Obama’s exclusive reliance on diplomacy forfeits U.S. monetary policy to Beijing, renders impotent U.S. fiscal policy, and visits enormous pain on American workers.
The recent announcement will be proclaimed as Victory by the administration who has been impotent in managing this issue to the pain of American Workers and manufacturers.
Permitting the Chinese yuan to appreciate by 3 percent this year is wholly inadequate and would do little to resolve the U.S.-China trade imbalance. China’s yuan is likely overvalued by 40 percent. In 2010, the trade deficit with China is reducing U.S. GDP by more than $400 billion or nearly three percent. Unemployment would be falling rapidly and the U.S. economy recovering more rapidly but for the trade deficit with China and Beijing’s currency policies. A three percent revaluation over the next year would not even amount to the change in yuan undervaluation.
Beijing is playing the Obama Administration for fools.
China’s currency policies reduce U.S. growth by one percentage point a year. The U.S. economy would likely be $1 trillion larger today, but for the trade deficits with China over the last 10 years.
“Absolutely must provide reciprocal access to US exporters.”
Win Win.