Nancy Pelosi claims that "One million U.S. jobs could be created if the Chinese government took its thumb off the scale and allowed its currency to respond to market forces."
In the NPR "Planet Money" report, Adam Davidson is pretty skeptical about Pelosi's claim, based on the following example:
Some American manufacturers that use industrial springs can buy them in China for 95% less than in the U.S. - if they cost $1.00 here, they're only 5 cents from China, shipping included. In that case, even if China's currency appreciated significantly by 30% or 40% or more, the springs from China would still cost only 7 or 8 cents, or maybe even 10 cents, and there would be NO jobs coming back to the U.S. That's just one example, but there are many other products (toys, T-shirts, shoes, low-end electronics, commodities, etc.) that are so cheap to produce in China compared to the U.S., that even a greatly-appreciated renminbi/yuan wouldn't bring any manufacturing jobs back to America, and certainly not anywhere close to 1 million jobs.
A similar point was made in a WSJ article in May, subtitled: "You're not going to change the balance of China trade by adding 25 cents to the cost of a T-shirt."
There are other reasons that a stronger renminbi wouldn't bring jobs back to America:
1. A stronger renminbi/yuan would give China an advantage for any commodities, inputs, raw materials, and energy products (oil and natural gas) that it imports, which might allow them to maintain the current prices for exports to the U.S.
2. If a stronger renminbi/yuan did make Chinese exports to America more expensive, manufacturing production and jobs would likely shift to other areas in Asia (Vietnam, Bangladesh, India, Thailand, Korea, etc.) and not back to America.
No comments:
Post a Comment