US China Relations at a Low: China at the Center of the Global Currency War and a Missed Opportunity

When did China become the enemy of the world?

In august, China became the second largest economy in the world, surpassing Japan to take the #2 spot. Since then it appears every country in the world has marked China as public enemy #1.

The recent controversies in the East China Sea between Japan and China sparked an international dispute between the two nations. While the situation is improving, with Japan’s return of the boat captain arrested in disputed waters, the causes of the dispute are still unresolved. The East China Sea is the wild west, a potential gold rush of oil, minerals, raw materials, and rich fishing grounds, waiting to be harvested and used. The problem with this region is that it is a cluster bomb waiting to explode; Vietnam, Taiwan, Malaysia, Brunei and the Philippines and Japan, each have territorial claims in the East China Sea, while China claims the entire region for itself (The BBC, The Inquirer).

At some point in the near future, these nations will begin to exploit these much-needed resources not just fishing rights. Increasingly, it appears that nations are preparing for confrontation rather than peaceful negotiations. Currently, Japan and India are forming a military defense alliance, and are for the first time beginning bilateral military exercises (India’s National Newspaper). Japan also disdains Chinese economic power considering them a junior nation underdeveloped and on the verge of bubble collapse similar to the Japan situation in the 1990’s, with a huge disparity in GDP per capita (Asian Times).  WWII atrocities always loom over Sino-Japanese relations, resulting in an ever-growing Chinese military to secure their place as a world power to prevent repeated history and to secure resources for growth. With these developments it is very doubtful that these antagonistic nations will become friendly neighbors.

China has also gotten into a row with the world’s largest economy America. The United States Congress has decided that in the interest of manufacturing sector in America, that it is time the Chinese raise the value of their currency to make their goods more expensive or they will begin placing a tariff on imports from China. This scheme hopes to develop US manufacturing domestically and cut exports from China to create jobs and cut China out of US domestic markets. China is becoming the scapegoat of America’s political leaders who have failed to ensure stable growth, jobs, and responsible fiscal governance. The US is risking relations with China to distract the American people from their own political mess, rather than waiting for the Yuan to naturally appreciate (which it is, see My Article); this is terrible Foreign Policy! Now the Europeans are following suite with their own requests for China to raise the Yuan’s value to help raise their own manufacturing base to export their way out of recession.

On top of currency issues, China and the US are at a standstill with current climate and trade agreements. Agreements made at Copenhagen are becoming unacceptable to China and the developing nations as they struggle to survive and sustain growth during the recession. This continues the trend of confrontation between developed and developing countries, pitting China once again against the USA.  The IMF has noted the currency war by the United States, Europe, China, Japan and others to lower their currency are contributing to international unrest and the inability to move forward on international trade and environmental agreements. If we want a peaceful world we cannot compete on who can devalue their money the fastest (The Guardian).

IMF video discussing currency war:

http://www.reuters.com/news/video/story?videoId=163802473&videoChannel=5

Taming the Tiger

While the world watches and shuns the growth of China, we should not ask ourselves how we can we stop that growth; rather, we should be using that growth to benefit America. The rise of China as the factory of the world and its return as a great power is a foregone conclusion, it’s time we accept that fact and move forward, gaining the benefits of that relationship while the friendly hand is still open. A good first start to building friendly relations would be to continue our policy of free trade with China, allowing for cheap goods to flow into the US benefiting our consumer base. Structural changes in our trade should be made such as the development of high-tech industries. China will need these advanced technology to sustain future growth, and the US a developed nation should use their labor capital and developed economy to export these high quality products such as mining equipment and advanced industrial parts to China.

The US should position themselves as a mediator between China and Asian Countries to determine mineral rights in the China Sea before the issue explodes; this is a necessary challenge that must be overcome. If we can help encourage a solution to this territorial dispute to avoid a future conflict when it comes time to harvest these needed resources. This coming conflict is only escalating and we need to diffuse it before diplomacy becomes even more difficult.

