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February 14, 2011

China Trade Gap Breaks Record, Destroys Jobs

-- by Dave Johnson

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.


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Did you see the Chrysler Super Bowl ad? Advertisers understand that Americans are hungry to be able to buy American-made goods again. And economists understand that the only way to truly recover from the economic doldrums is to expand our manufacturing base.

Compare that with today's news: US trade deficit widened by 33% in 2010, and especially: Record 2010 trade deficit with China,

The 2010 annual trade figures for the U.S. were released today. They show a $497 billion trade deficit in goods and services, including a new record $273 billion goods deficit with China.

Instead of getting the message and seeing the warning it's back to the same old same old as fast as we can.

Scott Paul, of Alliance for American Manufacturing, has this to say about that:

"A record trade deficit with China does not put us on a path to win the future. It will be hard to get our unemployment rate down if our trade deficit keeps going up. And while I am all in favor of doubling exports, it is a meaningless benchmark unless we also bring down our trade deficit. Instead, our global trade deficit is growing at an alarming and unsustainable rate.

"China now accounts for 75% of our overall non-petroleum goods deficit, yet I have seen little attention paid to it from this Administration, and even less from the new majority in the House of Representatives.

Washington talks about this but doesn't seem to be able to actually do anything about it. Last week: Treasury gives China a pass on currency manipulation.

The AFL-CIO blog says it plainly and clearly: Stopping Currency Manipulation Would Create U.S. Jobs,

Economists from across the spectrum agree that currency manipulation distorts trade and exacerbates our unsustainable trade deficits. Putting an end to currency manipulation is an issue that unites business and labor, farmers and ranchers and Republicans and Democrats. Action by our government to put an end to this destructive illegal activity is long overdue.

Once again, some in the Congress will try to do something about this: US lawmakers try again for China yuan bill,

A bipartisan group of 101 U.S. lawmakers in the House of Representatives launched a new bid on Thursday to pass legislation aimed at pressuring China to let its yuan currency rise in value.

The same proposals cleared the House last year but died in the Senate. If approved this time, they would clear the way for the Commerce Department to treat currencies deemed to be undervalued as an illegal subsidy under U.S. trade law.

That would allow companies, on a case-by-case basis, to seek higher countervailing duties against imports from China that compete with U.S. production.

U.S. congressional anger at China over what lawmakers see as deliberate undervaluation of the yuan, also called the renminbi, was fanned anew last Friday by a Treasury Department decision not to declare China a currency manipulator.

Here is the Chrysler ad:

"This is the Motor City and this is what we do." "A know-how that runs generations deep in every last one of us."

OK I am from the Detroit area, and even worked at Ford for a while. My grandfather worked in the first GM offices in Flint. This ad made me tear up. Seriously. And I know that people all over Michigan feel that way. It's a stupid, manipulative commercial, but it taps into something that is very deep. People are saying, "finally corporate America (the America that counts) is talking about us instead of them."

Here is Toyota, trying to say the same thing:

People are hungry for a change. Washington needs to hear that.

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Posted by Dave Johnson at February 14, 2011 8:18 AM


Comments

China’s Innovative Beggar-thy-neighbor Strategy!

China’s beggar-thy-neighbor strategy is not a competitive devaluation of its currency, which would only cheapen its exports and make exports into China more expensive, but an over-valuation of the currencies of one or more of its trading partners. This negatively affects all the trade of the pegged trading partner(s), not just trade with China. U.S. Dollar over-valuation was 8 times as damaging to the U.S. recovery as what the media refers to as “China keeping it currency undervalued”.

The United States’ trade gap is the proverbial “leak-in the-dike” with its de-simulative effect on our recovery. In November 2003, Warren Buffett in his Fortune, Squanderville versus Thriftville article recommended that America adopt a balanced trade model. The fact that advice advocating balance and sustainability, from a sage the caliber of Warren Buffett, could be virtually ignored for over seven years is unfathomable. Media coverage that China has kept it currency undervalued is a gross understatement, it has actually been keeping the U.S. dollar over-valued; which adversely affects all U.S. trade with ALL U.S. trading partners, not just trade with China. Until action is taken on Buffett’s or a similar balanced trade model, America will continue to squander time, treasure and talent in pursuit of an illusionary recovery.

A link to my submission for the record for the September 15, 2010 Hearing on China’s Exchange Rate Policy, follows:

http://democrats.waysandmeans.house.gov/media/pdf/111/2010Sept15_Campbell_Submission.pdf

An Inflation-Neutral Balanced Trade System (BTS), inspired by Warren Buffett’s 2003 Import Certificate Plan is introduced at the top of page 4 of the Pdf.

Posted by: Hugh Campbell [TypeKey Profile Page] at February 14, 2011 7:56 PM

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