
Here's the thing: protectionism is dead and gone, but the REALITY is buying local is better for the environment. So, filthy rich pigs, import/export as usual, but pay the TRUE COST of transport. No more SOCIALIST bail-outs for you. After all, you're the poster beasts for Capitalism.
I'd rather buy my food from local farmers, my clothes used to avoid paying Slave-shop imports from China or Indonesia, my drugs from American manufacturers, with a SINGLE-PAYER HEALTH CARE SYSTEM.
Oh, that was off-topic.
Sorry
http://economictimes.indiatimes.com/News/News_By_Industry/Jobs/Expatriate_executives_making_way_for_local_hires/articleshow/4039529.cms
Local goods and local currencies is the only option, because China IS investing worldwide now, and goods will fall in price as the dollar will do the same and lose it's value. The sinister part of this is that there are no tradition of using other than freetrade on the hands of Chinese worldwide supremacy. This is not a competitive democratic superpower, but a suppresive Party-dominated state dictaorship which will use every opportunity to overrule anything else but the money-game. The only way is to show the world what people in and on the move using internett is capabal of, which is almost illegal in China (censorship) and show the Chinese people what freedom of speech, and all things liberated democracies can offer to outnumber the money supremacy of the country that since
2005 has hold Africas Natural ressources to their own, by forcing upon them a new colonial slavery.
This was yeterday called "the right of free trade" and held in postion by mostly American and European companies. Few are left, and this is not a free company business opportunity any longer but an economic hostage situation for that continent, and the citizens of Kongo, Gabon, Cameroon, Malawi , Zimbabwe and Zambia is now on the Chinese slave pay-roll. Wake up America, and face who you're dealing with.