Armageddon (21 page)

Why does the United States let China get away with its currency manipulation? American politicians and Treasury officials claim that they are reluctant to rein in China's purchases of American Treasury notes since, in effect, China is lending us money with each purchase, relieving our banks and citizens of the necessity of lending their own money to our government to cover its deficit. (And making it less necessary for the Fed to monetize our deficit by printing currency to cover it.) But that reason is obviously phony. If China stopped “lending us money” by ceasing to buy our Treasury bills, its currency would become stronger and its goods less attractive to American customers, causing a reversal of the jobs outflow from our country. We would prosper as a result, reducing our deficit dramatically. Even if China immediately stopped buying our Treasury bills, the effect would be minor. The Federal Reserve Board is, by far, the biggest lender
to our government, lending us the money it creates to pay off our debts. Undesirable as a long-term policy, this “monetization” of the debt has not set off the feared inflation. In fact, as China has oscillated its level of purchase of US securities, the markets have scarcely noticed.

While China's trade in dollars is opaque to say the least, there is evidence that China dumped about $94 billion in US securities in August 2015, bringing its holdings down to $1.3 trillion. And the world didn't fall apart. The Fed just cranked up the old printing press once more. Nobody much noticed.
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Why doesn't the WTO crack down on China's cheating? The rules of the World Trade Organization are biased in China's favor. The rules of the WTO do not even address currency manipulation. While the WTO holds down tariffs, it does nothing about artificially holding down the value of a nation's currency to gain competitive advantage.

A tariff, of course, is a tax imposed on imports to make them more expensive for consumers to buy. Tariffs are a no-no. The entire thrust of global economics in the years since World War II has been to hold them down and, eventually, to eliminate them because they give one country an unfair competitive edge against another. But currency manipulation does the exact same thing. Not by taxing imports from the other country to make them more expensive, but by weakening a country's currency to make their exports to other countries cheaper.

If the World Trade Organization has a blind spot where currency manipulation is concerned, the International Monetary Fund (IMF) does not. The IMF forbids currency manipulation but, unfortunately, does not have adequate enforcement power. The WTO, which has the power to stop currency juggling, won't use it. Of course, if Obama—or the next president—wanted to, he or she could force China to abandon its unfair manipulation. The first step would be for the White House to label China as a currency manipulator and then invoke sanctions on Chinese exports to the United States
to force Beijing to reverse its policy. China would, doubtless, crack down on American exports to China in retaliation, but since they sell us four times as much as we sell them, that's not a sanction that is likely to bring us to our knees.

University of Maryland economist Peter Morici suggests that the United States impose a tax on Chinese imports equal to the extent of its currency manipulation, rising or falling as China pushes its currency value down or lets it float up to the market rate.

The real reason our White House—and Hillary's State Department—did not and will not crack down on China is that Beijing has its tentacles deep into the Clintons. China hired Patton Boggs, a top US lobbying firm, for a fee of $35,000 per month, to fight against curbs on Chinese currency manipulation. Reuters reported that “the Chinese hire top-notch lobbying firms whose ranks are filled with well-connected former U.S. and Canadian officials [and] buy TV advertisements to buff their image.”
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While US law bars candidates from taking campaign contributions from foreigners, a ton of money from China has found its way into the Clinton Foundation, which funds Hillary's staff and travel needs. One donor, Rilin Enterprises, pledged $2 million in 2013 to the foundation's endowment. While allegedly a private company owned by Chinese billionaire Wang Wenliang, it has strong links to the government. Jim Mann has written several books on China's relationship with the United States and points out that the company was one of the contractors that built Beijing's embassy in Washington. Mann points out that the Chinese government was especially careful in choosing Rilin to build the embassy because of its close ties to the company. “So you want to have the closest security and intelligence connections with and approval of the person or company that's going to build your embassy,” Mann writes.
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Rilin also keeps its US contacts up to date, spending $1.4 million since 2012
to lobby Congress and the State Department.
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And remember who was secretary of state.

The Clintons began raking in money from China in 2008, a few days after Hillary was nominated to be secretary of state. Bill hosted a special meeting of the Clinton Global Initiative called CGI Asia. The keynote speaker was Chinese Foreign Minister Yang Jiechi, who is particularly famous for saying that the Chinese people do not consider the Dalai Lama to be a “religious leader.” He described the Dalai Lama as, instead, “the mastermind behind [Tibet] separatist sabotage” and the “personification of evil and deception,” whose efforts are “doomed to failure.” Since then, the Clintons and their foundation have gotten millions from Chinese sources in donations and speaking fees.

Other top American foreign policy experts and former diplomats also find fertile soil in dealings with China. Former Secretary of State Madeleine Albright currently serves as the chair of the Albright-Stonebridge firm. The late Sandy Berger, Clinton's National Security Advisor and Hillary confidante, was her cochairman. Albright-Stonebridge offers its clients “the knowledge and on-the-ground resources to help businesses and organizations successfully navigate this often complex [Chinese] market. Our team in Beijing and Shanghai works to create allies within the Chinese system, through an approach that emphasizes systematic engagement with agencies and nongovernment stakeholders at the central, provincial, and local levels. We offer the agility, insights, and practical support to overcome challenges and a strategic approach to help you thrive for the long term.”
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In other words, the firm that includes Bill Clinton's secretary of state and a key Hillary ally promises an inside track to Beijing's wealth, a sure inducement to any politician to sell his soul to China.

As Democrats watch Hillary take money from Chinese interests to sell them out, they feel abused and spurned, betrayed by those who claim to fight for them. With friends in high places, protective
lobbyists hovering over Congress, and funds flowing to the secretary of state, China has been more than able to protect itself against charges of unfair trading practices. The American worker has been less fortunate. In fact, competition from China—through lower wages and currency manipulation—has introduced a third-world wage standard into American manufacturing. No longer do US workers compete with one another or even along union/nonunion lines. Rather they are being forced to a global, third-world level of compensation entirely incommensurate with middle class life in the United States. It's time that US voters stand up and demand that their elected officials declare their independence from China and resolve to advance the needs and interests of American workers instead.

It is not only China that is sucking jobs out from the United States. It is Mexico too. As a result of NAFTA, our balance of trade has changed drastically from a positive $2.2 billion in 1991 to a negative $59 billion in 2015!
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NAFTA, hailed as a job-creating agreement for American workers, has proven to be the exact opposite. Ross Perot predicted, when he ran for president against Bill Clinton and George H. W. Bush in 1992, that NAFTA would create “a giant sucking sound” as jobs fled over the border. Derided and even ridiculed at the time, Perot was right, and the statistics prove it!
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US Trade Balance with Mexico

Ever since NAFTA was passed, our trade deficit with Mexico has soared. The blame for NAFTA falls squarely on the shoulders of Bill and Hillary Clinton. It is the centerpiece of the new Left's criticism of the Clintons and their wing of the Democratic Party. While its adoption and ratification by the Senate were heralded in the mainstream media as the signature achievements of the Clinton administration's first year, it has been a disaster for working Americans. It led to deficits, deficits, and more deficits.

In a way, the deficit with Mexico is more problematic than the one with China. American businesses are flocking to Mexico as Chinese wages increase. The
New York Times
reported that businesses are turning to Mexico for outsourcing where once they chose China:
“With labor costs rising rapidly in China, American manufacturers of all sizes are looking south to Mexico with what economists describe as an eagerness not seen since the early years of the North American Free Trade Agreement in the 1990s. . . . Mexican workers are increasingly in demand.”
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US trade with Mexico has grown by 30% since 2010 and foreign direct investment is up to $35 billion. Mexico now makes 14% of the manufactured goods imported by the United States.

“When you have the wages in China doubling every few years, it changes the whole calculus,” said Christopher Wilson, an economics scholar at the Mexico Institute of the Woodrow Wilson International Center for Scholars in Washington. “Mexico has become the most competitive place to manufacture goods for the North American market, for sure, and it's also become the most cost-competitive place to manufacture some goods for all over the world.”
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The list of fleeing US companies is long and painful: Caterpillar, Chrysler, Stanley Black & Decker, and Callaway Golf. Americans are hearing “that giant sucking sound” and resent it mightily. Again, Donald Trump was first on the case saying Mexico is “killing us on trade.”
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Workers at the Carrier Corporation, a big air-conditioner manufacturer who just announced plans to move to Mexico, would agree. Founded by Willis Carrier, who invented air conditioning, the formerly Indianapolis-based company stands to save $81 million a year by kicking 1,400 Americans out of their jobs. The company pays its Indiana workers $34 an hour, including benefits, but will have to pay its new Mexican employees only $6 an hour.
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Trump was quick to pounce: “I would go to Carrier and say, ‘You're going to lay off 1,400 people. You're going to make air conditioners in Mexico, and you're trying to get them across our border with no tax.' I'm going to tell them that we're going to tax you when those air conditioners come. So stay where you are or build in the United States because we are killing ourselves with trade pacts that are no good for us and no good for our workers.”
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But this dismal experience with China and Mexico has not soured the Obama administration—or Hillary—on free trade deals. Obama, with Hillary's support, has approved free trade deals with Colombia, Peru, Chile, and a host of other countries. But the big player is the TPP—joining us to 11 countries on the Pacific Rim: Singapore, Brunei, New Zealand, Chile, Australia, Peru, Vietnam, Malaysia, Mexico, Canada, and Japan.

To win in 2016, we must exploit the fault lines revealed by the Democratic Primaries. None is greater than the TPP, which Bernie Sanders has denounced and Hillary helped to negotiate (although she now says she's against it). James Hoffa (the younger) spoke on behalf of the Teamsters, Steelworkers, Food and Commercial Workers, Machinists, and Communication Workers in denouncing TPP. Hoffa said, “Bum trade deals like NAFTA have killed upwards of 1 million U.S. jobs, many of which moved abroad. And that's the concern with the looming TPP. These big business handouts continue to hollow out the manufacturing base of communities and destroy middle-class jobs in their wake.”
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