Part of the problem is that people in the United States have this enormous impulse to try to come up with suggestions rather than come up with issues.

For example, the logical thing for a Congressman from North Carolina to do is not to lecture Chinese officials about what they should do but rather talk about North Carolina. If Chinese actions are having an adverse impact on North Carolina, then mention that and then try to figure out what can be done about it.

If it wasn’t in the US interest to buy so much from China, it would have stopped doing years and years ago. China acts in China’s interests. The US acts in the US interests. Trying to pretend otherwise just makes things more complicated than it needs to be. If a nation’s leadership isn’t aggressive at asserting national interest, then really they need to be replaced.

People need to put up or shut up. Either start putting in protectionist measures or stop talking about them, because talk without action just undermines one’s own credibility. If there really is a national consensus that the US would be better off with new tariffs, then for goodness sakes, stop whining and put them in. If people in the US don’t like the current system of rules for international trade, then for goodness sakes, propose new ones.

Right now everyone is bending the global rules regarding trade as far as they go, but no one has suggested either breaking them or changing them. China made a set of commitments a few years ago when it joined WTO, and so far it has mostly kept them.

If the US has a problem with Chinese actions, then it needs to get on the phone to Beijing and start screaming and if necessary making threats, because otherwise Beijing has no real clue about what it needs to do. If the US really wants China to stop export rebates then it needs to at formally least *complain* about those export rebates.

If there is no formal complaint about it (and there hasn’t been), and if it doesn’t violate any pre-existing agreements (which it doesn’t), and Beijing finds it in its national interest to do something, then China will just go ahead and do it. Why shouldn’t it?

The basic problem here is that there *isn’t* a national consensus for getting “tough on trade”, that lots of American companies are benefiting from the export rebates. But that’s a problem that needs to be resolved in Washington and not in Beijing.

Cool, that’s why NY and NC are making noises again.

DJC: While the current Bush administration probably does not have enough time left, the Obama administration is expected to seriously consider the possibility of a trade war by restricting Chinese textile imports. This will merely shift over one-half million Chinese textile jobs to Indonesia, Vietnam, Mexico, and India. Not a single US textile job will be created or even preserved.

This isn’t quite true. Textiles are odd since they are one of the areas in which China does really have a competitive advantage over both the first and the third world. The other interesting thing about textiles is that they are one area in which the US gets support from other countries.

If the US increases tariffs on textiles, then Indonesia, Vietnam, Mexico, and India get annoyed, but if the US gets China to restrict textile exports then Indonesia, Vietnam, Mexico, and India side with the United States since it helps those markets. Most of the trade negotiations over textiles have involved getting China to voluntarily restrict textile exports, which Beijing has been willing to do because its been able to get other things in the negotiations.

Part of the reason may be that although production moves to the United States, the people doing the producing end up being Chinese anyway.

Adding just one more agency to the alphabet soup of Chinese agencies. It’s all really unnecessary and counterproductive. Anything that Liu proposes be done with his proposed new agency can be done through the National Development Reform Commission, PBC and Ministry of Finance, and starting a new agency would require the approval of the National People’s Congress in which situation you get into all sorts of bureaucratic turf wars which is going to eat up a lot of time and energy.

Also, I’m a believer in the idea that “power corrupts” and “absolute power corrupts absolutely.” The fact that you have Chinese political and economic power distributed among a lot of different groups that really don’t like each other is the reason why everything works as well as it does.

There is a very good reason why China is timid about some things. Some things are more easily reversible than others. If China does export tariffs and those turn out to be a bad thing in a year, they can be easily reversed. By contrast, if China starts major infrastructure projects and a year from now things look they are over heating, then you will have pitched battles with local officials trying to shut them down.

You saw this in 2001-2002 when a lot of the policies that got us out of that recession were impossible to stop once you got out.

The danger of whipsawing is a very big one. A year ago the danger was inflation and overheating. If it turns out that the US recession isn’t that deep, then policies that assume that they are will turn into huge problems.

Here is an excerpt from his article:

The structural problem of the Chinese economy can be described in one sentence: China produces from plants financed by foreign investment that operate with low domestic wages for foreign markets that pay with dollars that cannot be used in the domestic economy.

The solution to this structural problem can also be summed up in one sentence: China must finance plants with sovereign credit to produce for the domestic market where consumer purchasing power will come from high wages, with sovereign credit repaid from increased tax revenue from a vibrant domestic economy.

To kick-start a new economic strategy of shifting the Chinese economy from export dependency to domestic construction, the Chinese government needs to establish a Commission to Restructure the Chinese Economy (CRCE) as a special agency in the State Council under the direct control of the office of the premier, with emergency powers to deal with the unemployment fallout from the sudden collapse of the export sector that will soon threaten social stability.

The proposed CRCE should have full authority to formulate and implement a national economic recovery program with appropriate and adequate credit-creation power to finance an urgently needed recovery to provide full employment at high wages. Equally importantly, the CRCE must have full government authority to commit unconditionally to the timely repayment and retirement of this temporary debt created by sovereign credit.

The CRCE would be responsible for launching immediately a massive work-creation program to achieve in-place national full employment with minimal relocation of population. This program can be financed outside of the government’s fiscal budget by a pre-financing regime through the use of work-creation certificates, a form of special-purpose money specially designed to facilitate job-creation in the socialist market economy.

Under the pre-financing regime, the State Council will authorize the CRCE, with full support of the Finance Ministry, to issue work-creation certificates that mature every three months and are renewable up to five years. These certificates would be distributed by the CRCE to local public works agencies and participating financial institutions that lend to private enterprises engaged in the job-creation in the program to shift export enterprises toward the domestic market.

http://www.atimes.com/atimes/China_Business/JL24Cb01.html