Free China Trade

Hong Kong. January 23, 2005. When it comes to free trade Vice President Dick Cheney acts and talks as if America is in the forefront. The global warrior against protectionism. His demands that China open it’s markets to U.S. manufactured products and services sounds like a broken political record. For decades America’s mantra to the world has been Leave it to the market. State governments should not intervene. Nothing could be further from the truth, especially when it comes to trade with China.

China seems to be blamed for everything that is going wrong for America-except the war in Iraq! China is being blamed for the failed 2003 WTO meeting in Cancun, and accused of keeping the value of the Yuan artificially low to maintain a trade advantage over US based manufacturers. Economists who warn the Bush administration of the potential trade war that will destabilize China’s economy and set off a global financial crisis are shunned aside in favor of the political spin meisters who want to appease the voters in the critical states and races in an election year.

High poll ratings do not stop America’s politicians from bashing China during an election year. U.S. politicians want to make sure that whatever blame is directed their way for their voodoo economics it is deflected and redirected at China. This is happening again as the 2004 presidential and congressional campaigns get under way. The US decision to impose quotas and tariffs on certain Chinese textiles and televisions because of the trade imbalance between America and China is pure political spin. Quotas on textiles and televisions from China will not save jobs or create the illusory jobs the quotas politically imply. The quotas will only increase imports from other low cost manufacturing centers that have lost market share to China.China is a convenient political scapegoat. Trade imbalance, devaluation of the Chinese yuan, quotas and U.S. sanctions if China fails to comply have become the political rallying call of politicians fighting for votes. So much so that the Department of Commerce set up a political team to ‘take care of China. Commerce Secretary Donald Evans is leading the charge in speeches across America.

To blame China for manipulating its currency and saying that is the cause for the trade imbalance between America and China is just more political and economic fiction. The fact is China has kept its currency pegged to the U.S. dollar since 1995. It has also taken the billions it has earned in trade and invested them in the U.S. buying U.S. federal bonds that help U.S. career politicians underwrite their rapidly growing budget deficits. China is the second largest purchaser of U.S. bonds.

Instead of blaming China for America’s economic woes caused by self serving career politicians, America should lift many of the export restrictions it has imposed on goods and services that can be exported to China. That would certainly help balance trade. Let us not forget that America had the trade surplus with China for 21 straight years from 1972 until 1993. China only started having a trade surplus with the U.S. since 1993. More importantly, more than half of the Chinese exports to the United States are produced by foreign-funded enterprises in China, many of them U.S. companies.Isn’t it time for America to start practicing what it preaches? Isn’t it time America stopped imposing quotas, tariffs and sanctions that protect campaign donors for their unprecedented campaign contributions? Isn’t it time for America to get up front and lead the free trade opportunities with China?