Campaign nonsense about China trade

chinafactories.jpg Both sides are guilty: Romney for promising to come down on China as a "currency manipulator" and Obama for imposing anti-dumping policies involving Chinese tires. Neither move means much of anything, except running the risk of higher prices for American consumers. From Slate's Matthew Yglesias:

The classic economist's worry about trade protection is precisely this. A small number of people with a large financial stake in the tire industry will extract money from the much larger set of people with a small financial stake in the tire industry. (That's why silly occupational licensing rules have run amok in the service sector.) Adding more arbitrary tariffs is a poor policy response to cheap Chinese tires. But instead making a free-market response to Obama, Romney promised to go much bigger. Instead of merely protecting us from the scourge of affordable tires, he promised to "label [China] a currency manipulator which allows us to apply tariffs where they're taking jobs." Higher tariffs and higher prices across the board!

As I point out in this week's Business Update on KPCC, there's been this underlying implication that the U.S. will somehow be able to reverse many years of relying on low-wage manufacturing in China. Toys, steel, clothing, electronics, home furnishings - all of that stuff is exported to the U.S. because American consumers are looking for the cheapest price available, and that's simply not going to change, no matter who gets elected.

Steve Julian: When it comes to things we import from China, is there much beyond consumer goods?

Lacter: Well, money - and we're talking about billions of dollars, much of it coming into California. The Chinese are investing in shopping centers, office buildings, small factories. Just as an example is construction of a Marriott Hotel downtown - it's a few steps from Staples Center and it received financing from more than 100 Chinese investors. Without that money, it's a good bet construction would have been delayed indefinitely (U.S. banks are still cautious about construction loans). Here's the thing: The Chinese economy is coming off a decade of massive growth and as a result China has almost one million millionaires and roughly 100 billionaires. And many of these people are looking overseas to invest that money.

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Mark Lacter
Mark Lacter created the LA Biz Observed blog in 2006. He posted until the day before his death on Nov. 13, 2013.
Mark Lacter, business writer and editor was 59
The multi-talented Mark Lacter
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