*NEWS*INTERNATIONAL TRADE IMBALANCE

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*NEWS*INTERNATIONAL TRADE IMBALANCE

 user 2005-05-13 at 10:35:00 am Views: 50
  • #9637

    International Trade Imbalance

    Protectionism is at the center of the debate; whether to encourage or
    avoid it. Some say a protectionist position is required by the US and EU in
    order to influence change and balance global trade opportunities.

    The under valued yuan and the low cost of manufacturing in China have led to
    dramatic increases in Chinese exports. Both the US and EU are taking issue with
    the current state of trade and wish to “level the playing field.”

    The US trade deficit with China accounts for about $162 billion,
    approximately 25% of the US national deficit. And, using the US textile industry
    as an example, there are 14,000 fewer US jobs than a year ago. These factors,
    along with growing concern over human rights issues, environmental concerns and
    copyright abuses could lead to stronger US and EU pressure for change in
    China.

    Copyright issues have been a leading concern of late. In fact, China has been
    blacklisted for excessive copyright abuses by the US Trade Representative’s
    office. The USTR could sue China through the World Trade Organization if the
    situation doesn’t improve.

    China is not taking these challenges lightly. China’s representatives say
    that restrictions on China would violate free trade principles as set forth by
    the WTO. Chinese representatives have also said they see a need to address
    copyright and other intellectual property issues. They indicate that progress is
    being made.

    There are many different opinions as to what to do, if anything, about the
    trade imbalance. Opinions range from taking proactive steps to address the
    situation to adapting to what the future brings.

    One proposal is to reduce the concern by lowering the US deficit. The deficit
    can be lowered by changing the way it’s measured; by updating the way the US
    calculates trade. If the sales of US foreign affiliates (sales of US companies
    no matter where they are located) were included in the trade calculation the US
    deficit would be greatly reduced. Some say this better reflects the global
    marketplace in which we live and work.

    Protectionism is at the center of the debate; whether to encourage or avoid
    it. Some say a protectionist position is required by the US and EU in order to
    influence change and balance global trade opportunities. Others say
    protectionism would adversely affect the US and other national economies.

    Federal Reserve Chairman Alan Greenspan said, “I’m getting increasingly
    disturbed about some of the pressures of protectionism that are emerging in the
    world because, were we to get a rigidifying of international market forces, I’m
    fearful of what the implications could be to the American economy and, of
    course, to the world as a whole.”