Latest Trade Figures Should Cool Talk of Getting Tough with China

Posted by Daniel Griswold

The drums of a trade war with China are beating more loudly in Congress this week. Sen. Chuck Schumer, D-N.Y., is threatening to introduce a bill in the next two weeks that would raise tariffs on imports from China if it does not quickly appreciate the value of its currency, the yuan.

The argument behind the bill is that an artificially cheap yuan makes Chinese goods too attractive for struggling American consumers, to the disadvantage of certain U.S. companies that would prefer to charge us higher prices, while it stifles U.S. exports to China.

The latest monthly trade report, released yesterday by the U.S. Department of Commerce, should give pause to those who want to punish China for its currency policies.

In the first four months of 2010, compared to the same period in 2009, U.S. exports of goods and services to China were up 41 percent. That is twice the rate of growth of our exports to the rest of the world excluding China.

Meanwhile, imports from China were up 14 percent year-to-date, compared to a 25 percent increase in imports from the rest of the world. As a result, while our trade deficit with all other countries grew by 46 percent, from $78 billion to $114 billion, our trade deficit with China grew only 6 percent, from $67 billion to $71 billion.

A more flexible, market-driven yuan would be welcome, for all the reasons we’ve written about at the Center for Trade Policy Studies, but its current rate is not an excuse for raising trade barriers.

19 U.S. States Sold $1 Billion or More in China in 2009

Posted by Daniel Griswold

The U.S.-China Business Council has performed a valuable public service by marshalling state-by-state figures on exports to China. In its annual survey, released this morning, the USCBC documents that 19 states exported $1 billion or more in 2009 to China, which is now the third largest market for U.S. exports.

In a statement accompanying the report, the USCBC noted that exports to China declined only slightly in 2009, compared to a 20 percent plunge in exports to the rest of the world. Top U.S. exports to China last year were computers and electronics, agricultural products, chemicals, and transportation equipment.

The USCBC figures tend to undercut complaints that China’s currency policies have stymied U.S. exports to that country. In fact, as I argued in an op-ed in the Los Angeles Times last week, since 2005, U.S. exports to China have been growing three times faster than our exports to the rest of the world.

There is agreement across the spectrum that the Chinese government should continue to move toward a more flexible, market-priced currency. But the export numbers do not give any support to the critics who want to threaten sanctions against China. In fact, as I concluded in my op-ed:

If the Obama administration hopes to double U.S. exports in the next five years, as the president announced in his State of the Union address, it should praise China for its growing appetite for U.S. goods and services, not threaten it with trade sanctions. Any company hoping to double its sales in the next five years would be foolish to pick a needless fight with one of its best customers.

Democrats Favor Trade Sanctions on Americans

Posted by Daniel Ikenson

Scott Lincicome sharpens his pencil today and calculates that Congressional failure to ratify the U.S.-Colombia Free Trade Agreement–a deal that was signed almost three full years ago–has so far cost American exporters $2 billion.  That tally increases $1.9 million each and every day.

Since that time [the trade agreement signing], American exporters have paid approximately $1.9 million per day in Colombian tariffs that they wouldn’t have paid if the Democrat-controlled Congress had just passed the FTA back then and thus allowed it to enter into force. By my math, that means that Congress’ and (now) the President’s partisan stalling has resulted in a pointless tax on American businesses of almost $2 billion ($1.9798 billion = 1042 days times $1.9 million) and counting.

My colleague Dan Griswold explained yesterday how U.S. trade policy punishes poorer people abroad, and amounts to a regressive tax here at home:

America’s highest remaining trade barriers are aimed at products mostly grown and made by poor people abroad and disproportionately consumed by poor people at home.  While industrial goods and luxury products typically enter under low or zero tariffs, the U.S. government imposes duties of 30 pecent or more on food and lower-end clothing and shoes — staple goods that loom large in the budgets of poor families.

The Obama administration and Congress could easily remove the sanctions that burden America’s exporters and lower-income consumers.  But until they’re convinced that they can make up the revenues lost by crossing Big Labor, the Democratic Party playbook counsels more of the same disingenuous rhetoric of fraternity with the common man and more exaggerations about evil foreign labor practices.