Schumer or Snow: who is the dodging the real issue?

Sen. Charles Schumer, D-N.Y., said Treasury's report last week that declined to brand China as a currency manipulator was ”a technical and legislative dodge.”

"China is a manipulator," Schumer said at a Senate Banking Committee hearing, "and the administration is afraid to say so."

Well, Mr.Schumer can accuse anyone of murder too, but when the experts disagree with him (Treasury department report did not find proof of manipulation), he may want to think carefully again whether he himself is actually dodging the real issue. It is agreed by most economists that U.S. domestic deficits are the real driver of the trade deficits. If you consume more than you produce, what else do you expect to see other than deficits? Are you going to blame obesity problems on European candy makers too?

China's surplus trade with the U.S. only accounts for one quarter of United States' trade deficit, which means that even China balances current account with the U.S. overnight, problems are still there. As Michael Woolfolk (senior currency strategist at the Bank of New York) said, "..government and investors will doubtless still be looking for another nation to blame."

"This is an incredibly important issue for my state," said Sen. Debbie Stabenow, D-Mich. "How many jobs are we going to lose from currency manipulation?"

The answer is none. The products China exports to the U.S. were previously made by South East Asian countries and Latin American countries, at a much higher costs though. Manufacturing jobs are moving from these places to China, not from U.S. mainland.  Even if the Chinese appreciates its currency or U.S. imposes high tariff on Chinese products, it is not going to bring manufacturing jobs back to U.S. It will only divert trades from China to other developing countries, and creates a huge financial burden on American consumers.

Snow acknowledged that "the sentiment is pretty strong to do something against China. The handwriting is on the wall and China needs to act."
That’s damn right. The whole trade issue is about sentiment, not about facts. It is always easy and convenient to blame on foreigners, demonize foreigners, than to face the real issues and one’s own mistakes.

Reference:

Sens. Criticize Treasury on China Currency -  Washington Post