More Useless Trade Negotitations with China

June 15, 2008

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.