Useless Sanctions on China: Robert Reich Says ‘Forget It,’ Better to Rebuild American Industry

Useless Sanctions on China: Robert Reich Says ‘Forget It,’ Better to Rebuild American Industry

Useless Sanctions on China: Robert Reich Says ‘Forget It,’ Better to Rebuild American Industry

 More and more, as the economic crisis continues and unemployment stays high, many politicians, labor officials and economists want to blame China and worse, take it out on China by punishing Beijing with sanctions, tariffs and other measures, even at the risk of trade war. What the United States needs to do instead is to create a domestic industrial policy to revive manufacturing, tax the rich, strengthen education and job training, and other measures to revive American decline. One country that has done a lot of that already is Germany.

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Earlier this month, in The Nation, I wrote a 5000-word piece describing the debate among progressives over the challenge from China.

 More and more, as the economic crisis continues and unemployment stays high, many politicians, labor officials and economists want to blame China and worse, take it out on China by punishing Beijing with sanctions, tariffs and other measures, even at the risk of trade war. That’s why Robert Reich’s piece in the Christian Science Monitor comes as a breath of fresh air.

 Reich says that “it’s naive to assume all we have to do to get the Chinese to do what we want is to threaten them with tariffs.” He points out that China might well retaliate, undermining the US economy, too, and that China isn’t likely to change what they believe is a key political and economic strategy just because the United States makes it more expensive for them to keep it. And, he says, “even if China did allow its currency to rise against the dollar, there’s no reason to think this would automatically generate lots more American jobs.”

 He concludes: 

“What worries me most about all this tough talk about China is it diverts attention from the real problem. American isn’t suffering high unemployment because we’re buying too much from China and not selling them enough. Trade with China is a small portion of the US economy. … The central challenge we face isn’t to rebalance trade with China. It’s to rebalance the American economy so its benefits are more widely shared.”

 On September 17, an editorial in the New York Times joined many others in slamming China and praising the Obama administration for talking tough about trade with China. But the Times, at least, warned that some in Congress (mostly Democrats supported by the AFL-CIO) want to go too far: 

“The administration will also have to be careful not to unleash something it can’t control. Protectionist impulses run frighteningly deep in Congress.” 

What the United States needs to do, of course, is to create a domestic industrial policy to revive manufacturing, tax the rich, strengthen education and job training, and other measures to revive American decline. One country that has done a lot of that already is Germany, as a Washington Post article this week provided a stunning glimpse into why the Germans don’t exhibit the kind of anti-China hysteria that so many Americans do. Unlike the United States, which has a huge and growing deficit with China, Germany’s trade is almost in balance, and Germany has managed to export huge amounts of high-tech goods, including BMWs, to China. Said the Post: 

“Vilified in the United States as a great sucking sound on the American economy, China is courted here as a revered client. Fast-growing demand from Asia’s giant is helping to fuel the strong German recovery, and Germany now stands as proof that a rich nation can profit off China’s rise.” 

The data show that Germany imports $8.2 billion in goods from China each month, but it exports $6.2 billion in return, meaning that its trade balance is almost even. In sharp contrast, the United States imports $33.3 billion a month from China, while exporting a paltry $7.3 billion. Read it and weep. As the Post says: “When it comes to building a healthy trading relationship with China, Germany is cooking America’s goose.” 

The Chinese market is vast and growing. By 2020, according to reports from the automobile industry, Chinese consumers will buy about 40 million cars per year, more than twice the number sold in the United States at the very peak of auto sales, before the current slump pushed the number down to around 12 million. Even by 2015, Chinese auto sales will surpass 25 million a year. Why is it that Germany can supply that market, and America can’t?

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