IN OTHER WORDS: Misguided
Just in time for the presidential campaign, Barack Obama has joined Hillary Clinton on the misguided bandwagon of those seeking to penalise China for manipulating its currency. Last week, the two senators and Democratic candidates signed up as co-sponsors to a punish-China bill that would mandate retaliation against countries that keep their currencies cheap to boost their exports. It is a predictable move at a time when voters are so anxious about low wages and holding on to their jobs. (Clinton had co-sponsored two anti-China bills in 2003 and 2005.) China’s cheap currency and vast trade surplus, which matches up nicely with America’s gargantuan trade deficit, are easy to blame.
Still, the prescription is wrongheaded. There is no guarantee that a rise in the value of the yuan would boost American workers’ wages or the economy in any way. Many of the things China exports to the US have not been made in America. Forcing China to revalue the yuan would likely also lead to higher prices for goods in the US and to a rise in interest rates if China decides to stop buying US Treasury bonds. Starting a trade war is not likely to change Beijing’s mind. And it will make it harder to persuade and pressure China to become a more responsible exporter and a more responsible international player.