Not-So-Flat World

at 12:35 AM

Tom Friedman coined the term, "The World is Flat" to describe the world as a level playing field where all competitors have an equal opportunity. Friedman's thesis is only partly true. Technology allows workers and machines from different countries to talk to one another creating an equalization of the global economy. But in a world where creating jobs is job one, the world is definitely not flat. Americans are losing jobs at an astounding rate.

The primary culprit is China. In 2002, China was admitted into the WTO. It was thought, indeed hoped, that the rising U.S. trade deficit with China would decrease. Well, the exact opposite has occurred. An average of 350,000 jobs, mostly in manufacturing, have been lost annually in the new millennium. Simply put, the promised benefits of trade liberalization with China have not been fulfilled.

Here's why. First, China continues to print currency which lowers its value against the dollar. This encourages a large bilateral trade surplus and is a subsidy of Chinese products in the staggering amount of 40 percent. Next, China suppresses labor rights. Estimates are that wages would be 47 percent to 85 percent higher. And finally China directly subsidizes export production.

As an importer of Chinese steel products, one of my suppliers was assessed anti-dumping duties of over 177 percent when it sold in the US, far below its cost of manufacturing.

Friedman might wish to avoid offending our Chinese trading partners but the president and Congress should not. The Senate has taken up the issue of sanctions against China and other currency manipulators . The Chinese have responded angrily calling it a boost for Obama's political agenda, asking Senators to "rationally understand Sino-U.S. trade cooperation."

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Americans are screaming for more jobs. One answer is to have a weaker dollar. If China stops manipulating its currency and lets it float, we will achieve this, and avoid a global trade war. This is the best and fairest solution.

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With a Perspective, I'm Joe Epstein.

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