Forget Iran, Let’s Take On China Instead
by sarabeth at 6:00 am on April 21st, 2006 in Bush Man Date, EconomyWhy is the basis of our economic relationship with China the apparently immutable assumption that we are, and always will be, China’s bitch? They have comprehensively had their way with us for longer than most of us care to remember. And all we do is keep on taking it.
The reason why we have this humongous trade deficit with China ($200 billion per year and counting) is no mystery to anyone—it’s because they keep their markets firmly closed to us, while we keep ours firmly open. But they manage to keep their markets firmly closed to us only because we keep on going along with it. They hypnotized us a long time ago; we accept without question that this is the way things are, and will necessarily be for a long, long time to come. We accept that things can change only at an infinitesimal pace that makes snails look turbocharged. Meanwhile, the trade deficit continues to grow, and China comes to own a larger and larger share of America. China’s holdings of U.S. treasury securities and American stocks are already more than $800 billion. In plain English, what that translates into is that they have us by the balls. And rather than letting go anytime soon, they are just going to be squeezing harder and harder.
One of these days, there will be a one-way hot-line between Peking and Washington, D.C. It may not ring very often, but when it does you can be sure that what they will be saying is: “Listen up, Mr. President, here is what we want you to do tomorrow, hehehe.”
The funny thing is that their economy needs us a heck of a lot more than our economy needs them. For all the clothing and electronic goods and whatnot we buy from them, there are many other countries that can supply pretty much the same quality for only a slightly higher price than American consumers pay today. But if we stop buying from them – for example, by Presidential fiat – guess what happens:
The counter argument to this strategy is supposed to be that the Chinese have us by the balls, remember? If we try to get tough, they will unload their treasuries and American stocks, and create havoc in U.S. financial markets. Interest rates will jump. The stock market will crash. The dollar will plunge. American investors will get comprehensively burned.
Ah, but the Chinese would get burned pretty badly too, wouldn’t they now? They are, after all, the biggest investors in America. So maybe what we have is one of those situations where they will threaten, and bluster, and hope to cow us down, but they simply can’t afford to pull the plug?
I hate to offer good advice to a man I deeply despise, but this is really what President Bush should look to if he wants to salvage his Presidency and create an enduring positive legacy. Take the Chinese on. Go eyeball to eyeball with them. Demand that they open up their markets to American goods and services. Threaten to impose a blanket ban on imports from China if they don’t.
We would, of course, be embarking on a game of economic Chicken. And there is, certainly, some risk involved. But this is a war that America could really get behind once again (remember the good old days, George?). Standing up to the bad guys. With no body count. Even Cindy Sheehan might march in support.
And (I don’t mean this in a sarcastic way at all) in the interests of our long-term national security, we have no choice but to have this showdown with China sometime. If we don’t, they sure as heck will be putting that hotline in. Arguably, only a second-term president in a deep, deep hole already with no other way out, can afford to fight this battle. And who better to do it than a President with a well-earned reputation for pig-headedly stupid stubbornness? We don’t really want to bring democracy to the Chinese, after all. We just want them to open up their goddamn markets, and start reducing the trade deficit. And if George Bush can’t scare the crap out of them, no one can.
UPDATE 11:15 AM (Matt):
As if further proof of Sarabeth’s point was needed:
We’re their bitches:
“We can be candid about our disagreements,” Bush said. “I’ll continue to discuss with President Hu the importance of respecting human rights and the freedoms of the Chinese people.”
Bush called for expanded Chinese freedoms to “assemble, speak freely and to worship.”
But then:
Bush later expressed regret to Hu over the heckling, a senior Bush official said.
Who’s your daddy now?
Victoria wrote:
Was talking with a VP at Target corp. the other day, and he said that they are buying from China less and less… not out of concern for human rights, but because it’s getting too expensive. (Where next? Bangladesh and Vietnam.)
Posted 21 Apr 2006 at 8:26 am ¶
42 wrote:
as if Wal-Mart would ever let this happen… nice idea, though.
but the above commenter brings up a good point: which wretchedly-poor country will be the next China? the factories move on; look how fast they fled Mexico when China bent over and flapped its cheap knickers at the CEO class, winking provocatively.
Posted 24 Apr 2006 at 6:14 pm ¶
Ken wrote:
It’s not simply a matter of being wretchedly poor - there also has to be sufficient infrastructure (e.g., transport, electricity, education) to support production at scale. Of course, the dream is that one day, *all* countries will become industrialized. What rationale will economists use then? Arbitraging regulations?
Posted 25 Apr 2006 at 9:48 am ¶