G20 rejection of US grievances doesn’t promote trade peace

Everybody says they don’t want a trade war, and yet when the United States, the long-time biggest loser in trade imbalance, seeks some relief, almost all the other countries turn away.

To say that the Group of 20 meeting in South Korea last week was a bust would be an understatement, at least from the U.S. perspective.

In short, the countries that are enjoying huge trade balances in their favor — China, South Korea and Germany chief among them — are more than happy with the status quo. The United States got little sympathy, and, in fact, was accused of manipulating its own currency through action by the Federal Reserve in pumping $600 billion into the economy.

Chinese Vice Foreign Minister Cui Tiankai made it clear going into the summit that he didn’t want to hear complaints about how Beijing has been manipulating the value of China’s currency to its own trade advantage. An artificially low yuan makes Chinese goods cheaper abroad and imports from other countries, including the United States, more expensive in China.

Cui even issued a warning that the U.S. Congress shouldn’t involve itself in currency matters. The U.S. House passed legislation sponsored by Rep. Tim Ryan, D-17, in September to allow Washington to sanction governments that manipulate their currency for trade advantage. It awaits Senate action. Perhaps the Senate will take umbrage at Cui’s presumption in telling the world’s greatest deliberative body what it should or shouldn’t do.

Sometimes there’s no choice

In the last decade, during which the U.S. trade imbalance between the United States and China became alarmingly broad, President George W. Bush suggested that the answer was in the buying habits of U.S. consumers. While it is true that every consumer has an obligation to consider whether the money he or she is spending on a particular item is staying at home or going abroad, trade imbalances are more creations of government policy than Bush was suggesting.

When no television sets are being made in the United States or when a decreasing fraction of small engines are being made for lawn equipment in the United States (just to pick a couple of for-instances), the consumer has little choice but to contribute to the trade deficit.

It is the obligation of the administration and Congress to demand that countries that enjoy exporting their goods to the United States respond in kind by welcoming U.S. products into their markets.

It is often said that no one wins in a trade war, and that is true. But when the United States has been importing more than it exports for a generation — to the tune of trillions of dollars — the U.S. is already losing. Just as people are now coming to realize that budget deficits matter, trade deficits matter too. Neither can be ignored indefinitely.

Unfortunately, what happened in Seoul last week shows that those who are winning today’s trade battles are not prepared to do what has to be done to avoid a trade war. Their economies are now growing, and they are counting on the United States to sheepishly continue to help fuel that growth. They’re taking a dangerous gamble.