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LONDON -- The economy of the United States is not recovering, and
everyone in Europe is well aware of it. Tourism is off, and the
terrorists can’t be blamed for everything.
From Europe it appears the mood in the United States is getting
ugly. Culprits are being identified. On the U.S. West Coast, cheerless
California Gov. Gray Davis is being blamed for everything from the
budget shortfall to the energy crisis and may be kicked out of office
by citizen referendum.
Perhaps he is a deserving target, but others are much less so. For
example, on the East Coast, members of the U.S. Senate are finding
fault with China for aggravating U.S. economic problems. Hearings
are set to be held on the emerging giant’s economic and monetary
policy.
The contentious issue is Beijing’s long-held strategy of keeping
its own dollar relatively cheap against other currencies so other
nations’ exports on the world market are more expensive. The
ploy increases sales as well as China’s market share in various
sectors. Japan, before it became another over-priced economic success
like Germany and the United States, used the same cunning practice.
The result for China has been two decades of phenomenal economic
growth -- good for China but creating problems for the United States,
now faced with a daunting trade imbalance.
America’s trade deficits with other nations, including China,
is one reason the U.S. dollar is no longer so almighty these days.
In the trendy shops of Rome and London, surprised U.S. tourists
are forking over more dollars for that blouse or tie this year than
they did the last time they were on foreign vacation.
Some American politicians will try to lay the blame for the weakening
U.S. dollar not on U.S. domestic economic performance, which has
been lackluster, but elsewhere, especially Beijing. This is the
same
blame-others syndrome of a decade ago when the bitter West Coast
recession in America was all but blamed on Japan’s budget
surplus. Tokyo was then No. 1 in the world, just as Beijing is now.
Worse yet, the congressional finger-pointing coincides with the
release of a Pentagon report concluding that Beijing is engaged
in a military buildup to reclaim Taiwan, by force if necessary.
This is the usual Pentagon scaremongering to beef up the budget.
In Europe, observers tend to regard the ritual Asia-bashing as an
occasional American psychosis. They note the rise of Asian tourism
here and welcome it, of course. By contrast, Europeans generally
regard China as the coming thing of the 21st century. It is to be
negotiated with respectfully and professionally, identifying areas
of mutual interest and overlapping aims.
That China has a huge trade advantage over the West, and especially
the United States, strikes people here more as evidence of Chinese
skill (they are producing many things that people around the world
want to buy, because the cost is so low) than mendacity. Europeans
also realize that China isn’t rich enough yet to buy a lot
of high-cost Western exports.
In all fairness the Chinese government adds to this problem because
it refuses to allow its currency to be traded openly on international
exchanges. Among other things, Beijing worries (understandably)
about
predatory currency attacks from Western financial speculators of
the kind that hastened and deepened the Asia financial crisis (1997-99).
This official practice of sheltering and pampering its dollar with
injections of economic Botox makes it difficult to lower the U.S.
trade deficit -- unless U.S. consumers want to start boycotting
everything from
choo-choo trains at Toys ‘‘R’’ Us to Chinese
noodles.
That may be precisely the next step called for by some U.S. politicians.
But it’s a fool’s game that won’t fool many Americans.
They’re still buying wonderful Japanese cars today just as
they did 10 years ago, despite the politicians’ huffing and
puffing. The Chinese will reflect on this as they increasingly become
targets of congressional blame.
Even so, China’s over-valued dollar is a legitimate international
issue, especially in the age of globalization. As a recently admitted
member of the World Trade Organization, Beijing now has new
responsibilities as well as rights. Persistent trade imbalances
with countries that have sponge-like markets for Chinese goods are
understandable from an economic point of view, but patently explosive
from a political point of view.
It is in the national interest of the new Hu Jintao government to
reduce the proportions of the economic issue before the political
issue in Washington explodes into an anti-China crusade. An alliance
between
anti-China politicians and budget-building Pentagon officials won’t
be good for international business or world stability.
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The above weekly column has just appeared in the Honolulu Advertiser,
The South China Morning Post and The Straits Times of Singapore.
The author, Tom Plate, is a regular columnist at these three papers.
The column also appears in other world newspapers, including The
San Francisco Chronicle, The Seattle Times, The Japan Times and
The Korea Times. Email him at: tplate@ucla.edu.
For publication
and reprint rights, contact the author directly or John Simpson
(john.simpson@latsi.com) of the Los Angeles Times Syndicate International. |
