As reported in The Detroit News:
President George W. Bush's administration is "very frustrated" with the pace of China's shift toward a market-based exchange rate, said Allan Hubbard, the White House's chief economic adviser.This makes absolutely no sense that a "free trade" and "free market" president should have issues with China (or Japan for that matter) "subsidizing" the U.S. consumers by selling products to the U.S. that are severely undervalued.
The same issue applies to the Japanese Yen as the Chinese Yuan, but the president has not indicated being "frustrated" with the Japanese. As George Mason University economist Dr. Donald Boudreaux points out in Cafe Hayek:
And while some Japanese exporters might benefit from an undervalued yen, so, too, do American consumers. We get automobiles and other Japanese-made products in exchange for oodles of tiny monochrome pictures of dead American statesmen. Now that's a subsidy!Sincerely,
Donald J. Boudreaux
So what's the problem?
"There are a number of problems -- the currency is just one of them," Hubbard said. The protection of intellectual property rights in China remains a "huge problem," access for U.S. financial-service companies is lagging behind and the administration has "violation concerns" about China's obligations under the World Trade Organization, he said.As I recently wrote to Dr. Boudreaux at Cafe Hayek:
So the Bush administration (and I ???) must not really be for "free trade" after all:
I continue to appreciate your efforts to educate me; however, I will also continue to distinguish between trade that is open and equitable and countries whose trade practices are designed to weaken U.S. (and other) manufacturers in order to strengthen their own.U.S. manufacturers have had to deal with counterfeiting, theft of proprietary information, currency manipulation and being locked out of lucrative markets
The Bush administration is considering bringing litigation against China at the Geneva-based WTO. The U.S. Trade Representative's office will release a report on Dec. 11 saying China circumvents global trade rules by using restrictions on investment and subsidies for domestic producers.Obviously, the President (and I) just doesn't get it.