Protectionism

The reevaluation of the Chinese currency will not help reduce America’s trade deficit. It will merely shift the source of imports to other low-cost countries. American consumers will be the victims of the trans-Pacific crossfire.

Americans have to boost national savings, promote U.S. exports and invest in responsible education and healthcare policies if we are to curb the trade deficit with China. It hit a record $233 billion in 2006, estimated to reach $250-300 billion in 2007, and continues to rise. It is important to keep in mind that after China joined the World Trade Organization in 2001, many companies from low-cost manufacturing countries in Asia moved their operations to China and brought with them their long-standing trade surpluses with the U.S. to the mainland.

About 60 percent of China’s exports by value are produced or assembled by foreign firms. American, European and Latino. But most are from Hong Kong, Taiwan, South Korea, Japan and Southeast Asia. The actual added value of mainland inputs is no more than 30 percent of the total value of mainland exports. That is why passage of the legislation will penalize mainly foreign firms, including American. Protectionism will have global and interlocal repercussions that will paralyze the international trading system. Protectionism is just so not American. It is totalitarian.

Protectionism flies in the face of international agreements that reduced or eliminated trade tariffs and capital controls, legalized subsidies and lowered transport costs.