This article was very interesting to me. I did not know about China's economic problems, most specifically the way they affected the United States economy. I love Paulson's blunt attitude toward protectionist policies. This a great follow up to to our tariff/quota talks in class.
http://ap.lancasteronline.com/4/paulson_trade
"The administration is coming under increasing pressure to deal with a soaring trade deficit. It reached $763.6 billion in 2006, the fifth straight year with a record. The imbalance with China climbed to a record as well — $232.5 billion, the highest trade gap ever recorded with a single country." The United States wants China to reform its economy obviously because it is not helping our budget by any means. Because China's currency is undervalued by appx. 40%, imported goods are less expensive for US consumers and exported goods are more expensive for Chinese consumers. The democratic party claims the US government is not doing enough to protect its workers. But Paulson has a very different idea on protectionist policies. "Raising protectionist barriers and isolating ourselves from the gains of trade would hurt our economy," he said. "The long-term cost of protectionism — for us and for the rest of the world — is lost jobs and lost opportunity." Our solution: push China to reform its economy, which will raise the currency value.
Not only will we isolate ourselves, we will cheat ourselves in the long run through protectionist policies. do we protect our workers in the short run or deal with competition and better ourselves from it? If competition and trade take jobs away from workers, does that make trade a bad thing? The book we read before class (Naked Economics) hit on this topic as well. Just wondering what you all thought about this!
http://ap.lancasteronline.com/4/paulson_trade
"The administration is coming under increasing pressure to deal with a soaring trade deficit. It reached $763.6 billion in 2006, the fifth straight year with a record. The imbalance with China climbed to a record as well — $232.5 billion, the highest trade gap ever recorded with a single country." The United States wants China to reform its economy obviously because it is not helping our budget by any means. Because China's currency is undervalued by appx. 40%, imported goods are less expensive for US consumers and exported goods are more expensive for Chinese consumers. The democratic party claims the US government is not doing enough to protect its workers. But Paulson has a very different idea on protectionist policies. "Raising protectionist barriers and isolating ourselves from the gains of trade would hurt our economy," he said. "The long-term cost of protectionism — for us and for the rest of the world — is lost jobs and lost opportunity." Our solution: push China to reform its economy, which will raise the currency value.
Not only will we isolate ourselves, we will cheat ourselves in the long run through protectionist policies. do we protect our workers in the short run or deal with competition and better ourselves from it? If competition and trade take jobs away from workers, does that make trade a bad thing? The book we read before class (Naked Economics) hit on this topic as well. Just wondering what you all thought about this!
3 comments:
Ash-very interesting article!
I really had no idea China was in THAT great of a trade defecit, but it's kind of to be expected considering the country's unrelenting rapid industrialization. Moreover, certain designated specialized economic zones make the trade imbalance even worse and encourage foreign investment, in particular the entire Shenzhen region on the coast of china. For a general question, how does the U.S. propose to alter the Chinese economy besides putting tariffs and quotas on imported goods? What else does the U.S. have the power to do to try and turn around other country's economies?
After reading this I was reminded of mexico's maquiladoras and how it's somewhat of the same problem in terms of trade imbalances on many goods (not quite to the same extent, but it could still apply).
Great article for our info on trade & protectionist policies! The situation with China is getting serious - mostly because the deficit makes people nervous.
Protectionist policies are tough - in general, trade is good, but people will lose jobs if something can be made cheaper/better somewhere else. That's all fine and dandy - an economist will say that those people will retrain to other, better suited jobs. But when it's YOUR family that loses a major wage earner who's maybe in their mid-50's...well, it's just not that easy. That's where the cry to save US jobs comes from.
Trade deficit = we are bringing in more imports than sending out exports, which affects the value of our currency overall (if our things are more expensive over borders, it changes the value of our dollar).
For Joelle's question: putting tariffs and quotas on imported goods would harm the situation more - that's a protectionist policy. The encouragement to make China's economy stronger by various means is what will lessen the trade deficit.
Yes - maquiladoras are a similar situation. With NAFTA, things changed, especially along the border.
With the increase of globalization, the economies of other countries affect the U.S. economy more and more because they are so connected. I didn't know that China was having a big problem with trade defecit. If puting tariffs and quotas on imported goods would harm the situation even more, what can be done?
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