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WSJ: Republicans, Democrats Should Reconsider Anti-China Trade Policies

By    |   Friday, 17 August 2012 08:18 AM

During this heated presidential election season, Democrats and Republicans do agree on one thing: the Chinese trade juggernaut is hurting Americans’ standard of living.

But a new analysis by the U.S.-China Business Council reveals a disconnect between business on Main Street and the anti-Chinese rhetoric, as congressional districts dominated by both parties gain from trade with China, according to an editorial in The Wall Street Journal.

While Democratic and Republican lawmakers are supporting legislation aimed at punishing Beijing for allegedly manipulating its currency, the yuan, to boost China’s exports, U.S. exports to China have surged in the past decade.

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

On the Democratic side, Reps. Nancy Pelosi of California and Louise Slaughter of New York, have co-sponsored legislation targeting China’s currency manipulation in spite of their districts' booming exports to China.

Republican Reps. Frank Wolf of Virginia and John Shimkus of Illinois represent districts that have seen U.S. exports to China increase by more than 500 percent and 600 percent, respectively, during that period, according to The Journal.

And the irony is especially evident in the key battleground states. The swing states of Pennsylvania, Michigan and Ohio are among the top 15 exporting states to China, with export growth of 1,177 percent, 1,169 percent and 838 percent, respectively, over the past decade.

Sens. Lindsey Graham, R-S.C., and Chuck Schumer, D-N.Y., have witnessed export booms in their states to the Central Kingdom since China joined the World Trade Organization: 2,261 percent for the Palmetto State and 472 percent for the Empire State. And that’s only in goods, not in services, where the United States has traditionally run a surplus with China, according to The Journal.

Even so, President Barack Obama continues to push for a trade "enforcement" policy against China that focuses on protectionist measures.

Presumptive Republican candidate Mitt Romney also threatens to sanction China for currency manipulation, including it as one of his five priorities in his stump speech.

Targeting Chinese imports seems particularly imprudent since so many U.S. exports are components for the products America ends up importing again. And that’s not to mention the retailing, transportation, marketing and other jobs that rely on those Chinese goods, the paper says.

About 55 cents of every dollar that the United States spends on goods that are made in China go to Americans who design, ship and market those products, according to a study last year by economists at the San Francisco Federal Reserve cited by The Journal. On top of that is the boost to the improved standard of living derived from cheaper consumer goods, as low-cost Chinese imports hold down U.S. prices for consumer goods.

This goes to show that free trade is a pillar of the U.S. economy and that should be recognized by both parties, The Journal says. U.S. leaders should continue pushing China to open up its economy to fair trade, something that also benefits millions of Chinese. But those same U.S. leaders should avoid protectionist policies that only hurt American companies and the consumers who benefit from free trade with China.

It may be too late, though, as Chinese trade figures have weakened. Exports in July grew just 1 percent, compared with an 11.3 percent growth rate in the prior month, The Associated Press reported last week. That puts pressure on the ruling Communist Party to ratchet up stimulus efforts at the same time it seeks to dampen public discontent ahead of a key leadership handover.

"With the export sector losing speed faster than expected, the government's current investment stimulus plan looks woefully inadequate," IHS Global Insight analyst Alistair Thornton said in a report. "The government is likely to respond by ramping up its stimulus efforts, with both monetary and fiscal guns firing," AP reported.

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

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Friday, 17 August 2012 08:18 AM
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