Killer Chinese imports?

Today, Andrés Martinez and Joseph Farah debate the danger of Chinese imports. Yesterday, they discussed the broad question of U.S. engagement with the world's most populous country. Later this week, they'll debate military threats, Olympic boycotts and more.

Trade creates a win-winBy Andrés Martinez
Dear Joseph,

At a playground in Boston I visited this weekend, there were several very cool toy vehicles -- including a construction truck and a police car -- meant to be shared. But much to my embarrassment, my son at one point refused to allow other kids to play with any of them (none of which were his!). Sebastian's tantrum is reminiscent of how too many Americans -- and too many American politicians -- view China.

There is widespread resentment that the world's most populous nation is taking its place in the world and aspiring to enjoy some of the development we have attained in this country. It's a petty resentment, and wrongheaded even if you want to be selfish, because the world economy is not some zero-sum game where Chinese gains come at our expense.

Quite the contrary: The current U.S.-China relationship is a symbiotic win-win for both countries and a locomotive for global stability and growth. China combines a capable and lower-cost labor force with highly efficient infrastructure, which is why so much manufacturing has been outsourced there from other Asian nations and Mexico. The hysterical complaints in Washington about our "unsustainable" (how long have we been hearing that?) rising trade deficit with China is overheated for many reasons. For one thing, those amounts reflect existing exports to the U.S. being sourced from China, as opposed to somewhere else. Second, while the trade deficit is talked about as proof of some evil communist plot to take us over, it largely reflects internal company sourcing decisions. Et tu, Wal-Mart?

We're talking at the end of the day about a commercial dynamic that makes more goods affordable to more Americans and helps keep inflation in check in this country. The food and toy safety scare of recent months is yet another form of over-the-top, ugly scapegoating of China.

It was rather amusing in the end that even while politicians in Washington were still lambasting the regime in Beijing last month for all those recalled toys, Mattel itself apologized to that country for damaging its reputation and acknowledged that its own "design flaws" were responsible for the recall of about 18 million playsets containing dangerous magnets.

Yes, the regulatory regime in China and plenty of other countries should be better, but U.S. companies themselves should take responsibility for overseeing their overseas manufacturing. But because the recalled imports came from China and not Germany, folks here lashed out at the Chinese government more than they lashed out at Mattel.

The benefits of the bilateral financial relationship are insufficiently appreciated as well. One of the reasons China has attained remarkable stability for an emerging market is because its monetary policy is set by the dollar, and it has pegged its currency to our currency. This presents another win-win, as China constantly needs to buy our Treasury bills to maintain that peg. So you have the irony of a communist regime helping to subsidize our standard of living, and helping to finance our purchases of Chinese imports.

Again, to scaremongers in Washington and in the media who see a (racially tinged?) plot and peril in the making: The fact that the Chinese central bank is sitting on a trillion dollars is somehow proof of that country's perfidy. Does this keep you up at night, Joseph? I've heard plenty of otherwise reasonable people argue that we are now hostages to China because any day now those commies are going to revert to form and stab us in the back by selling all their T-bills at once, thereby destroying the U.S. economy. Unless you believe that China wants to hurt the United States so badly that it would commit suicide in the process, this is silly stuff. The point is that both nations now have a vested interest in each other's welfare.

What's the old joke in banking circles? Owe the bank $1 million and they own you, but owe the bank $500 million, and you own it. No one should be more interested in American well-being now than China because its savings are tied up with our future prospects. I for one am relieved that China continues to bet on the U.S. and buy dollars rather than invest elsewhere.

As for the currency peg, railing against the "undervalued" yuan became one of trendier causes on Capitol Hill in recent years, with Sen. Charles Schumer (D-N.Y.) and others threatening that if China doesn't let its currency float freely, we'll slap massive tariffs on its imports (talk about suicide!). The issue became trendy because of its suggestion that those commies must be cheating; but most economists are quick to point out making Chinese goods 10% or 20% more expensive by appreciating its currency would hardly alter the trade flows between both countries (which, again, don't really need altering).

Further, there is an element of hypocrisy in the overheated calls for abandoning the fixed peg -- back during the late 1990s' Southeast Asian economic crisis, the U.S. begged China not to abandon its fixed exchange rate and to buck the regional trend of devaluing its currency. We were then very grateful that China stuck to its policy.

