“The U.S. has a large trade deficit of billions of dollars per week with China because they undervalue their currency. The undervalued RMB makes Chinese-manufactured goods inexpensive to Americans, and it makes American goods expensive to Chinese…

…The trade deficit is money continuously flowing out of the U.S., and much of the wealth production inherent in manufacturing is now enjoyed by China instead of the U.S. It is not a coincidence that the U.S. government has to borrow billions of dollars per week to pay for entitlement programs that prop up our standard of living…The U.S. needs a free-market agreement with China. Free trade is only half of the total transaction. A free-market agreement would incorporate the free trade of goods, but would also ensure that the currencies used in the corresponding transaction have their valuations set by the free market…”, Walter Rothschild, Textile Manufacturer Reidsville, N.C., “China Trade Should Be Free-Market”, Letters to the Editor, Wall Street Journal

Letters

China Trade Should Be Free-Market

A free-market agreement with China would help solve America’s multifaceted economic problems, such as a growing national debt and a stagnant standard of living.

Maurice R. Greenberg and C. Fred Bergsten ’s Dec. 19 op-ed “The U.S. Needs a Free-Trade Deal with China” is only looking at half of the picture. The flip-side of every international sale of goods is a currency transaction.

The U.S. needs a free-market agreement with China. Free trade is only half of the total transaction. A free-market agreement would incorporate the free trade of goods, but would also ensure that the currencies used in the corresponding transaction have their valuations set by the free market.

China sets the value of its currency (the RMB) unilaterally by government decree, unlike the rest of the major economies of the world that participate in free currency markets. There is no real market, and certainly no free market, that determines the value of the RMB versus the dollar.

The U.S. has a large trade deficit of billions of dollars per week with China because they undervalue their currency. The undervalued RMB makes Chinese-manufactured goods inexpensive to Americans, and it makes American goods expensive to Chinese.

The trade deficit is money continuously flowing out of the U.S., and much of the wealth production inherent in manufacturing is now enjoyed by China instead of the U.S. It is not a coincidence that the U.S. government has to borrow billions of dollars per week to pay for entitlement programs that prop up our standard of living.

Messrs. Greenberg and Bergsten say that American exports would increase to China if we had a free-trade agreement. This is very unlikely unless the Chinese currency is fairly valued.

China naturally wants the U.S. to have free trade of goods flowing into our country, but they do not want free markets for the subsequent currency transaction. The U.S. should insist on a free market to set the value of the RMB as a precondition for selling goods to the U.S with low, or no tariffs. China will never change its winning strategy unless it has the proper incentive: access to American consumers.

A free-market agreement with China would help solve America’s multifaceted economic problems, such as a growing national debt and a stagnant standard of living.

Walter Rothschild

Reidsville, N.C.

(Mr. Rothschild is a textile manufacturer.)

Posted on December 30, 2014, in Postings. Bookmark the permalink. Leave a comment.

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