While China is a dictatorship, it is a society that is changing. Democratic reforms are slow and brutal gulag prisons await those who openly defy the government. Yet, the development of a capitalist, free enterprise economy in China will only enhance the yearning of the people of China to be free. With the rise of economic freedom comes the rise and desire for political freedom. The rising middle class created by international trade will eventually demand the birthright as free people: Liberty.

If the US shuns their economic relationship with China, these democratic ideals (represented by capitalist democracies) will become in the minds of the Chinese, antithetical to Chinese nationalism. The US will increasingly appear an enemy to the people of China, alienating the free world and requiring greater political crackdown in China due to civil unrest from low employment. Trade sanctions will hurt the Chinese middle class and America consumers: a trade war is the worst solution! If we continue our free trade policies with China (which benefits America anyway) we can increase our relationship with China, gaining leverage over China in political issues such as human rights. Rather than attempting to cut China out of the picture, we can leverage our friendship to encourage political reform, and freedom of information. Only with the leverage of as a trade partner can the US encourage China to progress to a more free society.

A stronger friendship with China will also make internal agreements and foreign policy accomplishments easier. The Doha Trade Negotiations round is an abysmal failure and environmental negotiations made at Copenhagen are at a standstill due to the increasing competition between developed and developing nations. If we used our friendship with China (leader of the developing world) strategically, we could rally support behind trade agreements, and solve international disputes (Associated Press). Greece and Italy have already perused this strategic relationship with China reaffirming their friendship and trade alliance.

The growing trade, reserves of foreign assets, and economic size of China and the US have linked the fates of our nations. Let us use this strategic relationship to our benefit rather than allowing it to become a problem. It is time the United States faces reality and makes a strategic ally out of China rather than a strategic and powerful enemy!

-Daniel Sniffin

Further Learning

Interview with Premier of China Wen Jiabao: http://www.danwei.org/video/wen_jiabao_on_cnn.php

China becomes second largest economy: http://www.csmonitor.com/Commentary/the-monitors-view/2010/0816/China-becomes-world-s-second-largest-economy-but-it-s-far-from-being-a-leader

Brazil gets involved: http://www.theglobeandmail.com/report-on-business/economy/world-is-in-currency-war-brazil/article1728151/

China holds up climate talks: http://www.guardian.co.uk/environment/2010/oct/06/china-climate-talks-us-negotiator

Sources:

The Hindu: http://www.hindu.com/2010/09/29/stories/2010092956252200.htm

Asian Times: http://www.atimes.com/atimes/Japan/LI29Dh01.html

The AP: http://www.google.com/hostednews/ap/article/ALeqM5gON3fOS44QCo6_Gopk2pBjtLd6nwD9IM8QC01?docId=D9IM8QC01

The Inquirer: http://newsinfo.inquirer.net/inquirerheadlines/nation/view/20100925-294185/Aquino-Asean-united-vs-China-on-territorial-dispute

The BBC: http://www.bbc.co.uk/news/world-asia-pacific-11473751

The Guardian: http://www.guardian.co.uk/business/2010/oct/06/currency-war-warning-imf-chief

IMF Video: http://www.reuters.com/news/video/story?videoId=163802473&videoChannel=5

The Coming Internet Cyber War: Can We Continue to Computerize Society without Opening Pandora’s Box?

The Battlefield of the 21st Century: Cyberspace

There is an underground war going on between nations, terrorists, corporations and private individuals, even You. This war is fought in a language that few know how to read, and an even smaller number know how to write. It is waged between two forces Architects and Wolves. Defensive fortresses are designed by Architects that have skills and training to protect our most precious treasure. Cunning wolves probe every opening of these cyber fortresses and with enough time, can find a passageway inside, break down the walls from within, and gain access to the fortress keep. This underground war if fought every day on cyber space, becoming more sophisticated and competitive. Increasing numbers of experts fight to protect computer systems from those who attempt to hack into those systems. This is the new battleground of the twenty-first century: Cyberspace.

