So bipartisanship isn't dead. By a vote of 348-79, Democrats and Republicans alike put aside their acrimonious differences and agreed, at least for a moment, to stop blaming each other for the sad state of American economic life. Instead, they agreed to blame China.
The bill authorizes the president of the United States to impose tariffs on Chinese goods in response to what it considers an illegal subsidy of Chinese exports in the form of an undervalued currency. It helps that the supporters in the House know that this bill has precious little chance of becoming law; it will not pass the Senate and it is unlikely that it would be signed into law by Obama if it ever came to that. As a result, the bill is the perfect campaign gesture, bombastic, angry, self-righteous, and without much real-world consequence.
The office AFL-CIO union leader Richard Trumka issued a statement that encapsulated the thinking behind the bill: "the House of Representatives voted to put an end to the Chinese government's currency manipulation, which has destroyed millions of good American manufacturing jobs. For more than a decade, the Chinese government has deliberately manipulated the value of its currency, ballooning our trade deficit with China and costing American communities good jobs....Working people continue to mobilize to elect candidates who will put America's workers first and are committed to rebuilding an economy that values working people. This November we will send a powerful message that we will support those who vote for an economy that works for everyone."
The idea is that there is direct line between China, its currency, its exports of lower-cost goods to the United States, and the erosion of middle-class life and now soaring unemployment. But U.S. manufacturing has been bleeding jobs for decades, since the early 1970s, when the Rust Belt began to decay faced with competition from the likes of Japan and Germany. That continued almost unbroken for the next decades, as countries ranging from Taiwan to Mexico became the low-cost producers (remember Ross Perot's famous warning about NAFTA in 1992 and "the giant sucking sound" of jobs heading south-of-the-border?). California and the state of Washington were hit hard by cuts in defense spending in the early 1990s, and industry throughout the country shed jobs as technology and robotics allowed fewer workers to do more. China is simply the latest example of these trends and hardly a cause.
What's more, the recent loss of millions of jobs since 2008 has everything to do with the collapse of the construction and housing industries along with the near-death of the Big Three American auto makers than with any competitive challenge from China. China has become a large car market for General Motors, but not for export to the United States: for sale in China. It would take a massive leap unsupported by any fact to lay the demise of the U.S. auto industry at the feet of China, or for that matter hold China responsible for the sub-prime and derivative debacles. Those are the cause of recent job loss.
Furthermore, China has been revaluing its currency, nearly 20% between 2005 and 2008 and now nearly 3% since June when the government resumed that policy having shelved it during the midst of the global financial crisis. It is in the domestic interest of the Chinese government to raise the value of their currency because they are focused on building up on internal, domestic consumption market. They have no wish to be dependent long-term of the vagaries and whims of American consumers, and higher purchasing power for Chinese consumers is the answer. They are not revaluing quickly enough to suit an America stuck in second gear and looking for someone to blame, but revaluing they are.
Of course, reason and fact aren't driving these measures. Emotion, anger and frustration are. There are good reasons to be angry with the state of affairs in this country and frustrated by the inability of the political class to do more than contribute to the confusion. But blaming China for a series of domestic challenges is not an act of strength or courage. It is an act of desperation, and the only saving grace is that this measure is a gesture, not an actual law - yet. But it suggests that the only thing Congress can agree on is how to shoot ourselves in the foot, which requires minimal skill and even less aim. Railing against Beijing may feel empowering, but seriously grappling with growth, investment, infrastructure and innovation, well that would actually be empowering.
Follow Zachary Karabell on Twitter: www.twitter.com/zacharykarabell
Very sad when politicians ream consumers in the name of . . . whatever they think they're defending.
Why are those people being screwed? Because we've entered an unbalanced trade relationship that is screwing the economy driving up unemployment. The key problem is EMPLOYMENT, so how do you propose they solve this problem?
China is big on apple juice and concentrates. Prices have dropped by over 50% since China started exported in quantity since a decade ago. China used to export cooked chicken meat but was blocked from doing so when Congress expressly line-itemed the funding for inspecting Chinese chicken meat - this month the move was found to be unlawful by the WTO.
