Chinese Vice President Xi Jinping is meeting U.S. President Barack Obama in the White House on Feb 14, Valentine’s Day. Their talks are likely to turn on Tibet and trade. But China’s veep isn’t expected to deliver a box of chocolates to the American president. China’s enormous trade advantage, now the largest nation-on-nation trade deficit in the history of the world, has put it in the enviable negotiating position of being able to say “bu” — that is, “no” — to most American demands.
The U.S trade deficit with China today is 28 times larger than it was during the Reagan era, according to new figures released by the U.S. Census Bureau. That daunting deficit has grown by 18 percent per year since China first entered the World Trade Organization in 2001.
Census figures now show $103.8 billion in U.S. exports to China during 2011, and $399.3 million in imports, a stunning $295.5 billion difference.
America’s political, policy and business leaders aren’t doing much to address the shocking statistics that suggest a real erosion of America’s once-strong manufacturing and technological advantage. Terrorists tore down the twin towers in lower Manhattan a little over a decade ago, the symbols of American economic dominance of the world. Now the Chinese are providing the glass for the exterior of the new world trade center.
“The Congress and the administration are too afraid to provoke China and do not sufficiently protect the American economy from the negative effects of Chinese economic policies,” Optimal Investing chief investment officer Wojtek Zarzycki told The Daily Caller “They have had several opportunities to officially name China a currency manipulator, but they have not.”
Zarzycki, whose boutique investment firm has offices in the U.S., Canada, and Europe, added that China has no qualms about blasting the Federal Reserve “and blaming them for keeping the U.S. dollar weak – however, U.S. government officials are slow to do the same in an equally forceful manner.”
In a federal budget proposal slated for a Monday unveiling, Obama plans to offer the latest in a series of government programs aimed at jump-starting manufacturing and rising to the Chinese challenge.
Obama will seek tax incentives for firms that relocate their foreign operations back in the United States, and Internal Revenue Service penalties for those that don’t. He’s also looking for more training and educational programs for the 50,000 manufacturing workers who are losing their jobs every month because their employers can’t compete effectively with low-cost Chinese products.
The Republicans running for President, and those who inhabit the halls of Congress, haven’t yet offered an alternative designed to motivate voters.
Former Masachusetts Gov. Mitt Romney is a bit more aggressive than Obama, promising to label the Chinese government “currency manipulators” and start a trade war with Beijing on his first day in the Oval Office.
“China has been able to run roughshod over many industries in this country,” Romney told reporters this week. “Presidents have looked at it, have complained about it, but really haven’t taken action to stop China from taking away our jobs.”
In an op-ed sent to newspapers this week, former Sen. Rick Santorum eschewed the latter-day Smoot-Hawley trade war approach. He called for tax breaks for U.S manufacturers, and slammed Newt Gingrich’s idea of starting a new space-race-type conflict with the Chinese as a way to revitalize the forlorn U.S. economy.
“The pioneers of flight and space exploration are inspiring to millions and the advancements that result are beneficial to our quality of life and also critical to our national security — particularly as China ramps up aggressively in this area,” Santorum wrote. “But I am less concerned about creating a government program to build a colony on the moon more concerned reducing government to build a strong economy here on earth.”
If the U.S. economy and the Chinese economy continue to grow at current rates, the average Chinese citizen will be wealthier than the average American citizen by 2042, says Stanford University economics professor Ed Lazear.
Some business leaders, though, don’t fret about that, figuring that the benefits of free trade with China will outweigh any negative consequences.
“The deficit problem is a much bigger problem for China than for the U.S.,” WB advisors managing director Albert Lu told TheDC. “A hard-line retaliation in the form of trade barriers, by Romney or other administration will penalize Americans by hampering their access to Chinese goods and raise prices at the worst time.”
Lu’s firm is a registered financial adviser and precious metals dealer in Houston. He explained that “China’s currency management policy is generally unproductive. But what is often neglected is that the policy hurts the Chinese because their massive productive effort still does not allow them to consume goods.”
Others are increasingly worried about what the massive trade deficit means for America’s future. They are concerned that the U.S. is involved in a race-to-the-bottom pricing war — the global equivalent of coupon promotions for shampoo — that it simply cannot win.
“People in general want low-cost computers and automobiles,” Dr. Sally Mounts, president of the management consulting firm Auctus Consulting Group, told TheDC. “Because they do, they are myopically oblivious to the problems inherent in a nearly three billion dollar trade deficit with China.”
“Over the past decade,” Mounts added, “the deficit has caused massive job loss in key manufacturing areas, Chinese-American price wars that necessitated U.S. outsourcing to India — thus causing further job loss — and sobering implications for our economic future.”
But other leaders, including some logical vice-presidential hopefuls in the GOP, don’t think America’s problem is its oblivious consumers who seek bargains from Best Buy or Amazon.
They think the problem starts at the top, in an Obama White House that engages in class war rather than economic cultivation.
So just as the challenge of Japanese manufacturing was America’s defining economic issue in the 1970s and 1980s, the stunning challenge of the Chinese will be at or near the center of political debates leading up to the November elections.
“Unlike any leader in modern American history, we are led today by a president that has decided to pit Americans against each other,” Florida Republican Sen. Marco Rubio said yesterday at the Conservative Political Action Committee.
“The basic argument he [Obama] is making to our nation is that the reason why some of us are worse off than we used to be is because other people are doing too well. That the only way for some of us to do better is for some people to do worse.”