These battles can be simple or sophisticated, whether from identity theft and password cracking, to attacks on banking or state infrastructure.  Cyber hackers are sometimes the “good guys” in this war, they can fight for justice. These hacker heroes are found in China where the state oppresses and hides search engine results, shuts down dissident websites, and continues its oppression through censorship.  Chinese hackers probe the fortresses of firewalls and blocks set up by Chinese authorities and bypass them to continue their fight for political freedoms.

This warfare can be a tit for tat battle. During the Iranian uprising in the summer of 2009, the Iranian government during their suppression campaigns attempted to block news and media from leaving and entering the country, specifically censoring social networking sites that were becoming the backdoor for dissent and protestors. In response, Iranian hackers were able to circumvent these barriers and bring moment by moment news to the world through social networking sites like twitter. Iranian hackers also went on the attack, disabling the government of Iran’s official and propaganda sites.

What our society should be concerned about is the increase in private and state terrorism in the field of cyber warfare and the effect it will have as American and World Society. As we move to greater dependency on the internet/computers for trade, banking, infrastructure, communication, socialization, news, and information, these systems are becoming more vulnerable when before they were unwired to the net or computer systems.

Military Warfare on the Internet

The attacks listed below are cyber attacks that illustrate catastrophic and threatening cyber attacks, which draw into question our continued wiring of our society opening ourselves up to these attacks. Large scale battles in this war include:

The first unclassified nation vs. nation cyber warfare attack occurred between an unknown entity (believed to be Russia but still unknown) and Estonia in 2007. Estonia, a highly wired society, was bombarded for a period of 3 weeks with cyber attacks which took control of government websites, computers, and critical state operations. The entire online banking system of Estonia was disabled for weeks.

Russia attacks on Georgian government websites, emails, news sites, and internet infrastructure occurred in August 2008. Georgia’s connection with the outside world was cut off, and the government was put in turmoil as Russian tanks moved across the border. Georgia was left helpless resulting in its military defeat. Russia’s victory demonstrates the effect of cyber bombs can have in combination with military and political operations.

The most significant and sophisticated cyber weapon to date, was discovered this summer and designated Stutnex. This computer worm was discovered in national infrastructures throughout Europe and Asia, as well as Iranian nuclear computer systems. Recent research on the weapon shows that it is a highly sophisticated weapon designed to shutdown and disable state infrastructure by taking control of those computer systems. The worm was highly covert and jumped through portable media drives to once thought isolated systems. It was intended for a specific target which is yet unknown.

Warnings for America

The disabling of Estonia’s economic sector and crippling of its national computer systems and the complete disabling of Georgia’s cyberspace in preparation for military attack, show a clear vulnerability of cyber, economic and political infrastructure. The recent release of the Stutnex virus shows an even scarier possibility that real world infrastructure that we rely on for our survival; electrical systems, nuclear power plants, dams, safety programs, water, sanitation, can be sabotaged through cyber attacks.

In an age where individual’s daily lives are becoming increasingly wired onto electronic devices and increasingly computerized infrastructure to sustain those lives is the trend, the possibility of catastrophic cyber attack increases. If we continue this progress, a future American or Europe could be brought to a complete halt, shutting down our banking, online business’s and electrical power. The increasing calls for a smart grid for power and resource management makes this possible reality even more real. While the benefits for the system are realized through decreased costs and conservation of energy, a major security risk could arise where our electrical grid can become an easier target for cyber attacks.

We don’t have to worry about terminators turning on humanity but we must be prepared to deal with man’s most dangerous enemy, his fellow man. If we continue to allow an increased wiring of infrastructure that keeps people alive, the risks of falling victim to attack and real world detriment increases. Every encryption can eventually be broken with enough time and persistence, so defense will never be foolproof. This does not mean we should not take advantage of this computerized information age! Planners should consider keeping parallel and when able, manual hack-proof backups to sustain us. Let us be cautious when we follow a path of “progress” and integration and ignore the threats of increasing cyber attacks.

