A new example today of the consensus that has formed on confronting China’s trade practices: At the America’s Fiscal Choices conference today economists Paul Krugman, Martin Feldstein and Jan Hatzius all agreed on the need for the dollar to fall.
Last week, in Consensus Grows: Confront China On Trade, I wrote.
Now that the beneficiaries of the “free trade’ bamboozlement are off to their private islands in their private jets or private yachts the rest of us are looking around at the devastation of our economy and standard of living, wondering what to do and finally becoming aware that rigid ideologies and their enforcers have kept us from looking for practical solutions that actually work for all of us as a country and community.
China’s currency scheme is just one part of their mercantilist trade manipulation. By keeping their currency undervalued they are able to bring goods to the world market with a huge price advantage. But they do a number of other things as well. Here are a few more of the main unfair advantages China uses to its advantage:
1) Currency manipulation. China “pegs” its currency at a very low, or “weak” rate, so goods from China cost up to 40% less than they otherwise should.
2) Labor-rights suppression has lowered manufacturing wages of Chinese workers by 47% to 86%.
3) There is massive direct government subsidization of export production in many key industries.
4) China allows environmental degradation that ends up affecting all of us.
5) Intellectual property theft and piracy mean that American products that could be sold are stolen instead.
6) China has a number of policies that block U.S. firms from market access.
Meanwhile, Europe calls on China to let currency appreciate,
European leaders on Tuesday urged China to let its currency rise and narrow a trade deficit that has strained relations, while promising Asian countries in return more power in global financial institutions.
China did not, however, commit to new currency action at a summit that highlighted how the global financial crisis had shifted the economic balance of power eastward.