China Trade Problem

Saturday, March 1, 2003

wantst o know S70 America’s Real China Trade Problem By Alan Tonelson (NAPSA)—Will China let its currency, the yuan, rise in value? As Chinese exports take market share and jobs from domestic U.S. industries, that’s the hope of everyone concerned with the future of the U.S. economy andits manufacturing base, from President Bush to the labor unions to the biggest manufacturing lobbies despite its rapid economic progress, China remains far too poor to buy a reasonable share of its burgeoning output. So it exports huge and growing surpluses, creating overcapacity, driving down wages, and threatening deflation Yet everything we know about China makes clear that currency issues are only a symptom Maximizing exports and minimizing imports. in . Fo c Tonelson of America’s China trade problem, not the root cause. Main Street, USA feels China’s growing economicrole in the form of some falling consumer prices, but also hundreds of shuttered factories, hundreds of thou- sandsof lost jobs, and lower wages. Even many U.S. multinational companies that have sent boatloads of jobs to China warn that Chinese currency manipulation threatens their remaining U.S. operations. Along with smaller domestic companies, they note that the Chinese are keeping their goodsartificially cheap in markets everywhere, and thus outselling goods from countries like the United States that let free market forces set currency values. Yet America’s real China trade problems go much deeper. First, around the world. Second, because China relies so heavily on exports for its growth, and suffers towering and growing unemployment,it has overwhelming interests in Currency manipulation is only one form that China’s protectionism takes—and possibly not the most important. Even if the Chi- nese agreed to a fair value for their currency, they would simply increase other formsof protectionism—asthey did in the 1990s, and continue to do. For America’s sake and the world’s, the U.S. government must not get further bogged down in the pointless debate about China’s currency. The U.S. and world economies can only be stabilized if  tells China to stop its underlying protectionism, and that the price for refusing will be painful. Alan Tonelson is a Research Fellow at the U.S. Business & Industry Council Educational Foundation, a  research organization and the author of The Race to the Bottom: Why a Worldwide Worker Surplus and Uncontrolled Free Trade are Sinking American Living Standards.

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