Sources:

Stuxnet Virus Info Christian Science Monitor

US Cyber Warfare and Smart Grid Wall Street Journal

Iran Cyber Warfare BBC

Estonia Cyber Attacks The Guardian

Congress Proposes Protectionist Free Trade Bill: Transforming America into China to Create Jobs

So what Congress is saying is…. We need to be more like CHINA (1840’s America?)????

Currently, the Chinese government is keeping their currency artificially lower than a floating value. The effects on Chinese society of this artificially lowered currency should be a warning to US policy makers who are attempting correct the trade imbalance by having China increase the RMB’s value.  Congress is considering imposing a tariff on Chinese products unless they raise the value of their currency in relation to the dollar, created a de-facto weaker dollar when it comes to trade. If the Chinese will not raise its currency value Congress will pin tariffs on Chinese goods effectively accomplishing the same effect.

Congress is ignoring major consequences of their actions for the sake of increasing manufacturing jobs in the US. When any nation, lowers the value of its currency in relation to their trading partner, a lower the standard of living for their people is generated. When a nation artificially decreases the value of its currency to increase exports, manufactured goods are exported elsewhere rather than kept at home enjoyed by the citizenry who cant afford it. In China the lower valued currency has resulted in China’s huge poverty rate and low standards of living, even though they have a huge manufacturing base.

An undervalued Chinese currency has resulted in a powerful manufacturing base which is a huge benefit to Chinese officials who reap the profits from the labor (because of their tight links with industry and the state). The state’s elite accomplish the second objective of satiating their population with jobs and a functioning economy. Employed people are complacent people. The Chinese government is also attempting to use their artificially low currency in a development plan where a large industrial manufacturing export base is rapidly created that can later be tooled the develop a domestic internal consumer market. The consequence of this strategy is a lower standard of living for everyone outside the elite (Who reaps the profits from overseas trade) until the switch can be made . The Chinese know lower currency and export are not signs of a developed nation.

For America, a developed economy, de-developing isn’t the answer. We already have a domestic consumer base, and a strong currency has allowed our people a high standard of living. We have spent decasedes transforming ourselves from a low tech manufacturing economy to a high-tech and service based economy that has resulted in the greatest era of human prosperity ever seen!  America had its industrial revolution in the 18^th and early 19^th centuries we don’t need it now. We have had during the last two decades virtually full employment at most times even though there was a trade deficit. As manufacturing jobs moved to China, those free laborers were retooled and eventually perused careers in other industries or high tech manufacturing. Now that we have around nine percent unemployment, the trade deficit issue has become a scapegoat for congress to blame for lost american jobs (even though the trade deficit is decreasing on its own without congress’s help and has had a low effect on US jobs).

If we want to eliminate our robust standard of living then Congress’s plan is the answer and the Chinese model will be adopted. America will dumb down its workforce and accept a lower standard of living to please and allowing the All Powerful Congress to waste America’s intellectual and labor capital by essentially creating burger flipping jobs in assembly factories. Wasn’t that the criticism of George Bush’s job numbers in 2003-2004?

Bring Innovation NOT Degeneration to American Manufacturing: Kill Three Birds with One Stone

We cannot have high standards of living and cheap goods without international trade. Some labor must necessarily cost less for a good to be cheaper. Do we want Americans sewing clothing and assembling toys or do we want them producing heavy machine equipment for export or designing the latest technological innovation to increase everyone’s livelihood?

Let’s build a better America, not copy China! Instead of shutting out the competition embrace it and make ourselves more competitive. Since American goods cost too much for a domestic market, let’s make our goods as cheap as the Chinese by helping industry reduce the large cost that have forced them to move and close down. Increasing industrial competition, not reducing it will lower prices, create jobs, and benefit the consumer with the availability better made American goods at the same cheap Chinese priced goods. If Congress truly desired a better America, policies can be pursued where consumers, industry and workers can benefit at the same time and our trade deficit would decrease naturally, making it a win-win for all.

