Recognizing that the New York Times recently editorialized on China's "artificially cheap supply of goods" and its "hogging the world export market," it's surprising to see them Recognizing that the New York Times recently editorialized on China's "artificially cheap supply of goods" and its "hogging the world export market," it's surprising to see them publish an op-ed today that makes fundamentally wrong assumptions with regard to U.S.-China trade. Former U.S. Trade Representative (USTR) negotiators Joseph A. Massey and Lee M. Sands have penned an editorial suggesting that a revaulation of China's currency, the Yuan, would make little difference in rebalancing U.S. trade  flows.  As proof, they cite the example of Japan's yen:

On this, the United States’ 40-year history of pressuring Japan to let the yen appreciate against the dollar is instructive. It indicates that de-linking the yuan would make barely a dent in America’s trade deficit.

In fact, the 1985 Plaza Accords with Japan helped eliminate the U.S. current account deficit by 1991, and resulted in roughly a decade of stable current account deficits, albeit at a lower level of about 1-2% of GDP.  It wasn't until the Asian currency crisis hit that the dollar rose again.  That bubble has never been fully corrected. Currency realignment does work because it reduces unfair competition from imports into the U.S. market, and because it makes U.S. exports more competitive on world markets.  Enforcing U.S. trade laws against dumping, subsidies, and currency manipulation does work, and Massey & Sands even recognize this with President Nixon's temporary import surcharge in 1971-- "the strategy worked."  Furthermore, in praising Japan for its subsequent success ("Japanese producers’ ability to cut their costs and stay competitive"), they completely overlook the predatory dumping, and subsidies that actually enabled Japan to get there. Simply put, countries cheat. And that cheating helps them prosper.  Until the U.S. holds China accountable for its cheating, we'll see a continuing rise in exports from China and decline of U.S. exports. ##