Once the American public begins to learn about how the Chinese (among others) are artificially propping up the Dollar in order to sell cheaper goods, this whole political issue will snowball.
Posted on 09/26/2003 7:53:32 PM PDT by maui_hawaii
US ups ante on China
People with clout in the US want more aggressive measures - like China-specific trade tariffs - invoked against Beijing
By Roger Mitton
WASHINGTON - A string of senior figures in the United States political and business community has voiced vehement criticism of China's unfair trade practices and demanded stern action be taken to rectify the situation over the past week.
The verbal assault was based on claims that China has sucked away much of the manufacturing base in the US and has skewed its trading rules to ensure that it continues to run a huge trading surplus with the US.
Testifying before the US-China Economic and Security Review Commission on Sept 25, Congressman Donald Manzullo thumped the table and roared: 'I am hot! The United States has been bled by the Chinese. And that's got to stop!'
Other senators, congressmen and trade experts echoed the passionate lamentations of Mr Manzullo and called for drastic steps, including the imposition of trade tariffs on Chinese imports to the US.
Even officials from the administration of President George W. Bush got into the act.
Referring to the alleged underhand tactics of the Chinese, Deputy Assistant Secretary of Commerce Henry Levine said: 'Americans are willing to compete on even terms with any country in the world, but we will not stand for unfair competition. We will not look the other way or wait idly.'
Most of the complainants waxed indignant about how China has not lived up to its obligations under the World Trade Organisation, which it joined on unique terms in December 2001.
Said Deputy Assistant US Trade Representative Charles Freeman: 'Rather than completing the process of implementing its WTO commitments as a pre-condition of membership, China was admitted to the WTO by committing to implement them.'
Many in the US assert that China has not come anywhere near to living up to these commitments.
In a clear barb against Beijing, the US Secretary of Commerce Donald Evans said: 'American manufacturers can compete against any country's white collars and blue collars, but we will not submit to competing against another country's choke collars.'
The most problematic areas in the impending trade war with China concern agriculture, services, enforcement of intellectual property rights and transparency.
As well, said Mr Freeman, 'China's use of certain tax policies to favour domestic production or provide incentives to increase exports has developed into a significant source of concern'.
Many US legislators repeatedly pointed out how thousands of jobs in the agricultural and manufacturing sector have been lost to China.
They said China was reaping a huge windfall in exporting its manufactured goods to the US, while making it difficult for US businesses to break into the Chinese market.
Last year, the trade imbalance between the US and China was a staggering US$103 billion (S$178.6 billion) and it is predicted to be even higher this year.
China's refusal to allow its currency, the yuan, to float freely according to normal free market practices came under sustained attack during last week's congressional hearings.
Said Senator Charles Schumer: 'Economists suggest that China's currency is undervalued by anywhere from 15 per cent to 40 per cent relative to the American dollar.'
He told the hearing that this gravely disadvantaged US companies.
'It means that American goods are artificially expensive for Chinese buyers,' he said.
'More importantly, it means that Chinese goods are artificially cheap.'
That meant fewer US goods are being sold in China and more Chinese goods are being sold in the US.
That has resulted in the whopping trade imbalance in China's favour.
Legislators claimed that this situation has gone on for far too long and they proposed a series of measures to fight back against China.
Mr Schumer and a group of his colleagues plan to introduce a Bill in the Senate that will impose a 27.5-per-cent levy on all imports to the US from China.
Senator Schumer said: 'There is no doubt that such a tariff is a blunt instrument, but previous experience shows that playing hardball works wonders in the world of international trade.'
While President Bush's administration would balk at such a measure, it must show sympathy for the need to take action against China and thereby stem the loss of jobs and revenue.
The economy will be a major issue in next year's presidential election and Mr Bush must be seen to be acting firmly to try to bring jobs back home.
Accordingly, the US Commerce Department will set up an Unfair Trade Practices Team to track, detect and confront unfair competition. Its principal target will be China.
Referring to Beijing's unfair practices, Mr Manzullo said: 'It's got to come to an end.'
If it does not, US legislators said that more aggressive measures like China-specific trade tariffs will be invoked.
And there are deep concerns that could spark a trade war between two of the world's trading giants.
Especially in the Senate, they openly pander to those specific special interests who just luuuv China...
Getting the ducks in a row is hard.
Hopefully some Senators get their political heads knocked.
Once the American public begins to learn about how the Chinese (among others) are artificially propping up the Dollar in order to sell cheaper goods, this whole political issue will snowball.
No, it's only now that the currency manipulation can be seen so clearly. With a $500 Billion federal budget deficit, inflation should have jumped up to as much as 4%. With a 5% GDP trade imbalance between what we import versus export, we should have seen another 2.5% bump to inflation this year.
