Mitt Romney Is Still Wrong about China

I certainly hope Mitt Romney is as insincere as he appears to be. The alternative is that he really does, as he says, “see eye to eye” with Donald Trump on the question of China. In case you’ve forgotten Trump’s position on China, it is:

“Listen, you m—–f—–s” (and he didn’t say “muffins”) “we’re going to tax you 25 percent.”

If Romney sees eye to eye with Trump, he’s seeing eye to eye with Barack Obama as well. As I noted earlier:

The administration has been stepping up the anti-China rhetoric for a year now, and Treasury secretary Timothy Geithner underwhelmed the G-20 meeting in Gyeongju, South Korea, in late October with non-credible demands that each country adopt policies to keep both trade surpluses and trade deficits “below a specified share” of GDP, with his preferred target being about 4 percent. The Indian delegation responded with whatever the Hindi is for “Get the hell out of here!” — or, as finance minister Pranab Mukherjee, New Delhi’s man at the G-20, put it, “Protectionist policies are not acceptable.” Japan’s representative called the plan “unrealistic,” apparently ignorant of the fact that “unrealistic” is the defining adjective of the Obama administration. The Germans denounced Geithner’s proposal as a move toward a “command economy,” demonstrating a fine Teutonic flair for the obvious. Too protectionist for the Indians, too authoritarian for the Germans — that’s our economic policy.

Much of what is wrong with Romney’s born-again China hawkery was spelled out in this editorial:

China is, to be sure, a particularly brazen and impenitent currency manipulator. The renminbi is probably undervalued by at least 15 percent, though estimates vary greatly. China keeps its currency artificially weak to keep employment high in its export-driven economy. Another way of saying this is that China keeps the standard of living artificially low for its workers in order to prevent unemployment, and Mr. Romney promises to retaliate by lowering the standard of living of U.S. workers by raising the prices they pay for imported goods. Beijing’s long-term strategy is to allow the renminbi to rise, gradually, over a long period of time, as China makes the transition from being a poor exporter to a higher-wage economy more driven by internal demand. In the meantime, the United States receives a subsidy from China in the form of lower prices for consumer goods made there. 

Yes, China manipulates its currency. So does the European Union. So does the United States — that’s what we pay Ben Bernanke for. So does every country that has the ability to do so and finds it in its interest to do so.

China is not the reason that manufacturing began to decline in the United States in the second half of the 20th century. The United States was an uncontested manufacturing powerhouse in the 1950s in no small part because Germany and Japan had been bombed to smithereens, along with much of the rest of the civilized world, while potential global competitors in much of Europe, Latin America, and Asia were suffocating under socialism in various forms. That is no longer the case.

The United States is a country with an average household money income of some $50,000 — we are not going to be the world’s leader in low-margin injected-plastic manufacturing. That is not going to happen, and we should not be eager for it to happen.

If I thought Mitt Romney were just being a Machiavellian calculator, I might be a little more kindly disposed to him: I am all for Machiavellian calculators in the White House, provided they are ruthlessly pursuing our national interests. But I half-suspect that Mr. Romney half-believes what is coming out of his mouth, which is worrisome. If he really intends to slap a 25 percent tariff on Chinese goods, he is embarking on a dangerous and destructive path. If he is just sucking up to Donald Trump . . . I honestly do not get why Romney, and Rick Perry, and Sarah Palin, and others feel the need to kiss that particular ring. It is a mystery.

Here is something that is not a mystery: China will soon be the world’s second-largest consumer market, and India will be fourth or fifth in a decade or so. We Americans excel at making high-end stuff: Technology, aircraft, industrial machinery, etc. It’s easier to sell high-end stuff to rich people than to poor people. China’s trade imbalances with the world at large are well on their way toward being sorted out, and have been for some time, and the fact that the United States continues to have a large trade deficit vis-à-vis China is at least as much a reflection of policy decisions in Washington as of those in Beijing. (And it is worth remembering that about half of our trade deficit with the world at large is from a single product: oil.)

The only thing that will raise wages in the United States is real long-term investment in productive capital. That’s it. Romney is better placed than most to appreciate that — I think. I’m skeptical of the cult of the businessman, whether your businessman is Romney, Herman Cain, Donald Trump, or Ross Perot. The United States of America is not Bain Capital, and it is not a pizza chain. If you really think that being a fabulously successful businessman is a knock-’em-dead qualification for being president, keep this face in mind: