Mark Perry writes:
At a recent event hosted by The Aspen Institute, "Is U.S. Trade Policy Helping or Hurting Manufacturing?" and featuring former U.S. Trade Representative Susan Schwab and former principal economic adviser to Vice President Joseph Biden Jared Bernstein, there was a lively debate on a number of issues relating to trade and manufacturing. While there were differences of opinion on most topics, there was a strong consensus (including among the attendees) on one topic: China is a currency manipulator. Here is a summary of that consensus, as I understand it:
1. China manipulates its currency by keeping the yuan undervalued and the dollar overvalued.
2. That currency manipulation gives China an economic advantage that harms the United States.
3. The United States and other countries should individually or collectively take steps to persuade or force China to stop its manipulation.
4. Solutions to China’s currency manipulation range from direct legislation, like the bill passed recently in the Senate that will impose stiff tariffs on Chinese goods if the Treasury finds evidence of currency manipulation, to other forms of indirect pressure on China to persuade it to stop manipulating its currency.
Let me break from that consensus about China’s currency policy and present an alternative position:
The ‘manipulation’ of China's currency is actually to the distinct advantage of millions of American consumers and U.S. businesses buying products made in China.
In the best of all possible worlds for the United States, China would use its labor and capital to manufacture consumer products like clothing, footwear, furniture, electronics, and appliances and send $300 billion worth of these products to U.S. consumers for free every year as a gift or a form of foreign aid to the American people. In addition, the Chinese would produce and send to America another $100 billion worth of raw materials, parts, industrial supplies, inputs, and natural resources at no charge, as a gift to American manufacturers every year. (Note: That’s roughly the amount of goods we will purchase from China this year.)
Read more: http://www.american.com/archive/2011/december/why-we-should-thank-the-chinese-currency-manipulators/article_print
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