US-China Trade in the News 6-23-11 Update: Is the U.S. Globally Competitive?

This week, economic analysts examined U.S. global competiveness.  Gordon G. Chang writes that for the U.S. just to keep pace with China, it needs to creates 150,000 jobs a month, which he concludes is a "seemingly out of reach" number.  He further argues that the U.S.' declining ability to keep pace with China “might be the result of multi-century trends we cannot hope to overcome.” 

Uri Dadush and William Shaw are more optimistic, stating simply “yes, the United States is competitive.”  They argue that the U.S.' problem lies in spending rather than per-capita income and manufacturing productivity. 

Managing the Dragon focuses on the competitiveness of specific American companies operating within China, particularly McDonald’s, Caterpillar, Unilever, and Coca Cola (which is “currently enjoying double-digit growth in China – its third-biggest market after the United States and Mexico – at a time when sales are close to flat across North America and Europe").

All this and more in today's US-China trade update.

Contents
Currency Issues
The Chinese Economy
The U.S. Economy
The Sino-American Relationship

Currency Issues

Commentary –Simon Johnson: China and the Saving of Europe
The Baseline Scenario,
June 20
“China has every interest in making sure that the euro survives and prospers as a major reserve currency – to make sure that, over a longer period of time, the US dollar will decline as the primary place in which to hold public and primary rainy day funds.”  Read more 

Commentary – Eswar Prasad: The Yuan's Reckoning
Wall Street Journal,
June 16
“China's annual consumer price inflation is entrenched above 5 percent and edging higher. Inflation is now being driven mostly by food prices, which are rising at an annual rate of over 11 percent. Nonfood inflation remains modest at about 3 percent.”  Read more

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The Chinese Economy

Commentary – Adam Segal: Strategies for Engaging China in Cyberspace
Council on Foreign Relations blog,
June 16
“A little less than two weeks after the China Youth Daily published a piece explaining why China might have to fight a cyberwar, the People’s Liberation Army Daily has called for the military to defend national networks and improve combat capabilities in cyberspace. Both articles spend a great deal of time going through a long litany of complaints about the United States: it is trying to dominate cyberspace; was the first to militarize the Internet by setting up U.S. Cyber Command; and uses Twitter, Facebook, and other networking tools to undermine governments it does not like.” Read more

What They’re Saying – Eswar Prasad: China’s Approach to Economic Development and Industrial Policy
U.S.-China Economic and Security Review Commission,
June 15
“Premier Wen Jiabao's report to the National People’s Congress, which should be read in conjunction with the other plan documents, strikes an interesting balance between self-congratulation for China's economic performance over the last five years, including the economy's resilience during the global financial crisis, and a sober evaluation of the immense development challenges that lie ahead.”  Read more

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The U.S. Economy

Commentary –Gordon G. Chang: Look, Ma, I Found 923,000 Jobs and $48 Billion
Forbes New Asia blog,
June 19
“To keep pace with new entrants to the workforce, the U.S. needs to create 150,000 to 200,000 jobs a month, and that number seems out of reach.  For one thing, there is Foroohar’s pronouncement that we have to reach back a half millennium to find an economic shift of similar magnitude to today’s.  So, it would seem that our declining ability to create jobs might just be the result of multi-century trends we cannot hope to overcome.”  Read more

Commentary – Uri Dadush, William Shaw: Yes, the United States is Competitive
Financial Times, June 14
“U.S. policymakers worry constantly about the nation’s declining competitiveness1—so much so that the theme dominated this year’s State of the Union Address. The country’s assumed inability to compete is blamed for everything from its structural current account deficit and declining number of manufacturing jobs to its rising debt levels and even its reduced influence in the world.” Read more

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The Sino-American Relationship

Commentary – Jack: Dim Sum Anyone?
Managing the Dragon, June 2011

“To date, McDonald’s, Caterpillar and Unilever are three large international companies that have taken advantage of this new financing vehicle. McDonald’s raised RMB 200 million ($31 million) of 3 percent, three-year notes in August 2010; Caterpillar Financial Services raised RMB 500 million ($77 million) of 2 percent, two-year notes in November 2010; and Unilever raised RMB 300 million ($46 million) of 1.15 percent, three-year notes in March, 2011. By comparison, the benchmark one-year lending rate in China set by the People’s Bank of China is 6.31 percent.” Read more

Commentary – Jack: Shanghai’s International Board
Managing the Dragon, June 2011
“Coca-Cola has a long history in China. The company set up bottling plants in Shanghai and Tianjin in 1927, but was forced out in 1949 with the founding of the People’s Republic of China. Nonetheless, when China began its economic reform program, Coca-Cola was one of the first international companies to understand the inherent potential of the vast China market and returned to the country in 1979. The company has been rewarded for its foresight. Coca-Cola is currently enjoying double-digit growth in China – its third-biggest market after the United States and Mexico – at a time when sales are close to flat across North America and Europe.” Read more

What they’re saying – Pascal Lamy: Trade Restrictions on the Rise
World Trade Organization, June 21
“World trade in 2010 recovered strongly following its worst decline in many decades, and is stabilizing in its long-term trend.  Our latest numbers show that the volume of world merchandise exports grew by 14.5% last year, and they are forecast to further expand by 6.5% this year.  These figures illustrate how trade has helped the world escape recession in 2010, and is contributing to economic recovery.  The significant increase in trade flows was possible thanks to markets remaining overall open despite the severity of the global crisis.  The WTO proved its value to guard against a resurgence of protectionism during very difficult times.” Read more

In the News –World Trade Organization: WTO course on Technical Barriers to Trade Concludes
World Trade Organization, June 17

“The WTO Secretariat organized the 2011 Advanced Course on the WTO Agreement on Technical Barriers to Trade, which took place at WTO headquarters, in Geneva, from 6 to 17 June 2011.” Read more

Commentary – Evan A. Feigenbaum: Speaking of the SCO …
Council on Foreign Relations blog,
June 15
“The U.S. does need a regional approach to Central Asia, particularly on economic issues. But there are interesting opportunities elsewhere. The U.S. could, for example, revisit a stalled 2007 effort to work with the Asian Development Bank and two strategic partners— Japan and the EU—to lend additional impetus to the ADB’s Central Asian Regional Economic Cooperation (CAREC) program, which includes ten countries (six in Central Asia, including Afghanistan, as well as China) and six international financial institutions. In 2007, the EU refused to join a U.S. and Japanese effort to create a forum between CAREC and the world’s three major market economies to be called “CAREC Plus Three.” However, if Washington and Tokyo approach Brussels again, this could still form a powerful pro-market nexus, working closely with key countries and the major IFIs. Together, Washington, Tokyo, and Brussels could aim to give market approaches a new push in the region.” Read more

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