Lost of cosmetics, even high end cosmetics, are made, or bottled and packed in China. Most liquid hand soaps are made in China. Almost 100% of the affordable "stuff" you find in 99 cent stores are from China. They are also the things that are needed by the lowest income folks.
China trade benefits consumers all over the world, especially the poorer ones.
Start in the kitchen-- pots, pans, plastic tools, countertop appliances, white goods
Living room-- furniture, stereos, TVs, DVDs
Bedroom-- furniture, clothes, shoes
Bathroom-- fixtures, towels, cosmetics, soaps of all kinds
Office-- computers, printers, CDs, furniture
It is all sold at Wal-Mart at prices poorer people can afford.
Why would anyone want to lower the standard of living of America's less well-off by raising the price of everything they HAVE TO buy?
http://www.examiner.com/technology-in-miami/world-s-fastest-train-exhibited-at-innotrans-2010-fair-berlin
China is paying good money for the best products and technology. There is nothing to stop the USA in being part of China's infrastructure build up.
"We are committed to transferring our world-class technology and advanced management philosophy to China."
It's hard to see how Canada is benefiting from this, or doing a better job than America is.
http://cn.bombardier.com/about_bombardier_in_country.html
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. A lousy two pennies in the dollar.â€
So the gross value of production in real terms is about 35% higher than in 1990, about 72% higher than 1980 and about double that in 1972.
Real manufacturing output as a share of real GDP has not declined significantly since 1950 (when it was around 16%) - see figure 3 at http://www.cbo.gov/doc.cfm?index=5078&type=0.
EPI even admitted (in 2004) that "manufacturing's share has actually been quite stable over the past 25 years" - see figure 1 at http://www.epi.org/publications/entry/briefingpa pers_bp149/
According to CRS: "From 1970 to 2000 the cumulative increase in manufacturing real output was 144%. That translates to an annual average rate of growth of 3.0%, only slightly slower than the 3.1% pace of the overall economy. This is not the picture of a sector that was in significant economic decline ... What has largely been in decline in manufacturing for the last 40 years is what consumers need to spend to purchase those goods". See http://www.policyarchive.org/handle/10207/bitstreams/2016.pdf
China's policy is ridiculously clear, they've seen Japan, Korea, and Taiwan rise on American technology/consumer markets/investment and they were willing to sacrifice their environment, currency value, and rural labour force to do the same. The problem is the scale required by China to accomplish what Japan did is 10x larger, which means the damage done to the American economy is no longer manageable. Trade deficits of the past were nowhere near what they are today.
The only solution to the problem lies in policies that WILL have a negative impact on China. There is absolutely no way around it, China has the overwhelming advantage in the current trade relationship. There is no market in China for American manufacturing, if it is sold in China and can be built in China then it is built in China. The best America can hope for is to recapture manufacturing directed at our own market, which will come at China's expense, and possibly the European/Latin American market where we have an advantage in terms of proximity to the consumer base.
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.
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. A lousy two pennies in the dollar.
Although China does export a lot more to the US than it imports, it also runs huge trade deficits against many other countries such as Japan where China imported about 30 billion USD more than it exported, or S.Korea where China runs a 50B trade deficit. Heck Australia exported $20B more to China than it imported. So the question Americans should be asking is: Why is China importing more from Japan rather than the US, even when Chinese people are supposedly hostile to Japan? What can American companies do to better compete against S.Korea or Australia for the Asian market, because surely Chinese are buying foreign goods.
Bashing Chinese won't get China to buy more American goods. It will just hurt the existing American investments in China such as GM, Boeing, etc.
On the other side of the globe, the Chinese have been people who knows their numbers since time gives us that memory. These people are a whiz in math they have beaten us to lower or undervalue their currency.
Our own investments are being used against us as we 'trade' with this and any other Communist regime !
Caving in to Communist China would demonstrate (again) that our elected continue to sell us out for personal gain. By the way - that's corruption by definition - and it seems to me it's occurring within the highest echelons of our own 'elected' government.
Middle America Wake Up !
But your message also resonates with me. As Pogo says, "We have met the enemy and he is us!"