If you agree with this article, TELL YOUR REPRESENTATIVE TO VOTE NO TO THE “CURRENCY REFORM FOR FREE TRADE ACT.”

This bill is nothing mare than PROTECTIONIST ploy to increase low skilled manufacturing jobs at the expense of ROBUST standards of living enjoyed by consumers.

Sources:

BBC NEWS http://www.bbc.co.uk/news/business-11407254

House Ways and Means Committeehttp://waysandmeans.house.gov/hearings/hearingDetails.aspx?NewsID=11347

Open Congress (good resource for Bill information): http://www.opencongress.org/bill/111-h2378/show

Nancy Pelosi’s Press Release: http://www.speaker.gov/newsroom/pressreleases?id=1888

Hoover Graphic: http://www.artdiamondblog.com/archives/2007/08/

Congress Puts Trade Sanctions on China Pandering to Special Interests, Hurting Consumers

WHY IS CONGRESS OK WITH IGNORING CONSUMERS?

The Legislature on both sides of the aisle is once again willing to abandoned the American consumer for the most nefarious of reasons; INTEREST GROUP POLITICS! The coming vote and probable passage of the “Currency Reform for Fair Trade Act” is a classic case of consumer vs. interest group politics. This battle usually plays out with the consumer being underrepresented in Congressional decisions and industry with union backing being overrepresented. Consumers are all the citizens within the society and the benefits from free trade are widespread among them. This spread results in a sacrifice by politicians of consumer interests due to of an organized and concentrated nature of unions and big business which have a large stake in pushing for protectionist policies. Consumers are lured into inaction by the free rider concept, where no one stands up for a consumer, because they can allow another to do it for them.

Free trade is a benefit to consumers, allowing for cheap goods to flow into their nation undercutting the market price offered by the domestic market. This undercutting allows more consumers who were not able to purchase the good at the higher price to purchase that good. More products are sold at a cheaper cost increasing the standard of living of the population, and freeing up capital that would not exist in the hands of consumers if domestic markets were cheaper!

The Democrats have a clear advantage in passing this bill and so do the Republicans. Both sides can claim that they supported bills to increase American jobs and fight the evils of overseas outsourcing. Congress believes that the American people will focus on jobs rather than statistical data from economist showing the benefits of trade for cheap goods that increase standard of living. If American can reduce the trade deficit by passing the higher cost on a widespread consumer base Congress looks good for creating jobs at the expense of unknowing American consumers.

Congress is also bought and paid for by the manufacturing industry and unions. An increase in manufacturing jobs will increase the number of union employees that have fallen over the decades. The unions are a strong backbone of the Democratic political machine and will benefit from the increased Union membership. The consumer will suffer at the expense of democrats rebuilding their once lost union base that has been in steady decline due to free trade.

Republicans and Democrats are bombarded constantly by corporate manufacturing lobbyist, which have been pushing for a means to block out their competition from Chinese firms. A recession with high unemployment is a perfect time to make their push and quickly pass protectionist policies. This has repeated itself constantly in the past, the best example being the Smoot-Hawley Tariff Act in 1930 which prolonged the Great Depression and was a reaction to job losses.

Many Republicans support the bill, in a false belief that plans to creating jobs fast will help Americans, and voting for the bill will gain those votes in November. With large unemployment, jobs right now are certainly needed but, bringing the low tech outsourced industrial base of America to the US on the backs of American consumers isn’t the way to do it! This quick fix will create long-term higher costs on goods. The Republicans are foolishly supporting this bill which is diametrically opposed to their economic principles as a party, which believes in raising American standards of living through free markets.

If one looks at the supporters of this bill it is striking that they are composed of all domestic industrial manufacturing corporations and unions (link at end of post). Not a single consumer group supports this bill. Why? BECAUSE IT IS BAD FOR CONSUMERS AND THE AMERICAN PEOPLE!

