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Originally posted by Bad_Rich_Chic
Most studies of the econ. benefits/harms of free trade show that one-sided free trade is still beneficial to the free trader (i.e.: opening your own market benefits your economy overall, regardless of the trade or fiscal policies of your trade partners); perhaps even moreso than two-sided free trade relatively speaking, because the free trader gets benefits while the non-free trader gets comparatively fewer than they would if they, too, were open. So I'd say that there can be beneficial "free trade" with China even if China does not practice free trade. Who says that "free trade" has to be two-sided?
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It's a definitional issue, I suppose. But, if the yuan floated, and were worth $1.50, and China imposed a 33% tariff on all US goods -- would you call that "free trade"? Would you think it was beneficial? It might get you cheaper shirts at Wal-Mart, but it doesn't help us sell American-built computers in China. Instead, we end up making them there.
And there is plenty of dispute to the theory that there's a net benefit to the one party who is opening its markets. If your idea were true -- the party with liberal trade policies benefits, the one without them does not -- then we would never pressure other countries to open their markets.
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FWIW, I think the argument that China has "suppressed" its currency is a bit silly. It's pegged to the dollar, has been for dogs years. The dollar is, compared to most currencies, way down, and so the yuan is, too. That probably does mean that the yuan is undervalued vis a vis the dollar (and other currencies) when compared to what it would be if it floated,
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Wow. That IS silly. I mean, suggesting that the value of the yuan is articifically suppressed, just because it is undervalued as a result of a government policy that pegs the currency to the dollar rather than letting it float? I don't know what came over me.
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but it doesn't mean the Chinese gov't has some evil policy to artificially "suppress" their currency as part of some devious plot to screw US textile workers, as the press often seems to imply.
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Again, I can't imagine what came over me, thinking that the Chinese government might have something to do with the policy of keeping the yuan pegged to the dollar. Or that it might not be an accident that they did so. Or that it might be related to keeping export prices low so as to provide more manufacturing jobs.
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In any event, I think the low yuan does give a net benefit to the US, and I don't have a view of whether it is an "acceptable" practice or not. It primarily harms the Chinese in the long term,
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Again, lots of disagreement on that. From Beijing, among other places.
