Sarkozy and EU pressure Beijing over Yuan

The EU trade deficit with China continues to grow.

Sarkozy and EU pressure Beijing to revalue Chinese currency

by Dong Zhixin

European leaders are mounting more pressure on China to allow the yuan to appreciate faster amid a rising trade deficit with the world's fourth largest economy.

Peter Mandelson, the European Union trade commissioner, warned of anti-dumping measures if Beijing failed to reduce an "unsustainable" trade deficit, according to the Britain-based Financial Times.

China should "manage its currency better" for its own economic good and address the widening trade gap, Mandelson was reported as saying.

French President Nicolas Sarkozy will also raise the currency issue during talks with Chinese leaders this weekend in Beijing, according to the Reuters.

Sarkozy plans to call for an "equitable and fair" relationship among four major currencies - the dollar, euro, yen and yuan, a senior French official was quoted as saying.

The lobbying for a stronger yuan is set to intensify when an EU delegation led by Luxembourg Prime Minister Jean-Claude Juncker and European Central Bank President Jean-Claude Trichet visit Beijing at the end of this month.

In the first nine months, China's trade surplus with the EU reached US$94.89 billion, an increase of 39.7 percent from a year earlier, according to statistics from the Chinese Ministry of Commerce. The EU is China's largest trade destination ahead of the United States.

To address the widening surplus, a commerce ministry spokesman Thursday urged the EU to ease restrictions on high-tech exports to China.

So far this year, the Chinese currency, the yuan, has appreciated more than five percent against the US dollar. However, that was far less than the euro’s 11 percent growth against the greenback.

By Thursday, the yuan has depreciated seven percent against the European single currency from the end of last year, prompting Europe to join the chorus of China's major trade partners in demanding the yuan to rise faster in value.

America's Globalized Economy

I will preface this post with a quote by Ross Perot back in 1993 during a debate with Al Gore, when he stated that America was "in a race to the bottom". Looking back, it is remarkable just how true his statement has become.

The pundits today talk about the economy in mostly glowing terms. The economy is strong, inflation is low, housing will bounce back in some future date which is always revised, unemployment is low, etc. Never reality, just the rosy projections that have no base in the economic world we actually live in.

The economy of the United States is, in fact, becoming more and more globalized each year. This, in turn, leads to the globalization of assets and wealth. As the value of labor decreases due to competition with cheap foreign labor, the assets held by American workers falls in direct relation to their declining wage. Let's study this for a moment.

Greg, a manufacturing employee had a job paying $55.000 but his company decided to outsource and he was laid off. He was then forced to take a similar job but now makes only about $25,000 a year. What is he to do? How can he afford to pay for the assets that he has, such as his home or debt that he has incurred? The truth is, he can't do it. No amount of cheap foreign goods, low paying jobs or the much vaunted tax cuts for the rich will restore his former standard of living.

So what is really happening? The American worker is seeing a decline in their standard of living and this will not be ending in the near future. In time, their descending worth, both of wages and assets, will meet with the rising worth of the global labor force. What a glorious day when the American worker can proudly stand by his Chinese counterpart and discuss how globalization had somehow managed to make them both equally poor while their respective companies have doubled in size and wealth.

Adding to these woes deregulation and privatization have resulted in the rising costs of good and services even while the value of wages and assets decline. It has not helped that the Treasury Department has become addicted to printing money primarily to finance the Iraq adventure (occupation). This little adventure will soon reach the unbelievable 1 trillion dollar mark! And this from the President that just today talked about being fiscally responsible with the "people's money". Go figure...

The standard of living of many Americans has experienced the steepest decline in over a half century. Foreclosures, bankruptcies and personal debt are at all time highs. Meanwhile, wages and assets (i.e. property values) continue their downward spiral.

Ask yourself, was globalization good for you? How have you benefited? What about 'free trade' and all of those benefits? Does the American trade deficit even matter to you? Do you care? It can be seen that after years of this so-called 'globalization', which is nothing more than a redistribution (on a global scale) of wealth, the few at the top are cashing in while the rest of us are left picking up the ever-decreasing crumbs.