More rhetoric about the Yuan and trade imbalances. I do not agree that currency valuations are not a major part of the problem. If country A has an undervalued by 40% and country B has basically free trade, country A will have an advantage when trading with B. Because A’s (Yuan) currency will be cheap, it will encourage business in B to do production in A because B’s (Dollars) will exchange for much more of A’s (Yuan) so they will go farther in A’s economy to purchase materials and labor.
Bottom line is that the United States population is addicted to cheap goods from foreign countries and China is the 800 pound gorilla in that area so they are a large target for this kind of rhetoric. Until we realize that we will not be able to keep the standard of living we are used to in America without jobs that support an income of what we would define as a middle class standard. We either need to support native production that would support jobs that are usually of a higher income level, OR we need to have extensive retraining programs so that when these production jobs go overseas , the displaced workers will be able to get the skills they need to find a job in another part of the economy.
China’s commerce minister warned the United States on Sunday against imposing trade sanctions over Beijing’s currency controls, and said his country was likely to report a trade deficit in March.
Washington and other trading partners are pressing China to ease controls that have kept its yuan currency steady against the dollar for 18 months to help its companies compete amid weak global demand. Some U.S. lawmakers have demanded to have China declared a currency manipulator in a U.S. Treasury Department report due out next month, which could precede possible trade sanctions.
Asked what measures China would adopt if the Treasury Department declared it a currency manipulator, Chinese Commerce Minister Chen Deming said China would not sit idly by and reiterated Premier Wen Jiabao’s statement a week ago denying that the yuan was undervalued.
“If (the Treasury Department’s) reply is accompanied by trade sanctions and trade measures, we will not ignore it,” Chen said. “If it is followed by any international legal lawsuit against China, we will take them on.”
Business groups say China’s currency controls keep the yuan undervalued by up to 40 percent, giving its exporters an unfair price advantage and swelling its multibillion-dollar trade surplus.
Analysis: We need to focus on a new doctrine of “Fair Trade” and get away from totally free trade in the U.S. or get used to falling wages and less middle classed jobs for some time until these low wages countries build up their standard of living to reduce the incentive for jobs to move from high to low wages areas. Higher education is the key.