Update on Chinese Competition
The title of a new book poses a question we all should ponder: The China Price: The True Cost of Chinese Competitive Advantage. Author Alexandra Harney paints a dramatic picture of the plight of Chinese workers who make those cheap products (shoes and socks, televisions and computers, etc.). Our Chinese imports have created an unprecedented trade deficit that has cost Americans 1.8 million jobs since 2001.
Chinese goods are so cheap because wages are so low. Few Americans realize how really low they are. The average wage of Chinese workers is $0.57 per hour. That's only 3% of the average U.S. manufacturing wage. Benefits such as health insurance or pensions are almost unknown.
Millions of Chinese workers live in crowded dormitories where all their worldly possessions fit under their beds.
Harney said that poisonous and counterfeit goods, bad as they are, are not China's biggest scandal. It is the diseases of China's factory hands. Only six of China's largest cities meet national standards for pure drinking water. One-third of the entire population breathes pollution from which 400,000 people die ever year.
Update on Chinese Espionage
A former Defense Department analyst who passed secrets to a Chinese government spy was sentenced on July 11 to nearly five years in prison. Gregg W. Bergersen, who pled guilty, was a weapon systems policy analyst at the Defense Security Cooperation Agency.
FBI Director Robert S. Mueller III said that Chinese intelligence operations against the U.S. are a major problem and that the FBI is stepping up counterespionage efforts against them. "China is stealing our secrets in an effort to leap ahead in terms of its military technology, but also the economic capability of China. It is a substantial threat that we are addressing."
Several recent Chinese spy cases highlight the problem, such as the case of Los Angeles businesswoman Katrina Leung, a longtime informant for the FBI who was later found to be secretly working for China's intelligence service.
Our director of national counterintelligence, Joel Brenner, said that China's theft of U.S. technology is a serious problem and that Beijing is "eating our lunch" in terms of compromised know-how.
Update on Chinese Trade Policy
The widely respected economist Robert J. Samuelson warns that China's trading system threatens to wreck the entire post-World War II trading system. Constructed largely by the U.S., that system flourished because its benefits are widely shared. China's trading policy is entirely different: it's designed to benefit China even if it harms its trading partners. This poses "a huge gap in philosophy."
China embraced export-led economic growth. The centerpiece is a wildly undervalued exchange rate, estimated at 40% cheaper than it should be. This gives China an advantage that props up its exports. Since 2001, China's surplus has jumped from $17 billion to $239 billion.
Samuelson says he personally is a "free trader," but that he must complain about "policies that are predatory; China's are just that." He explains that the logic of free trade is that comparative advantage ultimately benefits everyone; countries specialize in what they do best.
But "the logic does not allow for one country's trade systematically to depress its trading partners' production and employment.... The deficits cannot grow indefinitely.... The longer these problems fester, the more intractable and destructive they will become."
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