Will China re-evaluate its currency fix America’s employment problems?
Yes it is true that there’s a really high trade deficit from US to China. However, it is easy to point to China as the scapegoat in an election year to point the problem on others. However, does currency re-evaluation would fix the problem? According to history, no. Remember the plaza accords when US complained to Japan about their trade deficit problems? After Japan ‘re-evaulated’ its currency to the US, the trade deficit was not eliminated. In 1986, trade deficit was 55 billion, 1987-56 billion, 1988 51 billion, 1989 49 billion, 1991 41 billion, 1992 49 billion, 1993 59 billion, 1994 65 billion. While trade deficit did decrease in the short term, but was increased in the long term. Talking about currency re-evaluation, China changed its currency from around $1 = $8 rmb, to $6.8 rmb. Did trade went down? No.
The problem with trade deficit in US should not solely blamed on China, rather the problem lies in US companies abroad. Would starting a trade war with China by putting up tariffs an answer? No, other countries would simply pick up the trade surpluses that China once have. Take the clothes export business for example. Made in China exports from Textiles was 70% of its imports in 2005. After the RMB evaluation in 2006, imports from Chinese textiles dropped to around 40% in 2009. However, many other countries like India, Vietnam and Bangladesh picked up what China left off. You barely see the jobs in the textile industry came back to the US.
Other countries like Japan and Germany have trade surpluses despite being a developed country. US can follow their example but corporate interests simply won’t allow it. Creating jobs here means telling many of the Multinationals not to export our jobs and forcing them back to creating the factories here and allow the US middle class to have a decent wage.
There are currently no comments highlighted.