Georgia will lose if U.S.-China trade is less free, more hostile
We have a trade problem with China. But Georgians will pay dearly if Congress keeps taking the wrong approach to solving it.
That approach is to punish China for currency manipulation. The bill being debated in the U.S. Senate applies to any country that Washington deems to have undervalued its currency and hurt our exports. But China, with which we had a $273 billion trade deficit last year, is the target.
Beijing’s manipulation of its currency, the yuan, has been a favorite bogeyman of members of Congress for years — most notably Sens. Charles Schumer, D-N.Y., and Lindsey Graham, R-S.C. Generally speaking, when politicians from both major parties continue to flog an issue for years on end, it makes for much better politics than policy. The currency bill would not solve our problems with China, real or imagined.
First, the imagined problem: that yuan manipulation contributes to our high unemployment rate.
The yuan was most undervalued versus the dollar from the mid-1990s to the mid-2000s — a time of low U.S. unemployment. Beijing began letting the yuan appreciate in value in 2005.
It has risen about 23 percent since then. Yet, the U.S. unemployment rate rose sharply during the same time period. Simply put, there’s no correlation between the yuan-dollar rate and U.S. joblessness.
The other problem you’ll hear about is our trade deficit with China. The real issue is that we export too little to China. Attacking the exchange rate is not the way to boost the goods and services we sell to the Chinese.
Instead, a currency fight could provoke a costly trade war with one of our most important trading partners. By “our,” I mean not just Americans’, but Georgians’.
Last year, China was tops in imports to Georgia and second only to Canada among destinations for our exports. Georgia exports to China were worth nearly $2.4 billion, up more than one-third from 2009. Wood pulp, aircraft and plastic were among the industries that did the most business with China.
The risk is that the currency bill would spark retaliation from China, which would provoke another measure from our side, and so on — until it grew into a full-blown trade war that made goods pricier for consumers and crimped exports, killing more jobs.
“There is no way a spiral of trade conflict can help the United States,” says Derek Scissors, an expert on U.S.-Asia economic policy at the Heritage Foundation. “It can hurt the Chinese worse, but it cannot help the United States.”
A far better way to boost exports is to negotiate with Beijing to improve our access to the Chinese market.
“What they say” now, Scissors says of Chinese authorities, “is state-owned enterprises must lead or dominate the following 20 industries. … “They’re going to not allow you [as a U.S. firm] to expand, not allow you to sell, not allow you to get licenses.”
Those sectors range from automobiles and banking to ones in which Georgia firms are more prominent, such as poultry and chemicals.
Poultry, he says, is an example of how even legitimate trade complaints can spiral.
“China has been messing with us on poultry exports for quality control because we messed with them on quality control — because their stuff kills people,” Scissors says. “We have a justified quality control issue; the Chinese retaliate. So someone loses even though we have a completely justified issue.”
With better access, Scissors estimates U.S. companies’ market share in China could be double what it is now.
Liberalizing trade rules — one of the key means through which the world economy grew, and people climbed out of poverty, in the last half-century — is far preferable here to picking a trade war. Legislators and presidents from both parties, however, have made it harder to open trade by focusing on the yuan and other peripheral issues.
Unfortunately, both of Georgia’s senators voted to advance the bill (albeit without committing to supporting the final legislation). And six members of our House delegation — all five Democrats, plus Republican Lynn Westmoreland — are co-sponsors of a similar bill in that chamber.
For Georgia’s sake, they need to reconsider.
– By Kyle Wingfield
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71 comments Add your comment
Alex
October 6th, 2011
11:18 am
@@: If I saw someone wear one of those I’m pretty sure I would have to high five them for the shock factor, especially if they cut the sleeves off!
Lil' Barry Bailout (Revised Downward)
October 6th, 2011
11:23 am
Unions killed manufacturing with their lack of flexibility and greed.
Stevie Ray
October 6th, 2011
11:33 am
Kyle,
I’m with you on this for sure. Not likely any bill will pass though because we got no leverage of value. Good news is that the Chinese have little leverage as well as their holdings in Treasury is 8-10% of total and there is no place else they can put that much cash. My understanding is that the Chinese want to be a “rich” nation and have a model that encourages exports over internal investment. Hopefully it’s cyclical and will result in some internal pressure to have more balanced investment policy. Good topic.
Jefferson
October 6th, 2011
11:56 am
You should stick to something else to make hay over. You are exposed on this subject.
Karl Marx
October 6th, 2011
12:14 pm
Kyle,
It’s the same libertarian tune “Free Markets” is the cure for all ills. But with China it is not and never has been a free market. We could sell a ton of goods however it will not be allowed to interfere with “State run Business”. China’s chicken industry in one they want to protect. Everything they export to us is heavily government subsidized such that our industry can’t compete. Don’t believe me go down to Harbor Freight and check out the price and quality of the goods imported from China. It retails for less than the cost of the material used to make it. That’s called “dumping”. Every time I counter the Libertarian “Free market” with Fair Competition and a Level Playing field all I get is a blank stare. If you want the middle class to work for 50 cents a week and child labor to rule the day then by all means continue to cater to China but don’t be alarmed when the retail industry collapses. There will not be a middle class to buy the goods and it’s the middle class that drives the retail market.
detritusUSA
October 6th, 2011
12:16 pm
The problem is not communist China, but their communist dupes in the U.S.
