As Congress approaches the midterm election, China-bashing has once again proven to be the convenient wool to pull over the voters’ eyes. It is, after all, easier to put the blame on China than explain to voters why America is still in the doldrums.
The House of Representatives seems determined to label China a currency manipulator and enact a law that would force the Obama administration to impose a countervailing duty on goods from China to adjust for the perceived undervaluation of the renminbi. So far, no one in the bipartisan effort has seen fit to explain how to calculate the alleged undervaluation.
Not even a Nobel Prize–winning economist has been able to present a case to prove how making imports more expensive to the American consumer would create more jobs for America. The last time the United States pressured China to take the yuan off the peg, the currency appreciated more than 20 percent against the dollar and, perhaps to the lawmakers’ surprise, the trade imbalance didn’t shrink but widened by about the same relative amount.
Premier Wen Jiabao, in his speech in New York before attending the UN General Assembly meeting, declared that the value of the yuan could not be responsible for the subprime mortgage scandal that led to the financial meltdown and the resulting record budget deficit and national debt. He suggested that Congress should be addressing the real root of the problems of America’s economy rather than distracting America’s attention by picking a fight with China.
It’s universally accepted that the protectionist Smoot Hawley Tariff Act did nothing to pull America out of the Great Depression but only made matters worse. Surely, some of the politicians on Capitol Hill must know that protectionism is the road to a lose-lose outcome. Most probably, the House is counting on the Senate or the Obama administration to not let the charade go too far.
On the other hand, instead of politics as usual, our elected officials could devote their energy to doing what they have been elected to do—namely, to think about and solve the many real problems confronting America.
For example, no one has the courage to ask: How can we balance the budget if we don’t raise taxes but continue to spend like we have with no worries instead of sitting on a record budget deficit?
How can we reverse the downward spiral of the value of the dollar if all we are doing is piling on our national debt?
No one is asking why our economic stimulus package doesn’t seem to work and is not creating jobs. Is it because too much was allocated to bailing out car companies and banks deemed too big to fail?
Why do we continue to act like the world’s only superpower when Iraq and Afghanistan are bleeding America into potentially fatal state of anemia?
Why does it take a comedian to point out to Congress that hating illegal aliens is contrary to our desire for affordable fruits and vegetables?
Our leaders continue to pat themselves on the back, expressing pride that our outstanding colleges and universities are world class, yet seem oblivious that these institutions depend on foreign students to maintain their excellence. Why are they not doing something about improving the quality of K-12 education in America?
Chinese cuisine has a delicacy called “fried live fish.” The head of the live fish is held out of boiling oil while the rest of its body is fried to a crisp. When served on a plate, the cooked body is covered in a sauce while the head is still alive and gasping for air. This is an appropriate but disheartening metaphor for our Congress.
China’s options and leverage to counter Congress are complicated and difficult. Of the hard currency reserve China is holding, more than 1.5 trillion are estimated to be in dollars. Any retaliation that would materially weaken the value of the dollar would not be in China’s interest.
China is already America’s second-largest export market and growing faster than China’s export to America. Obama’s recent announced intention to reform the export control process will boost high-tech sales and add to the momentum. China could halt imports from the United States, but its vested interest is in a stronger U.S. economy, not a weaker one.
The Chinese embassy spokesperson in Washington, Xie Feng, has just publicly confirmed that China’s President Hu Jintao has accepted President Obama’s invitation and will visit the United States in January. He added that China considers this visit to be the highest national priority.
Xie also indicated that both sides—meaning Beijing and the Obama administration—expressed confidence that all the thorny issues facing the bilateral relations can be worked out.
Given Congress's determination to sidetrack the relations, there is always a chance that the January visit will be postponed or cancelled. Or worse, Washington could force Beijing’s hand into making a mutually destructive move in order to get America to focus on the real issues.
Dr. George Koo is a retired international business consultant and a contributor to New America Media.
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