Should the US Break Up with China?
Mar 08, 2010
By Steve Cornett
Can you believe that Lyle Lovett was married to Julia Roberts? Have you seen a picture of the man? Did you know he’s an Aggie? Where is the symmetry in a relationship like that?
Which reminds me of our trade deficit with China.
Our place is on a highway the wide load people use. You often see big tanks and those big windmill parts moving north.
The windmills travel in caravans and one intersection between here and town is occasionally blocked for a while by wide load flaggers keeping you from running into them while they make a left turn.
Last year or so, I got chatting with a flagger who said all the windmill parts were made in China, shipped to the U.S. then hauled to the construction sites. He was on his way from one of the Gulf ports to Wyoming. So, when our President announced that he was going to stimulate all those green jobs, my first question was “how many wide-load flaggers do we really need in the U.S.?”
Last week, Congress noticed what the wide load flagger told me back then and some want to pass a law that says not to buy Chinese windmills. That strikes me as a bit protectionist. I mean, if China can build big windmills cheap enough to ship them across the ocean and then haul them 1,500 miles to Wyoming cheaper than we can build the things, I want that to be ok. Why pay more?
It worries me to be passing laws that seek to protect individual products from fair trade. Once you start that, you’re giving more power to the “special interests” who have the most friends in Congress and giving Congress more power they can sell to the special interests.
I don’t like that. I support NAFTA and free trade for several reasons—not least of which is that I think a rising world-wide tide will make a safer and more just world. I think if everybody plays by the rules, we can all prosper.
It’s that “play by the rules” part that has me thinking about China..
In my admittedly rural brain, China assuming that the U.S. market is a “given” is like Lyle Lovett taking Juliet Roberts for granted. I mean, hey, who’s going to suffer most after the divorce?
I never thought I’d see me write this. Our countries’ marriage is so important to both of us that you’d think China would be more loving than they seem inclined to be. I mean, if we get in a trade war with them, we can always go without—or tool up to make our own—plastic cups, Swedish furniture, cowboy boots, Toyota floor mats, baby food, trash cans, huge TV sets and all that other stuff we’ve outsourced. Stuff would cost more, but everybody in America has junk aplenty, anyhow.
But their people, without the U.S. market to keep the factories open, would go back to starving and standing in front of army tanks.
Nonetheless, we can’t get enough legal beef into China to keep a lapdog fat. This is because they want to sell us their chickens. Granted, we’re being silly. We could give them free access to any food product without worrying about the competition. Who’s going to buy a chicken from China with their bad press?
But our government, in its ongoing attempt to slow human evolution by protecting the dumbest among us, has banned Chinese chickens. To get even, the Chinese won’t let our beef in.
This seems such a tiny bit of their trade with the U.S. you’d expect them be a little more flexible. They would be if they didn’t take us for granted.
After all, in 2009, they bought just over $69 billion of our goods, most of which they need. We bought $296 billion worth of their junk, most of which we merely want.
Beef is not their biggest transgression, however. Our whole government—from the Administration to Congress—continues to complain about China’s refusal to adjust the value of their yuan. They’ve got it pegged at 6.83 to the dollar.
So, as our government borrows and spends enough to drive the dollar lower on international markets, the yuan follows. The self corrective way this is all supposed to work is as one country acts stupidly—that would be us—the value of its currency goes down, while the currency of a country with sane economic policy—that would be China—would go up.
That would make our products more competitive and their products less so. So their consumers would buy more U.S. stuff, like beef, and ours would buy less of their stuff. Like everything else. There would be some leveling effect, pulling them down and us up, and helping correct the problem.
It’s not working that way. They’re too impatient for growth. They should be willing to share the world’s slowdown. Instead, while we’re mired in 9.7% unemployment, they’re projecting 8% growth in GDP this year. (Most of which, by the way, will come from our pockets. To make it all madder, a lot of their growth will come from stimulus funds Obama borrows from them to buy windmill parts from them! It’s like China is our “company sto’,” as Tennessee Ernie would call it. They loan us money to buy their stuff and keep the profits on both ends.)
Everybody’s scared to make China mad. But we’ve got lots of leverage with these guys. We’re their biggest market, by a wide margin. And we owe them jillions. Of course that last part is a problem, from one perspective. You don’t want your banker to hear everything you say about him at the coffee shop.
On the other hand, there’s the way an old cattle feeder told me once. “If you borrow $10,000 from the bank to buy a car and you can’t pay, that’s your problem. If you borrow $10 million and can’t pay, it’s THEIR problem.” Then, they work with you.
Free trade or no, I think it’s time the U.S. show some backbone with China. Maybe it would make some of our other trading partners take us less for granted.
Steve Cornett is editor emeritus at Beef Today. You can reach him via e-mail at email@example.com.
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