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Monday, September 22, 2003

It's Not the Economy, Stupid

Again I know it's being indulgent, but I can't resist it. Fons Tuinstra in Shanghai, with an advance posting of his WTO ChinaBiz column, being his very own ironic self. I agree, ridicule is effective. (incidentally, one argument no-one seems to be making, does occur to me. When Argentina pegged to the dollar, no-one complained, at least no-one on Wall Street. It may have been a good or a bad decision - I think it was a bad decision - but no-one cried 'foul'. Why was it thought a good thing for Argentina to peg: to create an infrastructure with financial stability. And why do some think it is convenient that China continue, for the time being, with the peg.........

Shanghai – China seems to be a convenient subject during the campaigns for American presidential elections, and at least two days afterwards. Especially in the upcoming campaign, since there are so many real issues politicians want to avoid – Iraq, taxation - China has become an issue very early in the struggle.

Unfortunately this time a real non-issue has the honor of becoming the epicenter of public attention in the US: the question whether China treats the world unfairly by pegging its renminbi to the US dollar. Even a Wall Street Journal commentator – not really a medium for China fellow travelers – sighted yesterday that since it is politics, arguments do not make a difference anymore. China has already sent US Treasury Secretary John Snow home, polite but empty-handed. Snow will have another go at this weekend’s G7 meeting, but that will not make much of a difference.
It is comparable to the Japan discussion the US in the 1980s when US manufacturers campaigned against Japanese cars. Now half of the Americans drive a Japanese car.

The US manufacturers, followed by lawmakers and the US administration accuse China of stealing American jobs in an unfair way. Other countries like Mexico and Italy lose many more jobs to China, but they have been less vocal on this issue. On the contrary, it is remarkable how many experts, countries and institutions agree with China when it says it first has to make its banking system healthy before it can give the renminbi in the hands of the free market.
Almost everybody agrees with China. The European Bank. The IMF. Nobel-prize winner Stiglitz. The Japanese Prime Minister. Mister Forbes. Almost nobody with a basic knowledge of economics thinks it is a good idea for China to float its currency, it might even hurt the world economy.

It is obvious that only a good alternative subject is going to take the heat off China. What advice can we give the American politicians? I think first they should turn away from the economy. It is very hard to blame anybody else for the fact you are unable to compete on a global market. Better forget about the economy as an issue unless you would really have a very smart idea to save it.

Just pick a little country with loads of nasty anti-American habits, and bomb the hell out of them – verbally please, not like in Iraq. If you promise not to send your marines, I can give you some really good arguments why you should take on Holland, my home country. We despise the US policy toward Iraq. We let homosexuals marry! You need more arguments? We condone soft drugs and legalized prostitution (although we liked it more when it was still illegal). We attract loads of American tourists who do not spend their money doing things that are banned at home. We facilitate abortion. We support safe sex. Economy is anyway such a boring subject is you have no really smart solutions. How can you keep up momentum for the next 14 months, especially if you still need a lot of favors from China? Go for the small countries and juicy subjects: that is much more convenient.
Source: The China Trade

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