MEADVILLE, Pa., Oct. 20 /PRNewswire-USNewswire/ -- The following statement is being issued by W.S. DeArment, President/CEO Channellock, Inc.:
Well, here we go again…The latest from our worthy (?) leadership in Washington, D.C.
It seems that our Congress, led by the Senate Finance Committee Chair, Charles Schumer (D-N.Y.) has decided that the Chinese currency is too weak and is continuing to threaten U.S. jobs and job creation. On that single issue, we can agree. (USA Today article dated 6/10/10).
In his announcement, Schumer stated that the approach of "asking" the Chinese government to strengthen their currency by Treasury Secretary Timothy Geitner and the Obama administration is too slow. Further, unless they become more aggressive, Congress would "likely pass legislation imposing tough trade sanctions on China." Well, what might those sanctions be?
1) The Chinese currently own over $1 TRILLION of our debt. I doubt we would refuse to sell them any more of our monthly issued debt; otherwise, the U.S. dollar would collapse along with our very fragile U.S. economy.
2) We might not allow Boeing to sell them any of their aircraft products, or IBM to sell them computer technology and hardware…same for Apple, Google, etc. We might not permit the sale of U.S. steel scrap to them (the Chinese are now the world's largest maker of steel…oh, and cars, too). We might also eliminate the sales of any of our commodity products like wood and coal. But, I doubt any of this will happen, as it would result in large U.S. layoffs.
3) Congress could impose import duties on Chinese goods coming into our country. (They have "most favored nation status"…very low or no tariffs and duties on their goods coming into the U.S.) That would result in higher prices for our already suffering U.S. consumer…and more than likely, countervailing import duties on U.S. imports going to China. Now, who do you think would win that trade war? I can assure you it will not be the guys waving the red, white and blue flags.
4) We could impound all Chinese assets in U.S. banks. I suspect that could lead to the Chinese selling off their massive U.S. dollar holdings, collapsing the value of the U.S. dollar and our fragile economy (see #1 above).
I am sure there are other sanctions. But, let us just say that the whole concept of imposing sanctions on our largest debtor, and, at the same time largest supplier of goods, is at first laughable; but, upon further thought, really quite dangerous to the U.S. economy and to consuming public citizens.
We need to spin this whole issue the other way. Why not make our U.S. manufacturers strong and globally competitive with the Chinese manufacturers? This can be done through aggressive tax and commerce policy changes. Get rid of the U.S. Department of Energy (established by President Jimmy Carter to get the U.S. off of foreign oil dependence…How are we doing so far?) and replace it with a U.S. Department of Manufacturing. Its sole purpose would to be an advocate for manufacturing inside our government.
We must eliminate taxes on dividends, capital gains and estate taxation.
We should create real/effective research and development tax credits, or even grants, for new and exciting technologies.
We must represent U.S. manufacturing in the global marketplace with tough/knowledgeable trade negotiators. (Most favored nation trade status for China and Taiwan is a joke!)
Do this and watch the private sector generate jobs and create economic wealth (called making stuff to be exported to our trading partners, like China, as never before). These would be well-paying, permanent jobs, which our fragile economy desperately needs.
Do this, Sen. Schumer, and you will have the attention and respect of the Chinese along with the rest of the business world.
But, with all due respect, any Congressional or Administration efforts to chastise the Chinese into strengthening their currency by threatening economic sanctions is not the way to go. It is weak and unsupportable. The Chinese will only laugh at us, along with the rest of the global business community.
It could become very dangerous (a trade war) and, not to mention, just plain embarrassing. For their part, the Obama Administration, led by Timothy Geitner, while under great pressure from Congress, has pushed back against the good Senator and his cohorts. Obama/Geitner are opting to allow the Chinese currency to very gradually strengthen. ("English Aljazeera.net News," 10/15/2010) This still comes under the category of do little/nothing and be controlled by the Chinese.
We need to be proactive in this matter and provide the tax and policy changes to help our U.S. manufacturers become world class and globally competitive. This would be much better than licking the boots of the Chinese, begging them to buy our debt and hoping their currency strengthens.
SOURCE W.S. DeArment, President/CEO Channellock, Inc.