Time to Get Tough with China

Posted by Michael A. Kamperman on January 17, 2011

President Hu is rolling into the U.S. and the Obama Administration is rolling out the red carpet with a State Dinner.  This is positive since the best course of action is cooperation between the U.S. and China on a host of issues, not all of which are economic.  However, the reality is China is interested only in what’s in it for China.  Therefore, it’s time for President Obama to get tough and tell President Hu, in private, that he now has a deadline to solve the huge imbalances in America’s trade deficit with China.  He can either start by revaluing the yuan by 20%, or let it float freely on currency markets, or he can choose to substantially increase purchases of U.S. goods and services to balance out the trade deficit.  It’s Hu’s choice, as the U.S. would not be dictating Chinese policy.  President Obama would simply use the same tactics as China and declare that U.S. policy will be for the benefit first and foremost for the U.S.  Were I President I would set a deadline of July 1, 2011, which is plenty of time for action on the part of China.  The U.S. is in a jobs depression and we can no longer just give U.S. jobs away with nothing to show for it in return.  If Hu fails to act, then President Obama can implement an across the board 30% tariff on all Chinese goods and services entering the U.S. and declare Chinese currency policies in violaion of the WTO.  This will make both China and the global corporate interests that benefit from current policies furious.  But it is necessary to restore the “American Dream” to the average American family.

Global corporate interests, like Apple Computer for example, benefit greatly from current policies at the expense of U.S. workers.  While the ipod, iphone, and ipad are great American inventions, they are mainly manufactured in China.  The reason of couse is cheap Chinese labor.  Billionaires are popping up everywhere in China on the backs of cheap Chinese labor.  And, billionaires are popping up in the U.S. without nary a thought of driving down the living standards of working Americans.  Plainly put, what’s good for Apple and other global corporate interests and what’s good for China is not good for the rest of us.

Our unemployment rate of 9.4% is by now well known to be undercounting the truth of an unemployment rate closer to the mid-teens.  We simply continue to drop people who want to work out of the labor force, even if they are healthy and in their 20′s.  But less well known, and much less often discussed by the media, is the fact that the U.S. unemployment rate is a quantitative measure, not a qualitative one.  If you get a temporary part-time job working for minimum wage and no benefits, then you are counted as a new hire and employed by U.S. government statisticians.  Try raising kids and paying a mortgage on minimum wage, part-time.  Or imagine yourself as a Chinese laborer working 80 hour weeks for a few hundred dollars a month and no benefits.  This is the world current policy has driven us too.  And current policy will continue to drive a world where workers are viewed as discardable input costs forced to compete across the globe with each other based on price, rather than viewed as people.  If President Hu does’nt want to change his currency policy, then he could offer healthcare to the vast majority of Chinese citizens now forced to go without it.  The U.S. is the leader in healthcare and China could help balance out the trade deficit by buying U.S. healthcare products and services.  Afterall, when U.S. employers are forced to provide healthcare in 2014 it will only make U.S. workers even less competitive when we allow iphones to be sold in the U.S. made by workers with no healthcare benefits.  The current path we are on is a path to a third-world entire world without a middle-class.  Where will the iphone buyers come from then?