*NEWS*INTERNATIONAL TRADE IMBALANCE

[Anonymous]

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.”

[Author]

May 13, 2005 at 10:35 AM