24 August 2010

Wanted: Tough Trade Negotiator

The United States logged a $26.2 billion trade deficit with China in June. Still refusing to let its currency rise in value against the dollar, China announced a trade surplus of $28.7 billion a month later. This widening of trade imbalances between nations is indeed alarming, and many in the United States believe we should lecture the Chinese about manipulating the international export market but not actually threaten sanctions, lest we start a trade war.

The truth is, lecturing China gets us nowhere. Right now, China’s poli- cies effectively impose high tariffs and provide large export subsidies — that’s how an undervalued cur- rency impacts a nation and its trad- ing partners. This should be a violation of trade rules; it might in fact be a violation, but the law’s language is vague on the subject.

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