Last night's debate continued a rhetorical pattern evident in the two previous debates: China-bashing. Since Ohio is key to the election and home to a good chunk of US manufacturing, both candidates believe it makes sense to hammer China. President Obama tends to cite his record and tout his successes in judgments against China at the World Trade Organization. Obama, in short, implicitly promises to play by the rules of the game--bring China to judgment when it is violating accepted international standards. Mitt Romney says he would change the game--he would declare China a currency manipulator on his first day in office and thereby, most are sure, ignite a trade war between the US and China. But even that extreme position sounds good to many Americans.
Both candidates need to take a deep breath, step away from the sanctions, and think again, especially Governor Romney. Most of all, we need to realize this is not 2004.
First, the renminbi has steadily appreciated against the dollar over the course of the past few years. As a result, China's current accounts surplus has steadily dropped. Some of this may be do to Chinese policy and some may be due to higher inflation in China. Whatever the reason, it's now clear, as even Paul Krugman points out (and he spent years on Romney's side of this issue), that China is no longer a currency manipulator. We could not now make that case at the WTO and we'd probably open ourselves to sanctions if we did so. Romney's position is badly out of date.
Second, China's economy is, in fact, slowing from its breakneck expansion of the past decade and that is bad news for us. Yes, I said bad news. Exports to China have been a small but significant help to our economy--the drop in exports likely shaved 0.1 to 0.2 percent off of GNP growth last quarter, which is no small thing, given that we had annualized growth of 1.3 percent in the second quarter. Add to that the economic troubles in the continent called "Europe" (a mystery to Bob Schieffer) and the economy is suffering. The slowdown in the Chinese economy probably contributed to the loss of 38,000 manufacturing jobs.
Finally, while I'm clear on the need to defend American national interests, I've never been quite clear on why the greatest anti-poverty program in world history is bad news. Millions and millions of Chinese (and Indians) have been lifted out of poverty in the last decade due to their adoption of market-based economics. Yes, their breakneck growth has caused difficulties. Yes, they need to open their domestic markets--much more than currency manipulation or their exports, that's the key--to our firms. But tens--even hundreds--of millions of people no longer suffer from grinding poverty and are contribuiting mightily to the world economy and our economy. As human beings, can we not take some joy in that?
In short, we have a practical stake in Chinese economic growth and we have a moral stake in a decent life for all peoples. A president should recognize that.