China, Washington's Economic Scapegoat

There's plenty of blame being thrown around Washington between Democrats and Republicans. But conveniently for both parties gearing up for election mode, there's also a scapegoat outside the American political system: China.

With its disregard for patent law and its notorious currency practices, China's become a favorite target for the ire of American policymakers. And with the 2012 elections around the corner, it seems the anti-China rhetoric is reaching new highs, especially as American jobs -- victim No. 1 of China's economic power grab -- remain front and center.

China, which became the world's second-largest economy in 2010 (after the United States), has become a major global economic power in recent decades and is the top foreign holder of U.S. debt. The country's government has long been accused of artificially keeping its currency undervalued, a tactic that gives its domestic exporters an advantage in the world markets.

Recently, members of Congress have been pushing hard to stop China's currency manipulation. On Tuesday, a Senate bill that would add extra pressure on China to let its currency appreciate passed with bipartisan support. Republicans in the House have said they have no plans to bring it up for a vote in the House; however, the bill's passage sent a strong message to China, which had threatened a trade war with the United States if the bill's provisions were implemented.

Members on both sides are hopeful that Congress will be able to act in response to China. Although the Senate's currency bill is stalled by the House, the right is just as adamant about putting pressure on China as the left, argues New York Democratic Sen. Chuck Schumer. "Republicans are more for cracking down on China and unfair trade than Democrats," he told reporters Wednesday morning.

GOP Republican candidates have also been taking aim at China, most recently at Tuesday night's debate on the economy, hosted by the Washington Post and Bloomberg. Former Massachusetts Gov. Mitt Romney, for example, has vowed to take on China on Day One of his potential presidency by urging the Treasury Department to list China as a "currency manipulator" and by directing the Department of Commerce to place duties on Chinese imports if China doesn't cooperate in floating its currency. "We gotta call cheating for what it is," he said during the debate, later dismissing the notion that China would engage in a trade war. "If you're not willing to stand up to China, you'll get run over by China."

While the debate in Congress and among presidential contenders over more aggressive strategies has brought China to the forefront, according to Ed Gerwin, a trade expert at the moderate think-tank Third Way, there are other more diplomatic solutions to dealing with the problem. "There is a group of countries that increasingly are concerned about this and could diplomatically bring some pressure on China," he says, adding that there are economic experts within China who have also argued for floating their currency to increase the buying power of the domestic population. "Some of the younger economists in China are thinking, 'We need to do this in China's interest.'"

The American people are also feeling China's economic actions themselves, Schumer argued Wednesday, sharing an example of a business owner whose product patent was stolen by China, which then sold the product in the United States at a cheaper price. "People feel this. Average Americans feel it," he said. "If we keep doing this, if we keep letting China ... flaunt the rules, we will not stay the leading economic power in the world."

While politically viable solutions to the China problem are still yet to come, politicians under fire from the American public have been successful in framing at least some of country's job losses as China's fault. "They're desperate for a solution. They have lost their patience," says Wei Liang, a research fellow at the Monterrey Institute's Center for East Asian Studies, referring to members of Congress dealing with the economy. "With the economic recession, it's important to have someone to blame. And really, China is an easy target."

 

 

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Copyright 2011, U.S. News & World Report