Twofish's Blog

July 29, 2007

Notes on the Obama/Clinton and China

Filed under: china, economics — twofish @ 2:50 am

 FT.com / In depth – Clinton and Obama back China crackdown

Actually if you look at the bills that Clinton and Obama are actually supporting, they really won’t have a huge effect on China trade.  The anti-dumping measures that the bill talks about are hard to invoke, and China’s actions are clearly within WTO rules so bring a trade case seems to be political theater more than anything else.

Baucus and Grassley are generally pro-China trade because they come from agricultural areas with a lot of Chinese exports.  Graham and Schumer care mainly about textile exports  None of them are too interested in bring Chinese trade to a halt.  What they all want to do is to be able to apply some pressure to the Chinese government to benefit their districts, and the problem with the trade measures on the books right now is that they are basically nuclear bombs, which can’t be credibly exercised.  The main thing that the Baucus/Grassley bills do is to give light pressure tools.

There are a number of reasons why I don’t think Chinese trade is not going to be a huge issue in 2008:

1) There are a lot of beneficiaries of Chinese trade in both parties.  The financial district is centered in New York which is a solid blue state.  In the labor union movement, one of the strongest unions is the longshoreman’s union which is booming because of Chinese trade.

2) With some exceptions, most of the trade issues are not China specific.  If you decrease Chinese production of auto parts, the factories are going to move to Mexico.  This means that for the purpose of keeping people employed, bashing China is useless except in specific industries where China has a major advantage (textiles).

3) Most people don’t care about the value of the RMB or the overall trade surplus.  They care about their jobs.  If you put things that help their jobs, the all of the concern about the RMB or the overall trade surplus disappears.

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