With Confrontation, Is There Really “Little to Lose”?

During America’s election year, the two parties denounce each other’s economic policies, with China long ago having become a casually grasped-at topic. The Republican candidate, Mitt Romney, once said that if he were elected, on his first day in office he would declare China a “currency manipulating country.” Recently, Romney again criticized the current president, Democratic candidate Barack Obama, for being too lenient on China with regard to economic policy. He also stated that America has “little to lose” by increasing confrontation with China and need not worry about causing a China-U.S. trade war.

On May 25, the U.S. Department of the Treasury published a report submitted to Congress about international economic policies and problems with exchange rate policies. In this semiannual report, the Treasury expressed the belief that China was not manipulating the exchange rate.

With respect to issues in Sino-American trade relations, American society does not lack a voice of reason. Former U.S. National Security Adviser Brzezinski issued a criticism the other day, saying that some American politicians, media organizations and especially some people who want to become president were truly demonizing China, and that some of their words were very unsuitable.

Stanford University professor Stephen Roach recently published an article and attended a related congressional hearing. He called on America to consider abandoning the restrictions drawn up during the Cold War against China purchasing technology-intensive items.

Romney still believes that it’s a mistake for America to focus all its attention on the Chinese RMB exchange rate issue because this conceals the more important problems underlying China-U.S. economic relations. First, the American trade deficit is multilateral. To use the year 2010 as an example, America and 88 other countries had trade deficits. This multilateral imbalance cannot simply be solved through bilateral exchange rate pressure between China and America, besides the fact that the origin of this multilateral imbalance lies in a shortage of a country’s own savings. In fact, America’s main problems come from within America; criticizing China will only hinder the improvement of America’s domestic state of affairs. Next, since mid-2005 the Chinese RMB had already increased 31.4 percent in value over the American dollar, far surpassing the 27.5 percent proposed in the Schumer-Graham bill. Finally, among the total amount of Chinese exports to America, it is reported that the increase in China’s domestic prices did not exceed 20-30 percent, and that about 60 percent of exports belong to shipments by “foreign investment companies.” The globalized platform of manufacturing has distorted the data of bilateral trade between China and America so that it has no relationship with the exchange rate.

Roach emphasized that America cannot view China as its major threat, as merely fixing attention on the Chinese RMB exchange rate problem will produce the opposite of the desired result. With regard to America’s lack of strength in economic growth, America should set its sight on market access problems. The state of American consumerism is still dispirited and listless. For the past four years, after adjusting for the factor of inflation, the annual average in American personal spending only increased by 0.5 percent. America urgently needs to look for a new point of growth; China has the capacity to fill the empty space that American consumers have left behind.

Only through cooperation can there be mutual benefit, and mutually beneficial directions can lead to win-win situations. The argument that there is “little to lose” by intensifying confrontation against China goes completely against the facts; what will ultimately be damaged are the actual interests of the American people themselves.