Lil' Barry Bailout (Revised Downward)
October 6th, 2011
12:27 pm
Amen, detritus. They’re currently manifested in that “occupy Wall Street” collection of losers.
Lil' Barry Bailout (Revised Downward)
October 6th, 2011
12:32 pm
President Obama said Thursday that the Occupy Wall Street protests show a “broad-based frustration” among Americans about how the U.S. financial system works.
———–
It couldn’t have anything to do with his never-ending 9% unemployment, of course.
Obozo: Moron. Loser.
Edward
October 6th, 2011
12:33 pm
@LBB: So I should make my own shoes lest I be a hypocrite? I’m not the one shopping at Walmart and I do buy locally whenever possible. I don’t mind paying a little bit more to a local merchant because I know it eventually helps me and my community. But you go right ahead and think of nobody but yourself and bitch and complain online all day long about how you’re taxed and regulated too much while you screw your neighbor out of anything you possibly can gain.
Hillbilly D
October 6th, 2011
12:46 pm
Not likely. We all know “they’re better” than their hillbilly counterparts here in the U.S. of A. They never miss the opportunity to tell us they are.
A comment like that might get you banned somewhere else, if you weren’t already. (IW&SH)
@@
October 6th, 2011
12:53 pm
Alex:
If I saw someone wear one of those I’m pretty sure I would have to high five them for the shock factor, especially if they cut the sleeves off!
Wazzamattah? You don’t like loud?
Nor do I. If I’m not mistaken, that’s a northeastern accent…ever so “enlightened”.
Jeff Sessions and Olympia Snowe have introduced the “Honest Budget Act”.
Sessions and Snowe have been in the Senate 16 and 18 years respectively. What have they and ALL reps been doing all this time…ignoring the problem?
Lil' Barry Bailout (Revised Downward)
October 6th, 2011
12:54 pm
Edward thinks it’s OK for him to save a few dollars by buying products made outside the US, but if a company does the same, he has a big problem with that.
Hypocrite.
@@
October 6th, 2011
1:00 pm
Hillbilly:
A comment like that might get you banned somewhere else, if you weren’t already.
You know me…a left-coaster with Southern roots. On the left-coast, it’s called unconventional. In the South it’s called rebellion. True to my heritage.
Stevie Ray
October 6th, 2011
1:01 pm
Barry Bailout, I agree but the humor is this: These protestors naivete is exhibited by choice of venue. They should be in front of the White House as well as the congressmen and congressmatrix’s et al. Banks never should have been allowed to be in investment banking or securities (not to mention commercial insurance) busines in general. Without leadership from Obama (from “change you can believe in” to “it’s not our fault”)and the other corrupresentatives to rescind subject legislation and increase regulations regarding S&P ratings and stop bailouts…the exposure of further problems will remain.
Edward, with or money already at close to an all time low in purchasing power, how can you possibly justify all of us paying more for computers, underware, textiles, steel, automobiles (tell me US manufacturers wouldn’t bump up prices to take advantage of tariffs or whatever else you are pitching), plastic goods, sporting goods, tires, phones, ….the list goes on. Good god man!
Lil' Barry Bailout (Unexpectedly Revised Downward)
October 6th, 2011
1:06 pm
Remember when the Obozo supporters were crowing during the 2008 campaign about how their Idiot Messiah had received more donations from Wall Street than McCain?
Haven’t heard much about that recently!
Obozo receptacles: Idiots.
Stevie Ray
October 6th, 2011
1:21 pm
Big Barry….doubt that will be the case this year although surprisingly, most of the bigger contributors generally hedge their bet but since he’s been a bastion of anti-capitalism, perhaps that will change. The guy at SBUX hopefully starting another trend.
Unfortunately, it is unlikely things would change with any of the traditional republican contestants. Of all of them, I sense the two who can’t win (Cain n Paul)are the least corruptible….
@@
October 6th, 2011
1:23 pm
Obama needs to choose his words more carefully.
Obama: Jobs bill could prevent second downturn
Which downturn? His approval ratings? His failed stimulus?
=================================
Hillbilly:
What, if anything, do you know about the price of Morton buildings?
Today on China from the blogosphere October 6, 2011 | China You
October 6th, 2011
1:31 pm
[...] Georgia will lose if U.S.-China trade is less free, more hostile | Kyle … We have a trade problem with China. But Georgians will pay dearly if Congress keeps taking the wrong approach to solving it. That approach is to punish China. [...]
Hillbilly D
October 6th, 2011
1:39 pm
@@
Don’t know anything about Morton buildings, specifically, but know a little about those types of buildings in general. There are many companies involved in building those types of buildings. I’d suggest getting one from somebody who does a good bit of business in your area. The ones I’ve looked into, it depends on what you want but the basic buildings are fairly reasonable but the add-ons can run into $$. You might also just ride around and if you see an existing one you like, drop in and ask the folks where they bought it or who built it. Also, if you’re on an EMC and get the monthly EMC magazine, there are usually ads in there for different companies. There are also many sites on the internet for companies that sell them.
I looked into one a few years back but never did anything. The prices ranged from a couple thousand to tens of thousands, depending on size and what you want.
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October 6th, 2011
3:57 pm
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