|source: Center for Responsive Politics|
Senator Schumer is a longtime sponsor of legislation for sanctions against China, on the basis of “unfair” currency practice or “currency manipulation”. His latest is the Currency Exchange Rate Oversight Reform Act of 2010. According to Schumer, at least as of April, this had 16 bipartisan cosponsors “and combines several separate bills into a single, strong bill that can pass the Senate and the House.” This issue came off the boil at just about this time, as Beijing announced a currency regime reform — although June 2010 US and Chinese trade data are putting it back on the agenda.
I’m well aware of the political-economy factors impeding a re-ordering of the Chinese economy more quickly into a stance more favourable to growth of Chinese non-traded sectors. A stance which the USA, the world, and Beijing itself are keen to actualise. Pardon the jargon, but it is a victim of path-dependence. What that means is that the very sectors which have done well out of the export orientation of China’s economy are consequently those best placed to resist a re-orientation. They have the money and the guanxi (connections). That’s a very real-world problem and I think there is as much frustration in Chinese policy circles with this as there is at the US National Association of Manufacturers.
Should we not at least consider the counterpart political economy problem in the United States? Washington has its own path dependence. The sectors which have done well out of the US boom were in the non-traded parts of the economy. Which are these? Finance and real estate come to mind. Surely they support re-establishing the status quo ante. How odd, then, that these sectors are the biggest contributors to the man in Congress who carries the torch for a grand reversal in the Sino-US trade relationship. Think about it. These sectors do very well indeed from generous financing borne of Chinese (and others’) purchases of US securities. Success in Schumer’s efforts would wound the very goose whose golden eggs these USA non-traded sectors are still poaching. It doesn’t make sense.