Romney vs. Renminbi


With Middle Eastern mobs making war on the United States, Barack Obama and Mitt Romney are declaring a trade war on China in the hopes that crude and economically illiterate attacks on Beijing will play big in the swing states — attacking Canton (Guangzhou) for the benefit of Canton (Ohio). Economically destructive political opportunism is of course precisely what we expect of the Obama administration, but we expect more from Romney.

Romney has been attempting to get some mileage out of claims that the president has been soft on Chinese trade shenanigans, and Obama has responded in character by using executive powers for political purposes, in this case by filing a new action against China in the World Trade Organization and escalating a previous action. Romney rightly called that a campaign stunt, and then reiterated his promise to surpass it with a stunt of his own: labeling China a “currency manipulator” and imposing economic sanctions. China had a response, too, filing a WTO complaint of its own against U.S. “anti-dumping” rules that it regards as unfair trade restrictions.

China is run by a cabal of decrepit tyrants who do in fact seek to exploit trade barriers to the benefit of the Chinese economy; that much is undeniable. But both Romney and Obama grossly exaggerate the impact of Chinese maneuvering as a way to escape confronting the much deeper and more serious challenges facing our economy. When the U.S. economy was booming in the late 1990s, China was a trade miscreant. When the economy was percolating along decently in the early millennial years, China was a trade miscreant. And when the U.S. economy tanked in 2008–09, China was a trade miscreant. Chances are very good that whatever the state of the U.S. economy in 2013, China is going to be a trade miscreant. That is a problem, but it is not a headline problem or even a top-25 problem.

The integration of global markets means that U.S. workers and businesses will face increased competition from overseas rivals, and this is especially difficult for relatively low-skilled workers and for those enterprises that seek advantages from employing them. That is a fact of economic life that will persist independently of any policy pursued or not pursued by the junta in Beijing. U.S. firms have lost out to more competitive enterprises based in low-wage countries such as China and India, but also to businesses in high-wage countries such as Germany and Canada. The portion of our economic troubles that can be blamed on Chinese wiles rather than brute economic realities is small if not trivial.

If we may be so gauche as to introduce some relevant facts into the political discussion, China is if anything today a less active currency manipulator than it has been at any time in recent decades. The renminbi, though it remains artificially devalued, has appreciated some 23 percent against the dollar since 2005. Beijing has been allowing the renminbi to appreciate not in response to pressure from Washington but because the Chinese authorities want their currency to play a more important role in international commerce, and even dream of the day in which it replaces the dollar as the preferred global reserve currency.

Because the renminbi remains a tightly managed currency, accounts and contracts in such key global commodities as oil are rarely if ever negotiated or settled in it; the world prefers the dollar, and the renminbi is not even within striking distance of such also-rans as the euro or yen. China has been slowly but steadily relaxing its foreign-exchange controls to accommodate its desire to play a more important role in the world economy. Which is to say, Romney is angrily demanding that China please the United States by doing what China already is doing for its own reasons. He should learn to take “yes” for an answer.