More Useless Trade Negotitations with China

Once again, the U.S. sends unarmed combatants into a battle of wits with Chinese trade negotiators.  Treasury Secretary Henry Paulson and Fed chief Ben Bernanke will meet with Chinese leaders to discuss rising protectionism and currency valuations.  Discussion of both topics is a complete waste of time and represents more of the same trade dilly-dallying we’ve witnessed for decades.  Currency valuation has almost nothing to do with the trade deficit in manufactured goods.  There’s more proof in this article:

Washington thinks the Chinese currency, which has risen about 20 percent against the dollar over the last three years, should appreciate further as part of exchange rate reforms that could also be helpful to control inflation, a politically sensitive issue in China where half of family incomes go for food.

The result of those three years’ of 20% yuan appreciation?  Our trade deficit with China has soared, not declined.  Negotiations to lower China’s barriers have yielded the same results.  The trade deficit isn’t declining because, without implementation of tariffs by the U.S. – tariffs that would compensate the U.S. for China’s inability to offer an equivalent market in exchange for access to ours – it’s impossible for it to decline.  The deficit is due to the gross disparity in per capita consumption between the U.S. and China – a disparity that’s due to China’s gross overpopulation, something that isn’t going to change any time soon. 

Perhaps this situation will begin to improve next year:

“If this tendency of protectionism grows unchecked, it may become a threat to the global trade and the multilateral trading system,” said Sun Zhenyu, China’s ambassador to the WTO.

Adding to the concerns is the prospect of a US rollback of market opening measures under a Democratic president, amid concerns over the US trade deficit with China, which ballooned to a record 256.2 billion dollars last year.

Democratic White House candidate Barack Obama has promised to review US free trade policies if he wins the presidential election in November.

If Obama is a man of his word, we may finally start to see some real action.  Does he have the courage to take on the Chinese and the WTO?  Time will tell.  But he’d better.  It’s our only hope.  The time has come to stop relying on currency valuation and the vague promises of our trading “partners.”  It’s time for the U.S. to take matters into its own hands to begin the rollback of the enormous trade deficit that is drowning our economy. 

8 Responses to More Useless Trade Negotitations with China

  1. Henry Dubb says:

    Here is what Obama’s senior economic adviser has to say about free trade,

    Austan Goolsbee (BARACK OBAMA): “I’m a University of Chicago economist and no one is ever going to be more in favor of open markets and free trade than an economist, so you would presume I’d be for anything that has the words ‘free trade agreement’ in it and all I’ll tell you is this: I do believe there’s no one more in favor of open markets than me and that said, if you look at a free trade agreement – if you have never read a free trade agreement I encourage you to go read it – because it is as close to the economists’ case for free trade as our tax code is to the economists’ case for the ideal tax system. If you look at these 900-page agreements, they’re two pages of what every economist says “yeah, that’s great” – opening tarriffs – and then 898 pages of loopholes. It looks just like the tax code – of protect this company and make sure they’re getting their money and these investor protections – and so I think that the case for open markets is different than what you think about this, that or the 146 trade agreements that were signed in the 1990s. And Obama has been trying to get us away from what I call the false choice that either you’re for every single thing the administration has done or else you’re a protectionist and you’re against America’s role in the international economy, but neither of those is true. There are perfectly grounded things oriented around opening markets and expanding American presence in the world that I think we can have pretty general consensus on and I agree with Garry – one thing that we should have general consensus on is if a country signs an agreement with the United States that says they’re gonna do a, b and c, that they should do it. If they don’t do it, we should pursue the means in the WTO or otherwise that makes sure everybody abides by the agreements that they sign, so it strikes me that there is common ground here

  2. Pete Murphy says:

    Thanks for sending this, Henry. I hadn’t seen it. However, as I read it, this guy is actually criticizing our trade deals when he says the first two pages of a typical trade agreement are good but then they go on to include 898 pages of stuff that reads like our tax code. He’s actually blaming these trade deals for short-changing the U.S. He claims to be a free trade advocate, but apparently not this kind of free trade.

    It’s true that much of the damage done to our economy by “free” trade happened under a Democratic administration – Clinton’s, to be specific. He pushed through NAFTA and also oversaw the granting of “MFN” (most favored nation) status to China. Under Bush, another free trader, both agreements spiraled out of control.

    In the interim, while the Republicans still favor any and every trade deal that comes along, I’ve detected a shift in the Democrats. Fixing bad trade deals was one of the centerpieces of Edwards’ economic policy. Obama hasn’t taken as hard a line, but repeatedly called out Hillary as a supporter of NAFTA and has vowed to renegotiate NAFTA if elected. The only statements I’ve heard from McCain regarding free trade is that he thinks it’s been wonderful for our economy and that we need more of it.

    I don’t trust any of these guys but, for now, at least to my eyes, Obama seems to be the one on the right side of the trade issue.

  3. Henry Dubb says:

    So Pete if I understand you correctly – free trade is good – the problem is that the trade agreements have these excemptions. Please, what he is arguing against are the same damn “loopholes” you put forward in your book.

    I really think your reading of Obama is naive. Gooslebee is one of the biggest free traders out there. Obama’s rhetoric on NAFTA was simply rhetoric. I guess I am rather surprised he got you on it. He would, depending on which day, attack NAFTA, but then reassure the free traders he was still with them.

    I think your right on the trade issue, but so wrong on Obama. I am not saying McCain is any better, but a certainly trust a Democratic congress more on trade with a McCain than an Obama.

  4. Pete Murphy says:

    I may be naive to believe that Obama will come through. If he eliminated the “loopholes” and we ended up with truly free trade, things could actually get worse when trading with overpopulated nations.

    I’m being a pragmatist here. One of these two guys, McCain or Obama, will be president. Neither is willing to go as far as walking away from the WTO and implementing tariffs, so it’s a question of which one is more like to take steps in the right direction on trade. Based on the rhetoric (and I realize that’s all it is), Obama seems to be the best choice so far.

    Henry, please keep me updated on anything you learn about either candidate’s position on trade!

  5. Nathan says:

    Here is an interesting article about Obama’s plan to have China revalue the yuan:

  6. Pete Murphy says:

    Thanks for the link, Nathan. This article is so loaded with typical free trade cheerleader propaganda and disinformation that I may use it as the subject of a new post. Naturally, the parasitic economies of the grossly overpopulated nations of the world (like China, Japan, Germany, Korea and many others) are critical of any protectionist talk in the U.S. These countries are totally dependent on exports and would collapse back into 3rd world economies, bearing the full brunt of their overpopulation, if they were no longer able to suck the life blood out of America’s economy.

    We can only hope that Obama is willing to go beyond discussions of currency valuation. This is the same misguided approach that has yielded no results for over three decades. America is being bankrupted by an enormous trade deficit, in spite of the falling dollar, because currency valuation has nothing to do with the deficit. The trade deficit in manufactured goods is a direct result of granting free access to the U.S. market without getting access to an equivalent market in return. All we get is access (if we get it at all) to markets stunted by over-crowding and low per capita consumption.

    It’s time for America to take our trade results into our own hands and implement the population density-indexed tariff structure on manufactured goods called for in “Five Short Blasts.” Is Obama the guy to do it? We can only hope.

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