[A-List] US Imperialism: Scapegoating China

["Anyutka" <annewilliamson@xxxxxxx>]

http://www.mises.org/fullstory.asp?control=1327

US to China: Make Goods More Expensive!

by Jude Blanchette

[Posted September 18, 2003]

There is, it seems, a segment of the American population that firmly
believes China to be the greatest economic threat facing our country. As if
domestic taxation, regulation and deficit spending were of negligible effect
upon America's economic well being, dealing with the threat from the Far
East now ranks as our nation's #1 priority. This animus towards the Chinese
has taken form in a number of disagreements between the respective country's
governments in addition to a well-organized campaign to convince the public
that China's increasing dominance threatens America's prosperity.

The latest economic battle between the two countries concerns the U.S.
federal government's displeasure with China's currency, the Yuan or
Renminbi, being pegged to the U.S. dollar. Treasury Secretary John Snow's
visit to Beijing earlier this month boosted the hope of many furious at the
Chinese for what they see as an artificially cheap Yuan. Snow's subtle
admonitions that the Chinese float, or at the least widen the band within
which their currency can float, went largely unheeded.

Back in America, companies have been lobbying for just the type of proactive
stance on China that the current administration has taken. According to The
Journal of Commerce, "(George) Jones (President of Seaman Paper Co.) alleges
that China is deliberately and unfairly keeping the exchange rate of its
currency, the renminbbi, at 40 percent below its true market value." Mr.
Jones apparently possesses some type of economic omniscience lacking in the
rest of the general public.

Stalwart protectionist Pat Buchanan recently lamented the "Death of
Manufacturing" in America. The cause of death, coincidentally, is trade and
China's cheap Yuan. "The U.S.-China relationship cannot truly be described
as trade. It is rather the looting of America by China and its corporate
collaborators in the United States," writes Buchanan. I'm not sure about Mr.
Buchanan, but I'm positive that when I purchase a product made in China,
it's trade. It is, perhaps, not the trade Mr. Buchanan would like to see
take place, but it is a trade nonetheless.

The cheap Yuan, it is increasingly alleged, is the impetus behind the recent
downturn in the American manufacturing sector. President Bush, for his part,
seems to agree. He used his recent Labor Day speech to announce the creation
of a new position within the Department of Commerce designed specifically to
deal with the hemorrhaging of jobs within the manufacturing sector. "We have
a responsibility that when somebody hurts, government has got to move,"
promised the President.  That "movement" the President speaks of includes
not only direct pressure on China, but also the attempt to convince other
countries of the harm the cheap Yuan is wreaking on their economies.

What opponents of economic China have in common, at least in their rhetoric,
is the idea of a level playing field in trade being established to make
trade both free and fair. It is as if, many argue, a trade between two
individuals does not occur so long as a government heavily protects or
provides unfair advantages to one of the individuals. The issue of level
playing field, however, is at best a cover for further trade restrictions by
domestic governments. The common argument goes something like this: "They
won't play fair, so we must take steps to protect our interests. Of course
we'd like to drop our tariffs, subsidies, etc, but until they do, we must
maintain ours." (Emphasis added.) This, of course, leads to a circular
argument in which one side presses the other to take that first step.

Most assuredly, the world economy would function more efficiently if all
trading partners lifted all trade and commerce restrictions. Capital would
flow to its most valued use, while goods and services would cross boarders
unimpeded. Fortunately, one country can continue to maintain free trade on
all imports and exports, all the while successfully trading with a closed,
or relatively closed economy.

In the case of the Chinese, while their government's cheap Yaun policy
benefits those in the business of exporting goods, it most certainly harms
those in the business of bringing in goods and capital from outside China. A
cheap Yuan keeps foreign products expensive. This, however, ultimately hurts
the Chinese, not the American economy. Those in America attempting to
compete with the Chinese in the same markets will find themselves at a
disadvantage, but try telling those standing at the checkout line with
cheaper, better products made in China that they are worse off for it. In
fact the history of the United States, one of the freest economies in the
world, has been to trade with less open economies. If we were to trade only
with those who matched our level of trade restrictions, all imported goods
would come from, say, England and Canada.

Also pervasive in the recent debate over freely floating vs. pegged
currencies is the idea that a floating currency is somehow a free-market
currency. "We expect our trading partners to treat our people fairly - our
producers and workers and farmers and manufacturers - and we don't think
we're being treated fairly when a currency is controlled by the government,"
said President Bush in an interview with CNBC. "We believe the currency
ought to be controlled by the market."(Emphasis added) It apparently eludes
President Bush and others who support the floating currency on free-market
grounds that currency created by government fiat can never be free market,
no matter what scheme is devised for its trading on the world market.

In the end, the latest skirmish with China is not about free trade. Nor is
it about fair trade. The pressure by the U.S. government for China to float
it currency will last only as long as it favors politically influential
interests. Back when the pegged currency was deemed to provide the only
bastion of stability during the Asian crisis, and hence, a stable economy
for which to sell American goods, no one cared a whit about establishing a
"free market" for the Chinese Yuan. While no one is ever safe so long as
Congress is in session and 1600 Pennsylvania Avenue is occupied, this
administration's policy, more so than any other in recent history, has been
"buy here, sell elsewhere."

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Jude Blanchette, a recent graduate of Loyola College, writes from Vermont.
He can be reached at  jblanchette1@xxxxxxxxxxxx See other articles by him.