March 23, 2012
The NYT did a piece on Governor Mitt Romney’s pledge to impose tariffs on China to pressure it to lower the value of the dollar relative to the yuan. At one point it noted that many business people are opposed to this position:
“business leaders, while pressing for China to open its markets and protect intellectual property, caution that labeling China a currency manipulator could backfire, harming those efforts.”
It would have been worth a paragraph or two expanding on this point. There is a direct conflict in the interests of most workers and many businesses in U.S. policy toward China.
Financial firms like Goldman Sachs and Citigroup have a major interest in getting more access to China’s market. Firms with claims to intellectual property like Microsoft and Pfizer have a major interest in getting China to offer increased protection for their copyrights and patents.
By contrast, workers in the United States have a major interest in lowering the value of the dollar against the yuan. Since other countries would likely follow China in allowing their currencies to rise relative to the dollar (this is exactly what happened in 2005, the last time China had a large re-valuation of its currency), the result could be millions of new jobs in manufacturing. This would offer a large number of relatively good-paying jobs for less educated workers, putting upward pressure on the wages of these workers.
The Obama or Romney administration must decide which goals it will prioritize in its negotiations with China. If it makes more progress in getting access to China’s financial markets for Goldman Sachs and Citigroup or increased protection of Microsoft’s copyrights then it will make less progress in persuading China to raise the value of its currency.
Whoever is in the White House will have to decide which group’s interests are pursued and which group’s interests are downplayed. It would have been worth making this conflict more clear to readers.
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