Top US economists rap protectionism
By Xin Zhiming
Updated: 2007-08-03 07:06

More than 1,000 top American economists have signed a petition opposing the protectionist policies proposed by the US Congress against China.

The US Senate Banking Committee approved legislation on Wednesday that aims to force the government to get tougher when dealing with China in trade issues.

Last week, the Senate Finance Committee approved legislation that would allow firms to seek higher anti-dumping duties against Chinese companies for what some US senators said a "fundamentally misaligned" currency.

A total of 1,028 economists from 50 US states, including Nobel Laureates Finn Kydland, Edward Prescott, Thomas Schelling and Vernon Thomas, signed the petition initiated by the US non-government organization Club for Growth.

They hold that free trade is in the interest of both the US and China and punitive tariffs on Chinese products are tantamount to a tax on American consumers.

China sells affordable goods to US consumers and helps keep the US interest rates low by buying US treasuries, they pointed out, adding that US consumers and businesses would suffer from higher prices, fewer jobs, economic woes and a potential trade war.

"We believe that barriers to free trade destroy wealth and benefit no one in the long run," they said.

Pat Toomey, president of the Club for Growth, said that the protectionist atmosphere permeating the US Senate is similar to what existed in 1930, when the notorious Smoot-Hawley Tariff Act - which aimed to shield US producers against foreign competition but is believed to have led to trade wars and dramatically shrunk global trade - was passed.

"The Congress is suffering from a bad case of amnesia," Toomey wrote.

In 1930, too, 1,028 economists signed a petition opposing that act.

Washington has been pressuring Beijing to revalue the yuan to solve the problem of its whopping trade deficit but economists have long pointed out that it is the US' fault.

"Many economists from the US as well as other countries have found that the problem has arisen from the US' economic structure," said Zhao Xijun, finance professor at Renmin University of China.

"The country has a very low savings rate and spends much more than it saves, which is reflected in its huge trade deficit."

A drastic yuan revaluation would not help the US as the rising costs of Chinese products would only shift the source of some of US imports to other countries with lower production costs.

"The US politicians are well aware of that," said Chen Xingdong, chief economist of Hong Kong-based BNP Paribas Peregrine Securities.

But they have stuck to their anti-China stance simply to win over voters, he said.

(China Daily 08/03/2007 page1)