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 Richmans' Trade and Taxes Blog

Summers heads to China to rescue U.S. recovery
Howard Richman, 9/7/2010

When Lawrence Summers read the latest unemployment and GDP reports, he probably arrived at the same conclusion that my father, son and I did (Obama Did Create 3 million Jobs -- In China) -- that the rising trade deficit was killing the U.S. economic recovery. So on Saturday, he left for China to persuade the Chinese government to loosen its currency manipulations and other trade manipulations which maximize Chinese exports to the United States while minimizing Chinese imports from the United States.

In anticipation of his meeting, the Chinese government is erecting a brick wall. They are claiming that they don't keep their people from buying U.S. products. They are claiming that if only we sold them the high tech gear that their military needs, trade would move toward balance. They are claiming that their manipulation of the yuan-dollar exchange rate is an internal Chinese issue. They don't plan to give in one iota. Here is a selection from the Associated Press report:

China rejected pressure over currency Tuesday amid a visit by two high-level U.S. envoys, saying Beijing will set the pace of exchange rate reforms....

The issue is expected to be on the agenda for talks between Chinese officials and the visiting director of the U.S. National Economic Council, Lawrence Summers, and Deputy National Security Adviser Thomas Donilon.

If Obama were just sending someone to talk the Chinese leaders into a voluntary change, he would have sent Chinaphile Treasury Secretary Timothy Geithner. Summers is obviously armed with a threat of some kind. Things are starting to get very interesting.

Comment by demand is useless, 9/8/2010:

Instead of direct confronting China, which use artful techniques to overcome USA, American firms should encourage Mexico, india, Indonesia to increase their productivity to match or exceed that of China's while maintaining lower wages.

That way, risk can be diversified. Otherwise, USA will be held hostage to Chinese creditor and inflation.

Response to this comment by , 9/8/2010:

Response to this comment by , 9/8/2010:

Comment by M, 9/9/2010:

What credible threat could the Obama regime impliment? 

If China stalls until the midterm elections deliver a new majority to the Republicans in the US House of Representatives, our own political gridlock will delay their need to negotiate in earnest on trade and currency manipulation until 2012 or beyond.