The US is Wrong to Take Such an Aggressive Approach to China -
But That's Always the American Way
Use A Broadsword When a Rapier Would do Just as Well
Take it by Force, if You Can, and Whine if You Can't
Takungpao, Hong Kong; 22 May 2010
If the U.S. really wants to open up the Chinese market and strive for trade equality, the most fundamental way would be to acknowledge China’s market economy status and abolish its outdated technology import bans.
The second round of the U.S.–China Strategic and Economic Dialogue will take place soon. Originally, this was to be a good opportunity for cooperation, but as always, the U.S. continues to pressure China on allowing the Yuan to appreciate, opening up its markets and balance of trade and so on. The flood of requests leads to double standards, thus creating an unfair basis for negotiation. China must therefore protest against this practice for the sake of securing the legitimate rights and interests of the Chinese.|
Earlier this year, the U.S. threatened to blacklist China as a currency manipulator. In the end, however, the U.S. had to back down and delay. The Yuan could appreciate, and the dollar could depreciate, but this delay does not solve any problems. The conflicts between the two countries continue. It has been said that in the coming dialogue, the U.S. will request that China allow the Yuan to appreciate. This is inappropriate in the current situation as the European crisis affects the world market and economy.
The euro exchange rate against the dollar has already fallen more than 10 percent. On top of that, many European countries are tightening their fiscal policies. All these in turn negatively affect Chinese and American exports. At this point, instead of continuing to argue about currency, the U.S. should perhaps consider examining ways to stabilize the international monetary system.
The father of the euro, Robert Mundell, has said that major currencies like the dollar, euro and Yuan should form a set exchange rate, which would enhance economic and trade exchanges. Fluctuations are reduced when the Yuan and dollar are linked. This, in turn, stabilizes foreign exchange and contributes to the market system. The main problem facing the world is how to stabilize the frequent fluctuations between the euro and the dollar.
Competition between Europe and the U.S. is high, and the influence of a plunge of the euro is much greater than one of the Yuan. This issue should be dealt with first. In reality, the market’s expectation for Yuan appreciation has subsided significantly, as evidenced by the one-year non-deliverable forward of the Yuan.
The next controversial point between China and the U.S. is protectionism. In recent months, the U.S. has limited imports of Chinese products. Trade unions and associations continue to apply for more restrictions. The situation has worsened. The U.S. has applied 23 more measures against China, which is an increase of 50 percent, and this makes up about 65 percent of China’s trade. It is apparent that the U.S. is number one when it comes to protectionist restrictions.
The situation looks like it will worsen this year, and China needs to counteract. A fundamental problem is the discrimination against China as a non-market economy. The U.S. has indicated that it is difficult to recognize China’s status as a market economy. This is at the core of the economic problem, and China needs to work hard to maintain its rights and viewpoints.
These frictions have existed for years and will intensify as the recovery of the U.S. economy remains unstable and the unemployment rate slowly improves. Protectionist sentiments will continue to be high. What is more worthy of concern is the allegation by some U.S. enterprises that Chinese government procurement encourages independence and discriminates against foreign investment policy. The export of American products to China is hindered, which affects American production in China.
The U.S. has therefore insisted that China remove its protectionist measures to achieve fair competition. Interestingly, the U.S. also has such measures in which members of Congress requested bans on policy that would stimulate economic planning through the purchase of foreign products. Fair competition can only be used on others but not on oneself. It is only fair for China as a developing nation to protect its infant industry and encourage innovation to become more independent.
Such measures are not targeted at foreign enterprises. China encourages sunrise industries like wind turbines and other new energy solutions. Logically, this is far better than the U.S. trying to protect its sunset industry.
If the U.S. really wants to open up the Chinese market and strive for trade equality, the most fundamental way would be to acknowledge China’s market economy status and abolish its outdated technology import bans. This will not hinder the development of China but rather make U.S. enterprises lose business opportunities. The U.S. will only hurt itself.