Blaming China for US economic woes is a fool's game

Straits Times ^ | 08.02.03 | TOM PLATE

[Dr. Marten]

Blaming China for US economic woes is a fool's game

By TOM PLATE
FOR THE STRAITS TIMES

LONDON - The United States economy is recovering very slowly; everyone in Europe knows that. Tourism is down, and the terrorists can't be blamed for everything.

From Europe, it appears the mood in the US is getting ugly.

Culprits are being identified. On the US West Coast, cheerless California Governor Gray Davis is being blamed for everything from the budget shortfall to the energy crisis, and may be kicked out of office through a referendum.

Perhaps he is a deserving target, but others are much less so. For example, on the East Coast, Senate members are finding fault with China for aggravating America's economic problems. Hearings are set to be held on the emerging giant's economic and monetary policies.

The contentious issue is Beijing's long-held strategy of keeping its currency relatively cheap against others', so that other nations' exports on the world market are more expensive. The ploy increases sales as well as China's market share in various sectors.

Japan, before it became another overpriced economic success like Germany and the US, used the same cunning practice.

The result for China has been two decades of phenomenal economic growth - good for China but a problem for the US, which is now faced with a daunting trade imbalance.

America's trade deficits with other nations, including China, partly explain why the US dollar is no longer so almighty. In the trendy shops of Rome and London, surprised US tourists are having to hand over more dollars for that blouse or tie this year than they did the last time they took a foreign holiday.

Some American politicians will try to lay the blame for their weakening dollar not on US domestic economic performance - which has been lacklustre - but elsewhere, especially Beijing.

This is the same 'blame others' syndrome of a decade ago, when the bitter West Coast recession in the US was all but blamed on Japan's trade surplus. Tokyo was then No. 1, just as Beijing is now.

Worse yet, the congressional finger-pointing coincides with the release of a Pentagon report concluding that Beijing is engaged in a military build-up to reclaim Taiwan by force, if necessary. This is the usual Pentagon fear-mongering to beef up its budget.

In Europe, observers tend to regard the ritual Asia-bashing as an occasional American psychosis. They note the rise of Asian tourism here and welcome it.

Europeans generally regard China as the coming thing of the 21st century. It is to be negotiated with respectfully and professionally, identifying areas of mutual interest and overlapping aims.

That China has a huge trade advantage over the West, especially the US, strikes people here more as evidence of Chinese skill - they produce many things that people around the world want to buy, not least because their costs are so low - than deceitfulness. Europeans also realise that China isn't rich enough yet to buy a lot of high-cost Western exports.

In all fairness, the Chinese government adds to this problem by refusing to allow its currency to be traded openly on international exchanges.

Among other things, Beijing worries - understandably - about predatory currency attacks from Western financial speculators, of the kind that hastened and deepened the Asian financial crisis of 1997 to 1999.

This official practice of sheltering and pampering its currency with injections of economic Botox makes it difficult to lower the US trade deficit - unless US consumers want to start boycotting everything from choo-choo trains at Toys R' Us to Chinese noodles.

That may be precisely the next step called for by some US politicians.

But it's a fool's game and one that won't fool many Americans. They're still buying wonderful Japanese cars today, just as they did 10 years ago, despite the politicians' huffing and puffing.

The Chinese will reflect on this as they increasingly become targets of congressional blame.

Even so, China's undervalued yuan is a legitimate international issue, especially in the age of globalisation.

As a recently admitted member of the World Trade Organisation, Beijing now has new responsibilities as well as rights. Persistent trade imbalances with countries that have sponge-like markets for Chinese goods are understandable from an economic point of view, but patently explosive from a political point of view.

It is in China's national interest to reduce the proportions of the economic issue before the political issue in Washington explodes in an anti-China crusade.

An alliance between anti-China politicians and budget-building Pentagon officials will not be good for international business or world stability.

• The writer is a UCLA professor and a Straits Times columnist. He can be reached at: tplate@ucla.edu

[ninenot]

He also plays fast and loose with the facts.

Near the end of the article, he prattles on 'how Americans still are buying Japanese cars,' without bothering to mention that most of those American-bought Japanese cars are MADE IN THE USA.

[ninenot]

Harley, by the way, handed Sec'y Evans a four-page complaint about Red China's prohibition of sales of Harley product in China just last week.

Oh--and yes, "Chinese Ingenuity." Since when is knocking off patented products "ingenuity?" Briggs and Stratton found four of its engine models being sold from Chinese factories. Ask Chrysler about the knockoff Jeeps.

OTOH, if theft is ingenuity, then what's grand larceny? Brilliant rocket science??