October 5th, 2011
05:04 AM GMT
Hong Kong (CNN) – China says it could be on the march to a trade war with the United States. That’s after the U.S. Senate on Monday passed a key test vote that targets countries believed to keep their currencies artificially weak.
If the bill passes in the Senate – perhaps as early as this week – it would be the next step at shooting new tariffs onto exports from those countries. Looking between those Congressional crosshairs, this week’s legislation is clearly aimed at China.
The consistent clash takes place over the yuan, China’s currency, which China keeps loosely tied to the U.S. dollar and makes the country’s exports to the U.S. cheaper than those “Made in the USA.”
The U.S. has had a trade deficit with China lasting more than a quarter century. In 1985, the deficit was $6 billion, according to U.S. Census Bureau data. It's now skyrocketed to more than $273 billion, according to the latest 2010 figures.
For its part, China has allowed the yuan to appreciate 6.7% since August 2010 but some critics say its real value could actually be 20% to 30% stronger. Today $1 gets you RMB 6.77. If those analysts are right, $1 could equal as little as RMB 4.75, shaving off a huge pricing advantage for Chinese goods sold in the U.S.
Will the name-calling from the U.S. Congress work? Will China bend over, say “I’m sorry,” and hike its currency?
That’s not going to happen. Saber rattling has rarely worked and as the Chinese economy rises, that kind of talk will work even less.
Let’s really simplify that bilateral conversation style that’s led to diplomatic, economic and military freezes over the past decade:
Washington: “China’s currency policy’s not fair! I’m gonna get a stick and wave it in their face so the world can see we have a stick we can use!”
Beijing: “The U.S. says it’s going to hurt me. But if it does then I’m gonna kick it right back. It’s not the boss of me, I can do whatever I want!”
Can anyone see any kind of solution come from this kind of posturing?
Call it name calling. Call it hot air. Call it political vote-getting. I call it tired.
To get things done, a change of communication style needs to happen.
Instead of each country beating its chests like mad gorillas vying for dominance – and my apologies to gorillas – let’s try our indoor, polite voices. After living in China for six years, I’ve learned this works better.
A quick story to illustrate:
It was the winter of 2001 and I was visiting Shanghai. It was frigid and I needed warm boots. My friend suggested we visit the market area of Xujiahui in the French Concession.
Walking through the stalls, I found a pair of boots and tried them on. Too big – and the vendor said this was his only pair in that style. Yet strangely, seconds later, he returned with another pair claiming they were 9½’s – my size. He put those on me and even tied them up nice and tight. Very tight.
I walked around, thought they were still a bit loose but figured I could manage and bought them.
A few minutes later and you can guess things started to fall apart, literally.
The laces came undone and the boots started flopping about. I checked the tag: size 11’s. The vendor had lied to me. They were the same pair I had tried on – the vendor’s only pair.
I marched back to the shopping market and prepped a tirade in Chinese that would make him lose face in front of everyone.
But as I got closer I thought, ‘If I did that, then I wouldn’t get my money or a pair of usable shoes.’
Fighting the urge for an oral smackdown, I found the vendor and focused to whisper these words in his ear, “喂哥们儿,我知道你做了什么”. (Translated, that means, “Hey buddy, I know what you did.”)
Looking down at the ground he nodded his head, led me into his shop and gave me back my money – without a word.
No saber rattling for fisticuffs. No brinksmanship to involve the police. No loss of face. Just a calm voice. You get the moral of the story.
And yet what kind of posture are U.S. politicians taking towards China this week? Clearly not the quiet, face-saving kind.
After Monday’s vote, these are what a few U.S. elected representatives pushed out.
Charles Schumer, New York Senator: “Jobs and wealth are leaving America and going to China because China cheats.”
Lindsey Graham, South Carolina Senator: “There's a series of measures engaged in by the Chinese government... That costs American jobs and I’m tired of it and it's killing American manufacturers.”
Sherron Brown, Ohio Senator: “I think there's a reasonably good chance China will respond in part by adjusting their currency.”
On the contrary, any China watcher will tell you these kinds of statements will neither encourage China to appreciate its currency, nor will it set a positive mood for negotiations.
Sure the United States has justified cause to be angry about its billion-dollar deficit. Sure unemployment is suspended at 9.1% amidst claims it’s losing millions of jobs to China. And yes the country is revving up its 2012 presidential election year and China is an easy piñata to hit for domestic points.
But we are able to achieve a higher level of discourse – in both the United States and China.
U.S. President Barack Obama said that diplomacy is the best way forward. He does not want an anti-China bill to land on his desk or for a trade war to start on his watch. Nor would a Republican president, regardless of what he says on the campaign trail.
China is the United States’ third largest trading partner in the world. Each country needs the other. It’s a long time coming to talk to each other more diplomatically, quietly and perhaps out of the public eye.
When we do, the issues might get resolved just a bit easier.
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