Who would have thought it -- the China trade deficit discussed in a presidential debate?
A brief, post-debate analysis by Scott Paul, Executive Director, the Alliance for American Manufacturing:
"So who ever thought the trade deficit with China would get any play in a presidential debate? It did fairly early in this one, with Mitt Romney raising the fact as a threat to US security. Romney is right. The trade deficit with China last year ($295 billion) was the largest on record, and we may be on target to pass it this year.
"The debate didn't really break new ground on China, though Romney acknowledged that some progress has been made on Chinese currency manipulation. Romney added to his critique tonight by tossing in intellectual property, cybersecurity, and piracy, all of which are also serious challenges.
"President Obama asserted that his Administration has brought more trade cases against China than 8 years of President Bush. He's right. Some specific cases on tires and steel pipe have clearly created American jobs. And, President Obama is 8 for 8 when taking cases to the World Trade Organization against Chinese practices. A 100% record is extraordinary. Obama cited the fact that exports to China have doubled. That's true, but it's not the most important metric, which is net exports (trade deficit is all time high with China). Plus, fast growing exports to China include scrap and commodities, which feed the Chinese industrial machine. Some high value stuff, but not a lot.
"I agree with Obama that the tire case was a clear success. Multinationals began investing in domestic facilities, and we have added more than 1000 tire jobs. Did consumer costs rise for some tires? Yes, but only because petroleum (a major input) rose from 2009 lows to 2011 highs.
"Mitt Romney was absolutely right on who has the leverage in the US-China relationship. About 1/3 of Chinese exports end up in the US. Our consumer market is the best leverage we have. The idea of a trade war is nonsense. The Chinese can't effectively retaliate--yes, they hold some US Treasuries, but around 10%. We just haven't used the leverage--we should.
"The real winner was American manufacturing. It's clear that both candidates believe it is critically important that China play by the rules. I'm glad the China debate expanded beyond currency. It's in important topic, but it's only one aspect of the US-China economic relationship.
"Finally, I welcomed the focus on manufacturing in Obama's closing. It's key to an economic recovery, and it's an important issue to voters in swing states."
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