And we preached to plenty of other countries -- Argentina comes to mind -- that they peg their currency to the dollar in the way we used to adhere to the gold standard. Yes, in the long run, as China's financial system matures, it is desirable that its currency trade freely, but the gradual transition to that day presents pros and cons for both China and the U.S.

There is an element of "be careful what you wish for" on this currency issue. First, a freely fluctuating exchange rate could lead to a great deal of speculative instability in China's financial system. And second, as many respected economists -- including Robert Mundell at Columbia and Greg Mankiw at Harvard -- have pointed out, another reason this is a bogus issue is that we don't even know whether a yuan set entirely by market forces would actually rise in value. What often gets lost in the debate is the fact that, under this scenario, plenty of Chinese households would rush out to buy dollars themselves, which would create a new downward pressure on the yuan's value.

I know, I know ... lots of nuance. Not as fun as ranting about the devious commie plot to take over the world. Bring it on.

Cheers,Andres

Andrés Martinez, a former editor of The Times' editorial page, is a senior fellow at the New America Foundation.


Nothing 'racial' about anti-totalitarianismBy Joseph Farah
The race card, huh? Already?

The objection to massive imports from China has nothing to do with fear of yellow skin, I assure you. It has to do with the following criteria, which I may be forced to repeat ad nauseam, I fear, through this week's debate:

  • China represents a future military threat to the U.S. and the free world;
  • China is a totalitarian country with no respect for the human rights of its own people and certainly no respect for people anywhere else in the world;
  • China exploits its own people and we participate in that exploitation -- including some slave labor -- through our thoughtless and crude appetite for cheap goods;
  • China's exports are of poor quality and often pose safety hazards to U.S. consumers;
  • Accepting unlimited exports from China threatens, at least to some extent, manufacturing jobs here in the U.S.

Having been put in the position of defending against the racism canard, let me explode that accusation thusly: I have no objections to imports from South Korea and Taiwan and Japan. None. Zip. Zilch. Nada.

You say we have a symbiotic relationship with China because of that nation's lower-cost labor force and "highly efficient infrastructure."

But much of China doesn't even have potable water for its citizens. Its "aquaculture" industry that exports seafood to the U.S. utilizes systems contaminated with raw sewage.

Indeed, China's labor force is cheap. But are the consciences of Americans bothered by exploitative low wages at home but not abroad? Why do we impose on ourselves minimum-wage laws and thick layers of regulations, only to outsource jobs and manufacturing to multinational corporations willing to take advantage of people who have no choice as to which job they will take?

I'm not talking about ethereal trade deficits here -- I'm talking about human misery and involuntary servitude and serfdom.

You think people like me resent the Chinese for taking their place in the world and aspiring to enjoy some of the development we have attained in this country? Just the opposite. Nothing would make me happier than to see real progress in China -- both in terms of human rights and quality of life. Unlike you, I don't believe one is possible without the other.

Yes, Andrés, it does keep me up at night knowing that China is, to a great extent, able to manipulate our currency because of the trillions of dollars it holds in Treasury bonds. That will be very meaningful to you too the day China decides to make good on its promise to invade Taiwan.

You seem very willing to put your trust in the Beijing regime. You're not worried about the T-bills. You're not worried about occasional threats by military officials to nuke Los Angeles. You're not worried about China buying up oil throughout our hemisphere. You're not worried about China supplying Iran and Syria with weapons of mass destruction. You're not worried about China's determination to claim Taiwan by any means necessary.

You see only some magical vested interest by the U.S. and China in each other's welfare. I'm sorry I don't share your optimism.

Neither do I see a genuine commie plot at work. In fact, what I see is a nightmarish conspiracy between the power of U.S. corporatism and the power of neofascism in China.

But keep hurling those stereotypes, Andrés. One of them is bound to stick.

Joseph Farah is the Washington-based founder and editor of WorldNetDaily.com and the author of the new book, "Stop the Presses! The Inside Story of the New Media Revolution." He is the former editor in chief of the Sacramento Union and served as executive news editor of the Los Angeles Herald Examiner for six years.


Followup: China Inc.By Joseph Farah

Hey Andrés!

Imagine what we would be saying about a giant corporation responsible for the following:

• poisoning the food of dogs and cats in the U.S., resulting in an estimated 39,000 deaths and injuries:

• killing of at least 51 in Panama through poisoned toothpaste;

• distributing foods throughout U.S. that are contaminated with pesticides, carcinogens, bacteria and banned drugs;

• distributing more unsafe products than every other corporation in the world combined;

• distributing seafood raised in waters contaminated with raw sewage, dangerous drugs and chemicals banned by the Food and Drug Administration;

• selling toys, makeup, glazed pottery and other products contaminated with significant amounts of lead;

• selling and distributing products twice as likely to be recalled by the Consumer Product Safety Commission as all other manufacturers combined;

You get the picture.

