Mr. Schumer goes to China

CHINA / Foreign Media on China

 Mr. Schumer goes to China
(nytimes)
Updated: 2006-03-27 14:07

The good news is that Senators Lindsey Graham and Charles Schumer have
started to inch away from their misguided attempt to club China for its
currency policies.

At the end of a fact-finding trip last week, Mr. Schumer told reporters
he was no longer sure he would push for a vote to impose tariffs on
Chinese imports into the United States. "The jury is out," he said. But,
he said, "we are more optimistic that this can be worked out than we were
in the past."

Maybe the chance to talk face-to-face with Chinese on their home turf is
what it took to make Mr. Graham and Mr. Schumer realize that just as
trade is a two-way street, so too are sanctions.

If lawmakers actually went ahead with the Schumer-Graham bill, which
would impose 27.5 percent tariffs  a staggering amount  on Chinese
goods, they would be accomplishing little to cut American unemployment,
while hurting poor Americans who rely on inexpensive goods and poor
Chinese whose livelihoods depend on making those products.

The Schumer-Graham bill is based on a fundamental misunderstanding of the
root cause of America's economic problems. No question, the United States
trade deficit and the loss of American manufacturing jobs are very
serious.

But most of the imbalance with China is caused by Americans' insatiable
appetite for Chinese imports for which there are few domestic
substitutes. While it's unfortunate that the textile industry has all but
faded away in this country, the fact is that few American factories make
things like low-priced apparel any longer.

As for the yuan, China clearly needs a more flexible currency, both for
the sake of trade relations and to gain more control over its economy.
But moving the yuan could cause pain in the United States. America's lack
of savings is the biggest contributor to global imbalances, making it
necessary to "import" billions of dollars of foreign capital daily to
cover budget and trade deficits. China is America's second-most-important
lender, after Japan.

As long as China links the yuan to the dollar, it needs to keep the
American currency stable. If China loosened its currency's peg to the
dollar, or removed it altogether, it wouldn't need to buy up dollar-based
assets at its current torrid pace. The result could be a rise, even a
sharp rise, in United States interest rates and, as a corollary, a
fall-off in economic growth.

Thus far the Bush administration has resisted calls to accuse China of
currency manipulation, but Treasury Secretary John Snow last month hinted
that could change. That too, would be a mistake. The administration has
done a fair job so far in its tap dance around America's relationship
with the world's fastest-growing economy. Now is not the time to slide
back into election-year shortsightedness.

Most Commented/Read Stories in 48 Hours

Today's Top News 

 China boosts processed oil prices, subsidies promised

 Gas leak forces 5,000 to evacuate

 40bln yuan T-bonds to be issued in April

 IKEA founder proud to be frugal at 80

Top China News 

 China sticks to policy of peaceful development: Jia

 Enterprises violating IPR punished

 Surges in processed oil prices continue

 Falcon dies of H5N1 bird flu in HK

 7,000 evacuated after gas leak, no injuries

20071123 Extracted from http://www.hellomandarin.net