CNBC’s Becky Quick tosses off a dud over at Fortune, telling us all to “Stop the Beijing bashing!” because the “The health of the U.S. economy depends on trade with China.”
The people appearing in the pages of Fortune and on the pixels of CNBC would have you believe that’s true. It’s part of the air they breathe.
But it’s not really. Last year, we exported $69 billion worth of stuff to China. Our total GDP was $14.1 trillion. That means just under 0.5 percent of our economy is dependent on exports to China.
But we imported $296 billion from China. In other words, for every one dollar of stuff the Chinese buy from us, we buy more than $4 from them—and that was in a recession year that actually reduced our trade deficit with them.
Which guts Quick’s argument that we don’t have any leverage over the Chinese, and not just because of these overall numbers. The relative ones are even worse. Trade with China (and I realize it’s more complicated than this, but bear with me) represents 0.5 percent of our economic production. Exports to America account for 6 percent of China’s $4.9 trillion GDP.
You tell me who loses most in a trade war here?
Now, granted there is potentially a big opportunity to export stuff to a fast-growing Chinese consumer class. But that’ll only happen if the mercantilist Chinese let us (And even then, you’re still forcing working-class and middle-class Americans to compete with workers with far fewer protections than we grant our labor force and who make far less money).
Which is why it’s flat silly to tell people to “stop the Beijing bashing!” Beijing is manipulating its currency not “allegedly” manipulating it as Quick says. That makes our goods and services 40 percent to 50 percent more expensive than they should be to Chinese consumers. Conversely their goods are about 50 percent cheaper for ours than they should be.
What’s not to bash about that? This state of affairs hollows out our middle class, boosts rich executives’ bottom lines and undermines whatever little bit of power American labor has left to get decent wages.
Quick and Fortune, bizarrely, don’t mention just how staggering the Chinese manipulation is, although I note that they’re aware enough not to use the misleading “free trade” phrase anywhere here.
And look how quickly she glosses over critical problems with the relationship (emphasis mine):
Indeed, it often seems as if we’re on the losing side of any trade partnership with China. Its cheap labor has cost the U.S. countless manufacturing jobs, and to Rendell’s point, it is hard for us to compete with companies that receive considerable overt — and hidden — subsidies from their government. Regardless, we make lots of things better than China does, and its 1.3 billion consumers may soon be clamoring to buy them.
All righty then! But only if the prices for our stuff aren’t artificially inflated by half. We’ve heard this kind of thing for a couple of decades now and it never seems to come true.
When the wealth porn press talks about "the economy", they consistently mean THEIR economy. If the bulk of Americans aren't buying, aren't participating in making them rich personally, they're immaterial to the health of THEIR economy.
At least until the pitchforks and torches come out.
#1 Posted by Jonathan, CJR on Wed 24 Nov 2010 at 10:08 AM
China uses a large part of its trade surplus/foreign reserves to buy US T-bills (the holding stood at nearly $883.5 billion in September) only to finance cheap lending in the US for the past decade, so that the American citizens could buy cheap products made in China with cheap credit. For all those years when life was good, few people in the US complained about the fact that the Americans were feeding off the Chinese labor and money. Now some people, oblivious to this established economic relation which Prof Niall Ferguson called "Chimerica," have started to call for China bashing? In Chinese, there is a saying, "When you get the benefit from others, show courtesy." But, somehow, some uncivilized chauvinists in this country are giving curse to courtesy. Shame on you!
#2 Posted by Michael C, CJR on Sat 27 Nov 2010 at 05:50 AM
China uses a large part of its trade surplus/foreign reserves to buy US T-bills (the holding stood at nearly $883.5 billion in September) only to finance cheap lending in the US for the past decade, so that the American citizens could buy cheap products made in China with cheap credit. For all those years when life was good, few people in the US complained about the fact that the Americans were feeding off the Chinese labor and money. Now some people, oblivious to this established economic relation which Prof Niall Ferguson called "Chimerica," have started to call for China bashing? In Chinese, there is a saying, "When you get the benefit from others, show courtesy." But, somehow, some uncivilized chauvinists in this country are giving curse to courtesy. Shame on you!
#3 Posted by Michael C, CJR on Sat 27 Nov 2010 at 05:52 AM
Of course, the U.S. government NEVER manipulates currency; it NEVER engages in malicious "trade war." Puh-leeze...
The biggest culprits are the U.S. govt's protectionist trade policies, including American consumer-strapping tariffs, "free [sic] trade" agreements and other entangling aliances — i.e., central economic and political warfare; the Federal [sic] Reserve [sic], whose immoral and unconstitutional monetary manipulations destroy wealth and allow D.C. to wage wars against consumers and producers alike, here and abroad; and the useful idiots and flat-out liars in the govt-coddling news media, who would have you believe that the goals of freedom, peace, prosperity, and equality are best reached through aforementioned central-govt violence and aggression.
For an honest and proved-correct look at the economic and political lessons of history, and how they apply today, see mises.org, independent.org, economicpolicyjournal.com, and lewrockwell.com.
#4 Posted by Dan A., CJR on Sat 27 Nov 2010 at 03:58 PM
The troubling thing is what can we export to them to balance the trade? really not much...
#5 Posted by Marc, CJR on Wed 1 Dec 2010 at 12:49 PM
Dan - how can the protectionist trade policies be to blame when we no longer have any? Every "free trade" policy was made at the disadvantage of the US on purpose, we though any foreign nation would never catch our production rate in the 60's. now the cheap labor and less restriction has enticed US manufacturing overseas, bringing with them the jobs and the money, in a simple nutshell. That leaves us with a service economy that can never create new wealth but just has money changing hands, person to person back to person. We need more of a protectionist trade policy to help our economy. Get back to the roots of Alexander Hamilton's original foreign policy, which is the new model for China's trade policy and why they are doing so well. I don't know what trade policy you saw. You are right that our Government has some blame, but if China didn't manipulate its currency value and it let their consumers spend, this unbalance might eventually work it self out. As it stands now, we are in a downward spiral that is going to be impossible to stop if issues are confused and our leaders can't get policy changed.
#6 Posted by Bill, CJR on Wed 1 Dec 2010 at 05:00 PM
Love this. Good work, Ryan. You've recognized the propaganda for what it is.
#7 Posted by Bob Hall, CJR on Wed 1 Dec 2010 at 08:17 PM