Tuesday, August 26, 2003

The renminbi rumble is really starting the heat up now. Much as Japan was the target for American industrial ire in the 1980s, China is the target in the 2000s.
In South Carolina, the Republican governor, Mark Sanford, cites the currency, the yuan, as posing a major threat to his state's struggling textile industry by making Chinese exports unreasonably cheap.

In Erie, Pa., executives and workers at scores of industrial companies are planning a loud protest on Labor Day over "unfair competition" � and one of the biggest targets will be the seemingly obscure matter of the yuan.

And in Washington, the Bush administration is gearing up to put direct political pressure on China next week when Treasury Secretary John W. Snow makes a highly publicized trip through Asia. The subject was near the top of the agenda when President Bush met with his economic team two weeks ago in Crawford, Tex. . . .

In a blunt letter to President Bush last month, 16 Republican and Democratic senators and representatives complained that China was undercutting American factories by intentionally keeping its currency undervalued.

The lawmakers, from Democrats like Senator Charles E. Schumer of New York to Republicans like Mr. English and Senator Elizabeth Dole of North Carolina, demanded that Mr. Bush press China to adopt a free-floating currency and to let the yuan rise in value.
There certainly is cause for concern in the manufacturing sector. Imports from China in current dollars doubled in just five years, from $62.6bn in 1997 to $125.2bn in 2002. In 2002 the goods and services balance with China weighed in at -$103.1bn, also doubling since 1997.

The sectors hit hardest by this imbalance are apparel and footwear, computer accessories and household goods. Tens of thousands of people in the US depend on textile, electronics and furniture manufacturing for their livelihoods, particularly in the American South. Already hard hit by decades of (from their perspective) an overvalued currency and a government policy to undermine manufacturing, it looks like many of these folks aren't going to take it anymore.
"In the Textile Belt, there are a number of governors who are acutely aware of the problem," [South Carolina Governor] Sanford said in an interview. "But our ability to impact currency rates halfway across the globe is frankly nonexistent."
Free traders usually step in to offer the fig leaf of "trade adjustment assistance" to smooth over the rough patches, but these policies are little more than salves for their troubled consciences. If you want the truth about adjustment, read the series "No end in sight to N.C. job losses" in the Raleigh News & Observer, 18-20 August 2002.

As the head of the Gaston County (NC) Economic Development Commission said in that series, "On a macro-level, we understand the need to have open and free trade for the overall economic health of the United States . . . but a lot of that will come on the backs of workers in North Carolina. I think we're going to have a whole generation of workers that is lost."

Oh well, I'm sure there's a nice chicken processing plant they can work in for $7/hr.

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