US senators Charles Schumer
and Lindsey Graham, urged by President George W. Bush and under the lobbying of
Treasury Secretary Henry Paulson, announced on September 28 that they had
shelved their bill pushing for the imposition of 27.5 per cent penalty tariffs
on Chinese imports unless China moved to allow a greater appreciation of the
renminbi, according to media reports. The US Congress would have voted on the
act on that very day.
With the bill's withdrawal, the strained US-China trade relations have
coasted around a snag.
The two senators initiated the bill because of the United States'
ever-expanding trade deficit with China, which according to the US calculation,
hit US$162 billion in 2004, for example.
After 2000, China replaced Japan as the country to which the United States
owed the biggest reversed trade balance. Senators Schumer and Graham believed
that China engaged in unfair competition on the world market, and the US market
in particular, by keeping the renminbi's exchange rate artificially low.
Hence, they pushed for the penalty tariffs on Chinese commodities entering
the US market unless China raised the renminbi's exchange rate by comparable
margins.
The motive is obvious. But from what perspectives should we approach the
matter?
For a start, the United States' reversed trade balance with China is
determined by the economic structures of the two countries.
The United States, a highly consumptive economy, needs an incessant flow of
consumer goods from various countries, which necessarily opens the US market
wide for cheap and good Chinese goods.
By contrast, China enjoys a very high bank savings rate, which means that
Chinese consumers buy relatively less.
On condition that the economic structures of the two countries remain
unchanged, the unbalanced trade will be there, which is good for both nations in
the opinion of this author.
In the repeated trade talks and negotiations launched since the 1990s,
Chinese negotiators have time and again pointed out that labour-intensive
industries are on the wane in the United States in the context of quickened
globalization and internal US industrial realignment. In this scenario, hot
sales of Chinese labour-intensive products are powered by market forces rather
than artificial means.
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