- The Washington Times - Tuesday, March 30, 2010


If excuses for appeasing China’s currency manipulation could be turned into growth and jobs, the U.S. economy might be enjoying real recovery.

For eight long years, U.S. domestic companies and their employees have complained seriously about China’s deliberately undervalued yuan, which has priced their output out of global markets for reasons totally unrelated to free trade. And for eight long years, Washington’s China lobby — lavishly funded by multinational companies whose China facilities benefit from this 50 percent subsidy — has trotted out rationalizations for inaction.

China isn’t manipulating its currency at all, this kowtow crowd has often claimed — when it was not insisting variously that quiet diplomatic “engagement” would end manipulation fastest; that China would move voluntarily because manipulation hurts its economy; that China will never move because jobs and thus social stability are at stake; that manipulation has not significantly affected the U.S. economy; and that whatever the merits, Americans can’t afford to get tough with their banker.

Have these arguments been proven failures, transparently absurd, demonstrably false or internally contradictory? Of course. But they served the lobbyists’ one and only aim — upholding the U.S.-China trade status quo. Now, as continuing U.S. economic woes have returned currency manipulation to the spotlight, the panda-huggers (along with some well-meaning China critics) are peddling yet another pretext for opposing strong U.S. countermeasures: an insistence that Americans take the time to build a global coalition to pressure China.

The disastrous costs already incurred of following the China lobby’s advice amply justify ignoring its latest ploy. Because Beijing’s prime subsidy and trade barrier has not only persisted but actually increased (reflecting China’s growing financial strength), American factories have kept closing, survivors’ profits have kept shriveling and even vanishing, job losses have kept mounting, and wages have kept sagging. Worse, U.S.-centric global economic imbalances kept mounting until they triggered the biggest American and worldwide downturn since the Great Depression.

Any U.S. leaders still listening to the kowtow crowd should recognize that despite its superficial appeal, the case for currency multilateralism couldn’t be flimsier.

It’s not that Americans are China’s only economic victims. So are Third World countries, whose labor-intensive exports compete with China’s in global markets. The Europeans are complaining, too, because during the recent spell of dollar weakness, the yuan’s peg to the greenback forced the relative prices of euro-zone-produced goods especially high.

Yet developing countries have held Third World solidarity too dear to turn against a country still technically in their ranks. They’re also highly susceptible to Chinese foreign-aid bribery. The Europeans, for their part, have long relieved import pressure by cutting side deals with Asian rivals or simply closing off their markets. The Asians have acquiesced because boosting exports to the United States has always been the easiest response.

Further, as even multilateralists acknowledge, other Asian countries manipulate their currencies as well. Therefore, they won’t be lining up against China. European tempers, meanwhile, could cool soon because the euro is weakening against the dollar (and, of course, the pegged yuan).

But the main problem with counting on multilateralism to halt China’s currency manipulation is the main problem with multilateralism generally: Despite the multilateralists’ assurances, the strong multilateral consensus needed for currency-manipulation success is nowhere in sight. Specifically, the world’s biggest economies seem determined to keep growing mainly by exporting to the United States and thus to keep fueling the still-dangerous global imbalances that China’s predation has worsened but by no means exclusively caused.

At recent global summits, those countries have promised to change. But clearly, trade policy-as-usual attitudes still reign. Otherwise, why would the Europeans and Canadians have protested so loudly when Congress added “Buy American” provisions to President Obama’s stimulus package, which plainly were allowed by World Trade Organization rules and therefore didn’t even apply to European and most Canadian exports?

Why would the Europeans be mulling retaliation for the Pentagon’s decision to give America’s world-beating defense industry a reasonable chance to build its new planned aerial tanker? Why would Brazil be imposing sweeping WTO-approved tariffs on U.S. exports even though the cotton subsidies it sued to eliminate have been drastically cut and restructured?

Luckily, even after years of squandering its economic strength by appeasing China and other competitors, the United States remains powerful enough to heal its own economy and rebalance the world’s economy unilaterally through stiff trade sanctions. The president and Congress simply must realize that there’s no more time for excuses.

Alan Tonelson is a research fellow at the U.S. Business and Industry Council, a national business organization whose more than 1,900 members are mainly small- and medium-sized domestic manufacturers. Author of “The Race to the Bottom,” Mr. Tonelson also is a contributor to the council’s Web site, www.americaneconomicalert.org.

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