Free or Protectionism? - A Follow Up

The Senate just passed a bill (65 to 35) that "would allow any 'fundamentally misaligned' currency to be labelled a subsidy to countervailing duties." Which essentially means that an undervalued currency could be labeled as an illegal subsidy. Anyone else confused?

The article chalks it up to jealously and resentment against China because it has a growing economy and we're losing all of our jobs to outsourcing which seems petty for this great nation (if I'm to believe the propaganda). Obviously this is against the World Trade Organization's policy and if the bill did ever end up becoming a law, China could bring the U.S. to court.

Bloomberg makes it a little clearer in that this bill is essentially a tariff against China. However, wouldn't a tariff also hurt the working class as it causes a rise in the price of goods? In addition, if a company can prove that it is being harmed, the review would take approximately a year. Am I the only one that thinks that is a waste of time and money?

So, I think that Obama should not sign the bill, but as the Senate and maybe the House are showing, there is growing support for anti-China sentiments. Xiahua says that it might end up leading to a trade war. That sounds like it will just hurt the people this is trying to help. Could this hurt Obama's campaign? I'm not really sure, but what do you think? One thing that seems fairly certain would be that this would definitely hurt the U.S.'s reputation and make many enemies.

There are many questions still reeling around and it is not even certain that the House will pass the bill although many of then to be leaning towards passing the bill. This protectionist attitude seems fairly new, but the Senate has been trying to pass similar bills since 2003. Puts a new spin on "the land of the free."

China Currency Bill Passes in Senate

The US Senate passed a bipartisan bill today (63-35) targeting China's alleged manipulation of its currency. This bill is aimed to impose tariffs on imports from countries whose currency is found to be "fundamentally misaligned" (in other words, undervalued). In detail, this bill will also disallow the purchase of goods or services by the federal government from these countries, and prevent the Overseas Private Investment Corporation (the US trade promotion agency) from investing in that nation.

Not all politicians are on the same page.

Speaker of the House John Boehner commented that the bill seems "dangerous" and will probably not pass in the Republican-controlled House. President Obama, on the other hand, is rather ambiguous and has yet to take a firm stance on either side. However, he warned last week that he does not want to pass a bill that is inconsistent with international trade rules and will likely be rejected by the WTO.

China's Vice Foreign Trade Minister, Cui Tiankai, has warned that if this proposed measure is made into law, "the result would be a trade war... [and] it would be detrimental to the development of economic ties and might have an adverse impact on bilateral relations".

Personally, I found quite a few problems with this bill.

First, I think this bill is far too risky. If dramatic trade tensions arises with our second largest trading partner (Canada is first), it would shatter and set back our already fragile recovery from the last dip.

Second, how are we to determine which countries have undervalued currencies? If we come up with some unbalanced model that mainly targets China, China will obviously take offense and aggressively retaliate with their own measures (similar to the previously mentioned issue). Keep in mind that China holds around $900 billion in US treasury securities and that the US owes China a hundred billion dollars in trade debt.

Lastly, will this help out average American citizens? Sure, the passage of this bill will dramatically decrease the US trade deficit to China. But at the same time, tariffs will jack up the price of the infamously low-priced "Made-in-China" products. The average American will be the ones to, once again, take on the burden.

Western Chinese province struck by 6.9 earthquake

The USGS reported on their website that a magnitude 6.9 earthquake struck an area in southern Qinghai, near Tibet, on Wednesday morning and was followed by two quakes in the same region. There were no immediate reports of casualties in the remote rural area, but witnesses have described houses quickly crumbled. Ten minutes following the first earthquake, the area was hit by a magnitude 5.3 quake, and a 5.2 two minutes later. The death toll is now at 67 (updated at 8:23pm PST via @BreakingNews)

Another earthquake... pretty scary. It's a good thing that the death toll is not as high, mainly because not many people live in that region. Hopefully the death toll doesn't keep rising and damage is minimal. Seems like 2010 is truly the year of earthquakes.

Edit 04/14/10: Death toll has risen to 589 and over 10,000 are injured.

Google Pulls Out From China

Yesterday, Google closed its search engine in China after two months of threatening to leave due to censorship issues and Chinese hackers. The google.cn address does not work anymore, and users from mainland China are now directed to an uncensored Google search engine site in Hong Kong.

