China: The Great Manipulator

Even as it tries to manipulate world opinion about the upcoming Olympics, China has succeeded in really manipulating the world when it comes to world trade.

Let’s start by looking at some numbers. The U.S. trade deficit with China will exceed $200 billion in 2005. This is up from $162 billion in 2004 and $135 billion in 2003. If we exclude our crude oil imports, China represents 42% of our overall trade deficit. In fact we spend more importing all kinds of “stuff” from China than we do on our entire crude oil imports world wide. You don’t have to go far to see the impact. Over 70% of the merchandise Wal-Mart sells has China content. Although Wal-Mart will not release the official figure, they will import approximately $20 billion from China this year.

If Wal-Mart were a country it would be China’s 8th largest trading partner ahead of Germany and Russia. Compare the $20 billion that Wal-Mart alone imports from China with China’s total purchases of American exports of a paltry $35 billion. Something is very wrong.

Presently Chinese duties on American products are on average 500% more than Chinese products entering the United States. However the net effect is much greater. Because of the multiplying effect of local sales taxes being applied on top of import duties, our products are simply priced out of the market

You can do the arithmetic. As a result of China’s currency manipulation as well as their excessive duties and the multiplying effect, American products are over priced by 70% in China. When a Chinese consumer pays RMB100 to purchase an American-made product, they should only be paying RMB30.

As an American exporter for the past 25 years I can emphatically state our sales to China would skyrocket overnight if our products were priced as they should be.

I have nothing but the utmost respect for the Chinese people and culture. They are some of the most hard working and entrepreneurial people in the world. They always seek out the best deals. If American products were available to them at fair prices, they would be great and loyal customers. At the same time the products that Americans make would improve the quality of their lives, resulting in a perfect win-win situation.

It’s time for American politicians to play a role in addressing this obvious manipulation by the Chinese government. Let’s start by manipulating world trade in America;s favor so that American workers are the beneficiaries.

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