The U.S. economy is undergoing one of the greatest periods of transformation in history. The convergence of powerful technological, political, economic and cultural forces is shaping the 21st century.

But as many U.S. industries seize global opportunities derived from today's economic realities, some are experiencing difficulty. This is causing fear and anxiety among workers similar to what was experienced during the industrial revolution. In turn, it is forcing a backlash against China—the latest scapegoat based mostly on misinformation.

For example, although the U.S. economy created 64 million net new jobs from 1970 through October 2005, the number of U.S. manufacturing jobs fell from a high of 21 million in 1979 to 14.2 million in October 2005. Many blame this on imports, particularly from China. The real reason: new technologies and higher productivity have empowered fewer American workers to produce more goods in far less time.

We've seen these trends before. New technologies enabled U.S. agricultural output to skyrocket. The result: the number of farm workers fell from 9.5 million in 1940 to 2.2 million in 2004. Yet, the United States did not lose 7.3 million jobs; they shifted to emerging industries resulting in higher standards of living and a more prosperous American economy.

Imports from China only are responsible for a fraction of U.S. job losses. Importantly, they offer U.S. consumers greater choices and lower costs. In turn, this affords the American family more disposable income for education, health care and rent. In addition to keeping inflation down, inexpensive imported components help keep U.S. producers competitive.

China does, however, present new challenges. And it does not always play by the rules, especially with regard to intellectual property, production subsidies, distribution rights and transparency. But, should we isolate China as many suggest? To determine how well isolationist policies work, look no further than North Korea and Cuba: two countries where the United States has virtually no trade—and no influence.

Since its accession to the World Trade Organization in December 2001, China has significantly opened its market, cut import tariffs by nearly 40 percent, virtually eliminated import licenses and quotas, and relaxed ownership restrictions.

As a result, China and Hong Kong have become the United States' fourth largest export destination. And from 1999 through 2004, U.S. exports to China increased nearly 10 times faster than U.S. exports to the rest of the world. With a growing population of 1.3 billion people—and 200 to 300 million consumers with considerable purchasing power—China offers U.S. companies tremendous opportunities.

The demands for China to float its currency, the yuan, is another issue fraught with misinformation. During the devastating Asian financial crisis of the late 1990s, China wasn't affected because the yuan was fixed to the U.S. dollar while U.S. policymakers praised China for its currency stability. Today, due to its fragile financial sector, China probably couldn't float the yuan if it wanted to. And even if the yuan's value were to rise, the impact on the U.S. trade deficit would be minimal, according to Federal Reserve Chairman Greenspan. Why? If the yuan's value were to rise, U.S. companies would continue to seek low cost imports from other developing countries.

President Bush's November visit to China is part of an ongoing effort to strengthen the U.S.-China relationship—a vital objective in today's complex world. Viewing China as a villain won't bring back U.S. manufacturing jobs. And when China doesn't implement reforms fast enough, understand its need to modernize at a pace that won't cause violent unrest among its unemployed.

Does this mean the U.S. should ignore unfair Chinese trade practices? No. But we should base our policy decisions on economic realities, not misinformation. Only through a mutually beneficial relationship will U.S.-Chinese business partners continue to create more globally attractive products—an effort that generates higher skilled, higher paid jobs in the United States.

This article was syndicated by Knight Ridder/Tribune Information Services and appeared in the Clarion-Ledger, Deluth News, Kansas City Star, Provo Daily Herald, Pueblo Chieftain, and Wisconsin State Journal in November and December 2005. This article also appeared in Impact Analysis, January-February 2006.
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John Manzella
About The Author John Manzella [Full Bio]
John Manzella is a world-recognized author and speaker on global business, emerging risks, and the latest economic trends. He's also founder of both the ManzellaReport.com and Manzella Trade Communications, Inc. His latest book is Global America: Understanding Global and Economic Trends and How To Ensure Competitiveness.




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