Us_Trade_with_China_Policies

Kathy Lee Speech 130 April 7, 2010 POLICY SPEECH TRADE IMBALANCE BETWEEN UNITED STATES AND CHINA Introduction: America is about independence. Reliance on Chinese imports threatens our autonomy and results in loss of power due to import/export imbalance cutting the value of the dollar and increasing US debt. The lower cost of goods imported from China has reduced the cost of things in the US allowing lower income peoples to improve their quality of life, and jobs have increased within companies selling goods imported from China; however, unemployment has increased as industries which support the American economy and way of life go out of business. Despite any advantages, dependence on and debt to China is seriously and unwisely reverting control of the US economy to China. Proposition: Trade and corporate business dealings with China should be regulated to maintain US independence. Inherency: China controls the value of the US dollar. Claim A: China keeps its yuan undervalued to reduce the value of the US dollar. Warrant 1A: Keeping the yuan undervalued gives China an unfair advantage over the US. Grounds: 1A: In a 2009 Washington times article Nobel laureate Paul Krugman and C. Fred Bergsten, director of the Peterson Institute for International Economics, charged that “The currency manipulation keeps the yuan, also known as the renminbi, undervalued by 25 percent on a trade-weighted basis and 40 percent relative to the dollar and provides China with an unfair trade advantage in violation of international trading rules.”. 2A: A report from the Economist Intelligence Unit in 2008 states, “Hong Kong's economic policy since 1983 has been the Hong Kong dollar's peg to the US dollar …. The system gives three banks … authority to issue Hong Kong dollars upon depositing US dollars … at the pegged exchange rate of HK$7.8:US$1. In return for their deposits, the … banks are issued certificates of indebtedness.” 3A: In a 2008 Cato report John Greenwood states, “since China revalued its currency against the U.S. dollar by 2.1 percent on July 21, 2005 … the RMB has appreciated … to about RMB 6.97 per US$ … On a trade-weighted basis, however, the currency has appreciated less than half this amount.” 4A: On Aug. 27, 2009 a report in the Economist Intelligence revealed that “China … maintains … a "managed float" of the renminbi, but which is in fact a peg to a basket of currencies.” Also called a “dirty float” it means central banks influence their countries' exchange rates by buying and selling currencies. 5A: In the Global Banking News, January 26, 2009 a story is run that “The People's Bank of China has denied allegations by a US Treasury official that it had manipulated the country's currency.” 6A: In the Washington Times Monday, March 15, 2010, Mr. Bergsten described China's intervention in the currency market as "staggering and unprecedented," which Mr. Krugman seconded. Mr. Bergsten estimated China is spending $30 billion to $40 billion per month to keep its currency undervalued. Warrant 2B: China is the largest holder of US debt. Grounds: 2B-1: The Global Times published in Nov 18, 2009 that “by the end of September, China continues to be the biggest holder of US debt.” 2B-2: According to Parameswaran, a writer for the Jakarta Globe, covered in the story “China May Be Hiding US Treasury Bonds” published February 25, 2010 “with a $43.6 billion increase in holdings of US treasury securities in September, China’s overall holdings amounted to $585 billion….” Claim C: Americans consume too much Chinese goods. Warrant C: Over consumption of Chinese Imports weakens the value of the US dollar. Grounds: C1: In the CRS report for Congress, 2006, updated 2007, “The U.S. trade deficit with China has grown significantly in recent years, due largely to a surge in U.S. imports of Chinese goods relative to U.S. exports to China. That deficit rose from $30 billion in 1994 to an estimated $232 billion in 2006.” C2: According to the same source “Imports from China … can destroy jobs in the parts of the US economy that produce the same products.” C3: The Financial Times, 2008 said “Prior to the financial crisis, the US trade deficit with China was marked as one of the big global "imbalances". American consumers were buying too many goods from a fast-growing China, which kept its exchange rate low.” Harm: China's strategies and our compliance with them lead to economic harms. Claim D: Dependence on Chinese surplus has created “The China Effect”. Warrant D: The US is forced to lower prices in order to compete. Grounds: D1: In a 2006 analysis chart of the effect on the gross domestic product (GDP) of trade with China the China-US Business Council states “our model suggests that US import prices were pushed down significantly…as a result of the increase in trade with China”… in order to compete effectively ...” D2: Mr. Krugman estimated in The Washington Times on March 15, 2010 “If China stopped manipulating its currency, it would produce a favorable net export shock to the United States, Europe and Japan amounting to about 1.5 percent of GDP, increasing the U.S. economy by about $220 billion.” Claim E: Addiction to cheaper prices of Chinese goods is leading to a decline in US manufacturing; jobs are lost and warehouses have to close down. Warrant E1: Distributors of Chinese goods are putting local businesses out of business. Grounds: E1-1: In an issue of China Business Weekly, November 29, 2004 it states that “70% of the commodities sold in Wal-Mart are made in China.” E1-2: According to the US-China Business Council article in 2008, "US-China Trade Statistics and China's World Trade Statistics," if Wal-Mart was its own country, it would rank as the eighth largest importer of Chinese goods, ahead of Russia and India. E1-3: Many of Wal-Mart's "American Suppliers" actually manufacture most or all of their products in China. A movie made about Wal-Mart interviews people in a small Ohio town which became a ghost town after a Wal-Mart opened. Even after being forced to move out the superstore developed on a cornfield a mile outside the city line. Claim F: China being the largest holder of US debt is a threat to US national security. Warrant 1F: Along with holding a large trade deficit with the US, China is buying up US treasury bonds from other countries. Grounds: 1F: The People’s Bank of China sterilizes their debts. An essay published in the spring 2008 issue of the Cato Journal said that “by continuing to maintain its currency at below-equilibrium levels, China's overall balance of payments can be balanced only by large outflows in the form of official acquisitions of foreign assets.” 