Bad News: Clinton and Obama Back China Crackdown
Eoin Callan of the Financial Times reports:
FT.com / In depth - Clinton and Obama back China crackdown: Hillary Clinton and Barack Obama, the frontrunners for the Democratic presidential nomination, have agreed to co-sponsor legislation that would levy punitive duties on Chinese goods to cajole Beijing into revaluing its currency, according to aides. The endorsement is a sign that trade with China is emerging as a hot political issue in the upcoming election and increases the prospect of the legislation passing with a veto-proof majority, analysts said.
The bipartisan legislation has been spurred by claims that China’s cheap currency makes its exports more attractive and is contributing to the record annual $232.6bn (£115.6bn) US trade deficit with the country. The early pledge to vote for the bill will strengthen the candidates’ claims to be defending US manufacturers against what they argue is unfair competition...
Of course, then the candidates will be attacking US consumers (who will pay higher prices for imports), workers in the construction industry, US borrowers (who will then pay higher interest rates to domestic and foreign creditors), and US homeowners (who will see the higher interest rates push down housing prices and reduce their equity). The net short-run effect is surely a minus--it's not as though we desperately need to swap construction jobs for manufacturing jobs right now, and we surely don't need a more-rapid decline in housing prices right now.
In the long run of three to five years, yes: The renminbi needs to become worth a lot more (primarily for China's sake). Pressure on China to adopt better policies is helpful (provided we don't shoot ourselves in the foot). But this strikes me as a classic threat to shoot ourselves in the foot: it is not a good policy move on either Obama's or Rodham Clinton's part.
Eoin Callan goes on:
A critical stance on US trade policy has become increasingly de rigueur for candidates as the Democratic presidential field tilts towards a populist stance on economic issues. The bill... would permit US companies to seek anti-dumping duties on Chinese imports based on the undervaluation of the currency....
Brian Pomper, a former Democratic adviser, said China was becoming a proxy for US political anxiety about globalisation and that sponsorship of the bill was the most combative position yet taken towards Beijing by the two candidates.Sandra Polaski, a trade analyst at the Carnegie Endowment, said US politicians were making China a scapegoat in the face of widespread economic insecurity among voters. “Opinion polls consistently show the American public has a balanced view of China. It is campaigning politicians who are turning the heat on Beijing,” she said...