Nothing new here, just another 'war' foisted on the American public by the usual suspects, our politicians to divert the American sheeple's attention from the dismal state of our society.
Personally I think there are a couple reasons for our demise.
1.) The US moving from a balance economy (producing/consuming) to a all consuming model. We don't make anything!
2.) The disparity between the rich and poor. There are CEOs making 100 million or more a year. 100 million could pay for a lot of jobs and it's going to one person. This is happening a lot.
3.) Adherence to the past; we need to end dependence on fossil fuels, lead the Green revolution and end massive defense spending.
Don't get me wrong, I'm all for security and making sure we're safe. I take up issue with our country waring across the world, fighting for the freedom of other countries when we desperately need to fix ourselves.
Unlike Japan, China does not engage in open market purchases - there IS NO OPEN MARKET where they can actually use RMB to buy Dollars to lower the value of the RMB.
The accumulation of trade dollars in the hands of the China central bank comes from the natural process mandated by law. Just like in the U.S., foreign currencies cannot be used locally. So when an exporter from China collects payment in US dollars, those cannot be used inside China. Of course they can be used to pay for imports (to buy materials, machines, etc.) By law the importer has to exchange the excess (net of imports) into RMB in order to continue doing business - to pay rents and other expenses, such as workers' salaries. This legally mandated exchange (central bank issue more RMB to the importers in exchange for their excess dollars) is the principal way that the China central bank acquired the dollar reserves.
Since the Chinese believe in savings (40% savings rate) and disfavor consumption, imports ARE less than exports. Thus the reserves increase over the years.
Since there are few open market transactions (to buy dollars on the open market using RMB), there CANNOT be manipulation. It is not manipulation that some folks just don't like to spend all their money on consumption.
however mercantilist nations like china are all too eager to exploit the above for their own gain, using their market distorting effects of cheap labor, lack of environmanetal and safety regulation, subsidies, IP theft, dumping and currency manipulation - all the tools at their disposal
So no getting tough on china isn't the be all and enda all - but it is a great place to start
Cheap labor is not market distorting - it IS the market that determines the value of the labor. It is not by choice of the Chinese government that there are LOTS of Chinese and they are willing to work for lower wages ($1/hr.) than those in the West ($18/hr. in the U.S.).
There may be isolated instances of lax environmental or safety regulation or enforcement. But in general the export industries in China are at least 1 or 2 generations NEWER than that in the U.S. (or anyone else's) - the Chinese factories are new and efficient, the best money can buy. You should go see them some day.
ALL nations subsidize. America subsidizes the most. American agricultural subsidies are infamous. After the 2008 debacle, almost ALL of the financial institutions (insurance companies, banks, securities houses) were all losing money. Then Uncle Sam propped them up with $12.8 Trillion(according to Bloomberg) - more than ALL subsidies by all other nations combined that year. What is good must be universal, and blaming it on the other guy's subsidies will get you nowhere, as the counterclaims will come right back at yer.
What IP theft? Out of the $300B in imports, how much actually involves IP that's not legitimately paid for? 1/2%? 1%?
There is emphatically NO CURRENCY MANIPULATION. See my comment immediately above. If you disagree, tell us why.
Bill Bradley: "It is in America's interest to grant China normal trade status on a permanent rather than annual basis because it would make China a more reliable trading partner and provide greater access to the Chinese market for American companies. This will create new and better jobs for America's workers and farmers."
George W. Bush: "I support permanent normal trade relations for China as part of China's admission to the WTO... It will provide American businesses and farmers access to China's growing market and narrow our trade deficit with China... To join the WTO, China is agreeing to live by fair trading rules... As we export American goods and services into China, we will export American values, especially freedom."
Al Gore: "I support extension of most favored nation status for China through accession to the World Trade Organization... failure to grant China permanent normal trade relations will put American farmers and factories at a vast disadvantage with respect to Europe and Japan and hurt our ability to enforce China's commitments in the WTO."
John McCain: "As a result of its participation in the WTO, China will have to abide by the organization's standards governing international trade, and there will be enforcement mechanisms available to ensure that China does so... I believe maintaining economic and diplomatic relations with China serves our national interests."