2F: P. Parameswaran stated in his article that “China, a top owner of US government debt, appears to be secretly buying bonds via third locations to hide its importance as a major creditor to Washington.” 3F: According to the same source, “Some say the massive holdings by China have implications for US national security, making it harder for Washington to carry out policies in conflict with Beijing.” Solution 1: Enforcing tariffs on Chinese imports can bring balance to US-China trade even when met with resistance. Encouraging Americans to purchase goods made in the USA would reduce the demand for Chinese goods, thus, the amount of imports. The US needs to circulate its own currency. Imposing a point of sale tax on Chinese goods would help motivate consumers to make that choice. National pride should make this an easier transition. Claim G: New tariffs on Chinese goods will reduce competition. Warrant G: Tariffs will help, not hurt the US economy. Grounds: 1G: In the Global Times, February 08 2010, “US, China Swap More Tariffs” “The US imposed stiff tariffs on imported Chinese tires, adding to a growing list of Chinese exports that face US duties, including electric blankets and steel tubes.” 2G: The article also says “noting that India's prime minister has complained about Chinese mercantilism and Mexico has "screamed" about it, Mr. Bergsten even offered a "guarantee" that most of China's other trading partners would follow suit if the United States imposed a 25 percent tariff on Chinese goods.” … “The Wall Street Journal called a cheap currency, regulated interest rates and low energy prices part of China's strategy, and that it is "stoking discontent in fellow developing countries, not just in Western capitals."” 4G: In the Washington Times March 15, 2010 “three economists at a forum endorsed a policy that would label China a currency manipulator when the Treasury Department submits its next semiannual currency report to Congress on April 15. “Unless China relents and allows its currency to significantly appreciate, Mr. Krugman called for a temporary, across-the-board tariff on all Chinese imports, insisting the chances for a trade war were "very small."” Claim H: Encourage Americans to buy USA goods by offering incentives. Warrant 1H: Some Americans wouldn’t need any incentives. Grounds: 1H-1: One of 264 comments posted in a response to an article printed in Reuters on Tue Feb 9, 2010 commented, “I buy product from China by the container load. I will stop and buy from India….” and “if we had any balls we would just announce that we are not going to make payments on any US bonds, like the South American countries did in the not so long ago past. Then we would force the US government to live on a budget of what they have not what the politicians want.” 1H-2: I went into Costco last weekend and a rack of clothes boasted “Proudly made in the USA.” Warrant 2H: Creating tax incentives for the purchase of goods made in the USA will help balance US-China trade. Grounds: 2H-1: A point of sale tax on Chinese goods would close the price gap. 2H-2: We can write to Washington and local representatives we are willing to face an additional tax on imports made in China, and purchase less Chinese goods. Conclusion: Something must be done to balance trade with China. Even when prices begin to increase due to imposed tariffs and taxes we must consider the worth and value of having a stronger economy and true autonomy in world trade. When we buy goods made in China we promote the problem by buying into China’s scheme to become the World Power. America must act to regain control of its own economy and remain an independent nation. Bibliography: 1. “US treasury bonds 'still the best option’” By Xin Zhiming. China Daily Updated: 11-20-2008 www.chinadaily.com.cn/china/2008-11/20/content_7221498.htm 2. “China increases US Treasury bond holdings.” Global Times November 18, 2009 http://business.globaltimes.cn/china-economy/2009-11/486178.html “US, China swap more tariffs.” Global Times, February 08 2010. http://business.globaltimes.cn/china-economy/2010-02/504218_2.html 3. www.thejakartaglobe.com/afp/china-may-be-hiding-us-treasury-bonds-experts/360791 P. Parameswaran. Jakarta Globe. “China May Be Hiding US Treasury Bonds” published February 25, 2010 4. USCBC The US-China Business Council. The China Effect: Assessing the iMpact on the US Economy of Trade and Investment with China. By Oxfords Economics and The Signal Group. Erik Britton and Christoper T. Mark, Sr. January 2006. www.chinabusinessforum.org/pdf/the-china-effect.pdf 5. “The costs and implications of PBC sterilization.” John Greenwood. The Cato Journal  28.2 (Spring-Summer 2008): p205(13).  Hide details 6. "Currency and derivatives markets: Overview." EIU: Country Finance: China. Economist Intelligence Unit N.A. Incorporated, August 27, 2009. Academic OneFile. 7 "China central bank denies manipulation of currency." Global Banking News [GBN] 26 Jan. 2009. Academic OneFile. 8. "Monetary system: Monetary policy." EIU: Country Finance: Hong Kong. Economist Intelligence Unit N.A. Incorporated, Jan 22, 2008. Academic OneFile. 9. “Is China a Threat to the U.S. Econonmy' CRS Report for Congress. Statement of Timothy Stratford, Assistant U.S. Trade Representative for China Affairs, before the Congressional Steel Caucus, June 14, 2006. Updated January 23, 2007. Congressional Research Service http://fas.org/sgp/crs/row/RL33604.pdf 10. “China's yuan value hits U.S. economy, two experts say”. By David M. Dickson Washington Times, Monday, March 15, 2010. 11. “The Real Facts About Wal-Mart.” Wake Up Walmart.com www.wakeupwalmart.com/facts/#Wal-Mart and China 12. en.wikipedia.org/wiki/Managed_float_regime