Barb, I don't want to drag this out too much but I'd like to make a few points. I agree with you that the US public education needs to improve and that the US needs to continue to embrace free trade. I think you and I are in agreement about the fundamental things! It's just that in dealings I have in my own job (as a business consultant) I see the effects of trade policies that are rather open and rules-based on the US's part and rather opaque and one-sided on China's part. In my opinion, the fact that the US government (for reasons I don't get; maybe for fear of seeing China drop its dollar reserves?) does nothing to rectify this situation will harm the US economy and this country's middle class in the long term. I have nothing against China, but my own interests lie in seeing my own city, state and county do well by playing by the rules rather than seeing any other place, be it China, Chad, Chile or the Cinqueterre, prosper on the back of unfair policies and unfree trade.
Too much of my job is telling companies how they need to move production to low-cost areas before companies (increasingly ones that the Chinese government is putting together by prodding compliant businessmen to action) kill them with prices that, for many products, are often as much as 40% below world market prices.
Those prices are lower for a number of reasons: lower capital costs thanks to friendly state-run banks and subsidies, subsidized energy, VAT rebates to encourage exporters, an artificially low currency, and one-sided protectionism. Many of those policies are illegal within the WTO on their own; together, they equal dumping, which is WTO-illegal as well.
CAPITAL COSTS: No other country that I know of is using state-bank money to build in the next ~5 years an amount of capacity equal to nearly 100% in areas from cardboard packaging to fiberglass to plastics. The effect of those policies will be to cause global oversupply that will lead to the closure of plants elsewhere in the world.
ENERGY COSTS: Like Russia and some Middle Eastern states, China subsidizes oil to the point where the state-run oil companies complain bitterly about not being profitable. In China, the goal is to encourage ever more factories with cheap energy.
VAT REBATES: The VAT taxes that Beijing gives to exporters violate the rules of the WTO, which granted China entry in 1999 after pressure from Bill Clinton. Why should abiding WTO law be important? It was entry into that organization that opened up world markets to Chinese goods in the first place, and at this point the rules are being observed unevenly with China benefiting at others' expense.
CURRENCY: The yuan is still pegged to the dollar, not ruled by market forces. It is still kept artificially low, much lower than the market would have it -- especially against the euro -- even if it has appreciated slowly against the dollar. Look at what any other currency has done against the dollar since 2002 for comparison's sake.
PROTECTIONISM: I know the most about this in terms of services and media, two of the US's biggest exports. Regarding (financial) services, China allowed two foreign banks to operate on the mainland before a 2005 law outlawed them. They are Switzerland's UBS and Goldman Sachs. At this point, all other foreign banks have operations only in Hong Kong.
Saying there's "no need for lawyers because there's no crime" is misguided. The real money in law is at the corporate level, not criminal law. And foreign law firms are not allowed to operate. Almost no services industries are permitted without an emasculating JV, and there is also a tight limit on the number of foreign movies and media allowed. That's why Warner Bros., Bloomberg, Reuters and others have filed suits with the WTO. And this is the sort of protectionism that leads to a $300 billion annual trade surplus with the US. ($350b of Chinese goods vs. $50b of US goods.)
MIDDLE CLASS STAGNATION: The middle classes of the developed world -- the US, Japan, Korea, EU, Australia (though less so because of their commodities), Taiwan -- have seen stagnant wage growth for a decade. A large part of this is the loss of factory jobs, which happens because of many, many factors, including new technologies but also because of the above-mentioned (and WTO-violating) trade policies that make it difficult for many businesses to justify a refusal to move production to China. One-fifth of US factory jobs have been lost since 2002, and that happens not because of poor education or globalization as embodied in pure market forces but because of violations of the WTO's rules and the US's unwillingness to retaliate and go against the WTO.
CONCLUSION: I agree with you that improving education and continuing to embrace free trade are vital for the US. I have nothing against China as a place, but there are very serious problems it is causing for the US and other developed economies, and those problems aren't being addressed.
Just think about the things any of us buys on the street; it's almost all made in China, not Mexico or Colombia or any other place where we now have some ludicrous "no more free trade" issue. That's problematic not because China's a good or bad place but because it leads to an unbalanced US economy, overly reliant on any one country and devoid of a rich number of industries and sectors that comprise a diversified economy.
Instead of free trade, we have a one-way street, which has led to an unnecessarily large loss in US jobs, a transition of factory workers to less-skilled jobs, and a sagging US economy. Heck, yesterday's big business story out of Boston was that Massachusetts' own 3Com is moving its management to China because it wants to shift production there.
Complaining a la Hillary about free trade with Mexico -- hardly a threat to jobs in any way -- is way off base. I can think of few companies that have moved or are moving production there. Unfree trade with China is a bigger problem, and it's led to huge trade imbalances, a hurting middle class struggling to adapt to mass job loss, supply-chain reliance on one foreign country, and huge amounts of US debt held by a foreign state. I don't mean to bash China at all -- instead, Washington needs to figure out what's best for the US (just as China acts for what's best for itself) and ensure the US digs itself out of a reliance on the goods of one place, no matter how awesome or friendly it is, and closes its unwieldy trade deficits.
By the exact same token, reliance on foreign energy sources, from Canadian to Venezuelan to Saudi supplies, has the same effect -- a big outflow of capital from the US and into another country's pockets. The US needs to find a way to end its reliance on foreign oil and gas the way as urgently as it needs to address its trade disparity with China. Both are big problems because they hurt America, not because it's China, Venezuela, or Canada benefiting.
Barb, I don't mean to offend you or anyone; I just see a massive imbalance that I think needs righting. ... I hope you'll understand ... Truce?