List of Bill Supporters: House Ways and Means Committee http://waysandmeans.house.gov/hearings/hearingDetails.aspx?NewsID=11347

Congress Planning Trade Sanctions Against China: Supporting Manufacturing at the Expense of the Consumers

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Trade Sanctions Bill Against China!

Congress’s Aid to Big Business and Unions at the Expense of American Consumers!

THE FACTS

This week, congressional Democrats and Republicans under the leadership of Sander Levin approved through the House’s ways and means committee the “Currency Reform for Free Trade Act” sanctioning import duties on nations who artificial depreciate their currencies. The bill is directly targeting China’s artificially low currency in comparison to the dollar which has allowed it to export cheap goods to American Consumers, fueling its economic growth and currency reserves. This bill will come to a vote in the house next week.

The US trade deficit with China in 2009 was $227 billion down from 2008. It is projected to decrease again by the end of this year due to a decrease in the value of US currency and China’s cutbacks on growth and lending.

According to Speaker Nancy Pelosi’s press release: There are approximately 150 Co-sponsors of the bill 45 of them are Republicans.

http://www.speaker.gov/newsroom/pressreleases?id=1888

Manufacturing Industries and Unions have enthusiastically supported the bill according to the Ways and Means Committees website. These supporters are: The Fair Currency Coalition, AFL-CIO, Coalition of Agricultural Producers, United Auto Workers (UAW), United Steel Workers, American Iron & Steel Institute, American Manufacturing Trade Action Coalition, Alliance for American Manufacturing, National Council of Textile Organizations

http://waysandmeans.house.gov/hearings/hearingDetails.aspx?NewsID=11347

CONGRESS’S JUSTIFICATION/LOGIC

The bill’s intent according to its sponsor Congressman Sander Levin  is to restore the balance of trade between the US and China. China’s artificially low currency has allowed the dollar to have a higher exchange rate, increasing the dollars purchasing power for Chinese goods. This stronger currency allows American consumers to purchase cheap Chinese goods rather than paying higher prices in dollar terms for US equivalent products. Congress wants to impose import tariffs on Chinese goods so that the price of those goods will increase to be on par with the already higher cost American products. Therefore American goods will be purchased over tariff imposed higher priced Chinese goods.

This increase in domestic consumption of domestic goods and decrease in imports will create manufacturing jobs for American workers, replacing the labor outsourced to China. According to Levin: “[The yuan] has a major impact on American workers and therefore American jobs. That’s what this is really all about.” If China doesn’t increase the value of the Yuan in relation to the dollar, Congress will impose tariff duties to correct its effect on the price of Chinese exports to the US.

JOBS MAY BE CREATED!!! BUT…..

If penalties and import duties are imposed as this bill outlines, it will result in a favorable outcome for US manufacturing industries. If China decides to retaliate with its own trade tariffs to reciprocate a trade war, US exports to China will decrease and nobody will benefit. This tit for tat policy is unlikely but still a possibility, and has happened in the past. The benefits for manufacturing industries that do not rely on cheap Chinese imports for parts or equipment will benefit from this policy by increasing market share.

Domestic demand for American goods will increase for comparable products imported from China that have the duty tariff imposed on them. American products will gain an advantage as cheaper priced and consumers would be left with the only rational option being the cheaper US product. The price increase from the tariff  results in a higher market price and less demand. The loss of supply for China subtracting the loss of demand of goods at the higher price will equal the gains and amount produced  by American industries. Less demand will result in fewer products being sold. While fewer products will be bought overall, the American industries would keep the money from production and sale inside the US.

With this increased supply to meet domestic demand, manufacturing jobs in the US would be created to service the increased US market share. Ultimately, the US will gain industrial jobs to build the products once imported from China.