But instead of seeing 6.5% inflation (which is really just a devaluation of the Dollar), we've seen 2% inflation and a Dollar that is trading at the exact same level versus the peg-controlled Yuan (among other currencies).
That's huge. It's also undeniable. The only thing that would currently explain all of the above is that China and other countries are buying and hoarding Dollars, keeping them out of circulation in order to increase their demand.
So now it's pretty tough for any politician to miss what has been happening all along (i.e. that foreign nations have been manipulating the Dollar in order to sell more of their goods and services here in the U.S.).
Heck, show me one poster (besides you or me) who's pointed this currency manipulation out to the public prior to this month!
If the same goods in Wal Mart were made elsewhere they wouldn't cost that much more, if any more at all.
The current model of 'cheaper cheaper' merely sustains Americans in their increasing poorness.
Its kind of like a junkie's bad habit... start with a little and end up needing more and more...
You have no money or job, so cheap is obviously good, the poorer you get the more cheap you want.
How about we focus on making us richer for once?
We've been talking about this same old stuff for 2 years here on FR....
Then reality sets in.
There is a MUCH larger structural issue on the global economy though.
No one is going to be making new investments like building new manufacturing facilities in China if the Yuan moves up to its free market level. So forget deals. Whatever shenanigans are going on now only exist because the propped up Dollar (e.g. against the yuan) makes foreign investment look better than it really is.
Where's a good ol' Buddhist monestary when ya need one?!?!
Right now if a product in China costs 100 rmb straight off the factory floor...
In dollars that equates to about $12.
A US manufacturer could make the same product at $14.50 each.
Under those circumstances the Chinese version is 17% cheaper, not in China, but in the US.
If the rmb is revalued to a proper level...but for the sake of this discussion lets just say instead of 8.3 to 1, it will go to 7 to 1...(about a 15% correction)
(please note that the average claim is that the RMB is about 30% undervalued)
The Chinese version then costs about $14.30...that is only 1.5% cheaper...thus allowing the US companies to compete. Also you have to realize that you would still have to get the product from China to the US...
If the 30% undervalue number is correct (and its close) then the exchange rate then goes to about 5.8 to 1.
In those circumstances the 100rmb product then becomes $17.25 in US dollars... In those circumstances the US product (@ $14.50) then becomes 16% cheaper...
This is the root cause of the lost 2 million jobs in the US.
It also threatens our economy.
The US exports over $50 billion per month in manufactured goods, but they are being undercut by China's monetary manipulations.
I have read one report regarding corn.
One of the US' largest export markets is to the Asia Pacific. They are being undermined though in the international arena.
Here's how. The Yen is a supposed floating currency...but the Yuan is not...in a strange and complex dynamic, by pegging the Yuan to the dollar Chinese goods not only become cheaper in the US but also in Asia. When the dollar declines, do does the RMB.
The net result is that US corn is more expensive than the alternatives. Its because of the peg.
Our tarriffs have little to do with it. Our % subsidies are dwarfed by China's % of the same. (IE one bushel of corn might have 5% subsidies in the US...the same from China might have 40%...)
The previous poster who mentioned the buying up of dollars as being the problem is correct.
It can actually work in more than one way. They can sell their own currencies too, not just buy ours. They can either drive ours up, or drive theirs down... similar results either way.
I also find the continuing arguement of there go American jobs to be mostly ridiculous. Sure there they go but if not to China they will go somewhere else. Right now the majority of jobs that are being taken by China are not American jobs rather they are Mexican jobs, which were taken from South Korea, which were taken from Taiwan, which were taken from some other location with cheap labor.
In a way you are right, but in a way not. Asia and Mexico are getting screwed too. That by very nature hurts America. 1/3 of all of our exports go to Asia alone, not including China. When they get nailed, we get nailed. For every dollar we have traditionally imported from Mexico we have traditionally exported 75 cents. Thats a tad better than the dollar to ten cents deal with China.
In a complex arrangement, the case and point is that China's peg leads to disruptive price differentials based on artificial means.
In Mexico and Asia they compete, yeah, but its not a solely price competition as in the case of China. Without the disruptive practices of China American manufacturers will often become relatively and absolutely more competitive. Hence investment dollars come here to hire people here.
America can beat China and Mexico and Asian countries like a drum...on a level feild that is.
When the feild gets leveled though, investors realize that, and they hire more people here.
US manufacturers export over $50 billion a month. Just as in the same case with the corn above, Chinese manufacturing (often set up visa via US companies) undercuts our exporting power.
It kills jobs faster than salt on a slug.
The ball game will be changed significantly if things level out in regards to the playing feild.
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