Tuesday, May 6, 2008

From "Indiana to Beijing": a WSJ delusion

Today's Wall Street Journal editorial closely examines the toenails of our trade relationship with China, but misses the elephant. They begin:

As part of her populist reinvention, Hillary Clinton last week criticized a Chinese business deal in Indiana that her husband's administration had supported. Perhaps she should have consulted the U.S.-China Business Council's study on U.S. exports to China before arguing that ties with China are hurting Americans.

That's right, exports. The study tracks exports from each Congressional district to China. Between 2000 and 2007, 406 of 426 House districts clocked triple-digit export growth to the mainland. Note that the bulk were manufactured goods: Electrical equipment and machinery, power generation equipment, and aircraft are America's top three export categories to China in dollar terms. In services, the U.S. ran a $3.7 billion trade surplus with China in 2006, the latest year for which data are available.

With the United States economy stagnating and the Chinese economy growing by 10-12% a year, economists would expect that US exports to China would be growing faster than imports.

However, according to BEA statistics, US trade deficit in goods with China was $257 billion (preliminary) in 2007 compared to $233 billion the previous year. That's up $24 billion. Our trade surplus in services with China in 2007 was $5 billion compared to $4 billion the previous year, up just $1 billion.

They continue with some anecdotal evidence that some congressional districts are showing growth in exports to China. True. However, our manufacturing companies laid off another 46,000 workers in April. The Wall Street Journal continues:

Trade with China, like trade with any country, will at times lead to closed factories and displaced workers. But these latest data are a reminder that trade creates new opportunities, too.

They are sounding a bit deluded. The WSJ is saying, "Don't pay attention to the trade deficit, China is starting to buy our goods and services." They conclude:

Rather than ratcheting up the antitrade and anti-China rhetoric, the presidential candidates would do better focusing on helping Americans seize the opportunities of trade. Pro-growth tax and regulatory policies would make a good start.

What nonsense. The choice is not between exports and protectionism. Requiring balanced trade through Import Certificates would increase our exports to China, not reduce them. They would cause China to take down her many barriers to our exports. The Wall Street Journal has completely missed the fact that China is following a mercantilist policy of selling to us without buying from us. No mention at all, of course, of the new 40% tariff that they just slapped on American mining equipment. Or the 17,000 jobs lost in the American motor vehicles and parts sector in April, partly due to the Chinese 30% tariffs on Harley-Davidson motorcycles and US autoparts, despite the fact that the WTO ruled their tariffs on our autoparts to be illegal. And no evidence of the elephant in the room: The fact that they are accumuluating hundreds of billions of dollars each year as a byproduct of their currency manipulations.

Follow the following link to read the editorial: http://online.wsj.com/article/SB121003316032369285.html?mod=opinion_main_review_and_outlooks


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