Better find a third way. But we don't seem to be able to imagine one here so why should we expect politicians to?
REH ----- Original Message ----- From: "Keith Hudson" <[EMAIL PROTECTED]> To: <[EMAIL PROTECTED]> Sent: Sunday, August 10, 2003 6:59 AM Subject: [Futurework] Between a rock and a hard place > Interesting article in today's Sunday Times -- no doubt syndicated > elsewhere over your side of the water. Implicitly, Stelzer presents a > dilemma to American voters. If they re-elect Bush, they can expect more of > the same gathering deflation and increasing unemployment and if they elect > a Democrat they can expect tariffs in order to protect trade unions jobs, > with a consequence of higher consumer prices all round, less money > available for investment and thus even more unemployment in due course. > > KH > > <<<< > BUSH'S HANDS ARE TIED OVER FLOOD OF CHINESE IMPORTS > > Irwin Stelzer > > Free trade and free elections do not always coexist peacefully. In an > economy in which workers find jobs hard to come by, employers find their > pricing power sapped by foreign competition. The 2004 election campaign is > now on fast forward and free trade is likely to find itself among the badly > wounded. > > When the gaggle of Democratic candidates appeared before the AFL-CIO > trade-union conference last week, vying for the dollars and foot soldiers > so important in the primary campaign, most promised to veto any new > free-trade agreements. In a display of protectionism red in tooth and claw, > the steelworkers' union declared that President George Bush's 30 tariff on > imported steel did not satisfy its appetite for protection. It denounced > Bush and promised to back any Democrat who is more protectionist. > > Meanwhile, the president's economic team was touring the nation's > hinterland to announce that the economy is a coiled spring, about to > unleash a full-blown recovery on the nation. Treasury secretary John Snow, > commerce secretary Don Evans and labour secretary Elaine Chao picked their > venues carefully, holding their meet-the-citizen sessions in the plants of > some of America's most successful companies, such as Harley-Davidson, the > motorcycle maker. > > Imagine their surprise when most of the questions were about the flight of > jobs to China. When the Bush administration persuaded China to make the > reforms necessary to secure membership of the World Trade Organisation > (WTO) and enter the global trading system, it was thinking of the vast > potential market for American goods. Now that the annual trade deficit with > China is running at $100 billion (£62 billion), almost twice as high as the > deficit with Japan, Republicans and Democrats are vying to persuade voters > that they are the ones who will be the hard men in tackling this latest > "yellow peril". > > The dirty little secret is that many of America's biggest companies, among > them General Motors, have invested heavily in China, are prospering > mightily there, and prefer the status quo to the re-evaluation that is high > on the agenda of smaller textile, toy and clothing companies. But the > corporate giants are keeping a low profile so as not to be pilloried for > defending a system that most Americans think is costing us jobs, and > experts know is resulting in widespread theft of intellectual property. > > It is certainly true that China is subsidising its exports by keeping > state-owned factories in business and, more important, by pegging its > currency, the renminbi, to the dollar. So when the dollar fell, making > imports from most countries more expensive in the United States, and > exports of made-in-America goods and services cheaper, China was > unaffected: its currency moved downward with the dollar. > > Experts estimate that if the Chinese authorities ended the dollar peg, the > renminbi would appreciate by anywhere from 10 to 40. But more than a minor > revaluation is unlikely: the Chinese leadership believes it cannot survive > the collapse in employment that would follow a big fall in exports. > > The problem for the administration is that trade with China is not an issue > that can be treated in isolation. For one thing, China is the only country > with the power to bring North Korea to the table to negotiate the surrender > of its nuclear ambitions. Bush has to consider whether it would be sensible > to forfeit Chinese goodwill in a matter of such overwhelming importance to > protect American producers of textiles and toys from Chinese competition. > > Second, the administration knows that it must produce a growing economy > by the first quarter of next year if it is to be assured victory in the > November 2004 elections. One thing that can derail the recovery now under > way is a further and rapid rise in interest rates. Here, China has an > important role to play. > > The $120 billion it has piled up by selling more to America than it buys > from us is being used to buy Treasury notes and bonds. They send us goods, > we send them dollars, they return the dollars, in exchange for which we > send them our Treasury's lOUs. That keeps the price of American debt > securities up and, on the flip side, interest rates down. > > If the Chinese authorities get cranky and stop buying Treasury notes, or, > worse still, start dumping them, soaring interest rates could wreck the > market for new homes, end the refinancing of mortgages that has put > billions into consumers' hands, discourage new business investment, and > produce the voter nervousness that gave the elder Bush a White House lease > with all too short a date. > > But even if Bush concentrates on the trade statistics alone, he will have > some difficulty in deciding what to do. Much of what America imports from > China is produced in plants owned by US companies. And some of the products > shipped from China, and counted in the statistics, are partly manufactured > in other Asian countries, and merely finished in China and shipped from there. > > In this as in other matters involving trade, the few who are hurt by > imports organise to make their voices heard in Washington, while the > millions of consumers who benefit from cheaper trainers, T-shirts, cars and > other products -- 10 of the trade deficit is accounted for by the $10 > billion worth of Chinese goods bought by Wal-Mart -- don't recognise the > relationship between free trade and their ability to get more bang for > their bucks. > > If the president is not to deviate further from his free-trade philosophy, > he will have to hold off the few, who will be angry, in the interests of > the many, who will neither know nor appreciate his efforts on their behalf. > That is a lot to ask of a politician. > > Irwin Stelzer is a business adviser and director of economic policy studies > at the Hudson Institute > > Sunday Times 10 August 2003 > >>>>> > > > Keith Hudson, 6 Upper Camden Place, Bath, England > > > _______________________________________________ > Futurework mailing list > [EMAIL PROTECTED] > http://scribe.uwaterloo.ca/mailman/listinfo/futurework _______________________________________________ Futurework mailing list [EMAIL PROTECTED] http://scribe.uwaterloo.ca/mailman/listinfo/futurework
