China Bashing Again

I never cease to be amazed how prevalent China bashing becomes during an election season in the U.S. The midterm 2010 election is no exception. China is again blamed for the low value of its currency, high unemployment in the U.S. caused by outsourcing to China and the bilateral trade deficit. The result was that last week the House of Representatives voted overwhelmingly to impose tariffs on virtually all Chinese imports to the U.S. The threat of putting sizeable tariffs on a country’s entire exports to the U.S. is not only highly unusual, but of dubious legality under international trade law ─ as is the case on China’s currency manipulation which the World Trade Organization does not define as illegal.

A currency fix alone won’t solve America’s problems. A revaluation of the yuan addresses only one of the many pressures shaping the imbalances in the Sino-U.S. relationship, a subject I discuss at length in Feasting Dragon, Starving Eagle.

The Chinese feel that America is trying to curb China’s growth, and thus its power and refuse to assist America in its efforts to isolate Iran and North Korea.

China, as America’s largest creditor, has become more confident in its dealings with the U.S. and on the world stage. Why should China make economic concessions to a country many blame for plunging the world into financial crisis? Why should China make its exports and imports more expensive? Why should China bail America out of its financial abyss at the cost of its exports being more expensive and Chinese factories being shut down and millions of workers becoming unemployed? Would America if the roles were reversed? I for one don’t think so. America should be thankful China is helping finance America’s unjustified deficit spending spree and stop blaming China for the mistakes of Washington career politicians. The alternative is America defaults on its financial obligations, or worse, bankruptcy.

A trade war with China, the world’s leading tea drinking country, does not help U.S. exports or employment in America as members of the Tea Party movement advocate. China can buy from elsewhere hurting U.S. export industries while American consumers pay higher prices for essential consumer items and also have higher tariffs imposed on U.S. products, which China defiantly imposed on U.S. poultry before the House vote. On the day of the vote, China warned of dire consequences and further economic disruptions and let the value of the yuan fall.