The move has spurred conflict between the international company and China. Chinese officials appear angered, citing that Google broke its promise to retain agreed upon censorship contracts. However, the Chinese Foreign Ministry said that it would handle the act "according to the law," and that the move should not affect Chinese-U.S. relationships. Google's chief legal officer said that he hoped "the Chinese government respects our decision."

Google's withdrawal from China is only partial, for now. Although the search engine no longer functions, Google will maintain their online maps and music services, as well as its research, development, and sales teams on the Chinese mainland.

Although censored, many believed that Google's entrance into China's market would allow Chinese citizens access to much more outside information. It symbolized China's growing acceptance of foreign influence on its citizens. Now that Google has removed itself from China, many Chinese have grown worried, especially students and professors who have lost access to Google's vast resources.

Looking from a business point of view, should Google have pulled out of China (keep in mind that only a small share of Google's overall profit is from China)? From a political and social point of view, was this a wise decision? Should this even be considered from the latter two points of views, or should it be contained purely as a business matter?

To read more about the official dealings, please read Google's blog post, with details about the situation.

China, Missiles, the US, and Taiwan

Last week, the United States sold Taiwan over 200 Patriot Missiles. In response, China shot down one of its missiles with another missile. This shot demonstrated China's anger towards the US and its continued support for Taiwan, which China has considered to be a "renegade province" since its separation in 1949. Taiwan has not formally claimed independence, and China has openly stated that if Taiwan did so, it would use military force. The US has hinted at the possibility that it would defend Taiwan.

The US is required to sell missiles to Taiwan under the 1979 Taiwan Relations Act, and of course, China has a problem with this. China views the Taiwan issue as an interior problem, which the US should not meddle in.

China-US tensions seem to be increasing, and this upcoming weeks' events may increase them further. Barack Obama will be meeting with the Dalai Lama and Taiwan's President will visit the US.

To be frank, this worries me. The fact that war is possible at any time in the future is something to shudder at, and rising tensions with a rising super power is not something desirable. It is to be hoped that Obama and the Chinese administration find some way to ease this tension. The Taiwan dispute will, as long as Taiwan, China, and the US exist, be a source of disagreement, but it would be nice if we could focus on something other than disagreements. How about, for example, the billion dollars worth of goods the US imports from China every day? There's some good there, right?

There must be some kind of analogy comparing this situation to two toddlers and a teddy bear in a sandbox, but I don't know it.

China Will Join The United States in Attending the U.N. Climate-Change Summit

Good news from China! Their Premier Wen Jiabao will attend a major U.N. climate-change summit in Denmark, December 7-18. This is a great demonstration of the Chinese government showing serious concerns about the environment, as they have also proposed cutting emissions to 40-45% in 2020, compared to their 2005 levels. Symbolically, this also shows that the Chinese government is will cooperate with the international community.

President Barack announced yesterday that he will also be attending this summit. Obama is prepared to set a goal of reducing emissions to 17 percent below 2005 levels over the next decade and reducing U.S. emissions by 83 percent by 2050. However, the United States is the only industrialized country that hasn't yet given the UNFCCC a proposal for cutting carbon emissions. To read more about this, http://www.cnn.com/2009/POLITICS/11/25/obama.copenhagen.climate/index.html#cnnSTCText

Next month's climate talks aim to strike a deal on a successor agreement to the Kyoto Protocol, the 1997 pact that has legally binding targets for reducing greenhouse gas emissions. The United States never ratified it, though more than 200 nations did.

I think this is a great step for the United States and especially China. The pollution is terrible in China, as I and many of you saw during the band trip. I think this trip will help get the Senate to pass the climate change bill. Internationally, I think the more, and bigger countries that make a commitment to improve environmentally, it will help other, more poor countries reach their goals. It might also put more pressure on other countries to be more active in environmental issues. However, Greenpeace is criticizing the president for going only at the begginning of the summit, since he will be in Norway to accept his Nobel Peace Prize on December 10, calling it a "photo-opp." I think it would be really hard for the preident to attend an 11 day conference. I don't think he is wrong to go at the begginning. What do you guys think?