Last week, President Bush toured Asia from Japan to China. In both countries, he pushed the governments to devalue their currencies.
Japan has been notorious for pushing down the yen. The Chinese have pegged the yuan to the dollar at an artificially low level.
Here we go again. First, it was Japan vs. America. Then, we heard the great sucking sound coming from Mexico. Now we have reached America's next great economic villain: China.
What are the crimes of these countries? Stealing American jobs, undervaluing their currency and general unfair competition.
They have also pegged the exchange rate for their currency to the dollar at an artificially low value. This has helped them tremendously around the world as the U.S. dollar has fallen in value. And since the yuan (China's currency) has stayed fixed to the dollar, Chinese manufacturers still hold a competitive position.
Finally, if you consider a stable government unfair competition because it caters to foreign investment and centralized loans, then China has been cheating.
Americans have been gobbling up Chinese imports faster than you can say, \gimme."" China has now passed Japan as the country with the biggest trade surplus with the United States. There is nothing wrong with trade surpluses; it simply says that a country is buying more than it is producing or that other nations think that country is an attractive place to invest.
What people associate with trade surpluses, especially when it comes to the Chinese surplus, is lost jobs. Of course, some jobs have been lost to China, but would it have been worth it to try to keep those jobs here in the United States?
When the U.S. government put tariffs on Japanese car imports, they were, in essence, valued at $170,000. By placing tariffs on these imports, they forced the American taxpayer to pay $170,000 for each automobile worker. Now I don not know about you, but I would have taken even a $100,000 buyout of my job from the government.
Now think if we started to place tariffs on Chinese products; they have an even greater comparative advantage in manufacturing goods due to their low wages compared to the Japanese who pay much higher wages. Therefore, we would have to put much larger tariffs on their products to level the playing field and value the manufacturing jobs lost at an even higher price than the automobile jobs.
Furthermore, the thing that these people and the general public miss with trade is the fact that there is a buyer and a seller. We only see the jobs lost. We do not see the cheap goods flowing back. We do not see the opportunities we have opened up for a whole new bunch of people.
We can be mad about unfair competition, but let's be realistic when we're discussing the costs and rational when it comes to providing solutions to the problem.