Even though job in manufacturing will increase in the US while their counterparts in China will decrease or move elsewhere, is low skilled manufacturing jobs increasing really beneficial to the US?  Do we really want to retool Americans to do the same low-level, low skilled jobs as Chinese labor? Rather than opening up position for jobs in high-tech industries to increase our exports, or to open business opportunities for export of Americas service labor industries, Congress is declaring that jobs of low skill are desirable. What we should be doing is training this unemployed worker force to retool for high-tech, technical and high paying manufacturing. Rather than dumbing down the work force we should be legislating to make it easier for the US to export high-tech industries around the globe. As much as the green industry is artificial political demand and inefficient it would be  preferable to Americans assembling dolls that unskilled Chinese labor does cheaply and efficiently. Lets produce exceptional engineering rather than exceptional American made plungers.

While the quality of jobs is an issue that should be considered, this policy completely ignores the effects duty tariffs will have to the US as a whole! While the manufacturing industries and its workers will benefit, the American people are getting a bad deal

WHO GETS THE SHORT END OF THE STICK?

THE AMERICAN PEOPLE!!! (as usual). The reason the trade deficit with China, and trade existing at all between the two countries, is that China is able to provide Americans cheap consumer goods. These goods are bought by Americans at a lower price than their American counterparts allowing for more purchasing power by consumers. These consumers are able to enjoy one of the highest standards of living in the world at the expense of losing the manufacturing base that produced them going overseas. When the tariffs take effect there will be no cheap alternative and the American people will be forced to pay higher prices for those goods, or reduce their standard of living. Free Trade and the cheapness of Chinese labor allows for Americans to save a buck and raise their standard of living.  To deny this reality of cheap goods benefiting consumers shows a fundamental misunderstanding of economics. Cheaper products keeps cost of living LOW! Congress is going to raise the cost of living while everyone is struggling to make ends meet.

While one might think this is simply picking a winner and a looser and that in an economic situation like a recession keeping everyone employed is more important than overall living standards, the benefits in the long run and the short run do not calculate to an increase in total welfare for society. In the long run prices will remain higher and those shorter term job gains being sustained by that higher price will not increase standards of living as long as they exist with the tariff. Creative destruction would not eliminate those inefficient jobs!  Also those short-term jobs made possible by the price increase will decrease the number of goods produced because of the price will become unaffordable for some. Therefore, the welfare gain of manufacturing does not compare to the overall surplus and total welfare gained from cheap Chinese goods.

The act of Congress trying to reduce the trade deficit is an attempt to stop the American people from making the most rational choice and buying the cheaper product! Manufacturing industries that depend on cheap products from China to build high-tech will have increased costs. These high-tech industries may be forced to raise prices cutting off one of the main exports the US has; high-tech equipment.

Sanctioning China is also a bad political move. China is and will be a major world power, regardless of US actions to cut off trade with it. China is on a course to become a massive economy, and it has a government geared toward that objective. If we make competitors out of the Chinese rather than partners, that would create an unneeded enemy. A stable friendly China can be a key ally on the world stage where the world is increasingly becoming multi-polar. Chinese relations is an investment with a future world power, being friendly with a nation of 1.3 billion people is more important than a trade balance that helps special interests.

China is actually slowly raising the Yuan but in small increments. Why rush a process that is occurring naturally as our trade deficit equalizes naturally? Congress needs to stop pander for votes and think with smart policy.

The oxymoron of this whole affair is that Congress has cleverly disguised Protectionist trade policies under the guise of a Free Trade bill.

If Congress passes “Currency Reform for Free Trade Act” H.R.2378 the Special Interests will benefit at the expense of consumers! Urge your congressman to vote NO to Protect Consumers!

Other sources:

BBC NEWS http://www.bbc.co.uk/news/business-11407254

House Ways and Means Committee http://waysandmeans.house.gov/hearings/hearingDetails.aspx?NewsID=11347

Open Congress (good resource for Bill information): http://www.opencongress.org/bill/111-h2378/show

Nancy Pelosi’s Press Release: http://www.speaker.gov/newsroom/pressreleases?id=1888

Hoover Graphic: http://www.artdiamondblog.com/archives/2007/08/