If you think about China as a corporation, it's pretty easy to conclude that it is reckless, avaricious, irresponsible, exploitive, dangerous and evil.

And that truly is the way we should view China — as a giant, privately held, unaccountable, multinational corporation with nuclear weapons and no conscience. If we think about it this way, we can understand the threat it poses and the risks we take in treating it like a benevolent empire awakening from a thousand years of slumber.

I'm not hysterical about all this. I just don't think most Americans have thought it through or been provided with the information they need to make intelligent decisions about China or the goods it floods into our marketplace.

Did you know, for instance, that in this wonderful age of globalization the U.S. government has yet to work out with Beijing the most basic safety regulations and requirements on food, drugs and other products imported from China?

But you, Andrés, and your friends in Beijing, blame not China for the blatant irresponsibility that has led to death and illness. No, you blame media hysteria.

Imagine what kind of media hysteria you and I would both be whipping up if some evil corporation had done what China has been doing to its customers. I don't think there would be any disagreement between us that such a company would need to be punished for the pain it inflicted and so that other corporations would learn from its embarrassing example.

Yet, we seem to have a problem holding the People's Republic of China accountable and responsible for the same crimes.

I only wish you were half right about media hysteria. From my experience as a leader in breaking these stories, most of our colleagues have been sitting on their hands. When the official Chinese news agency Xinhua pointed its finger at the American media for over-hyping the safety issues about food and consumer goods, it cited only one news agency specifically — my own WorldNetDaily.com.

Xinhua, too, tried to make the case for racism. But, again, I'm a fan of imports from Japan, South Korea and Taiwan. I think most Americans are. These countries are known for producing quality goods at reasonable prices, for paying their workers fair salaries and for sharing many of our most basic values about human rights and liberties.

It's time to shut off the spigot on this junk flooding in from China. It doesn't do Americans any good, and it sure is not improving the lives of most of the Chinese people in ways that really matter.


Response: China caricatureBy Andrés Martinez

Dear Joseph,

I commend you for loving Japanese imports, but I must say a lot of the same people who are so exercised about China taking on the U.S. on the global stage are the same people who worked themselves into a frenzy over Japan's rise in the late 1980's and early 1990's. Remember when Toyotas were chainsawed on Capitol Hill? I don't play the race card lightly, but I do think there is an element of "yellow peril" mongering at issue here. The hysteria has moved from Japan to China, but the point is no one ever rants about German imports or Dutch foreign investment (the way they moaned about Japanese foreign investment).

Yes, China makes an even more alluring target than Japan because it is the most populous nation on earth and because of the ideological angle — the fact that the country is ostensibly communist.

Your analogy of China as a company is conceptually flawed, if only because the aggregate of what is taking place in China on the manufacturing side is a function of decisions being made by actual U.S. companies. Again, Mattel, not the Chinese politburo, needs to be blamed if it is making dangerous toys, I don't care where. Yes, the U.S. needs to negotiate tougher safety and environmental standards (and enforcement of intellectual property rights!) with Beijing, but we shouldn't let our own companies off the hook when they are negligent.

Your earlier post continues to paint China as a Maoist caricature, a static place where everyone is exploited by our avaricious companies (who should only do business, by your logic, in nations with U.S. wages and standards of living). By any measure imaginable, living standards in China are improving dramatically. There are now more cell phone users in China than there are people in the United States. Consumption of any number of goods is exploding, which is why global commodity prices are soaring. And this isn't just a matter of being awestruck at the new affluence in coastal cities like Shanghai. In the last couple of decades, some 300 million Chinese, mostly in the countryside, have been lifted out of poverty. The China story is one reason the U.N. is confident the millennial development goals of halving global poverty worldwide by 2015 may be met, and the UN is now urging China to help the cause in Africa, as it should.

Obviously there are many problems in the world's most populous nation, a place experiencing the type of chaotic industrialization we experienced in the late 19th century. But if you persist in saying that none of this is translating into any benefits for the Chinese people, I'd urge you to get on a plane and go there at once. Talk to a cross-section of the population and ask them how their lives today compare to where they were at 20, 30 years ago.

Cheers,

Andrés

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